March 5/Chinese growth probably below 3%/43% of Japanese tax revenue pays for the interest on debt/ECB kicks starts its QE program/they allow Greece to increase ELA by .5 billion euros/ Turkish lira plummets to record lows/Huge layoffs planned in USA industry/Shale industry reports its first debt default/

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold: $1195.90 down $4.70   (comex closing time)
Silver: $16.13 unchanged  (comex closing time)

In the access market 5:15 pm

Gold $1199.00
silver $16.22

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 33 notices for 165,000 oz .

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 257.05 tonnes for a loss of 46 tonnes over that period.

In silver, the open interest fell by only 501 contracts even though Wednesday’s silver price was down by 13 cents. The total silver OI continues still remains relatively high with today’s reading at 163,517 contracts. The front month of March contracted by 139 contracts.

We had  33 notices served upon for 195,000 oz.

In gold we had a fall in OI as gold was down by $3.40 yesterday. The total comex gold OI rests tonight at 403,134 for a loss of 1990 contracts. Today, surprisingly we again had 0 notices served upon for nil oz.

Today,  inventory stays at 760.80  tonnes/ i.e. no change for the gold inventory at the GLD

In silver, /SLV  we had no change in inventory at the SLV/Inventory

325.992 million oz

We have a few important stories to bring to your attention today…

1. China reports on slower growth

2.Cornerstone Corporation pegs Chinese growth at less than 3%

3.  In Japan 43% of tax revenues go straight to pay interest on debt.

This is unsustainable.

4. The ECB raises Greece’s ELA by another .5 billion/up to 68.6 billion euros.

5. The 4th largest bank in the Ukraine goes bell up

6. Turkey’s lira plummets to record lows as their economy spins out of control

7. The USA shale industry reports its first bond default

8. Challenger and Christmas report a huge 19% increase in job cuts

9. Jobless numbers increase.

10.  The ECB officially launches its QE as the euro plummet to 1.1020

we have these and other stories for you tonight.

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

Here are today’s comex results:

The total gold comex open interest fell by 1990 contracts today from 405,124 down to 403,134 as  gold was down by $3.40 yesterday (at the comex close). We are now in the contract month of March which saw it’s OI fall by 3 contracts falling to 150. We had 0 notices filed on yesterday so we lost 3 contracts or an additional 300 oz will not stand for delivery in March. The next big active delivery month is April and here the OI fell by 4,834 contracts down to 22,739. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 66,444. The confirmed volume yesterday ( which includes the volume during regular business hours  + access market sales the previous day) was poor at 117,310 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 501 contracts from 164,018 down to 163,517 with silver down by 13 cents with respect to Wednesday’s trading. We are now in the active contract month of March and here the OI fell by 139 contracts down to 997. We had 39 contracts served yesterday. Thus we lost 100 contracts or 500,000 oz will not stand.  The estimated volume today was poor at 10,955 contracts  (just comex sales during regular business hours. The confirmed volume yesterday (regular plus access market) came in  at 29,068 contracts. We had 33 notices filed for 165,000 oz today.

March initial standings

 

March 5.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz  114,790.651 oz (Scotia)
Withdrawals from Customer Inventory in oz   6,352.851 oz (HSBC,Manfra)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices)  150 contracts (15,000 oz)
Total monthly oz gold served (contracts) so far this month 1 contracts(100 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month  114,790.651 oz

Total accumulative withdrawal of gold from the Customer inventory this month

 22,942.9 oz

Today, we had 1 dealer transactions

Dealer withdrawals:

i) Out of Scotia had one withdrawal:  114,790.651 oz

total dealer withdrawal: 114,790.651 oz

we had 0 dealer deposits:

we had 2 customer withdrawals

i) Out of HSBC: 3890.346 oz

ii) Out of Manfra: 2462.505

total customer withdrawal: 6,352.851  oz

we had 0 customer deposit:

total customer deposits;  nil  oz

We had 0 adjustment

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

To calculate the total number of gold ounces standing for the March contract month, we take the total number of notices filed so far for the month (1) x 100 oz  or  100 oz , to which we add the difference between the open interest for the front month of March (150) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.

Thus the initial standings for gold for the March contract month:

No of notices served so far (1) x 100 oz  or ounces + {OI for the front month (150) – the number of  notices served upon today (0) x 100 oz} =  15,100 oz or .4696 tonnes

we lost 300 oz of gold that will not stand in this March contract month.

Total dealer inventory: 700,002.664 oz or 21.77 tonnes

Total gold inventory (dealer and customer) = 8.264 million oz. (257.05) 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.

end

And now for silver

March silver initial standings

March 5 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 562,707.81 oz (HSBC)
Deposits to the Dealer Inventory   5,163.10 oz (HSBC)
Deposits to the Customer Inventory 600,667.45  oz (Scotia)
No of oz served (contracts) 33 contracts  (165,000 oz)
No of oz to be served (notices) 964 contracts (4,820,000)
Total monthly oz silver served (contracts) 1665 contracts (8,325,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  1,088,153.2 oz

Today, we had 1 deposit into the dealer account:

i) Into HSBC  5,163.10 oz

total dealer deposit: 5,163.10   oz

we had 0 dealer withdrawal:

total dealer withdrawal: nil oz

We had 1 customer deposit:

i) Into Scotia: 600,667.45 oz

total customer deposit: 600,667.45 oz

We had 1 customer withdrawals:

i) Out of HSBC:  562,707.81 oz

total customer withdrawal: 562,707.81  oz

we had 0 adjustment

Total dealer inventory: 68.855 million oz

Total of all silver inventory (dealer and customer) 178.215 million oz

.

The total number of notices filed today is represented by 33 contracts for 165,000 oz. To calculate the number of silver ounces that will stand for delivery in March, we take the total number of notices filed for the month so far at (1665) x 5,000 oz    = 8,325,000 oz to which we add the difference between the open interest for the front month of March (997) and the number of notices served upon today (33) x 5000 oz  equals the number of ounces standing.

Thus the initial standings for silver for the March contract month:

1665 (notices served so far) + { OI for front month of March( 997) -number of notices served upon today (33} x 5000 oz =  13,145,000 oz standing for the March contract month.

we lost 100 contracts or 500,000 oz will not stand for delivery in March.

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

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

end

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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

March 5 no change in gold inventory at the GLD/760.80 tonnnes

March 4/ no change/inventory 760.80 tonnes

March 3 we had another 2.69 tonnes of gold withdrawn from the GLD. Inventory is now 760.80 tonnes.

March 2  we had 7.76 tonnes of withdrawal from the GLD today and this physical gold landed in Shanghai/Inventory 763.49 tonnes

feb 27.2015 no change in gold inventory at the GLD/Inventory at 771.25 tonnes

Feb 26. no change in gold inventory at the GLD/Inventory at 771.25 tonnes

Feb 25. no change in gold inventory at the GLD/Inventory at 771.25 tonnes

Feb 24.2015: no change in gold inventory at the GLD/Inventory at 771.25 tonnes

Feb 23.2015: no change in gold inventory at the GLD/Inventory at 771.25 tonnes

Feb 20/we had another good addition of 1.79 tonnes of gold into the GLD.  Inventory 771.25 tonnes

Feb 19/ a huge addition of 1.5 tonnes of gold into the GLD/Inventory 769.46

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

March 5/2015 / no change in inventory

inventory: 760.80 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 : 760.80 tonnes.

end

And now for silver (SLV):

March 5 no change in inventory/725.992 million oz

March 4 a slight reduction of  126,000 oz of silver/SLV inventory at 725.992 (probably to pay for fees)

March 3 a small deposit of 328,000 oz of silver into the SLV/Inventory at 726.118 million oz.

