feb 19/GLD adds 1.5 tonnes of gold to its inventory/Inventory at 769.46 tonnes/Silver adds 4.08 million oz to its inventory/Rebels in Ukraine advance unto Mariupol/Decision tomorrow on the Greek crisis/











 Web page address:  www.harveyorganblog.com

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold: $1207.10 up $7.40   (comex closing time)
Silver: $16.37 up 12 cents  (comex closing time)



In the access market 5:15 pm



Gold $1207.00
silver $16.37


Today, we have seen a lot of important stories on three fronts to report to you!!


i) The Greek crisis

ii) the failed Ukrainian ceasefire.


iii) global economy sinking (Baltic Dry Index and Caterpillar results)


We will have to wait until tomorrow to see if there is any cracks in the EU armour with respect to the Greek crisis.

The rebels are marching toward Mariupol.





And now for gold/silver trading today.


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



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



The gold comex today had a poor delivery day, registering 0 notices served for nil oz.  Silver comex registered 36 notices for 180,000 oz .


Three months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 257.31 tonnes for a loss of 46 tonnes over that period.


In silver, the open interest fell by a large 4021 contracts as yesterday’s silver price was down by 11 cents. The total silver OI continues to remain relatively high with today’s reading at 171,172 contracts. The front month of March contracted by 12,069 contracts with only 6 days before  first day notice.


We had 36 notices filed  for 180,000 oz



In gold we had another surprisingly rise in OI even though gold was down by $8.40 yesterday. The total comex gold OI rests tonight at 391,032 for a gain of 1,502 contracts. Today we had 0 notices served upon for nil oz.  We are still pretty close to rock bottom OI gold support being around 359,000.




Today, we had a good deposit of 1.5 tonnes with respect to inventory at the GLD Inventory 769.46 tonnes.



In silver, /SLV  no change in  of silver inventory to the SLV/Inventory 320.327



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 rose by another 1502 contracts today from  389,530 all the way up to 391,032 even though gold was down by $8.40 on yesterday (at the comex close). We are now in the big delivery month of the active February contract and here the OI fell by 49 contracts falling to 552. We had 50 contracts served upon yesterday, thus we  gained 1 gold contract or an additional 100 ounces will stand  in this delivery month . The next contract month of March saw it’s OI fall by 192 contracts down to 718. The next big active delivery month is April and here the OI fell by 486 contracts down to 261,538. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was awful at 69,278. The confirmed volume yesterday ( which includes the volume during regular business hours  + access market sales the previous day) was poor at 130,522 contracts even  with mucho help from the HFT boys. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results.  Silver OI fell by a large 4021 contracts from 175,193 all the way down to 171,172 even though silver was down by only 11 cents yesterday. The bankers were  able to shake some silver leaves from the silver.  We are now in the non active contract month of February and here the OI remained constant at 56. We had 0 notices filed on yesterday so we neither gained  nor lost any silver ounces in this contract month. The next big active contract month is March and here the OI fell by  12,069 contracts down to 58,722.  First day notice for the gold and silver February contract months is on Friday, Feb 27.2015 or 6 trading days away.  The March OI is extremely high. The estimated volume today was poor at 21,695 contracts  (just comex sales during regular business hours. The confirmed volume yesterday was huge (regular plus access market) at 77,569 contracts.  We had 36 notices filed for 180,000 oz today.

February initial standings


Feb 19.2015



Withdrawals from Dealers Inventory in oz nil oz
Withdrawals from Customer Inventory in oz   64,067.399  oz (Manfra,Brinks,Scotia)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  80,375.000 oz (2500 kilobars) Scotia/JPMorgan
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices)  552 contracts (55,200 oz)
Total monthly oz gold served (contracts) so far this month  636 contracts(63,600 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month

Total accumulative withdrawal of gold from the Customer inventory this month

 228,275.0 oz

Today, we had 0 dealer transactions

we had 0 dealer withdrawals:

total dealer withdrawal: nil oz



we had 0 dealer deposits:




we had 3 customer withdrawals

i ) Out of Manfra;  32.15 oz  (1 kilobar)

ii) Out of Brinks:  32.15 oz (one kilobar)

iii) Out of Scotia; 64,003.099 oz


total customer withdrawal: 64,067.399 oz



we had 2 customer deposits:  (and the farce continues)


i) Into Scotia:  64,300.000 oz (2,000 kilobars)

ii) Into JPMorgan:  16,075.000 oz  (500 kilobars)


total customer deposits;  80,375.000 oz  (2,500 kilobars)


We had 0 adjustments


Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contract of which 0 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.

To calculate the total number of gold ounces standing for the December contract month, we take the total number of notices filed for the month (636) x 100 oz  or 63,600 oz , to which we add the difference between the OI for the front month of February (552 contracts)  minus the number of notices served today x 100 oz (0 contracts) x 100 oz = 118,800 oz, the amount of gold oz standing for the February contract month.( 3.7 tonnes)

Thus the initial standings:

636 (notices filed for the month x( 100 oz) or 63,600 oz + { 552 (OI for the front month of Feb)- 0 (number of notices served upon today} x 100 oz per contract} = 118,800 oz total number of ounces standing for the February contract month. (3.7 tonnes)

we gained 100 oz of gold standing in this February contract month.



Total dealer inventory: 809,950.970 oz or 25.19 tonnes

Total gold inventory (dealer and customer) = 8.256 million oz. (257.31) tonnes)


Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 46 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 19 2015:



Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 364,000.98  oz (Delaware, Brinks ,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  40,038.300 (CNT)  oz
No of oz served (contracts) 36 contracts  (180,000 oz)
No of oz to be served (notices) 20 contracts (100,000 oz)
Total monthly oz silver served (contracts) 420 contracts (2,100,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  5,534,486.2 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit: nil   oz


we had 0 dealer withdrawal:

total dealer withdrawal: nil oz


We had 1 customer deposits:


i) Into CNT:  40,038.300 oz

total customer deposit: 40,038.300 oz


We had 3 customer withdrawals:

i) Out of Brinks:  301,366.98 oz


ii) Out of Scotia: 60,638.600 oz

iii) Out of Delaware;  1995,400 oz




total customer withdrawal: 364,000.98  oz


we had 0 adjustments




Total dealer inventory: 68,100 million oz

Total of all silver inventory (dealer and customer) 175.081 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 February, we take the total number of notices filed for the month (420) x 5,000 oz    = 2,100 oz  to which we add the difference between the OI for the front month of February (56)- the number of notices served upon today (36) x 5,000 oz per contract = 2,200,000 oz,  the number of silver oz standing for the February contract month

Initial standings for silver for the February contract month:

420 contracts x 5000 oz= 2,100,000 oz + (56) OI for the front month – (36) number of notices served upon x 5000 oz per contract =  2,200,000 oz, the number of silver ounces standing.

we neither gained nor lost any  silver ounces standing in this February contract month.

It sure looks like something is brewing inside the silver comex.  We are within a fraction of all time high in OI and yet the silver price is at all time lows.  Something must eventually give out!!


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 19


Feb 18/ a small withdrawal of .3 tonnes/no doubt to pay for fees/Inventory 767.96 tonnes


Feb 17/no changes in gold inventory at the GLD/Inventory 768.26 tonnes


feb 13. we another another withdrawal f 3.25 tonnes of gold from the GLD/Inventory 768.26 tonnes



Feb 12: we had a withdrawal of 1.8 tonnes of gold from the GLD/Inventory 771.51 tonnes


Feb 11.no change in gold inventory at the GLD/Inventory 773.31 tonnes


Feb 10 no change in gold inventory at the GLD/inventory 773.31 tonnes

Feb 9 no change in gold inventory at the GLD/Inventory 773.31 tonnes


feb 6/ no change in gold inventory tonight/inventory 773.31 tonnes

feb 5. we had another addition of 5.38 tonnes of gold to the GLD/Inventory tonight at 773.31 tonnes

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






Feb 19/2015 /we had an addition of 1.5 tonnes in gold inventory at the GLD

inventory: 769.46 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 : 769.46 tonnes.






And now for silver (SLV):


Fen 19/ we had a huge addition of 4.082 million oz of silver into the SLV/Inventory 324.299 milllion oz



Feb 18.2015/ no change in silver inventory at the SLV/Inventory at 320.327 million oz


Feb 17 no changes in silver inventory at the SLV/Inventory at 320.327 million oz


Feb 13 no change in silver inventory at the SLV/inventory at 320.327 million oz.


Feb 12 no change in silver inventory at the SLV/inventory at 320.327 million oz


Feb 11 no change in silver inventory at the SLV/inventory at 320.327 million oz



Feb 10 no change in silver inventory at the SLV/inventory at 320.327 million oz



Feb 9  no change in silver inventory/SLV inventory at 320.327 million oz



Feb 6  no change in silver inventory/SLV’s silver inventory at 320.327 million oz.


Feb 5.we had no change in silver inventory/320.327 million oz/


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 19/2015 we had an addition of 4.082 million oz of  silver into the SLV

SLV inventory registers: 324.299 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  7.2% percent to NAV in usa funds and Negative 7. 1% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.1%

Percentage of fund in silver:38.4%

cash .5%


( feb19/2015)


2. Sprott silver fund (PSLV): Premium to NAV rises to + 3.69%!!!!! NAV (Feb 19/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to +.44% to NAV(feb 19 /2015)

Note: Sprott silver trust back  into positive territory at +3.69%.

Sprott physical gold trust is back into positive territory at +.44%

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 Thursday  morning:



(courtesy Mark O’Byrne)


Gold Bars Worth Over $500,000 Robbed From Pensioner By Fake Cops in France




  • Story of pensioner in Paris who has had €450k of gold stolen by fake police highlights risks of storing gold in home
  • Criminals impersonating cops gained access to home claiming to be investigating gold robbery
  • 13 kilogram bars worth €450,000 taken, pensioner unharmed
  • Gold owners must take precautions
  • Greek depositors taking precautions by taking cash out of banks

A file photo shows French police officers standing at the site of a crime. AFP

A curious and sad story broke last night about a pensioner in Paris who had €450,000 worth of gold bars stolen from his home by con-artists posing as police officers.

The criminals arrived at his home claiming to investigate a gold robbery according to Agence France Presse. The pensioner was asked if he had gold bullion and he told them that he did and allowed them into his home to inspect it.

While one of the robbers distracted the 69-year old with paper work the other stole his gold – 13 bars, each weighing 1 kilogram or 32.15 ounces each with a total value of €450,000.

The story lacks details but if it proves to be true then it is a cautionary tale for owners of gold who take possession.

We have no details as to why he may have been targeted. It is unlikely that he was selected at random. The thieves must have had some information regarding his affairs. It highlights how discretion is of utmost importance when buying gold.

Storing gold in the home can be quite risky – especially in very large volumes. If one can afford to own €450,000 worth of kilo gold bars, one can afford storage costs. Insurance for gold held in the home is available although it tends to be prohibitively expensive.

We do not discourage holding gold in the home per se but it is essential to take certain precautions. No matter where one’s gold is held one should not disclose the fact that one owns gold except to one’s closest confidantes and indeed in a will.

It is also highlights the importance of buying from established and trusted bullion brokers who have a track record in terms of  being very protective of client’s confidentiality and privacy.

Gold has a mysterious aura, pun intended, evoking folklore and mythology which tends to intrigue and fascinate people. People with loose tongues enjoy relaying tales of gold and it’s owners to eager listeners. One should be certain that one is not the subject of such tales which may fall on ears whose curiosity extends beyond mere gossip.

In the not unlikely event of a currency devaluations, negative attitudes toward gold will shift dramatically. In such a scenario criminals will become very interested in the affairs of gold owners. Some desperate governments will too.

Discretion is vital, not just to protect gold held in the home but also to protect against being forced to ship one’s stored gold home – to hand over to criminals due to intimidation or tiger-raid style coercion.

In the UK and Ireland in recent years, there have been many instances of the homes of Indian national’s being targeted by criminals in search of gold jewelry. These thieves are aware of the strong cultural affinity that Indians have for the precious metal.

When buying gold in volume to be shipped to one’s home it is wise to use a reputable broker who is sensitive to security issues. One does not want one’s information being passed on to unknown third parties.

As with all investments diversification is important – even within asset classes.

If you are compelled to hold gold coins and small bars in your home as a kind of absolute bedrock insurance – and there are plenty of good reasons to do so – that is fine. However, be careful how this is done and other alternatives should also be utilised such as local safety deposit boxes run by reputable firms and the major international vaults in safe locations such asSwitzerland and Singapore.


Today’s AM fix was USD 1,217.75, EUR 1,068.30 and GBP 788.60 per ounce.
Yesterday’s AM fix was USD 1,206.50, EUR 1,059.36  and GBP 781.77 per ounce.

Gold climbed 0.22 percent or $2.70 and closed at $1,211.20 an ounce yesterday, while silver slipped 0.36 percent or $0.06 closing at $16.45 an ounce.


Gold made gains yesterday as buyers viewed the recent price falls as excessive and a buying opportunity. The U.S. Fed minutes released yesterday showed that Fed officials were cautious about raising interest rates too soon, hurting the dollar.

The Fed’s dovish comments led to gold’s finish up 0.3 per cent on Wednesday after hitting a six week low of $1,197.56 earlier in the session. The close above $1,200 was positive from a technical point of view and emboldened technical traders to go long.

Spot gold last traded at $1,217.82 up 0.39% in late London trading while silver was $16.66 up 0.76% and platinum was also up 0.78 percent to $1,179.31.

The Greek debt saga continues and financial tragedy seems increasingly likely.

Greece officially applied for a six month extension to its loan agreement, Eurogroup chair Jeroen Dijsselbloem confirmed on twitter. U.S. Treasury Secretary Jacob J. Lew contacted Greek Finance Minister Yanis Varoufakis yesterday and warned him that failure to strike a compromise would bring further hardship on the country.

Bank runs continue as Greek depositors rightfully fret regardingbail-ins or a return to the drachma. The prudent money is diversifying their savings so as not to be financially decimated.





This is hugely bullish for gold as the Central bank of India lifts its ban on the importation of gold coins and medallions by banks


Two stories on this front:


first: /zero hedge




India Lifts Ban On Bank Gold Imports: Gold Can Again Be Used As Loan Collateral

One week ago we reported that central bank purchases of gold in 2014 were the second highest in the past 50 years, driven by purchases out of Iraq, Kazakhstan and – most of all – Russia, with no offsetting selling. But what about other more conventional sources of demand? Take jewelry, which while very strong in the beginning of the century, dropped off after the Great Financial Crisis, and then tumbled again after India imposed numerous restrictions on gold imports, which however merely forced the local population to find novel ways of smuggling gold into the country.

This is what the WGC had to say about gold jewelry demand in 2014.

Having suffered weak year-on-year comparisons for much of 2014, jewellery demand rallied to a strong finish, reaching 575t in the fourth quarter – 1% higher than Q4 2013. The sector was buoyed by good festival- and wedding-related demand in India, as well as by the seasonal holiday effect in the US and UK. Global annual jewellery demand of 2,152.9t, although down 10% year-on-year, was above the five-year average by a comfortable 5% margin. 2014 was a standout year for Indian jewellery. Demand reached a record 662.1t, topping the previous year’s total by 8%. This in spite of government measures designed to restrict gold imports being in place for much of the year. Wedding- and festival-related purchases drove robust demand of 179.1t in the fourth quarter, up 19% over Q4 2013. Indeed, the second half of the year was the strongest H2 in our data series (from 2000), up 37% on H2 2013.


US jewellery demand was again notable for its improving trend: Q4 was the seventh consecutive quarter of year-on-year growth and the strongest fourth quarter since 2009. Similarly, 2014 full year demand of 132.4t was the highest for five years. That being said, it clearly has to be acknowledged that the market remains far  below pre-crisis levels of jewellery demand, which between 2000 and 2006 averaged 360t per year.


In considering jewellery demand, it is interesting to look at the contribution that the sector has made over recent years to the accumulation of above-ground stocks.Jewellery is by far the largest component of above-ground stocks of gold – accounting for almost half of the 177,200t of gold estimated to be held by private owners and central banks. Jewellery consumption less recycling provides a fairly good proxy for net demand (as the vast majority of recycled gold will be old jewellery). In years gone by net jewellery demand regularly added as much as 2,000-2,500t per year to above-ground stocks. This plunged to less than 100t during the depths of the global financial crisis as distress selling of gold skyrocketed in tandem with a slump in jewellery demand.


The last two years have seen net jewellery demand recover to exceed 1,000t. This is partly due to a firming of jewellery demand as the world has emerged from the crisis. But by far the greater impact comes from the recycling sector and the sharp reduction in the volumes of gold being sold back onto the market. Above-ground stocks of jewellery should continue accumulating at a similar rate as we expect recycling to remain low in 2015, counterbalancing the recent growth in mine production.


In short, even with extended draconian measures created by India to prevent capital account outflows as a result of uncontrolled gold imports (which still take place only “under the table”), a whopping 1000 tons of gold ended up in the form of gold trinkets in 2014 mostly in India, and to a lesser extend in China.

All of that is about to change: earlier today India’s Economic Times reported that the RBI, surely facilitated by the drop in oil prices – a key import for India – has finally lifted its ban on imports of gold coins and medallions by banks and trading houses.  The RBI in a notification also said banks are permitted to import gold on consignment basis. Domestic sales will be, however, permitted against upfront payment only.

“While the import of gold coins and medallions will no longer be prohibited, pending further review, the restrictions on banks in selling gold coins and medallions are not being removed,” it said.


The RBI and the government have been receiving requests for clarification on some of operational aspects of guidelines. Aiming to tame the then widening current account deficit (CAD), the central bank in August 2013 had prohibited imports of gold coins and medallions besides restricting inbound shipments of the metal.


Under the 80:20 scheme, which was withdrawn on November 28 last year, gold imports were linked with its exports.


The notification further said the obligation to export under the scheme will continue to apply in respect of unutilised gold imported before November 28, 2014.


“Banks are free to grant gold metal loans,” it said, adding that Star and Premier Trading Houses (STH/PTH) can import the metal as per entitlement without any end use restrictions.

And it’s not just jewelry: per the RBI announcement:

“Nominated banks are now permitted to import gold on consignment basis. All sale of gold domestically will, however, be against upfront payments. Banks are free to grant gold metal loans.”

Why is that important? Because as we wrote in January 2013 in “Don’t Show Bernanke This Chart Of Gold Loans In India“, before the import ban, gold in India was most certainly money, and the amount of gold loans being created in India was simply exponential.

However, since the importing of gold and its reuse as a money-equivalent collateral meant even more undesired capital outflows, the RBI was forced to halt the practice. Until now.

What all of the above simply means is that the government, tired of fighting a losing war with gold smugglers, has opened up one more avenue by which gold can enter the country on an official, and taxable basis, and as a result physical gold will now resume flowing into India officially, a process which depending on how much gold is being mind out of the ground could mean a rapid depletion of the net available gold in any one period.

It also means that going forward, India’s true gold demand will finally be on the books, as banks find numerous loopholes to pass on the imported gold to end consumers – either in physical or loan form – only this time with the total tonnage once again being officially represented, as was the case in previous years.

By way of example, gold imports surged by 8.13% Y/Y to $1.55 billion in January after the initial RBI restrictions were eased. Expect this number to spike that much more in the coming months as banks rush to reload on physical, especially with paper gold prices determined mostly by ETFs and manipulated by central banks, continue to make purchases (in most currencies, and certainly the dollar) increasingly more attractive, just as the CEO of Rosneft explained is happening to oil right now.

Finally, for those who are unaware, India is considered the largest importer of gold – a title it shares on again, off again with China, the bulk of whose gold imports are also undocumented as they end up almost exclusively in some bonded warehouse where the gold is used as (infinitely) rehypothecated collateral for Commodity Funding Deals and/or in the vault of the PBOC.






(courtesy Press Trust of India/Times of India/GATA)


RBI lifts ban on import of gold coins, medallions by banks


By the Press Trust of Inda
via The Times of India, Mumbai
Wednesday, February 18, 2015

MUMBAI — The Reserve Bank of India today lifted the ban on imports of gold coins and medallions by banks and trading houses.

In a notification the RBI also said banks are permitted to import gold on consignment basis. Domestic sales will be, however, permitted against up-front payment only.

“While the import of gold coins and medallions will no longer be prohibited, pending further review, the restrictions on banks in selling gold coins and medallions are not being removed,” it said.

The RBI and the government have been receiving requests for clarification on some of operational aspects of guidelines on import of gold after withdrawal of restrictions on import of the metal on November 28 last year, the notification said. …

… For the remainder of the report:






Interesting commentary about one bureaucrat from China who tells his audience the truth:


(courtesy Simon Black/Sovereign man)



Meet The Bureaucrat Who Had The Courage To Tell The Truth (& Will Be Jobless Tomorrow)


Submitted by Simon Black via Sovereign Man blog,

It’s not very often that you hear a senior government official refer to their economic situation using the word ‘crisis’.

Yet with uncharacteristic bluntness of any government official anywhere, at least one senior Chinese government official is sounding the alarm bells.

And he would know.


Guan Tao oversees the foreign exchange of China’s $4 trillion stockpile of reserves, so he has an incredibly unique view of capital flows and currency movements in and out of the country.

Currency movements and capital flows are extremely interesting indicators.

They don’t necessarily tell you that there’s a problem. They tell you that people have figured out there’s a problem.

Look at Greece, for example.

The government is bankrupt, another default is looming, and the country is literally about to run out of money. It’s pretty obvious that there’s been a problem for a very long time.

But the central bank data in Greece now shows that roughly 8% of all customer deposits have vanished from the Greek banking system so far this year.

That’s an astonishing figure.

Again, a currency movement like this doesn’t tell you that there’s a problem. All the other data can tell us that.

The currency movements out of the banking system tell us that the people of Greece have figured it out… that they’ve lost confidence in the system.

This is extremely important… because the entire global financial system is only held together by a very thin layer of confidence.

Nearly every western government is bankrupt. Central banks are borderline insolvent. Banking systems are extremely illiquid.

Everything about this system is fundamentally weak. And the only reason that people aren’t panicking is because no one else is panicking.

Like a very thin piece of glass, the tiniest chip can turn into a crack… and ultimately shatter the confidence in this system. That’s exactly what happened in 2008.

Major currency movement and capital flows tell us that people are starting to panic.

It’s happening in Greece. And it’s happening in China.

Mr. Tao informed the audience that the capital flight from China in December alone amounted to $20 billion, and that was just from official channels. The true amount could be four times greater.


This is significant for a number of reasons:

a) It’s happening.

Tens of billions of dollars are fleeing China, which is arguably the largest economy in the world. This does not bode well at all for the global economy.

b) They’re admitting it.

Again, it’s ridiculously unusual for a senior government official, ESPECIALLY IN CHINA, to admit to an audience, “yeah, people are taking their money and getting the hell out of dodge.”

Moreover, Tao even told his audience that China’s financial conditions “looks more and more like the Asian financial crisis” of the 1990s, and that we can “sense the atmosphere of the Asian financial crisis is getting closer and closer to us.”

(Our Chief Investment Strategist said the exact same thing last year.)

Such brutal honesty is certainly welcome. But it’s akin to career suicide.

c) If people are taking their money out of China, with all of its growth and savings, what does that say about other bankrupt nations?