March 2/ no change in silver inventory tonight; 725.734 million oz

Feb 27.2015 no change in silver inventory tonight: 725.734 million oz

Feb 26. no change in silver inventory at the SLV/Inventory at 725.734 million oz

Feb 25. no changes in silver inventory/SLV inventory at 725.734 million oz

Feb 24.we had an addition of 1.435 million oz of silver to the SLV/SLV inventory at 725.734 million oz

Feb 23 no change in silver inventory/324.299 million oz

Feb 20 no change in silver inventory/324.299 million oz

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

March 5/2015   no change in silver inventory at the SLV/ SLV inventory remains at 325.992 million oz

end

Not available yet/will update later tonight

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  6.9% percent to NAV in usa funds and Negative 6.8% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.8%

Percentage of fund in silver:37.8%

cash .4%

( March 5/2015)

Sprott gold fund finally rising in NAV

2. Sprott silver fund (PSLV): Premium to NAV falls to + 2.33%!!!!! NAV (March 5/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to +.26% to NAV(March 5  /2015)

Note: Sprott silver trust back  into positive territory at +2.33%.

Sprott physical gold trust is back into positive territory at +.26%

Central fund of Canada’s is still in jail.

And now for the important paper stories for today:

Early Thursday morning trading from Europe/Asia

1. Stocks mostly lower on major Chinese bourse/higher in Australia, India and Japan  / the  yen falls  to 120.16

1b Chinese yuan vs USA dollar/ yuan strengthens  to 6.2665
2 Nikkei up 48.24 or 0.26%

3. Europe stocks all higher  // USA dollar index up to 96.18/

3b Japan 10 year yield huge rise to .41%/ (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.60/everybody watching the huge support levels of 117.20 and that level acting as a catapult for the markets.

3c Nikkei still  above 17,000/

3e The USA/Yen rate still  below the 120 barrier this morning/
3fOil: WTI 51.93 Brent: 61.18 /all eyes are focusing on oil prices. This should cause major defaults as derivatives blow up.

3g/ Gold down /yen down;

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

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

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

3j Oil up this morning for  WTI  and down for Brent

3k Tomorrow’s job report important to the world as they see if the USA is also faltering

3l  Greek 10 year bond yield :9.63% (down 1 basis points in yield)

3m Gold at $1202.00 dollars/ Silver: $16.22

3n USA vs Russian rouble:  ( Russian rouble  up 1/2  rouble / dollar in value)  61.22!!!!!!.

3 0  oil  into the 51 dollar handle for WTI and 61 handle for Brent

3p  Draghi’s day has arrived and will tell the world how he will buy 60 billion euros of bonds each month

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 Britain’s Serious fraud squad investigating the Bank of England 

3s  China’s Premier Li lowers growth targets to China/sounded downbeat

3t  German factory orders tumble 3.9%

4. USA 10 yr treasury bond at 2.13% early this morning. Thirty year rate well below 3%  (2.73%!!!!)/yield curve flattens/foreshadowing recession
5. Details: Ransquawk, Bloomberg/Deutsche bank Jim Reid

end

Euro Slides, Futures Flat Ahead Of Mario Draghi’s Press Conference And Q€ Cheat Sheet

Markets Stumble After China Slashes Growth Target For 2015, Warns “Downward Pressure Growing”

You wouldn’t know it if you looked at the price of oil, but arguably the world’s largest economy just unloaded a kitchen sink of fears, warnings, and downgrades on its economy; the most notable being:

  • *CHINA SETS 2015 GDP GROWTH TARGET AT ABOUT 7% (from 7.5% in 2014)

In a report to be delivered to the government tonight,Premier Li Keqiang warned China may face more economic difficulties in 2015 vs 2014 and downward economic pressure is still growing (despite Western ‘analysts’ proclaiming China fixed). The currency is weakening on the news and AsiaPac stocks are lower and as Chinese stocks open lower (despite hints at more easing), millions of newly minted “can’t lose” Chinese investors begin to worry.

Among the most notable headlines:

  • *CHINA SETS 2015 GDP GROWTH TARGET AT ABOUT 7%
  • *CHINA TARGETS ABOUT 6% TRADE GROWTH IN 2015
  • *CHINA MAY FACE MORE ECONOMIC DIFFICULTIES IN 2015 VS 2014
  • *CHINA’S ECONOMIC DOWNWARD PRESSURE IS STILL GROWING: LI
  • *CHINA MONETARY POLICY MAY EASE FURTHER IN 2Q: CHEN YULU
  • *CHINA WILL BUILD ADDITIONAL 7.4M UNITS OF PUBLIC HOUSING
  • *CHINA TO EXPAND YUAN’S GLOBAL USE: LI KEQIANG WORK REPORT
  • *CHINA TO INCREASE TWO-WAY YUAN FLEXIBILITY
  • *NO NEED TO WIDEN TRADING BAND THIS YEAR, CHEN YULU SAYS

And the reaction…

The offshore Renminbi is 160 pips weaker than its early morning levels and gapped 50 pips weaker on the growth target cut…

Chinese Stocks are lower in the pre-open, as is the Hang-Seng.

But can you spot the moment that the world’s largest economy took an ax to its economic forecast for the year in the oil chart below?

*  *  *

Just two short weeks ago, one of Beijing’s official mouthpieces printed a story which seems to have pre-empted much of this with a warning from no lesser person than Lu Lei, the head of the research bureau of the People’s Bank of China, the central bank…. As ChinaDaily reports, strcutural adjustments may cause a liquidity squeeze…

The nation is paying a price for economic structural adjustment, reflected in commercial banks’ surging nonperforming loans. To avert further risks, the People’s Bank of China may take measures to control the expansion of debt.

Difficulties are increasing for the central bank to manage liquidity. The traditional measure of increasing money supply based on the position for foreign exchange purchases is no longer efficient, and the uncertainty of capital flows is increasing.

Amid slower economic growth, a rise of commercial banks’ NPLs will lead to liquidity problems, which will cause volatility and influence interbank interest rates.

However, it is unlikely that we will see a systemic liquidity crisis, although there may be a short-term liquidity squeeze.

Macroeconomic policies have different target periods.

For the short term, they focus on maintaining moderate liquidity. In the medium term, the policy emphasis will be on fiscal and financial reform. And in the long term, the target will be to reshape the sustainable growth model.

The policies should avoid aggressive stimulus, accelerate the deleveraging process and drive structural reforms.

Monetary policy fine-tuning is likely according to changes in the economic situation, with apreference for maintaining reasonable market liquidity and providing a neutral financial environment for industrial upgrading.

The reforms of the exchange rate and interest rate systems will continue and encourage fair competition in the financial markets.

China’s economic growth rate may remain stable at a relatively lower level in 2015, between 6.9 and 7.1 percent, restricted by sluggish demand.

Fixed-asset investment is likely to slow further, restrained by the gloomy real estate market and a moderation in local governments’ drive to invest. Consumption growth will become more stable.

Upside risks will mainly come from the growth in external demand, but a trade surplus will result because of a decline in imports rather than growth in exports.

The biggest medium-term uncertainty for the economy is deflation risk.