Europe is a complete basket case and will likely go from bad (Greece) to worse (Italy).

Japan is a terminal failure, currently spending over 25% of its tax revenue just to pay interest.

And, perhaps just due to process of elimination, everyone seems to be looking to the United States as the beacon of growth and stability right now.

I’m sorry but this just doesn’t compute.

The US Federal Reserve on a mark-to-market basis is borderline insolvent. The US Federal government actually IS insolvent (based on their own financial statements).

The US banking system is EXTREMELY illiquid and has once again loaded up on risky loan packages (more on this in another letter).

How exactly is this safe?

It’s not. In fact, it’s downright ugly. And not even less ugly than the others.

Bottom line, there are very few safe places out there. Each of the governments has royally screwed up, and at this point, they’re all interconnected.

Greece and Italy cannot fail without devastating much of Europe. Europe cannot suffer without causing problems in China. China cannot slow down without causing major problems in the rest of the world.

Everything is connected.

So it’s simply wishful (and foolish) thinking to simply presume that the US, with its $18 trillion debt level and nearly insolvent central bank, can somehow be ‘all good’ while other nations are hemorrhaging cash.

Be mindful of the risks in the system. Don’t hold everything in the illiquid banking systems of bankrupt countries.

These are important decisions: where you hold your savings matters. Seek out countries with low (or zero) debt that have well-capitalized, highly liquid banks.

And if you haven’t done so already, definitely consider trading in at least a portion of your paper currency for a real asset like gold and silver.

could not have happened to a better bunch of guys..


Barrick is having lots of trouble:



(courtesy A MacDonald/Wall Street Journal)


Barrick Gold to Sell Some Mines, Posts 4Q Loss — Update

By Alistair MacDonald

Barrick Gold Corp, the world’s biggest gold miner by production, announced a fourth quarter net loss of $2.85 billion as the Canadian company added billions of dollars in impairments to the long list of write downs it has already made.

The net loss for the fourth quarter was $2.85 billion, $2.45 per share, compared with a net loss of $2.83 billion, $2.61 per share, for the quarter in 2013.

Adjusted earnings fell to $174 million, or 15 cents a share in the final quarter of 2014 from $406 million, or 37 cents a year earlier, above the 13 cents analysts polled by Thomson Reuters were expecting.

The company announced that it had started a process to sell its Cowal mine in Australia and a joint venture in Papua New Guinea as it looks to reduce debt by $3 billion this year.

Miners around the world are looking to sell assets and trim costs after years of bulking up during a decade long commodity boom. But many have struggled to actually sell their assets, given rival firms’ caution on mergers and acquisitions and hesitation by investors and banks to fund purchases in the current environment.

Barrick’s sales followed years of buying mines around the world. Among the most costly was its debt-financed $7.65 billion takeover of Equinox Minerals Ltd. in 2011.

That purchase included the Lumwana mine, an operation in Zambia, which on Wednesday the company said was partly behind a $2.8 billion in after-tax impairment charges. Barrick suspended the mine last December after Zambia passed legislation to increase royalty taxes. The company said that the write downs were also related to its Cerro Casale mine in Chile.

In recent years the company has written down billions of dollars in the value of assets, amid a decline in the price of gold and as prices paid for projects during the mining boom failed to realize their anticipated value. That includes around $6 billion in write-downs for its massive Pascua-Lama project on the Chile-Argentina border.

Barrick said it expects to produce 6.2 to 6.6 million ounces of gold this year and 310 340 million pounds of copper. It forecasts costs of $860 to $895 per ounce of gold for 2015.

The company said it produced 6.25 million ounces of gold at all-in sustaining costs of $864 per ounce in 2014, lower than its projected cost of $880 to $920 an ounce for the year.

The company said that it was continuing to cut costs and would reduce the size of its head office by almost half to 140 positions. Barrick also wants to become more “decentralized” in a bid to return it to what it calls its more entrepreneurial roots, a mantra that Chairman John Thornton has used since taking that role in April last year with the retirement of founder Peter Munk.

Mr. Thornton has shaken up the company, making several changes to its senior personnel. Former Chief Executive Jamie Sokalsky left the company to be replaced by dual chief executives. Investors though, say the former Goldman Sachs banker has to deliver better results and the sort of investments into the company that he promised when taking up his role.

Gold miners have been hit hard by a fall in the price of gold that has seen it lose over a third of its value since it peaked in 2011. Copper prices have been hit by concerns of slowing growth, particularly in China, the world’s biggest buyer of the industrial commodity.

Write to Alistair MacDonald at alistair.macdonald@wsj.com



A gold reset coming?


(courtesy Koos Jansen/Bullionstar)


Middlekoop and Macleod see a gold-based reset


5:10p ET Wednesday, February 18, 2015

Dear Friend of GATA and Gold:

Gold-based transformations of the world financial system are envisioned in two commentaries today, one by Willem Middlekoop, author of “The Big Reset,” who writes today in Koos Jansen’s space at Bullion Star a commentary headlined “A New Gold Standard in the Making”:


And GoldMoney research director Alasdair Macleod, writing at Gold-Eagle, wonders if the Russian government has figured out that Western central banks don’t have the gold they claim to have and if Russia is ready to undertake a reset of its own. Macleod’s commentary is headlined “Gold and Russia” and it’s posted here:


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





Huge demand for gold from China (SGE withdrawals = Chinese demand) of 59 tonnes.

This demand is not sovereign gold but demand from  its citizenry:


(courtesy Koos Jansen)




Posted on 19 Feb 2015 by

SGE Withdrawals 59t in week 6, YTD 374t: Chinese Gold Soap Extended Another Season

The latest numbers from the Shanghai Gold Exchange (SGE) demonstrate a little over 59 tonnes have been withdrawn from the vaults in week 6 of 2015, down 0.35 % w/w. SGE withdrawals, which are often used as a proxy for Chinese wholesale gold demand, account for an amazing 374 tonnes year to date, up 17 % y/y.

Screen Shot 2015-02-17 at 8.45.16 AM
Blue (本周交割量) is weekly gold withdrawn from the vaults in Kg, green (累计交割量) is the total YTD.

Corrected by the volume traded on the Shanghai International Gold Exchange (SGEI), withdrawals in week 6 were at least 51 tonnes (read this post for a comprehensive explanation of the relationship between SGEI trading volume and withdrawals). Year to date withdrawals corrected by SGEI volume were at least 333 tonnes.

I can’t proof it at this stage, but I think domestic withdrawals are more likely to be 374 tonnes year to date than 333 tonnes. The Chinese import huge amounts of gold which obviously is not going through the SGEI. In addition, it seems unlikely every trade on the SGEI is withdrawn from the vaults in the Shanghai Free Trade Zone to be exported. The SGEI is not yet the place to buy gold.

Shanghai Gold Exchange SGE withdrawals delivery 2015 week 6

Shanghai Gold Exchange SGE withdrawals delivery only 2014 - 2015 week 6

According to my estimates China has imported 280 tonnes year to date (until February 13).

Here’s some more perspective; SGE withdrawals year to date are definitely not less than last year when we experienced how Chinese people can storm their local malls on a mission to buy as much gold as they can (perhaps that’s why this year lifeguards were on the scene to control the shoppers).

Lunar Year Withdrawals

Yes, demand has been huge in China, but not according to the price of gold. Technically speaking it doesn’t matter how much gold is bought to qualify demand, if supply is outstripping demand the price will go in one direction only, down. Officially, by tracking the price this should tell us everything about supply and demand of gold. A declining price means supply transcends demand, until a new price equilibrium is found, and vice versa.

If the price of gold is determined by physical supply and demand of gold we are supposed to believe that since April 2013 (see chart 1) there has been far more supply than demand as the price has come down substantially. Supposedly there has been so much supply, that Swiss refiners expanded their plants and worked in three shifts 24 hours a day to refine all this gold, which they fortunately could dump in China. The decline in the price was an enormous flood of supply and feeble demand!

Perhaps you can read my cynicism between the lines, as in my opinion there is more going on than the official story; for example, all leading Western consultancy firms have underreported 2013 and 2014 Chinese gold demand in both years by roughly 1,000 tonnes. As I have written a few thousand times on these pages: why the mainstream media isn’t covering this remains a mystery.

Most of the big potatoes in the gold realm sort of deny the amount of gold China is accumulating or present inaccurate arguments to defend their understated demand numbers.

On February 17, 2015, Mr Phillip Klapwijk, an analyst with Precious Metals Insights in Hong Kong, previous Executive Chairman of Thomson Reuters GFMS, was interviewed by Jan Harvey and Michael Wagner at the Reuters Global Gold Forum:

Harvey: The period in the run-up to the Lunar New Year is considered a peak season for gold demand in China. From what you have seen, how has buying been this year, compared to last year and the year before?

Klapwijk: In terms of the YoY, my sense is that 2015 is up moderately on 2014 but well below the exceptional demand seen in the same period in 2013.

Hmm, I beg to differ as we can see in chart 3.

Harvey: What sort of consumer trends have been noticeable this year – what sort of products are people favoring, and is gold buying overall as widespread as it has been in the past?

Klapwijk: This is partly a price and timing related phenomenon but also I think speaks to – by Chinese standards – a somewhat ‘soft’ environment for retails sales of jeweler this New Year.

I wrote a lengthy piece a couple of days ago stating retail sales do not make up the majority of gold sales in China.

Harvey: Do you consider withdrawals from the Shanghai Gold Exchange to be a useful measure of demand?

Klapwijk: The withdrawals show what the big picture is for physical “demand”. They are not per se an indication of the total demand for jeweler, investment products or industry.

This is because a good part of the withdrawals represent gold that is used purely for financing and other end-uses that are not equivalent to real consumption.

Wagner: Is financing with Gold a big deal in China?

Klapwijk: Therefore relying on SGE withdrawals to measure the size of and change in true demand is highly misleading. For example, withdrawals in 2013 came to 2,197t and in 2014 to 2,102t. This both overstates the true size of demand and, of course, completely understates the drop in jewelry and especially bar demand last year.

Yes, the difference is mainly the use of gold for financing. 

Harvey: How has that side of the market developed over the last few years? Is it still a growing area of business?

Klapwijk: The use of gold for financing… a kind of “gold carry trade”….has developed tremendously in recent years. Essentially borrowers in the shadow banking milieu are taking advantage of the availability of gold at comparatively very low rates of interest compared to straight forward RMB loans.

An indication of this is that at end 2013 the SGE reported gold loans by members totaled over 1,100 tonnes. My understanding is that number will have grown quite a bit in 2014.

There it is again, the amount of gold tied up in financing deals (CCFD’s) used as an argument to explain elevated SGE withdrawals. In my latest in-depth article on the Chinese gold market I expanded on why this can’t be the explanation as these deals only show up as SGE withdrawals if used for genuine gold business; jewelers leasing gold for production.

Additionally, in a report the World Gold Council (WGC) released April 2014, China’s gold market: progress and prospects, it was stated:

… No statistics are available on the outstanding amount of gold tied up in financial operations linked to shadow banking but Precious Metals Insights believes it is feasible that by the end of 2013 this could have reached a cumulative 1,000t…

Right, so we’re talking about the same gold, 1,000 tonnes has grown into 1,100 tonnes, but now the source of this number (Precious Metals Insights, Phillip Klapwijk, February 17, 2015) says this is simply the amount leased at the SGE (not disclosing what is withdrawn or not). When I emailed the WGC in 2014 to ask what kind of “financial operations” the 1,000 tonnes actually were, they replied:

Gold leasing: Banks have built up this business to support China’s burgeoning gold industry. Miners, refiners and fabricators all have a requirement to borrow gold from time to time. For example, fabricators borrow gold to transform into jewelry, sell and then repay the bank with the proceeds. It is an effective way for the fabricator to use the bank’s balance sheet to fund its business. Banks have strict policies in place for who they can lend to, and these have been tightened over recent years, but during PMIs field research it identified that, in some instances, organizations other than genuine gold business had used this method to obtain gold, which it would then sell to obtain funding [in this case the gold wouldn’t be withdrawn from the SGE vaults]. It would then hedge its position. According to PMI, this can generate a lower cost of funding than borrowing directly from the bank. Our colleagues in China think this would be a very small part of total gold leasing; the majority of it would be used to meet the demands of genuine gold businesses.