The Consumer Price Index may remain low under the pressure of a weakening economy. It is difficult to anticipate any rise in the Producer Price Index, as the structural rebalancing process has progressed slowly andovercapacity is still a serious issue for manufacturers.

As global commodity prices may remain low, imported deflation may deepen in 2015.

Cross-border capital flows will become more complicated as the European and Japanese central banks pursue monetary policies that run in opposition to those of the United States, and the dollar is expected to further appreciate.

*  *  *

Can anyone in America (or Europe) imagine a central banker speaking so forthrightly about the possibility of turmoil?

end

Cornerstone is a paid economic report and these guys are pretty good.

In a public commentary, they stated that the Chinese economic activity is probably less than 3% and they give reasons why. They are deeply concerned on the huge outflows of cash.

(courtesy Cornerstone/zero hedge)

Chinese Economic Activity Has Probably Slowed To Less Than 3%”

In a world in which sell-side research (and even that of independent third-parties) is not only meaningless – because as we first said in 2010 the only thing that matters in the New Paranormal is ‘the Fed’s H.4.1 statement’ – there are few sources of insightful, non-conflicted analysis. One place which stands out is Cornerstone Macro – yes, it costs a lot of money, but it’s worth it.

Cornerstone is the one place which actually turned bearish a little over a month ago, purely on fundamental factors (FX, oil, global recession), and has been pointing out many of the discrepancies in the narrative (then again, as we showed before, in a world in which central banks are set to have the greatest amount of nominal “intervention” surpassing even the post-Lehman period…

… one doesn’t have to be a rocket surgeon to realize that things are not only not good, but have rarely been worse even with the benefit of $13 trillion in central bank liquidity).

We bring it up because Cornerstone’s analysis of recent developments in China bears keeping a very dose eye on. We won’t spoil it, especially for those who are paying subscribers to the paid (and quite expensive) service, but we will present what they have chosen to broadcastpublicly on their research section, which in light of last night’s official news of yet another confirmation the slowdown in China is getting worse (not only on the unprecedented debt build up which we have covered extensively in the past, and where monetary ‘austerity’ is suddenly a very hot topic, but where capital outflows have become the number one focal issue) has released several key research reports.

Here are the key publicly-available excerpts from some of their salient recent reports (accessible here and here):

From Hello Beijing, We Have a Problem:

China is likely to continue to ease, for 3 reasons:

1.    Chinese economic activity has probably slowed to less than 3%.
2.    China is likely to experience broad-based deflation.
3.    China is Nicely to continue to experience net capital outflows. That last bullet, net capital outflows, is the focus of the report today.

Bullets 1 and 2 are already widely discussed/debated. In the video and slide deck, we focus on this net capital outflows and how they are basically tightening financial conditions. That is what the PBoC is battling right now. Will growth reaccelerate?

From 3 Updates, China, Eurozone, And The U.S.

In China, based on the composite PMI (HSBC & CFLP), employment is weakening, helping explain the declining trend in consumer confidence. In addition, company earnings, as reported by IBES, declined 0.7% y/y in February. So, although the composite PMI ticked up slightly, it’s still at a sluggish 51.5%. That’s apparently weak enough to keep downward pressure on company earnings and therefore, employment

And finally from Another Dark Day For The CRaBs

Chinese govt has acknowledged growth is slowing, and is now forecasting 7% real GDP growth for 2015, the slowest pace in 25 years. We still believe underlying economic activity is growing closer to 2% – 3%.

There is much more in the actual notes, with extensive supporting documentation, which we leave to readers to uncover, but the bottom line is clear: on one hand we have China’s premier warning China will slow to “only” 7%, on the other we have a reputable research boutique using fact-based research and evidence, to determine that actual China’s growth is not even half this number!

What does this mean? Well, in a world in which the US is now very rapidly recoupling with what until recently was an ex-US global contraction (as Goldman confirmed), a China which is growing at a well below stall-speed pace, and in fact is at what even Deutsche Bank said is on pace for a mini hard landing, to think that the ECB’s monetization (of bonds which nobody really knows who will sell) will make up for China’s furious pace of credit creation (which is really what in a Keynesian world is what “growth” really is) is beyond naive.

If and when the reality of China’s predicament (recall that it was China’s creation of over $3 trillion in credit during the post-Lehman depression that was instrumental in the global rebound) spills over to the entire world, then all bets are off.

And just so readers have a sense of the Chinese credit/asset creation juggernaut, here is the chart of the day from our November 2013 post (update for the latest data below) showing “How China’s Stunning $15 Trillion In New Liquidity Blew Bernanke’s QE Out Of The Water.”

If the blue line plateaus, or – inconceivably – starts declining, that will be the time to panic.

end

Two important points here:

1. Japan now spends 43% of all tax revenue just to fund the interest on the debt.

2. Japanese investors realizing the dire situation in Japan is pulling money out of Japan and parking it in various strong safe havens like Singapore:

(courtesy Simon Black/the Sovereign Man)

Japan Now Spends 43% Of Tax Revenue To Fund Interest On Debt

Submitted by Simon Black via Sovereign Man blog,

It’s entirely possible that we may see interstellar space travel in our lifetime. And what a dream that would be.

But in the meantime, for anyone that’s losing patience with space technology, I would recommend you visit Japan. Because for anybody that has been here, this place is as close as it gets to being on another planet.

Japan is a land of irony and dichotomy. It is one of the most conservative cultures in the world, while simultaneously being one of the most perverted.

Business culture here is yet another thing that seems totally alien. Creativity and innovation are constrained by process and procedure. The individual is never celebrated, and dutiful compliance is everything.

In Japanese corporate culture, business meetings follow a strict agenda. New ideas, no matter how valuable, are simply not welcome.

They actually have a term here called nemawashi, which is a meeting before a meeting. The idea being that if you have an idea to present at a meeting, you need to discuss it first so that nobody’s caught off guard or embarrassed by not having a prepared response.

This is a cultural nuance that is completely lost on most Westerners. It stems from this mindset that everyone has an obligation to make sure that nobody else looks bad.

This carries over especially into Japan’s economic and financial situation. As a percentage of GDP the government here is carrying more debt than anyone else on the planet.

At one quadrillion yen, the debt level is so high that it now takes the government 43% of its central tax revenue just to pay interest this year.

The percentage of tax revenue to service the debt has been rising for years and is absurdly unsustainable. Yet large Japanese businesses have dutifully continued to hold Japanese government bonds as part of their obligation to make sure that the government doesn’t look bad.

It’s like a financial nemawashi, saving their counterparty from embarrassment.

This, however, is starting to change. Through its policy of aggressively seeking to create inflation, the government is now guaranteeing that anyone who holds Japanese government bonds will lose money.

This makes government bonds no longer an investment or a store of value, but a charity case. At best it’s just another tax.

Throughout history governments have often overestimated how much their citizens are willing to accept.

Japan has a beautiful stoic culture that has been able to endure tremendous suffering. That said, everyone has a breaking point.

And that’s when you see that there’s a big difference between love of country and love of government.

Bottom line – it’s already starting to unravel.

Every time I’m in Singapore now, as I was just last week, my banking contacts report exponential growth in Japanese customers. Businesses, entrepreneurs, and investors are all moving money out of Japan and into Singapore.

Even Japanese banks are aggressively expanding, following the money out of their own country.

This is precisely when capital controls end up being imposed—when a trickle of capital fleeing turns into a flood.

We’re seeing the same things right now in many places around the world, with most of the attention now focused on Greece and other parts of southern Europe.

However, as Japan has the third largest economy in the world and is the most woefully indebted, it’s really the one to watch.

When the powder keg goes off that sets the global financial system ablaze, it will most likely be in Japan where the match is lit.

end

Greek news: ECB extends emergency ELA by another 500 million euros. The maximum is now 68.8 billion euros.

ECB extends emergency ELA pool for Greek lenders: CapitalGR reported that the ECB has raised the amount of emergency liquidity available to Greek banks by €500M, bringing the total size available via the emergency lending assistance (ELA) facility to €68.8B. Recall that the ECB previously raised the amount available to Greek banks by €3.3B on 18-Feb and €5B on 12-Feb.

end

The Ukraine bans gold transactions as well as currency derivatives and interbank purchases.  The 4th largest bank in the Uraine failed last night.

(courtesy Mish Shedlock)

Ukraine Bans Gold Transactions Over $125, Currency Derivatives and Interbank Purchases Exceeding $10,000; Update on Black Market Rates in Ukraine

Today the National Bank of Ukraine announced new capital controls on currency transactions. All Interbank Transactions Over $10,000 are Banned.

The national Bank of Ukraine has expanded the list of administrative restrictions for stabilization of the hryvnia, in particular, completely prohibiting the withdrawal of foreign dividends and limiting the purchase of foreign currency on the domestic markets.

Resolution No. 160 is effective from March 4, 2015 and is valid until June 3, 2015.

Previously, prohibitions did not target dividends on securities that are traded on stock exchanges.

The NBU has also introduced limits on the balance of banks’ operations on the interbank market at the end of the day and banned financial institutions from using currency derivatives on stock exchanges.

These restrictions apply to customer’s accounts over $10,000 as valued by the official rates.

Gold Buying Prohibited

In addition, the NBU banned precious metal transactions in amounts over 3,000 UAH [about $125], and also the transfer of currency abroad in excess of 15 thousand UAH [about $625].

The list goes on and on, I translated what I could understand.

Interbank Rates

For my gold and currency estimates, I used today’s interbank rate of approximately 24 UAH per 1 US dollar even though the official rate is ridiculous.

Reader John whose sister lives in Lviv informs me the current rates in Ukraine are as follows.

  • As of 2:30PM today, the official rate is 23.7712 UAH to the dollar. (Rate was at 24.8206 on March 3)
  • The trading range of the USD tightened into the range of 21.5 – 23.5 UAH in the Interbank market. The Euro traded in the range of 24 – 26 UAH per Euro.

Back Market Rates

On the streets of Lviv, the rates are as follows …

  • BUY 1 USD = 22.00 UAH
  • BUY 1 EURO = 25.00 UAH
  • SELL 1 USD = 27.00 UAH
  • SELL 1 EURO = 30.00 UAH

The third line is key. It takes 27 hryvnia to buy a dollar on the black market in Lviv, an improvement over the mid-30s last week. For how long?

Imports Will Dry Up

I caution that capital controls on gold and foreign exchange is a huge sign of weakness. And if the IMF doers not give Ukraine a “loan” or gives Ukraine less of a loan than expected, I expect street rates will quickly hit 50 if not 100 to the US dollar.

Finally, importers are going to be under extreme pressure at artificial rates. Imports will dry up. Merchandise in stores will not be available at almost any price because there will be not be any imported merchandise to speak of at all.

If this reminds you of Venezuela, it should.

Mike “Mish” Shedlock
http://globaleconomicanalysis.blogspot.com

Read more at http://globaleconomicanalysis.blogspot.com/2015/03/ukraine-bans-gold-transactions-over-125.html#KmJjKQ6ZIaXHMCMQ.99

end

(courtesy Reuters/Daily Mail)

Ukraine central bank declares fourth-largest lender insolvent

KIEV, March 3 (Reuters) – Ukraine’s central bank declared the country’s fourth-largest lender, Delta Bank, insolvent on Tuesday, saying it had adopted risky policies during a period of economic turmoil.

Political upheaval and conflict have weakened the national hryvnia currency around 60 percent in value against the dollar since the start of 2014 and the central bank has taken steps to protect the banking sector, including offering refinancing for lenders suffering severe capital outflows.

“These steps temporarily improved the situation for (Delta), but did not lead to a significant improvement of its financial condition,” the central bank said.

Delta’s insolvency is due to a “failure to take timely, effective and sufficient measures to improve the finances of the bank,” the central bank said.

No one from the bank was immediately available for comment.

Central bank chief Valeriia Gontareva said the bank, which controls assets of around 60 billion hryvnia ($3.2 billion), had been involved in “risky activities”.

“The bank … decided to get into corporate lending but unfortunately it didn’t have enough expertise in this sector,” she said in a briefing.

The central bank said 94 percent of Delta’s depositors would be compensated for their lost deposits in full, because it offers guarantees for holders of deposits amounting to less than 200,000 hryvnia.

Ukraine’s banks were already weighed down by a raft of non-performing loans from the 2008-2009 financial crisis, but the economic crisis exacerbated by a year of conflict with pro-Russian separatists was too much of a burden for many to bear.

The central bank closed thirty banks last year and has declared around ten bankrupt since the start of 2015.

($1 = 19.0000 hryvnias) (Reporting by Natalia Zinets; Writing by Alessandra Prentice; Editing by Andrew Heavens)

Read more: http://www.dailymail.co.uk/wires/reuters/article-2977574/Ukraine-central-bank-declares-fourth-largest-lender-insolvent.html#ixzz3TXnCyJPk
Follow us: @MailOnline on Twitter | DailyMail on Facebook

end

The daggers continue to enter into the heart of the dollar hegemony:

(courtesy zero hedge)

Who’s Isolated Now? Kazakhstan Authorities Announce Plans To De-Dollarize Economy

Following the approval of the government, Kazakhstan’s Central Bank has announced it plans to de-dollarize its economy by the end of 2016. The goal is to avoid the macroeconomic instability that the USD creates and to give priority to Tenge in trade agreements (banning price designations in foreign exchange). Coming just 2 weeks after the ratification of the $100 billion BRICS bank, and Russia’s creation of a SWIFT-alternative, one wonders – as one by one foreign nations agree non-dollar trade and swap agreements – who is becoming ‘isolated’ now?

The Tenge is at record lows against the USD…

Full Zazakhstan Central Bank Statement (via Google Translate):

On measures to reduce dollarization of the economy

March 4, 2015 in Almaty

National Bank jointly with the Government to develop a plan to reduce the level of dollarization of the economy of Kazakhstan for 2015 – 2016 years, which was approved at a meeting of the Government of February 17, 2015. In addition, the plan approved at the meeting of the Board of the National Bank February 25, 2015.

The plan includes three main strategic directions:

  1. Ensuring macroeconomic stability;
  2. The development of non-cash payments and reduce the shadow turnover;
  3. Priority over foreign currency.

In the first direction in the plan includes measures to diversify the economy and increase the local content in goods, works and services.

The second area includes measures for the development of non-cash payments.

In the third direction is provided to increase the size guarantee on deposits in the national currency with 5 million. Tenge to 10 million. Tenge, reducing interest rates on deposits in foreign currency up to 3% annual, providing liquidity to banks and recovery of the banking sector, a ban designation on prices in foreign currency (including in arbitrary units).

Reducing the level of dollarization of the economy is a long process, whose progress is possible with constant and systematic work with a set of interrelated measures and joint efforts not only of the Government and the National Bank, but also of all economic actors.