Here the WGC admits leased gold that is withdrawn from the SGE vaults is used for genuine gold businesses and only a small part of total leases is used in shadow banking! I rest my case. 

Koos Jansen





Bill Holter delivers a very important paper on timing for a gold reset with China raising the price of gold in yuan per gram:


(courtesy Bill Holter/Miles Franklin)







The year of the goat?





There are many financial and geopolitical events all coming together, culminating or beginning within the next couple of weeks.  The two most notable are what will happen in Greece and Ukraine. There have also been many other clues pointing to some sort of event coming to pass.  In southern drawl, you might say “somethin’s fixin’ to break”.

  We have previously covered Greece and how it’s exit or default could affect Europe, the West, derivatives and ultimately the global financial system.  We have also looked at Ukraine and the potential geopolitical/military ramifications involved.  As of now, the Greeks have not yielded to taking on more debt and the cease fire in Ukraine never even took hold.  What I want to look at today are two seemingly unimportant and entirely disconnected events that may turn out to be of utmost importance AND very connected.
  Chinese New Year begins this week on the 19th and the gold/silver fixes are being altered in a very big way.  I know what you are thinking, “so what?”.  Please follow this thought process through, I have a theory and it will not take very long to find out whether or not it is valid.
  The Chinese are a very methodical people.  They believe in their “rural calendar” which most Westerners would call ritualistic or even superstitious.  For instance the Chinese make plans and even business decisions based on this calendar.  The calendar is based on the solstice year and 12 zodiac signs which Chinese believe “influence” personal traits, abilities and thoughts during the year and for those born in any particular year.  True or not, the Chinese believe it and their actions are definitely affected by their calendar.  They also are famed for making “five year plans” and look very far (100 years or more) into the future.  Unlike the West who looks only to the next quarter, the Chinese look out to future generations (plural).  They are also famous for making policy decisions which implement at the beginning of their New Year.
  We also know the gold and silver fixes will be changed beginning in March.  What was once five or six cigar smoking “gentlemen” in London deciding the morning and evening prices was recently pared down to only four.  Now there will be 11 participants  http://www.cnbc.com/id/102390692 .   The “fix” will now be done electronically and include 11 separate banks …several of which will be Chinese.
  I mentioned a “theory” above:  I believe there is a very good chance the way business is done will change with and as the Chinese New Year comes in.  The Chinese understand the West may very well be thrown into chaos by the Greeks fracturing the Eurozone, Ukraine becoming a hot war zone, both, and or with many additions.  As I have maintained over the last two years, I believe the Chinese have been accumulating gold and plan to eventually peg their currency to it.  They have set up currency swaps and clearing facilities in a dozen “hubs” all over the world including Western capitals such as London, Zurich and Sydney.  They have been preparing for this for several years.  The Chinese have also backed Russia during her recent time of need and also signed several oil, gas, pipeline, currency, clearing and credit facility deals with them.  Russia has in fact gone live with an alternative clearing system, 91 financial institutions have already joined.  It is clear Russia and China are “partners” now and intend to be in the future.
  I have also maintained the Chinese want to eventually see a “cash” market for physical gold and silver to actually “make” price rather than the paper markets of London and New York.  The SCO has recently been opened and beginning to function in Shanghai, it is this “cash and carry” market that I believe will soon be “making” price.  The Chinese fully understand the COMEX is a fraudulent casino.  It is fractional reserve in nature and absolutely miniscule in relation to cash markets as to their inventory.  For example, China imported 10 times the amount of gold in January as COMEX claims as available for delivery.  China’s imports for just one month completely dwarf what COMEX delivers for an entire year.  $10 billion or less could wipe this Western pricing mechanism clean with mere pocket change in today’s world.
  Let me ask a few questions so you might understand how this could go down.  If several Chinese banks are part of the new “fix”, what will happen if these banks decide on a higher price than that desired (and until now “forced”)by the Western banks?  This process will be a “supply and demand” function where a clearing price is “discovered”.  If the process is truly physical in nature, what will happen if these Chinese banks bid, and bid hard for physical metal?  So hard in fact that delivery is made impossible?  Do you see where this is going?  I am asking a very real question, will (can?) the Chinese hijack this process and actually make whatever gold or silver price they desire?  The answer is yes they “can”, the only question remains “when will they?”.
  Before moving on, this train of thought fits perfectly with several of my past thoughts, namely, the physical and paper metals markets diverging and doing so in “gap” fashion.  It is my firm belief we will go to sleep one night and wake up to a very changed world, my thoughts can be found here   http://blog.milesfranklin.com/gaps-will-lead-to-the-truth
  The “fix” is only one small cog in the wheel of coming change.  Logistically, everything is very well in place for this change to occur.  The Chinese have trade deals, currency swaps and trade credit facilities in order.  Both the Russians and Chinese have clearing systems and credit card facilities in place.  Militarily, Russia has moved hardware into place and also courted the Greeks (which by the way may be the reason they refuse European offers?), French, Germans and others.
  A move “logistically” on the part of the Chinese and Russians is now doable and can be expected at any moment.  The two seemingly unimportant and disconnected events of a new calendar year and new fix process may well be the doorbell.  We will soon see.  Please keep in mind, if it is not “now” …it WILL be.  The Chinese and Russians have not done everything they have over the last several years to remain engulfed in a fraudulent and one sided monetary system …and one which they have little power over.  I am not saying that any new system will be “Nirvana” nor will it not eventually be abused by its masters.  What I am saying is this new system will initially (before abuse) be one where the weights and measures are fixed and thus more fair.
  To finish, let me hypothesize a bit more.  I think the Chinese will “peg” gold and maybe even silver to the yuan.  They will do this via use of the daily fix price and they will thus bust the COMEX wide open.  COMEX vaults will be emptied in an overnight arbitrage fashion and the dollar will begin a hyperinflationary implosion.  Let me ask you a couple of questions so you may understand “how” this can easily be done.  If China decided to push the fix price up to an arbitrary number of $1,500 per ounce, how could naked COMEX shorts then raid the futures market?  Could they really be taken seriously that gold was actually dropping in price?  No, arbitrage will set in immediately gobble up inventory.  Let me explain this a little further because I believe it’s where we are surely headed.  Several sources have contended the “cash” market for large gold orders is currently trading with premiums of 50% or even more.  The COMEX apologists have and will surely say “this cannot be because arbitrage would surely step in and raise paper prices”!  I agree, this would be absolutely so in fair markets …but this is a perfect example of how COMEX is operating.  Before you call me a “whiner” please take into account the other side of the equation.  As I just wrote yesterday, COMEX gold as of the Feb. gold contract has not only seen the open interest dry up drastically going into first notice day as it always has, it also saw the amount initially “standing” drop by 90% since FND.  These standing longs walked away from 23 tons of gold which they had already fully funded the accounts for delivery.  Why?  As I wrote yesterday, I believe they are being “bought off” for the very reason of discouraging the arbitrage trade!  Were China to create an “official gold price” via the new fix process, higher than COMEX …then how would the COMEX discrepancy be explained?  The answer is …it could not.  This is a very big problem and one which will expose the current fraud and reveal the ugly truth!
  It is in this fashion we will see gold and silver in dollar terms explode upward.  The fraud of the West will be exposed by empty vaults and unfilled offers at the London fix.  The dollar will collapse versus the yuan and newly gold ratio’d ruble.  Dollars will stampede our shores as the only place to spend them as foreign trade in dollars will dry up (this has already begun).  It will be this wave of dollars bidding for everything from eggs to toilet paper to gasoline which will jack prices to unheard of levels.  The Federal Reserve can try to “buy” as many of these homecoming dollars as they please …with newly printed dollars of course. Functionally it will not work as the supply of new dollars to “buy” old dollars will only increase supply and dilute value.  I believe this scenario has a decent chance of being triggered as the “year of the goat” begins!  We do not have but a few days to see what, if any changes are in store.  Regards,  Bill Holter


And now for the important paper stories for today:



Early Thursday morning trading from Europe/Asia

1. Stocks up on major Asian bourses  / the  yen rises  to 118.91

1b Chinese yuan vs USA dollar/ yuan slightly strengthens  to 6.2550
2 Nikkei up 65.62 or 0.36%

3. Europe stocks in the green  // USA dollar index up to 94.34/

3b Japan 10 year yield huge rise to .39%/ (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.77/everybody watching the huge support levels of 117.20 and that level acting as a catapult for the markets. Poor Japanese auction causes the yield to rise

3c Nikkei now  above 17,000/

3e The USA/Yen rate still  below the 120 barrier this morning/
3fOil: WTI 50.04 Brent: 58.94 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold up /yen up;

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

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

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

3j Oil falls this morning for  WTI  and Brent

3k  The EU and Greece fail to come to an agreement/Germany rejects loan extension/

Greece formally asked for an extension on the “loan agreement”.  Germany said no that they must seek extension on the “programme agreement”

3l  Greek 10 year bond yield :10.02% (up 2 basis points in yield)

3m Gold at $1222.00. dollars/ Silver: $16.80

3n USA vs Russian rouble:  ( Russian rouble flat per dollar in value)  62.02!!!!!!.  Ukraine’s UAH:26.90 flat from last night

3 0  oil  into the 50 dollar handle for WTI and 58 handle for Brent

3p  ECB removes Greek sovereign collateral in their investment strategy (on Feb 11). This leaves only ELA funding for the next two weeks. Maximum allowed 68.3 billion euros for this funding. They also limit the amount of treasuries that Greek can issue.  Greece rejects any more EU funding on the previous program and thus rejects the European ultimatum to accept this funding extension as they cannot have more austere measures and cannot have a primary 4.5% surplus to GDP


3Q  SNB (Swiss National Bank) still intervening again driving down the SF/window dressing/Swiss rumours of intervention to keep the  soft peg at 1.05 Swiss Francs/euro and major support for the Euro.

3r  Dovish FOMC minutes.  Patience on raising rates supports getting the rates at 0% for much longer

3s  Fighting in Eastern Ukraine continues despite ceasefire and surrender of 700 Ukrainian troops

3t  Better UK employment data (see Jim Reid/Deutsche bank)


4. USA 10 yr treasury bond at 2.07% early this morning. Thirty year rate well below 3%  (2.70%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid



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



Stocks Rebound On Hopes Of Resolution To Greek Impasse


After yesterday’s FOMC Minutes, despite a huge dovish reversal by the Fed – one which increasingly puts its “credibility” and reputation at risk – stocks were unable to close green, or even above 2100, for one simple reason: uncertainty with the fate of Greece. Overnight there has not been much more clarity, when as previously reported Greece submitted a 6 month extension request to its master loan agreement but not to its bailout extension, a nuance lost in the annals of diplomacy. But is this the much-awaited Greek capitulation? Or will the Eurogroup reject this too? The answer may be available in a few hours after an emergency Eurogroup meeting due later today. However, as usual stocks are ready to “price in” yet another Greek conflict resolution, and after futures were lower by 7 points overnight, were up 4 points at last check: a rebound which will not correct if the latest Greek “compromise” fails to deliver.

So as we wait for the answer, and as stocks eager to see a favorable outcome, one thing that is not waiting if oil, which after yesterday’s record API inventory build, has finally realized that plunging rig counts do not mean a decline in production – in fact, quite the opposite – and is flirting with the $50 price, threatening with breaching it to the downside.