*  *  *

With China’s earlier statement and now this, today is not a great day for the US reserve currency’s future. Just as the dollar emerged to global reserve currency status as its economic might grew, so the chart below suggests the increasing push for de-dollarization across the ‘rest of the isolated world’ may be a smart bet…

end

The following is a terrific commentary on the plight of one of the BRICS: Brazil.

This should help explain why Brazil and the rest of the world are having a global contraction

(courtesy Rauol Meijer)

A Day In The Life Of A Falling BRIC

Submitted by Raul Ilargi Meijer via The Automatic Earth blog,

It’s not that long ago, in 2001, that Jim O’Neill, then still with Goldman Sachs, coined the term BRICs, for the fast emerging markets of Brazil, Russia, India and China. O’Neill saw a global power shift from the west to these four nations happening. Fast forward to today, and we see Russia under multiple attacks, including economic ones, from the west, as India just announced the second rate cut this year and China is attempting controlled demolition of the possibly biggest financial bubble in the history of the world.

And Brazil? If anything, it’s falling even faster off its pedestal than the other three nations. And in Brazil, it’s as much corruption scandals as it is the financial crisis and the plunge in oil revenues that take center stage. The stories have long been simmering, but they all came together in the media yesterday.

First, a seemingly minor one. Eike Batista was once the richest man in Brazil, and one of the 10 richest men on the planet, having made a fortune in gold mining and later oil. Then he went on to become probably the one man to lose the most money in the shortest time, going from $32 billion in early 2013 to minus $5 billion or so a little over a year later, impossible to pin down exactly for numerous reasons, but spectacular for sure.

Yesterday Mr. Batista made the news when the judge in a case against him for insider trading, was taken off that case for driving one of Batista’s luxury cars to his own home. He claimed the police had no place to store the vehicle…

Brazilian Court Upholds Removal of Judge From Eike Batista Trial

An appeals court on Tuesday upheld a decision to remove the judge presiding over the trial of Brazilian businessman Eike Batista , throwing out many of the judge’s rulings, according to a spokeswoman for the court in Rio de Janeiro. Later Tuesday, the court said it granted the judge— Flávio Roberto de Souza —a medical leave until April 8th. A separate appeals court had ordered last week that Federal Judge de Souza be removed from the case after he allegedly drove one of the cars he had ordered seized from Mr. Batista. Tuesday’s ruling was on a motion filed in December by Mr. Batista’s lawyers to have Judge de Souza removed from the case, claiming he had given a number of news interviews in which he used language demonstrating bias against Mr. Batista.

Judge de Souza has denied being partial. His removal will delay the case, which could be assigned to a new judge as early as Tuesday, the spokeswoman said. Mr. Batista is on trial for market manipulation and insider trading, charges he has denied. The judges who ruled on Tuesday overturned all of Judge de Souza’s actions during the trial until another judge can decide how to continue the case. The freeze on Mr. Batista’s assets ordered by Judge de Souza remains in place, however.

Police in February seized 11 vehicles, including a Porsche Cayenne the judge allegedly drove, as well as a Lamborghini Aventador, from Mr. Batista’s homes. They also took jewelry, a grand piano and a fake Fabergé egg as guarantees to repay investors in the event the entrepreneur is found guilty. The cars were to be sold at auction and the proceeds placed into escrow until the conclusion of the trial, an action allowed under Brazilian law. The piano, which was being kept at the apartment of one of Judge de Souza’s neighbors, along with one of the seized cars have been returned to Mr. Batista…

Then, on the same day, Brazil’s top prosecutor asked the country’s Supreme Court to start 28 separate investigations against 54 individuals, mostly politicians, in the Petrobras kickback scandal (‘under Brazilian law, politicians and cabinet members can only be tried by the Supreme Court.’) I don’t know how many politicians Brazil has, but it would seem 54 is a solid haircut. And, of course, current president Dilma Rousseff was herself head of Petrobras from 2003-2010, the period in which the kickbacks took place. She’s probably not among the 54 to be investigated, however.

Petrobras did Batista one better. Its market capitalization was a reported $310 billion in May 2008. It has since lost $270 billion of that. According to the BBC, $100 billion was lost just since last September.

Petrobras Scandal Takes Politicians To Court

Prosecutor-General Rodrigo Janot’s office did not release the names of the politicians, but plea bargain testimony by defendants in the case leaked to local media indicate that most are members of the ruling Workers’ Party and coalition allies in Congress. O Estado de S. Paulo and other newspapers said the list includes Senate President Renan Calheiros and Speaker of the Chamber of Deputies Eduardo Cunha, both the top leaders of Congress and members of the PMDB party, the largest ally in Rousseff’s ruling coalition. The judge in charge of the case must decide whether to lift a secrecy provision and release the names and plea bargain statements.

The politicians were named by a former senior manager at Petrobras and a black market currency dealer whose arrest last March triggered an investigation into the funnelling of money from overpriced infrastructure contracts into the pockets of corrupt executives and politicians. Some of that money, prosecutors say, may have helped finance election campaigns for political parties, including Rousseff’s Workers’ Party and other members of her governing coalition.

The corruption probe known as “Operation Car Wash” has so far led to 40 indictments on racketeering, bribery and money laundering charges. Officials have indicted two former senior managers at Petroleo Brasileiro as the company is formally called and 23 executives from six of Brazil’s leading construction and engineering firms. The scandal threatens to have a ripple effect on Brazil’s already weak economy, prompting Petrobras to halt or cancel several investment projects.

Prosecutors are seeking the return from construction firms of about $1.6 billion siphoned off Petrobras contracts and are investigating Swiss bank accounts where funds were transferred and in some case laundered through off-shore front companies. The investigation and possible trial of politicians by the Supreme Court could take years. Brazil’s largest political corruption case to date, involving monthly payments to lawmakers in return for support in Congress for the Workers’ Party, took seven years before it went to trial in 2012.

Rousseff has denied knowing about the scheme during those years and has vowed to respect the Judiciary’s independence. A recent opinion poll, however, showed three in four Brazilians believe Rousseff knew about the scam. … even opposition leaders believe that recent calls for her impeachment will go nowhere.

Sabrina Valle and Anna Edgerton, writing for Bloomberg, must have seen this coming. They have a very long article on Rousseff and her power politics, very much worth reading. Some excerpts:

Petrobras CEO Lost Job Over a $30 Billion Disagreement

As the kickback and money-laundering scandal engulfing state-run oil giant Petrobras escalated in late January, Brazilian President Dilma Rousseff got calls from two of her top appointees. They were in the midst of a marathon board meeting and they heatedly disagreed. The first was from her former finance minister and current Petrobras chairman, warning her that the board was discussing the release of a potentially embarrassing number: a $30 billion writedown that company auditors were saying was partially tied to scandal-related losses. The chairman left in the middle of the meeting to call his political benefactor to discuss releasing it – believing it was a bad number conjured up by faulty methodology. Rousseff agreed.

The second call, later in the same evening, came from Maria das Gracas Foster, the Petrobras chief executive officer whom Rousseff had appointed three years earlier. She expressed the opinion that under Brazilian law the $30 billion figure, whether faulty or not, had to be released because if the board now knew the number, the market had a right to know as well. Foster was aware Rousseff preferred the number not be released and hoped her close friend the president would understand her position..

After a dramatic ten-hour boardroom showdown, the number would in fact be included in a note to Petrobras’s overdue third-quarter earnings but it would be costly to Foster. On Feb. 6, Rousseff replaced her with Aldemir Bendine, CEO of state-run Banco do Brasil – a government executive popular with Rousseff’s leftist Workers’ Party. The appointment sent the shares of the company formally known as Petroleo Brasileiro down 6.9% that day.

Rousseff’s replacement of Foster also has ruptured the long-held bond of loyalty the two forged over more than a decade as business and political allies rising up in the ranks among a sea of powerful men. Foster’s departure further helps to isolate Rousseff as Foster joins a cadre of onetime close supporters who have been swept aside in various government dust-ups.

For Brazil and millions of ordinary Brazilians, Petrobras has become both an embarrassment and a source of anger even as they hope for a rebound. Only five years ago, the company was the darling of the global energy world, able to raise a staggering $70 billion at a share sale because of deep-water oil and natural gas finds so huge that they were expected to propel Brazil to decades of growth.

The first allegations of Petrobras corruption came in March of last year [..] Foster, however, seemed to be weathering the storm until October, when video tapes published online by a federal judge in a Parana, Brazil, court showed that same executive confessing to investigators that Petrobras had long been compromised – that for at least nine years he and others siphoned millions in kickbacks from companies to whom Petrobras awarded inflated construction contracts.

As allegations of wrongdoing escalated, the public became more outraged and investors continued to dump Petrobras shares; the hard-charging Foster found the political weather turning foul. [..] Throughout the ordeal, Foster had offered to resign several times. Rousseff wasn’t having it..

But the scandal kept escalating. A growing list of former executives started cooperating with investigators, hoping for reduced sentences. Cash deliverymen went by flamboyant nicknames such as Big Tiger, Watermelon and Eucalyptus, according to testimony before the Parana court. One former Petrobras manager admitted to taking as much as $100 million in kickbacks as part of a plea bargain deal.

As the drama unfolded, the one constant was Rousseff’s support for Foster, the woman she met in the early 2000s when she was an energy secretary for a southern state of Brazil and Foster was Petrobras’s representative for a gas pipeline to Bolivia. This trust began to unravel in December, when Foster decided to ban 23 construction companies caught up in the probe from doing business with Petrobras, according to a person familiar with the situation. Rousseff’s public position was that corrupt individuals — not the companies that employed millions of Brazilians and worked on strategic infrastructure projects — should be held accountable.

Then came the contentious Jan. 27 board meeting. Foster found herself at odds with Guido Mantega, the Italian-born, left-leaning Petrobras chairman. Foster knew that a fight with Mantega was a fight with Rousseff. But at some point, with the back and forth exhausted, Foster signaled to her management team and declared “enough, huh?” according to people who were in the room.

A week later, on Feb. 3, Foster was summoned by Rousseff to the presidential palace about 465 miles away in Brasilia. After two hours of candid discussion, the two came to terms. Foster and her executive team would be replaced by month’s end while a search for successors proceeded… Foster then boarded a commercial flight back to Rio de Janeiro and was booed by other passengers. There was no relief back home. Dozens of protesters greeted her at her Copacabana apartment, banging pots and pans outside her door, demanding she resign.

The CEO was still willing to stay on until Rousseff named a replacement but in a conference call from Brasilia with her five-member executive staff they declined to continue as lame ducks. Since Foster had said publicly she would never serve without her team, she had no choice but to go. The announcement came on the morning of Feb. 4 in a one-line regulatory filing that took the market by surprise.[..]

Petrobras continues to face huge challenges. With its market value shrunken, its debt ratings in the tank and its global image tarnished, it desperately needs to get back to basics. Over the past decade, its oil and gas production has lagged the company’s own projections — due to equipment delivery delays, maintenance issues and faster-than-expected declines in its older fields – even though that is starting to change.

Starting in 2007, stupendous deepwater offshore finds in an area known as the pre-salt had exponentially raised its reserves. Those discoveries still afford Petrobras plenty of potential upside assuming they are managed properly, analysts say. The most productive of its pre-salt wells pumps 35,000 barrels of crude a day. At the Bakken shale formation in North Dakota it takes more than 300 wells to pump that much. That’s in the top 1% for “all oil wells on the planet,” said Cleveland Jones, a geologist and researcher at Rio de Janeiro State University.

I think it might be wise to question the real reserves in those ‘stupendous’ finds. And in any case, the deeply inbred culture of corruption could easily waste all of it even if they are indeed so huge. With Lula as president, things seemed to go well, though he might have just been lucky to be at the right place at the right time. Rousseff has no such luck. And she doesn’t seem able to cope with the power she has, either. But it doesn’t look like she’ll have to bother with that for much longer:

Brazil’s Senate Resists Rousseff’s Austerity Push

Brazil’s Senate on Tuesday threw out a presidential decree that reduces payroll tax breaks for businesses, in a political setback for President Dilma Rousseff’s new fiscal austerity crusade. The Senate’s president Renan Calheiros said the matter was not urgent and should be presented to Congress in a bill rather than a temporary decree that bypasses lawmakers. Rousseff immediately responded by sending Congress a legislative proposal to trim the tax breaks, saying the change does not hamper the government’s fiscal savings plan.

In an action applauded by financial markets, Rousseff on Friday moved to pare back tax breaks on payrolls and export revenues to save the government up to 7 billion reais ($2.39 billion) this year and reduce its widening budget deficit. The new-found fiscal rigor threatens to tip the Brazilian economy into a deep recession, raising opposition from lawmakers and even senior members of her own Workers’ Party who want to water down the savings measures.

Since her narrow re-election win in October, Rousseff has made a dramatic U-turn in economic policy to regain the trust of investors worried with the financial health of an economy that until recently was one of the world’s most dynamic. Calheiros, a member of Rousseff’s main ally in Congress, the PMDB party, said her government was trampling on the constitutional right of Congress to legislate on important matters that affect Brazilians, such as raising taxes.

Opposition leaders praised Calheiros’ decision to assert the independence of the Senate, which will make it harder for Rousseff to push through belt-tightening legislation needed to avoid a credit rating downgrade. The surprise move by Calheiros, who has been a loyal ally to Rousseff during her first term, comes at a time of tension in Congress where politicians are worried that they will be implicated in a corruption scandal engulfing state-run oil company Petrobras.

One of other measures under fire includes a controversial decree that trims unemployment and pension benefits to save state coffers about 18 billion reais this year.

If the Petrobras affair doesn’t bring Rousseff down, her decisions will. You have to be an exceptional politician to survive the kind of huge economic downturn that Brazil finds itself in. Rousseff is no such exceptional politician. And of course most ‘leaders’ are not (that makes the few exceptional). That in turn means we will see increasing numbers of leadership changes as economies go downhill. Argentina went through 5 presidents in less than 3.5 years at the beginning of the century. Don’t be surprised if Brazil goes down that path too. And many other countries.

end

Turkey’s currency the Lira collapses again to 2.65 lira to the dollar.

In 2006 it was 1.1 million lira to the dollar.  They just dropped the 6 zeros and it became 1.1 lira to the dollar.  The lira in 8 years has lost 2/3 of its value.  This nation is in deep trouble:

(courtesy zero hedge)

Turkey Warns “Speculators Will Be Burned” As Lira Collapses To Record Lows

UPDATE: TRY now +6.5 handles at 2.6275…

The Turkish Lira is down over 4 handles again this morning as the currency’s collapse accelerates exponentially. Having devalued by 30% year-to-date amid Erdogan’s rage against central bank independence, selling its gold, threats of jail for not cutting interest rates, and rising repression of increasing social unrest, the country’s Economy Minister took to the TV today to expose the“hidden currency war” and blast ‘speculators’ (because only a speculator would pull his capital from such a ‘stable’ place) – “The manipulation of those who play with the dollar will explode in their hands and their hands will be burned.”