European equities opened in minor negative territory, thus shrugging off the overtly dovish FOMC Minutes release which revealed numerous members were in favour of keeping rates on hold for longer and cautious over removing the ‘patient’ phrase. Instead European equities were led lower by the fall in energy prices after yesterday’s API inventories. Note that stocks saw a leg lower around 0730GMT which coincided with reports in FAZ that the ECB would like Greek capital controls. However, the move lower was not attributed to the story with fixed income and FX markets relatively unphased by news. Furthermore, the downtick in the DAX was more technically driven on the break of lows printed in yesterday’s afternoon session. Additionally, these reports were later denied by the ECB, upon which there was no market reaction. Nonetheless, despite opening lower, European equities have pulled away from their worst levels with little in the way of fresh newsflow, while Bunds have held onto their initial gains. In terms of Greek assets, the ASE has fluctuated between gains and losses while the 3yr yield is higher circa 75bps as fears for the nation continue to linger.

Overnight, the Nikkei 225 (+0.4%) surged to close at its highest level since the May 2000 following yesterday’s FOMC minutes, with participants shrugging off a slightly stronger JPY. ASX 200 was dragged lower by energy names after WTI fell as much as 3.7%. Chinese, Hong Kong, South Korean, Taiwanese and Singapore stock markets were closed today due to the Lunar New Year. JGBs trade up 26 ticks underpinned by yesterday’s post-FOMC spill-over buying in USTs.

In FX markets, USD was initially broadly weaker against its major counterparts in the wake of the dovish FOMC minutes release. GBP also saw a bout of underperformance in early trade following some dovish comments by BoE-Hawk McCafferty who said the level of current GBP appreciation is slightly uncomfortable and is an issue that should be monitored, adding it is better to hold interest rates at current levels for a little bit longer. The broadly weaker GBP saw EUR/GBP test 0.7400 to the upside thus providing a further boost to EUR/USD. Elsewhere, overnight AUD came under selling pressure sending AUD/NZD to a fresh record low, after S&P said the Australian budget, due in May 2015, would be vulnerable to risk overseas which could risk the country’s AAA rating. Heading into the North American crossover, EUR/CHF saw a bout of strength with the being attributed to potential SNB intervention in lieu of the comments from SNB’s Jordan a few days ago. This subsequently supported USD/CHF and saw the USD-index return to relatively unchanged territory.

Price action for the energy complex has largely been dictated by last night’s API inventory report rather than the FOMC minutes. The report revealed a 6th consecutive build in stockpiles (+14300k vs. Prev. +1600k). This comes ahead of today’s DOE inventory data expected to show a build of 3000k vs. Prev. 4868k. In terms of price action, WTI has come off its worst levels after failing to make a sustained break below the key psychological USD 50/bbl. Nonetheless, precious metals  markets have continued to remain at their best levels, with prices underpinned by the FOMC-inspired USD weakness, while Copper saw subdued trade overnight amid a lack of participants in the markets amid a number of market closures across the region due to the Lunar New Year. CME lowered Henry Hub (NN) initial margins for specs by 16.9% to USD 880/contract from USD 1,059; raised RBOB Gasoline futures (RB) initial margins for specs by 4.2% to USD 5,500/contract from USD 5,280. (CME)

European shares little changed, having risen from earlier losses, with the personal & household and autos sectors outperforming and oil & gas, basic resources underperforming. Greece submitted a request to its euro-area creditors to extend the availability of bailout funds for six months. ECB increased ELA for Greek banks to EU68.3b from EU65b yesterday, to publish a summary of its monetary-policy meeting for the first time today. Leaders of France, Germany, Russia and Ukraine agreed to stand by Minsk agreement despite breach of the cease-fire in Debaltseve. Fed signaled its willingness to keep interest rates near zero for longer in FOMC minutes released Wednesday. The Swiss and French markets are the best-performing larger bourses, U.K. the worst. The euro is little changed against the dollar. Japanese 10yr bond yields fall; Italian yields decline. Commodities decline, with WTI crude, Brent crude underperforming and natural gas outperforming. * U.S. jobless claims, Philadelphia Fed index, leading index due later.

Market Wrap

  • S&P 500 futures up 0.1% to 2097
  • Stoxx 600 up 0.1% to 380.7
  • US 10Yr yield unchanged at 2.09%
  • German 10Yr yield down 1bps to 0.37%
  • MSCI Asia Pacific up 0.3% to 144.7
  • Gold spot up 0.5% to $1218.2/oz
  • Euro little changed at $1.1392
  • Dollar Index down 0.01% to 94.19
  • Italian 10Yr yield down 5bps to 1.57%
  • Spanish 10Yr yield down 5bps to 1.53%
  • French 10Yr yield down 1bps to 0.68%
  • S&P GSCI Index down 1.8% to 413.2
  • Brent Futures down 2.7% to $58.9/bbl, WTI Futures down 4.2% to $50/bbl
  • LME 3m Copper down 0.3% to $5730/MT
  • LME 3m Nickel down 2% to $13965/MT
  • Wheat futures down 0.8% to 519.8 USd/bu

Bulleting Headline Summary From Bloomberg and RanSquawk

  • European equities initially chose to focus on lower energy prices rather than FOMC minutes before pulling off their worst levels amid no fundamental news
  • The ECB have denied reports by German newspaper FAZ that the central bank would favour imposing capital controls on Greece
  • Today sees the release of the first ever ECB minutes, as well as data from the US, including weekly jobs data, Philly Fed Business outlook, EIA natural gas storage change, DoE inventories and earnings from Wal-Ma
  • Treasuries 10Y and longer extend gains seen yesterday after Jan. FOMC minutes said many officials were inclined to keep fed funds rate at zero longer to offset risks to economy.
  • Minutes suggest Fed uncertain about raising rates prematurely, removing “patient” from guidance, based on published research
  • ECB will today publish a summary of its monetary-policy meeting for the first time, which should make interesting reading as it’ll cover the Jan. 22
    deliberations behind the central bank’s controversial choice to start QE
  • Greece’s government submitted a request to its euro-area creditors to extend the availability of bailout funds for six months in a last-ditch effort to avert a cash crunch
  • The ECB said reports that its Governing Council discussed capital controls in Greece at Feb. 18 meeting were “incorrect”; Kathimerini reported ECB rejected Greece’s request to auction EU5b in additional t-bills
  • The biggest buyout fund in the Nordic region says an unprecedented era of monetary stimulus is inflating asset prices across markets to extreme levels, with history offering little help in predicting how it will all end
  • Any sharp gains in the krona would mean “more or less game over,” making it impossible for Swedish policy makers to jolt the economy out a deflationary spiral, Riksbank Deputy Governor Per Jansson said
  • Fighting continued in eastern Ukraine after government troops relinquished a strategic crossroad town and the country’s leader called for the deployment of UN
    peacekeepers to safeguard a fragile truce
  • North Korean leader Kim Jong Un has signaled he may further purge top cadres, ordering senior Workers’ Party members to carry out a “campaign against abuse of power, bureaucratism, irregularities and corruption”
  • Obama, who has come under criticism from Republicans who say he avoids acknowledging the Muslim roots of extremist groups, said terrorists use religion as a recruiting tool by portraying the U.S. and European nations as being at war with Islam
  • Sovereign yields fall. Asian, European stocks gain; U.S. equity-index futures lower. Brent and WTI fall, gold gains, copper declines


DB’s Jim Reid concludes the overnight recap



The Fed decided to keep hold of its crutches for a bit longer last night in what at face value looked a dovish set of minutes. However the level of dovishness probably depends on whether you think the statement would have been much different had the committee seen the most recent strong employment report when they met back in late January. With 38 countries having eased so far in 2015 (many a surprise) and with inflation so low we think the Fed have to tread carefully even if employment numbers are decent.

In terms of the details, much of the focus for markets was on the text concerning that Fed officials ‘indicated that their assessment of the balance of risks associated with the timing of the beginning of policy normalization had inclined them toward keeping the federal funds rate at its effective lower bound for a longer time’. Concerning the inflation outlook, there was some focus from officials that ‘the continuing weakness of core inflation measures as a concern’ as well as some emphasis on further near term disinflationary pressures from falling oil prices but the longer term inflation outlook essentially remained the same with the FOMC still seeing a gradual rise to its 2% target. For us however, attention was on any forward guidance particularly as some sort of pre-requisite to Yellen’s upcoming Humphrey-Hawkins speech. There were perhaps some clues from the text. Specifically the minutes cited that ‘many participants regarded dropping the ‘patient’ language in the statement, whenever that might occur, as risking a shift in market expectations for the beginning of policy firming toward an unduly narrow range of dates’ and that ‘some expressed concern that financial markets might overreact’. Perhaps a signal that it’s easier to keep the ‘patience’ language for now as a means of flexibility? For us we’ve always felt it might be a struggle for the Fed to raise rates in 2015 however there is no doubt the Fed want to raise in June but that they also want to keep flexible with a lot going on macro wise. So it remains difficult to pre-judge and continues to be data dependant and event driven. If the data isn’t there in inflation terms will they really make a pre-emptive strike in the summer? The only reason for doing so in our opinion if this is the case is a belated (possibly by two decades) attempt to avert more bubbles and moral hazard.

Moving on, it’s a bit of a relief that it’s taken 526 words before we mention Greece today but after a quieter 24 hours the clock ticks closer to midnight. The anticipated request for a 6-month loan extension was said to be postponed to today. It’s not entirely clear why the request was delayed however it didn’t appear to upset markets with risk assets in Europe in particular having a stronger day – which we’ll touch upon later. Clearly some of the debate remains in the actual substance of the proposal which will ultimately decide which way we go on Friday. German finance minister Schaeuble maintained his stance on the situation, quoted on Reuters as saying that ‘our room for maneuver is limited’ and that ‘we must keep in mind that we have a huge responsibility to keep Europe stable’. Greek finance minister Varoufakis meanwhile said that ‘the application will be written in such a way so that it will satisfy both the Greek side and the president of the Eurogroup’.

Yesterday we also got news that the ECB had approved an increase in the ELA facility. The facility has now been increased to €68.3bn, from €65bn. Although this is likely to relieve some short term pressure for Greek banks, it of course highlights the further pressure from deposit outflows. Although there was no statement from the ECB side, the incremental small increase does perhaps show how officials are using the tool to keep the pressure on Greece and somewhat force them to come forward with a proposal to satisfy Europe. Previous reports in Greek press Ekathimerini suggested that the Bank of Greece had demanded for the facility to be increased by €10bn. In terms of market reaction yesterday, in the US the S&P 500 closed more or less unchanged (-0.03%) having pared losses of as much as -0.4% pre-FOMC release. Treasuries meanwhile closed notably firmer following the minutes. The benchmark 10y yield finished 5.8bps lower at 2.08% with the bulk of the rally coming post minutes. It was a similar pattern for the Dollar. The DXY had previously traded as much as +0.5% higher in the run up to the release, before giving up all of the gains more or less to finish just +0.05%. A decline in oil prices and softer data in the US had previously weighed on markets before the release of the minutes. Energy stocks (-1.46%) dragged the S&P 500 lower as WTI (-2.60%) and Brent (-3.20%) fell to $52.14/bbl and $60.53/bbl respectively. Meanwhile, data yesterday was softer. Both housing starts (-2.0% mom vs. -1.7% expected) and building permits (-0.7% mom vs. +0.9% expected) printed below expectations. PPI was also weaker with the headline reading coming in below consensus (0.0% yoy vs. +0.3% expected) and down from +1.1% previously and the core print (ex. food and energy) also surprising to the downside (+1.6% yoy vs. 2.0% expected). Both manufacturing (+0.2% mom vs. +0.4% expected) and industrial production (+0.2% mom vs. +0.3%) also came in below consensus whilst capacity utilization for January was unchanged at 79.4%.