As Bloomberg reports, TGRT website publishes full remarks by Turkish Economy Minister Nihat Zeybekci in televised interview yesterday.

Zeybekci: “The manipulation of those who play with the dollar will explode in their hands and their hands will be burned”

Says Turkish economy can’t be evaluated on currency alone; cites improvements in bank capital ratios, public debt levels, current-account balance and tourism

Says “nothing to worry about” on currency and“market will solve this on its own”

Says there may be a “hidden currency war” going on in the world

“The game that’s being played now is this: “Don’t cut rates, look the lira will lose value, the exchange rate will rise”

Says “there’s no central bank in the world more independent” than Turkey’s

Says Turkish central bank’s independence not being debated: “We’re saying let’s pay attention to growth in addition to price stability. Let’s pay attention to interest rates and employment and trade balances and the current-account”

“Right now the central bank doesn’t have any concern with the currency market. It also doesn’t have any need to intervene”

*  *

end

Today is the day that Super Mario revealed its 1.1 trillion Euro bond purchases.  In the following commentary he releases how he expects Europe to inflate and grow.  It is all giberish:

(courtesy zero hedge)

Mario Draghi Reveals Biggest. Hockeystick. Ever!

Back in December when Mario Draghi revealed the latest ECB staff inflation forecast, when oil was already plunging, the ECB slashed its 2015 inflation forecast from 1.1% to 0.7%, while reducing the 2016 HICP inflation estimate modestly from 1.4% to 1.3%. Moments ago, during the ECB press conference, Draghi revealed the latest set of staff forecasts. They were, to put it mildly, bullish.

First, here is the GDP forecast:

  • 2015 GDP is now seen at 1.5%, vs 1.0% previously
  • 2016 GDP is now seen at 1.9% vs 1.5% previously
  • 2017 GDP – a new data point – is now seen at 2.1%

Good luck with all that, especially in a world in which China – the Eurozone’s most important trading partner – is now openly warning that 2015 will be worse than 2014, and with a Grexit now lurking just around every corner, an outcome which would send Europe right back into a depression, there is zero chance the ECB hits these latest revised forecasts.

But where the fun really begins with the ECB projections is when it comes to inflation. Not surprisingly, the trend of short-term deflation expectations continues to accelerate, and that already slashed 2015 inflation forecast which was 0.7% in December has been bombed into the stone age as of March, down to precisely 0.0% (a number which will with 100% assurance end up negative by year end). The reason for the collapse? Plunging Oil – the same plunging oil that was perfectly obvious to the ECB back in December when it revised its forecasts lower once again.

And the punchline: the ECB’s 2016 forecast. Because while the ECB slashed its 2015 inflation projection to 1 decimal point away from outright deflation, it boosted its 2016 inflation forecast from 1.3% to 1.5%. Why? Because Draghi hopes that oil prices will finally rebound. In other words, the head of the ECB is betting the farm, and QE, on Saudi Arabia succeeding to crash the US shale industry over the next 9 months, which is ironic, because the same shale industry can continue to keep itself funded despite its record negative cash flow, and avoid default and liquidation, precisely due to Draghi’s QE, and scramble for yield… even if it means buying 3rd lien bonds offered by Ca/CC rated shale drillers who won’t be able to make even one payment!

Call it the biggest circle jerk in history.

But before that, here also, thanks to Draghi, is the biggest inflationary hockeystick in history, as European inflation, magically, is now expected to soar from 0.0% to 1.5%!

end
This is funny as the following Greek reporter cannot understand why all other nations are receiving free money and not Greece.
No doubt he will not be invited back..
(courtesy zero hedge)

Caught On Tape: The Moment Mario Draghi Gets Heckled

Perhaps echoing two entire nations’ frustration, one reporter loses his cool when Mario Draghi explains how everyone else in Europe gets free money except Greece and Cyprus

Having explained that The ECB’s Bond-Buying program will not include Greek and Cypriot bonds, “feisty” veteran Greek journalist Aristidis Vikettos unloads on Draghi… “You’re Biased…” he exclaimed, leaving Draghi speechless

As In-Cyprus reports, there was a lot more going on behind the scenes…

Mario Draghi was left speechless on live television when a feisty veteran journalist accused him of bias during really tense moments at a press conference, following the conclusion of the ECB Governing Council meeting in Nicosia.

Aristidis Vikettos, the Athens News Agency correspondent, apparently miffed that mostly foreign media were asking the questions, (including US and European papers as well as journalists based in Frankfurt) launched into a Greek verbal onslaught against Draghi who was left staring, while cameras were rolling.

Being heard into the mic of a reporter sitting next to him and about to ask a question,Vikettos accused the ECB chief of allowing only what he termed ‘his own journalists’ to take the floor.

‘What are we, decorative elements?’ he is reported to have said, before shouting out ‘You’re biased’ and making a furious exit. It seems that a Draghi aide attempted to translate the goings on to the governor, mumbling something about a protest.

We found out that a number of Cypriot reporters actually shared Vikettos’ views, with a daily paper referring to ‘tension at Draghi press conference, as Cypriot journalists complain of being sidelined’.

Everything happened so fast that the state broadcasters’ cameras missed the stormy exit. Really, come on! There also seemed to be a number of complaints about the quality of translation, with at least one source telling CW that they heard new economic terms being uttered.

*  *  *

Someone is not getting invited back.

end

Great bunch of guys, the IMF!!

(courtesy zero hedge)

IMF Director Admits: Greek Bailout Was “To Save German & French Banks”

For the first time in public, though practically the entire world assumed it, an official from The IMF has admitted that the various Greek bailouts were not for The Greeks at all… “They gave money to save German and French banks, not Greece,” Paolo Batista, one of the Executive Directors of International Monetary Fundtold Greek private Alpha TV on Tuesday. As KeepTalkingGreece reports, Batista then went on to strongly criticized not only the euro zone and the European Central Bank but also the IMF and the Fund’s managing Director Christine Lagarde for defending Europe much too much

Oops! “The Greek issues were not the best handled by The IMF… They put too much of a burden on Greece and not enough of a burden on Greece’s creditors

Batista then urged Greece to directly negotiate with the IMF and favored the restructuring of the Greek debt that is been hold by the European partners.

Source: Keep Talking Greece

end

A terrific commentary from Brandon Smith as he tackles the importance of the Baltic Dry Index in formulating his opinion that the entire globe’s economy is faltering

a must read…

(courtesy Brandon Smith)

One Last Look At The Real Economy Before It Implodes – Part 1

Submitted by Brandon Smith via Alt-Market.com,

We are only two months into 2015, and it has already proven to be the most volatile year for the economic environment since 2008-2009. We have seen oil markets collapsing by about 50 percent in the span of a few months (just as the Federal Reserve announced the end of QE3, indicating fiat money was used to hide falling demand), the Baltic Dry Index losing 30 percent since the beginning of the year, the Swiss currency surprise, the Greeks threatening EU exit (and now Greek citizens threatening violent protests with the new four-month can-kicking deal), and the effects of the nine-month-long West Coast port strike not yet quantified.This is not just a fleeting expression of a negative first quarter; it is a sign of things to come.