In terms of price action in Europe yesterday, as mentioned the delay in the Greece proposal did little to dampen sentiment as the Stoxx 600 finished +0.89%, the DAX (+0.60%), with the CAC (+0.95%) also firming. Greek equities (+1.06%) also closed higher and 3y yields finished around 116bps tighter. The Euro closed 0.12% weaker versus the Dollar at $1.1397 although had traded as low as $1.133 pre-FOMC. It was a stronger day for credit markets too as Crossover ended 14bps tighter. The latest on Ukraine meanwhile are reports on Bloomberg that Ukrainian PM Poroshenko has asked for UN peacemakers to be deployed across the front-line and rebel controlled areas of Ukraine as the conflict continues.

In the UK yesterday Gilt yields rose following the release of the BoE minutes and better than expected employment data. The benchmark 10y yield finished nearly 9bps higher at 1.848% after the minutes showed something of a desire to ‘return inflation to the target as quickly as possible after the effects of energy and food prices movements had abated’. The minutes also noted that ‘in practice, this means that the committee would seek to set monetary policy so that it was likely that inflation would return to the 2% target within two years’. Members voted unanimously for keeping rates on hold, however two members did say that the decision was ‘finely balanced’. The Pound closed +0.53% versus the Dollar yesterday. Elsewhere, data released yesterday in the UK showed that unemployment ticked down one-tenth to 5.7% yoy in December, whilst average weekly earnings rose to +2.1% yoy from +1.8% – however excluding bonuses, weekly earnings actually dropped one-tenth to 1.7% yoy.

Refreshing our screens this morning, it’s a fairly quiet day in Asia with a number of markets closed for holidays, however in Japan the Nikkei (+0.38%) and Topix (+0.80%) are both trading firmer. Oil markets have also extended their declines this morning with both WTI and Brent trading 2-3% lower. It appears the latest decline is ahead of expectations that the latest EIA data will show US crude stockpiles at record levels. In terms of the day ahead, we kick off this morning in Europe with French CPI data along with UK CBI business trends followed later by Euro-area consumer confidence. In the US this afternoon, we’ve got jobless claims and the Philadelphia Fed business outlook to look forward to.






Even though Japanese imports fell 9% year over year and exports rose 17%, seasonal adjustments causes Japan to report its 31 st straight trade deficit:


(courtesy zero hedge)


31st Japanese Trade Deficit In A Row, Longest Stretch In 60 Years



With seasonal adjustments wreaking havoc on the data, Japanese imports (collapsed 9% YoY) and exports (soared 17% YoY), leaving Japan with a trillion-yen deficit. This is the 31st month in a row… the longest stretch since 1954…


Japanese Trade Balance…


*  *  *






Formally Greece requests a six month LOAN AGREEMENT extension


(courtesy zero hedge)


Greece Requests Six Month Loan Agreement Extension, Denies It Requests “Memorandum” Extension



As had been leaked in advance, earlier today Jeroen Dijsselbloem first reported…

… that Greece had submitted a request to euro-area creditors to extend the availability of bailout funds for six months, i.e., an extension to the “Master Financial Assistance Facility Agreement” not an extension to the Greek “bailout programme” aka the Memorandum per se…

… which has been the sticking point in all Greek government public addresses in recent days. Greece further asked for best use of flexibility in “current arrangement”, which supposedly means an unconditional extension with Greece given the liberty to determine what happens in the next 6 months without Troika intervention. But was it a bailout extension or just a loan extension?

It appears not even Greece is certain after Market News reported that:


And furthermore:

So what exactly does Greece want, ask or request? As Bloomberg reports, Greek authorities state intention to cooperate with partners in order to avert technical impediments in context of Master Facility Agreement recognized as binding vis-a-vis financial and procedural content, according to draft letter requesting extension obtained by Bloomberg News.

  • Greek govt applying for extension of Master Financial Assistance Facility Agreement for 6-month period
  • During extension, authorities will make best use of given flexibility in current arrangement, toward its successful conclusion and review on the basis of the proposals of Greek govt and institutions.
  • Purpose of 6-month extension to Greek loan facility is to agree on mutually acceptable terms for the stabilization of Greece’s financial position, attainment of fiscal targets, according to draft extension request letter obtained by Bloomberg News.
  • Any new measures will be fully funded, Greek authorities will refrain from unilateral action which would undermine fiscal targets
  • Extension will allow reintroduction of collateral waiver for Greek banks, extension of availability of EFSF bonds held by the HFSF
  • Extension will allow for work to begin on new contract arrangement between Greece, Europe and IMF to follow on existing agreement
  • Extension will allow agreement on supervision under EU, ECB framework and IMF during extended agreement
  • Extension to allow discussion on means to implement Nov. 2012 commitment on debt relief

Of course, as we first reported two days ago when redlining the original, Moscovici, and final Eurogroup draft proposal, what Greece is requesting is merely a return to the original, “agreed-upon” language formulation. The problem is that now that Europe officially threw up on that language, conceding to the Greek bailout proposal would effectively see the European Goliath bested by the Greek David, something which Germany’s Schauble will hardly agree to.

As such the Eurogroup promptly takes a cautious tone:


Still, Yanis Varoufakis would surely not have sent in an extension request without getting a preapproval on the language in advance from Europe, would he? Here is whatKeep Talking Greece reported moments ago to clarify some of the confusion:

A little light in the confusion… What is the loan agreement for which Greece requests an extension?


“Greece requested an extension of the Master Financial Assistance Facility Agreement” government sources told several media.


The M-FAFA is the official name of the agreement between Greece and the Eurozone.


The loan agreement was signed between Greece and the European Financial Stability Facility (EFSF) and amended 12. December 2012.


Full 68-page text here in pdf


(sources: To Vima, Left.gr)


The EuroWorkingGroup will take up the Greek request at 4 pm today, an extraordinary Eurogroup meeting with physical presence of the Finance Ministers (no tele-conference) is allegedly scheduled for 3 pm tomorrow Friday.


This could be translated into an agreement between Greece & the Eurogroup


Speaking earlier to To Vima, FinMin Varoufakis said that the extension requested is until 31. August 2015, and that it does not contain “recession measures.”


“There will be a YES or NO at the Eurogroup” on Friday, he added.

So was this it? Has Greece officially folded? Expect to find out shortly when the Eurogroup decides whether to go ahead and give Greece the green light on whatever linguistic acrobatic formulation is being passed around right now.





Germany rejects Greece’s proposal


(courtesy zero hedge)


Rejected: Germany Throws Up Over Greek Extension Proposal


Moments after we reported that stocks were delighted to price in yet another Greek resolution (even if they would be loath to reprice the reality), both Bloomberg and Reuters poured cold water over the HFT servers in Mahwah with the following headlines:


In other words this is precisely what we warned first thing today when we said that “as we first reported two days ago when redlining the original, Moscovici, and final Eurogroup draft proposal, what Greece is requesting is merely a return to the original, “agreed-upon” language formulation. The problem is that now that Europe officially threw up on that language, conceding to the Greek bailout proposal would effectively see the European Goliath bested by the Greek David, something which Germany’s Schauble will hardly agree to.

And sure enough, Germany did not.




Greece gives Europe a counter ultimatum:  accept or reject our offer.

Note the huge amount of money that Greece owes Germany on their target 2 balances:




(courtesy zero hedge)


Greece Gives Europe A Counter-Ultimatum: Accept Or Reject Our Offer




After days of repeated ultimata from The Eurogroup, as Germany (bad cop) and the rest (good cop) make optimistic sounds, this morning’s rejection of Greece’s latest plan (following Greek comparisons of Germany to Nazi surrender demands) has prompted something new:


Markets are stumbling on this news as Germany and the rest come to terms with not just the billions in debt on ECB and various bank balance sheets but the 49 billion other reasons to avoid Grexit that have mounted in TARGET2 liabilities.

*  *  *

As Bloomberg reports,

Eurogroup has two choices tomorrow, either reject or accept Greece’s extension request, a Greek govt official says, in response to German Finance Ministry spokesman comments.


Greece has submitted request for 6-mo extension of loan agreement: official

Reuters adds that the Greece’s government “said it was up to euro zone finance ministers to decide whether to accept or reject its proposal to extend a loan agreement, in a bid to play down German comments rejecting the proposal as insufficient. “The Greek government submitted a letter to the Eurogroup asking for a six-month extension of the loan agreement. Tomorrow’s Eurogroup has only two options: either to accept or reject the Greek request,” a government  official said. “It will then be clear who wants to find a solution and who doesn’t.” Earlier on Thursday, the German finance ministry rejected Athens’ request for an extension by saying it fell short of the conditions set out earlier this week by the euro zone.

What else is at stake besides the tens of billions of Greek sovereign bonds held by the ECB and various European official institutions? Why just some EUR 49 billion in Bundesbank Target2 claims which risk a prompt unwind once the sanctity of the “monetary union” is finally broken…



*  *  *

As Goldman recently warned, this is the worst case scenario…

That said, there are aspects that leave usmore worried than we have been since the start of the Euro area crisis. The confrontation between Greece and its European creditors is taking place against different political constraints than on previous occasions. The new Greek government has to be able to claim at home that the program agreed on by its predecessors is all but defunct. While the European partners can agree to modify the content of the program, as we have seen occur in other program countries, they cannot abandon previous arrangements. In our view, the risk of a miscalculation in the negotiations remains high and will peak between now and month-end, when the current program ends.



To mitigate the risk of a failure of the two sides reaching an agreement by the end of the month, investors could consider buying deep out-of-money put options spanning this horizon on liquid equity indices. Given the systemic nature of the ‘shock’, we doubt that even the major markets would be unaffected.

And now, back to BTFATH.




Below is the full text on Germany’s rebuff to Greece’s ultimatum:


(courtesy zero hedge)


Germany Slams Greek Bailout Extension Proposal As “Trojan Horse” – Full Text


As leaked by Reuters moments ago, here is the text of a document that describes Germany’s position on Greece’s letter requesting an extension of its bailout facility as nothing short of a Trojan Horse.

Euro zone officials said the paper was prepared for a meeting of the Euro Working Group in Brussels, a gathering of officials preparing a meeting of the Eurogroup of euro zone finance ministers to be held in Brussels on Friday:

“The Greek letter is not clear at all, but opens immense room for interpretation. To mention the three most important points: It includes no clear commitment to successfully conclude the current programme and its falls short of a clear freeze of Greek measures. It is totally unclear how the Greek government wants to pay its bills over the coming weeks with the current shortfall in tax receipts.


This is why the letter is not in line with the last Eurogroup position. It rather represents a Trojan horse, intending to get bridge financing and in substance putting an end to the current programme. On this basis it makes no sense to start drafting a Eurogroup statement on Friday. We should aim at three things now:


First, the three institutions should carefully examine the Greek current fiscal position in relation to the letter and give us their advice, as agreed in the last Eurogroup, whether on the basis of the Greek letter a successful conclusion of the current programme would be possible, with a sufficient primary surplus and debt sustainability to be assured.


Second, we need a clear and convincing commitment by Greece, which may just contain three short and well understandable sentences: “We apply for the extension of the current programme, making use of built-in flexibility. We will agree with the institutions any changes in measures from the existing MoU. And we aim at successfully concluding the programme”.


Third, Greece has to publicly confirm that it will refrain from unilateral national measures to roll back the current programme. The authorities will, with immediate effect, not take any initiative or implement any measure or policy which is inconsistent with existing commitments under the current programme or aggravate the fiscal situation. This includes refraining from announced labour market and social reforms to be voted in Parliament this week.


The 10.9 billion euros earmarked for banking recapitalisation should not be prolonged since the Greek banks have successfully passed the stress test last year.”



More bank runs


(courtesy zero hedge)


Greek Deposit Run Accelerates Ahead Of Monday’s Bank Holiday


Official Greek deposit data began tumbling in December (outflows around EUR3bn), and accelerated in January in the run up to the Syriza election (proxied by JPMorgan at over EUR 12bn). During the last two weeks, however, the absence of ATM lines and visible bank runs has been curiously lacking as, at least on the surface, there appears to be no panic. However, as Dody Tsiantar reports,sources in the Greek banking sector have told Greek newspapers that as much as EUR 25bn euros have left Greek banks since the end of December with outflows surging this week. Perhaps they are getting anxious that authorities will take Cypriot advantage of the Bank Holiday that is planned in Greece on Monday.


As Dody Tsintar reports (via CNBC),

In the midst of the dramatic showdown in Brussels between the new Greek government and its European creditors, many Greek depositors—spooked by the prospect of a Greek default or, worse, an exit from the euro zone and a possible return to the drachma—have been pulling euros out of the nation’s banks in record amounts over the last few days.


The Bank of Greece and the European Central Bank won’t report official cash outflows for January until the end of the month. Butsources in the Greek banking sector have told Greek newspapers that as much as 25 billion euros (US $28.4 billion) have left Greek banks since the end of December. According to the same sources, an estimated 900 million euros flowed out of Greek banks on Tuesday alone, the day after the talks broke up in Brussels, sparking fears that measures will be taken to stem the outflow. On Thursday, by mid-afternoon, deposits had shrunk by about 680 million euros (US $77.3 million).


“If outflows reach 1 billion euros, capital controls might need to be imposed,” said Thanasis Koukakis, a financial editor for Estia a conservative daily, and To Vima, an influential Sunday newspaper.

*  *  *

Of course the surge in ELA funding needs somewhat confirms the much larger than expected deposit outflows.

*  *  *
One wonders if the seeming standoff between Schaeuble and Varoufakis is making depositors anxious given theplanned Bank Holiday in Greece on Monday…



Strange that Spanish and Italian bonds are not pricing in contagion with respect to the Greek crisis!!
(courtesy zero hedge)


Ukraine Fighting Shifts To Mariupol Whose Capture Would Grant Russian Land Corridor To Crimea


Yesterday, when we reported that the last Ukraine outpost in the rebel-controlled eastern territory, the town of Debaltseve, has fallen into separatist hands, we concluded that “perhaps the only question is whether fighting continues around Mariupol which would enable Russia to have a land corridor all the way to Crimea.”

Moments ago we got the answer when Reuters reported that “pro-Russian separatists have launched mortar attacks on government-held positions near the coastal town of Mariupol in southeast Ukraine and are building up their forces there, local military reached by telephone said on Thursday.”

“Right now there are mortar attacks on Shyrokine,” a local military spokesman said referring to a village about 30 km (19 miles) east of Mariupol, along the coast of the Sea of Azov.

“There is no attempt to seize our positions up to now. The rebels are bringing up reserves,” the spokesman said.

Well, since the Minsk ceasefire is officially over before it even started, one can be sure that an attempt will be made. The reason: as the updated map below showing who controls what territory in east Ukraine currently – with Debaltseve firmly in separatist hands – Mariupol is the last remaining outpost before “Novorossiya” will have a land access to Crimea.


As for what happens after Mariupol, too, falls? Well, the broke Ukraine government is just making it too easy. As Reuters also reports, “Ukraine has suspended supplies of gas to its eastern regions because the gas network was damaged by fighting between pro-Russian separatists and government forces, Ukrainian state gas firm Naftogaz said on Thursday. “Due to the extensive damage of the gas transport networks, the supply of gas … was suspended on Feb. 18. The resumption of gas supplies is not yet possible because of the ongoing hostilities in the region,” the company said in a statement.”

In other words, with Kiev fully cutting off east Ukraine from its control, it will be up to Putin to swoop in and “save” the territory from its host government which no longer cares about the fate of the people living there.







Russia launches its SWIFT program ahead of schedule.  This is not good for the dollar:


(courtesy zero hedge)




De-Dollarization Accelerates: Russia Launches SWIFT-Alternative Linking 91 Entities


Back in 2013, The NSA was first exposed for secretly ‘monitoring’ the SWIFT payments flows. This appears to have been among the last straws for Russia (and others) as far as both NSA spying and dollar domination.

Last year, following threats to remove Russia from SWIFT by the UK, (which SWIFT rapidly distanced its ‘independent-self’ from), Russia (and China) announced plans to create its own de-dollarized version. In November, Russia detailed the SWIFT-alternative’s launch date around May 2015, and just last month, Medvedev warned of “unlimited reaction” if Russia was cut off from the SWIFT payments system.

So the news this week that Russia has launched its own ‘SWIFT’-alternative, linking 91 credit institutions initially, suggests de-dollarization is considerably further along than many expected(especially as Russia dumps US Treasuries at a record pace).


As Sputnik News reports,

Almost 91 domestic credit institutions have been incorporated into the new Russian financial system, the analogous of SWIFT, an international banking network.


The new service, will allow Russian banks to communicate seamlessly through the Central Bank of Russia.


It should be noted that Russia’s Central Bank initiated the development of the country’s own messaging system in response to repeated threats voiced by Moscow’s Western partners to disconnect Russia from SWIFT.



Joining the global interbank system in 1989,Russia has become one of the most active users of SWIFT globally, sending hundreds of thousands of messages per day. In general, SWIFT provides a secure communication network for more than ten thousands of financial institutions around the world, approving transactions of trillions of US dollars.


Earlier this month Russian Deputy Prime Minister Igor Shuvalov expressed confidence that Russia would not be disconnected from SWIFT. In her turn, Russian Central Bank First Deputy Chair Ksenia Yudaeva called upon Russian civilians and financial institutions not to dramatize the current situation.


Russian experts point to the fact that Western businesses would face severe losses if they expelled Russia from the international SWIFT system. On the other hand, the alternative system launched by Russia might reduce the negative impacts caused by measures imposed by the West, including possible disconnection from SWIFT, and diminish Western financial dominance over Russia.

*  *  *

SWIFT (The Society for Worldwide Interbank Financial Telecommunication) is a Belgium-based international organization that provides services and a standardized environment for global banking communicating that allows financial institutions to send and receive messages about their transactions.

The core of SWIFT’s work is a secure financial messaging service that communicates payment orders to be settled at correspondent accounts — accounts that one financial institution holds with another financial institution.


The network has become key to the functioning of Russia’s financial system since the first bank began to use the service in 1989.


About 360,000 such messages are sent daily, making Russia the second most prolific user of SWIFT in the world, the head of SWIFT in Russia, Roman Chernov, told a conference last year, according to RIA Novosti. Over 600 Russian financial institutions use SWIFT, which saw a 40 percent growth in its traffic in 2014, he said.

* * *



WOW!!  The Baltic Dry Index falls to 509, the lowest ever recorded.


(courtesy zero hedge)


Shipbuilding Orders Slump As Baltic Dry Hits Fresh Record Low


For the 56th day of the last 58, The Baltic Dry Index dropped. At 509, this is now down over 65% from the dead cat bounce highs in November 2014 and – yet again – a new all-time record low for the cost of shipping freight. It is no surprise then that, as Lloydlist reports, bulker newbuilding orders slumped in January. When the Baltic Dry tumbled in 2012, the glut of ships then caused a 49% plunge in orders for shipbuilding – as JPMorgan said at the time, “you just have too many yards and too few orders,” and given the artificial signals provided by credit-inflated commodities since, we can only imagine the overhang now.




What happened in 2012 when the BDIY dropped…

China has too many ships.


The glut has pushed new vessel prices to eight-year lows and caused a 49 percent plunge in first-half orders at the nation’s more than 1,500 shipbuilders. It’s also tipped smaller yards into bankruptcy and hit earnings at larger players.


“It is a pretty depressing environment,” said Ajay Mirchandani, a Singapore-based JPMorgan Chase & Co. analyst. “You just have too many yards and too few orders, which is hurting pricing and profitability.”


Orders have tumbled as a global excess of commodity, oil and container ships has damped cargo rates and deterred owners from ordering more vessels.


And today is far worse – the building has been driven by the artificial boom in commodity prices influenced by the exuberant money printing largesses of the world’s central banks…

A SLUMP in bulker newbuildings was recorded during January, with analysts linking the decline to the current dismal state of the dry bulk market.


Greece-based Intermodal Research and Valuations, which prepares a monthly report on global shipping, reported just 20 new orders for bulk carriers.

It is just starting…





Caterpillar has always been a Bellwether on global economic activity along with the Baltic Dry Index.  Today Caterpillar suffers its worst month since Lehman and now it records 26 straight months of declining retail sales.


(courtesy zero hedge)


Caterpillar Suffers Worst Month Since Lehman, 26 Consecutive Months Of Declining Retail Sales

Once upon a time, Caterpillar was the world’s industrial bellwether and a Dow Jones Industrial staple. Lately, in addition to suddenly developing a very close relationshipwith Federal authorities who “are investigating the movement of cash among Caterpillar Inc. ’s U.S. and overseas subsidiaries”, CAT has become a completely ignored and forgotten poster name of the “old-economy” (the on in which cash flow still mattered). However, there are those who still believe that the second coming “eyeballs” as the only valuation term category is destined to end in tears, and as such care about how companies like CAT do.

Sadly, we have some more bad news: Caterpillar just reported that in January, it suffered its worst retail sales month since Lehman, with global sales plunging 14% from last January (when sales in turn had dropped 8% from a year before, while the year before had slid 3% from the year before that and so on). In fact, January was so bad, it was the first month since 2013 when CAT reported declining sales across all regions in which it does business, now that the dead CAT bounce in North America is over.


Finally, those who disagree that the S&P500 is really only and just AAPL, will be even less pleased to learn that as of January CAT was now recorded a record 26 months of consecutive declining retail sales, which is now 7 months more than during the Great Recession period. This alone should make some wonder just how bad the unspoken depression the world is currently in, truly is?

And now Goldman Sachs official announcement that we have a Global Economic contraction for the first time since 2012;
(courtesy Goldman Sachs/zero hedge)

It’s Official: Global Economy Back In Contraction For First Time Since 2012 According To Goldman

After spending the past year deteriorating with each passing month, as global acceleration dipped decidedly in the negative camp, the only thing that kept the Goldman Global Leading Indicator “swirlogram” somewhat buoyant was that “Growth” measured in absolute terms had remained slightly positive. Not any more: according to Goldman’s latest global economic read, the world is now officially in contraction, following a sharp plunge in both acceleration and growth in February.

As the far simpler 2-D chart below shows, the Goldman GLI mometum indicator is now below 0 for the first time since 2012. It also shows what the momentum of the Global Leading Indicator looks like compared to Global industrial production, which is sure to follow below the X-axis in the coming weeks.


What is causing it? Pretty much everything except Initial Claims in the US (which are great for everyone, except the shale states – expect the weakness seen there to spread everywhere in the coming months).

What is the GLI? “The Global Leading Indicator (GLI) is a Goldman Sachs proprietary indicator that is meant to provide an early signal of the global industrial cycle on a monthly basis. There is an Advanced reading for each month, released mid-month, followed by the Final reading, released on the first business day of the following month. The GLI was introduced in 2002 and has been revised twice since then, in 2006 and 2010.

Finally, some parting words from Goldman’s Noah Weisberger:

The February Advanced GLI came in at 1.8%yoy, down from last month’s reading of 2.0%yoy. February Advanced Momentum fell to just slightly under zero, after remaining positive but in decline for seven months. With Momentum slightly negative, the GLI falls into the ‘Contraction’ phase.


Components weak


Six of the seven Advanced GLI components have worsened in February so far. The two market-based gauges – the S&P GSCI Industrial Metals Index® and AUD and CAD TWI aggregate component – continued to decline this month. The Philadelphia Fed headline print (the Advanced proxy for the Global PMI) declined for a third month following its two-decade high of 40.2 in November. The volatile Baltic Dry Index also decreased for a third month. The Philly Fed New Orders less Inventories component and the University of Michigan survey (an early proxy for our Consumer Confidence aggregate) also deteriorated this month. The sole improving component in the Advanced GLI this month was US Initial Jobless Claims.


Into ‘Contraction’ side of the Contraction-Slowdown border


The February Advanced GLI locates the global industrial cycle in the ‘Contraction’ phase, which is characterised by negative and decreasing momentum. This follows last month’s Final GLI, which indicated that the GLI was still in ‘Slowdown

How much longer the rigged, HFT and central bank-manipulated “markets” can continue to ignore what is now a global contraction (from which the US is now clearlynot decoupling courtesy of the 30 out of 35 economic misses just in February following today’s latest Philly Fed miss) is anyone’s guess.




Oil related stories


Oil down as inventories build in Europe  (huge increase in the European API inventory levels):


(courtesy zero hedge)




WTI $49 Handle, Brent Under $59 On Inventory Build Concerns

Following last night’s dramatically larger than expected API inventory build (and ahead of today’s EIA inventory and production data), crude oil prices are tumbling. WTI is back below the $50 Maginot Line and Brent has brokenm back below $59…




This morning we got the EIA inventory levels and they surged to record highs.  Oil drops again:


(courtesy zero hedge)

EIA Crude Inventories & Production Surge To Record Highs




Between European uncertainty and last night’s massive API inventory build (14.3mm barrels), Brent and WTI crude was sliding into today’s inventory data – well off the kneejerk highs at the US equity open (and back under $50). Market participants expected a US crude inventory build of around 3 million barrels but the number more than doubled that at 7.72 million barrels and production soared to new record highs.


Idiot algos kneejerked higher (because 7.72 is lower than 14.3?) but that insanity is fading fast…


This is the 6th week in a row of inventory build…


Record high crude inventories


For those banking on production slowing and inventories being drawn down at some point, we suggest you look away… Crude inventories in the last 6 weeks have risen at the fastest pace in 14 years and 2nd fastest pace in history…


Production surged to record highs…


It seems WTI is sitting at a crucial support level…


This will do nothing to help the WTI-Brent spread which has soared to almost $10 (as the refinery strike and storage capacity limits in the US contest with Libya disruptions across the pond).




Charts: Bloomberg






Your more important currency crosses early Thursday morning:



Eur/USA 1.1366  down  .0020  (with every country on earth buying euros to support it due to the Greek crisis)

USA/JAPAN YEN 118.91  up .180

GBP/USA 1.5435 up .0002

USA/CAN 1.2489 up .0032

This morning in Europe, the euro is down, trading now well below the 1.14 level at 1.1366 as Europe is supported by other nations keeping the Euro afloat,  Europe reacts to deflation, announcements of massive stimulation,  and the Greek crisis .   In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31. The yen continues to trade in yoyo fashion as this morning it settled down again in Japan by 18 basis points and settling just below the 120 barrier to 118.91 yen to the dollar. The pound was up this morning as it now trades well above the 1.54 level at 1.5435.(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 was well down again reacting to the lower oil price and is trading  at 1.2489 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 as well as the potential for a GREXIT.

The NIKKEI: Thursday morning : up 65.62 or 0.36%

Trading from Europe and Asia:
1. Europe stocks all green

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

Gold very early morning trading: $1222.00



Early Thursday morning USA 10 year bond yield: 2.07% !!!  down 1  in basis points from Wednesday night/


USA dollar index early Thursday morning: 94.34  up 15 cents from Wednesday’s close.



This ends the early morning numbers, Thursday morning




And now for your closing numbers for Thursday:







Closing Portuguese 10 year bond yield: 2.26% down 6 in basis points from Wednesday


Closing Japanese 10 year bond yield: .39% !!! down 2 in basis points from Wednesday


Your closing Spanish 10 year government bond,  Thursday down 3 in basis points in yield from Wednesday night.

Spanish 10 year bond yield: 1.55% !!!!!!


Your Thursday closing Italian 10 year bond yield: 1.60% down 2 in basis points from Wednesday:



trading 5 basis points higher than Spain.




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

Euro/USA: 1.1359  down .0041

USA/Japan: 118.97 up .258

Great Britain/USA: 1.5411 down .0024

USA/Canada: 1.2498 up .0042



The euro fell quite a bit  this afternoon following the negative news on the Greece crisis and the continual war raging  rebels going after Mariupol).  It was down on the day by 41 basis  points finishing the day just below the 1.14 level to 1.1359. The yen was well down in the afternoon, and it was down by closing to the tune of 26 basis points and closing just below the 119 cross at 118.97. The British pound lost a lot of ground during the afternoon session and was down on  the day closing at 1.5411. The Canadian dollar was down again today due to the lower oil price.  It closed at 1.2498 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. The last asset still rising are the stock exchanges.



Your closing 10 yr USA bond yield: 2.10 up 4 in basis points from Wednesday


Your closing USA dollar index: 94.41 up 22 cents on the day.



European and Dow Jones stock index closes:


England FTSE  down 9.81 points or 0.13%

Paris CAC up 34.25 or 0.21%

German Dax up 40.94 or 0.37%

Spain’s Ibex up  105.10 or .97%

Italian FTSE-MIB up 130.65 or 0.60%



The Dow: down 44.08. or 0.24%

Nasdaq; up 18.34 or 0.37%



OIL: WTI 51.12 !!!!!!!

Brent: 60.18!!!!



Closing USA/Russian rouble cross: 61.85 down  3/10  rouble per dollar on the day.


closing UKrainian UAH:  (hryvnia)  26.90 UAH to the dollar. (par)

Since November the currency has lost half its value.




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


Your New York trading for today:


Turmoiling Markets Leave Stocks Red, Crude Green, Greeks Blue

(courtesy zero hedge)


Summing up today… “Nein” – Germans to Greece; “Nein” – Greece to Germany; “Nein” – hiring in Texas; “Nein” – Philly Fed ‘hope’; “Nein” – crude production and inventories hit record highs


It’s madness… The US equity market is trading like a penny stock…


As is Crude…


Despite its best effort, the S&P 500 could not hold 2,100 for the 3rd day in a row…


Nasdaq is only looking for one thing… 5000 or bust baby!! but notice the collape in Trannies intrday…


On the week, US equities are mixed with Dow red. S&P unch, Nasdaq leading


Treasuries rallied early but as equities pushed higher on bad macro data and record oil inventories and no deal in Europe!!!?? yields rose once again….


The Dollar rallied on the day, recovering the FOMC Minutes losses… Swiss Franc continues to plunge…


Another day, another take down of gold ansd silver, copper flat and crude recovering magically its plunge as it rallied for some fucked up stupid reason off the big inventory builds…


Just for clarity… Oil soared after the massive EIA build and productiuon data (and gold and silver were sold)…


Charts: Bloomberg







The Philly Manufacturing Fed report shows manufacturing in that area plunging the most since Lehman.


The USA is also imploding faster than a speeding bullet!!


(courtesy Philly Mfg Fed Report/zero hedge)





Philly Fed Down 3rd Month In A Row, “Hope” Plunges Most Since Lehman

Following January’s crash in Philly Fed from 21-year highs to 12-month lows, expectations among the Keynesian-gazers was for a mean-reverting bounce… it didn’t. Falling for the 3rd month in a row, Philly Fed printed a worse-than-expected 5.2 (against 8.43 exp), its lowest in a year. New Orders tumbled to its lowest in a year but most critically, “hope” – the six-month forward outlook index  – tumbled from 50.9 to 29.7the biggest MoM drop since lehman.


From 21-year highs to 12-month lows…


As Hope collapses most since Lehman..


Unde rthe covers it is very ugly…


Charts: Bloomberg




Wow!! just look at Texas with their initial jobless claims as they surge higher than expected.  Also total continuing claims jumps the most since 2015:


(courtesy zero hedge)

Texas Initial Jobless Claims Surge Higher As Continuing Claims Jump Most In 2015



For the 9th week in a row, the smoothed average of initial jobless claims in Texas surged (Other Shale States – PA, ND, and CO also saw a notable rise in claims). While Tennessee’s levels were estimated, the broad levels of claims send a mixed message. Initial claims beat expectations, fell from 304k to 283k with the trend now clearly flat since September. However,Continuing Claims jumped 58k to 2.425 million – the biggest jump in 2015, notably missing expectations. The trend of employmenmt has clearly changed…


It appears the trend of employment has changed…


But The Shale States are suffering… Smoothed average of initial claims (lagged a week)




Charts: Bloomberg


A good bellwether for the USA economy is WalMart. Today Walmart announces a cut to sales growth and they are blaming the strong USA dollar:
(courtesy zero hedge)

Walmart Slides After Cutting Sales Growth Guidance, Blames Strong Dollar

The chorus of companies complaining against the Fed’s strong dollar policy just saw one more addition, when moments ago WalMart- which reported better than expected numbers but disappointing guidance – said that “like many other global companies, we faced significant headwinds from currency exchange rate fluctuations.”

A quick look at the numbers: the EPS of $1.61 was a beat to expectations of $1.54. Of course, the GAAP EPS of $1.53 would have been a miss but let’s ignore that. Let’s also ignore that that WMT’s tax rate in the quarter was 29.5%, which compared to the 33% paid to Uncle Sam a year ago, is what allowed it to beat EPS. Perhaps the only unadjusted silver lining in the WMT results was the increase in comp store sales ex-fuel which rose by 1.6% versus the 0.8% expected. This compares to -0.4% a year ago. Oddly enough, WMT also said that the impact of fuel prices on Sam’s Club comp stores was a whopping -2.4%. Did gas prices somehow soar in Walmartland without anyone getting the memo?

Anyway, that covers the good news. Now the bad, which again are mostly in the projection area and all mostly due to the soaring dollar.

To wit:

“Along with these significant investments, we expect ongoing headwinds from currency exchange rates during the year. We also consider economic conditions in our various markets and our estimated tax rate in establishing our guidance ranges for the year,” added Holley. “After evaluating these factors, we are forecasting earnings per share for the full year of fiscal 2016 to range between $4.70 and $5.05. For the first quarter, EPS will range from $0.95 to $1.10.”


This guidance compares to $1.10 per share Walmart reported for the first quarter of fiscal 2015 and $4.99 per share for the full year. In addition, Holley said that if currency exchange rates remain where they are today, this would cause a negative impact to fiscal year 2016 net sales of approximately $10 billion, as well as a negative impact on operating income of around $0.10 per share.

Thank the Fed’s “strong dollar” policy:

Given the potential impact of currency headwinds, we expect that our fiscal year 2016 sales growth will be between 1 and 2 percent, versus the 2 to 4 percent we provided at our October investor conference,” said Holley. “Our capital expenditure guidance of $11.6 billion to $12.9 billion, which includes investments for stores and e-commerce, remains unchanged. Our net square footage store growth target, excluding future acquisitions, remains unchanged at 26 to 30 million square feet for this year.”

So to summarize:

  • Q1 EPS: $0.95-$1.10 vs Wall Street estimate of $1.14
  • 2016 sales growth of 1-2% vs 2-4% previously
  • And Full Year EPS of $4.70 – $5.05 vs Wall Street estimate of $5.19.

End result, despite WMT announcing it would increase its quarterly dividend from $0.48 to $0.49, below the $0.50 expected, this:

That’s what happens when you don’t surprise Wall Street pleasantly with a boost in your buyback program. As for the strong USD, check to you, Janet Yellen.






We  will see you on Friday.

bye for now



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