Stock markets are, of course, once again at all-time highs after a shaky start, despite nearly every single fundamental indicator flashing red. But as Zero Hedge recently pointed out in its article on artificial juicing of equities by corporations using massive stock buybacks, this is not going to last much longer, simply because the debt companies are generating is outpacing their ability to prop up the markets.

This conundrum is also visible in central bank stimulus measures. As I have related in past articles, the ability of central banks to goose the global financial system is faltering, as bailouts and low-interest-rate capital infusions now have little to no effect on overall economic performance. The fiat fuel is no longer enough; and when this becomes apparent in the mainstream, all hell will indeed break loose.

The argument that banks can prop up the system forever is now being debunked. In this series of articles, I will cover the core reasons why this is happening, starting with the basis of all economics: supply and demand.

The Baltic Dry Index has been a steadfast indicator of the REAL economy for many years. While most other indexes and measures of fiscal health are subject to direct or indirect manipulation, the BDI has no money flowing through it and, thus, offers a more honest reflection of the world around us. In the past two months, the index measuring shipping rates and international demand for raw goods has hit all-time historical lows, plummeting 57 percent over the course of the past 12 months and 30 percent for the year to date.

The dwindling lack of demand for shipping presents obvious challenges to mainstream talking heads who contend that the overall economic picture indicates recovery. That’s because if demand for raw goods has fallen so far as to produce a 57 percent rate drop over the past year, then surely demand for the consumer goods that those raw goods are used to produce must be collapsing as well. The establishment machine has used the same broken-record argument against this conclusion, despite being proven wrong over and over again: the lie that fleet size is the cause of falling shipping rates, rather than a lack of demand for ships. This is the same argument used by pundits to distract from the problems inherent in the severe drop in oil prices: that oversupply is the issue, and that demand is as good as it ever was. Forbes has even attempted to outright dismiss the 29-year low of the BDI and alternative economic analysts in the same lazily written article.

First, let’s address the issue of global demand for goods. Does the BDI represent this accurately? Well, as most of you know, the real picture on manufacturing and export numbers is nearly impossible to come by considering most, if not all indexes fail to account for monetary devaluation and inflation in costs of production. For instance, mainstream propagandists love to argue that manufacturing (like retail) generally posts at least small to modest gains every year. What they fail to mention or take into account is the added costs to the bottom line of said manufacturers and retailers, as well as the added costs to the end consumer. Such costs are often not addressed in the slightest when final numbers are tallied for the public.

In manufacturing, some numbers are outright falsified, as in the case of China, where officials are forcing plant managers to lie about output.

In my view, any decline made visible in the false numbers of the mainstream should be multiplied by a wide margin in order to approximate what is going on in the real economy. China, the largest exporter and importer in the world, continues to suffer declines in manufacturing “expansion” as it’s PMI suggests orders remain steadily stagnant.

“Official” statistics show a 3.3 percent decline in Chinese exports in January from a year earlier, while imports slumped 19.9 percent. Exports slid 12 percent on a monthly basis while imports fell 21 percent according to the Customs Administration.

In Japan, despite the falling Yen which was expected to boost overseas demand, export growth declined for last year, certainly in terms of export volume. The recent “jump” in January does nothing to offset the steady erosion of Japanese exports over the past five years and the flat demand over the past two years.

Japan’s manufacturing expansion has slowed to theslowest pace in seven months.

In Germany, the EU’s strongest economic center, industrial output has declined to the lowest levels since 2009, and factory orders have also plunged to levels not seen since 2009.

Despite the assumptions in the mainstream media that lower oil prices would result in high retails sales, this fantasy refuses to materialize. Retail sales continue the dismal trend set during the Christmas season of 2014,with the largest decline in 11 months in December, and continued declines in January.

Oil is certainly the most in-our-face undeniable indicator of imploding demand. Volatility has skyrocketed while pump prices have dropped by half in many places. One may be tempted to only see the immediate benefits of this deflation. But they would be overlooking the bigger picture of global demand. Oil is the primary driver of economic productivity. Dwindling demand for oil means dwindling productivity which means dwindling consumption which means a dwindling economy. Period.

OPEC reports announce downgraded global demand for oil above and beyond expectations. Oil demand has fallen to levels not seen since 2002.

Beyond the issue of real global demand for raw goods, the argument that the BDI is being gutted only due to an oversupply of cargo vessels also does not take into account the fact that Shipping companies often SCRAP extra ships when demand falters.  I find it rather amusing that mainstream economists seem to think that dry bulk companies would continue a trend of fielding cargo ships they don’t use causing an artificial drop in freight rates.  As far as I know, such companies are not in the habit of undermining their own profits if they can help it.  When an oversupply of ships occurs, companies remove unused vessels either through scrap or dry dock in an attempt to drive freight rates back up to profitable levels.  This often works, unless, it is DEMAND for cargo shipping that is the issue, not the supply of ships.

Ship scrapping boomed in 2013 and has not stopped since.  In fact, dry bulk mover COSCO dismantled at least 17 ships in the month of January alone and has been dismantling ships consistently since at least 2013.  The trend of scrapping is often glossed over by shippers as a “modernization effort”, but the fact remains that cargo companies are always removing ships from supply in order to maximize rates and profits.

Finally, global shipping giant Maersk Line now openly admits that the primary detriment to shipping rates, the reason the BDI is falling to historic lows, is because of falling demand in nearly every market; ship supply is secondary.

Does falling demand result in a lack of fleet use and thus “oversupply”?  Of course.  However, this chicken/egg game that establishment economists play with the BDI needs to stop.  Falling demand for goods came first, the number of unused ships came second.  This is the reality.

A rather cynical person might point out that all of the stats above come from the propaganda engine that is the mainstream, so why should they count? I would suggest these people consider the fact that the propaganda engine is constantly contradicting itself, and in-between the lines, we can find a certain amount of truth.

If manufacturing is in “expansion”, even minor expansion, then why are exports around the world in decline? If the Baltic Dry Index is dropping off the map because of a “supply glut of ships”, then why are other demand indicators across the board also falling, and why are major shipping agencies talking about lack of demand? You see, this is what alternative analysts mean by the “real economy”; we are talking about the disconnect within the mainstream’s own data, and we are attempting to discern what parts actually present a logical picture. The media would prefer that you look at the economy through a keyhole rather than through a pair of binoculars.

Beyond this lay the true beneficiaries of public oblivion; international corporate moguls, banking financiers, and political despots. Corporations and governments only do two things relatively well — lying and stealing. One always enables the other.

The establishment has done everything in its power to hide the most foundational of economic realities, namely the reality of dying demand. Why? Because the longer they can hide true demand, the more time they have to steal what little independent wealth remains within the system while positioning the populace for the next great con (the con of total globalization and centralization). I will cover the many advantages of an economic collapse for elites at the end of this series.

For now I will only say that the program of manipulation we have seen since 2008 is clearly changing. The fact of catastrophic demand loss is becoming apparent. Such a loss only ever precedes a wider fiscal event. The BDI does not implode without a larger malfunction under the surface of the financial system. Oil and exports and manufacturing do not crumble without the weight of a greater disaster bearing down.These things do not take place in a vacuum. They are the irradiated flash preceding the deadly fallout of a financial atom bomb.

end

Your more important currency crosses early Thursday morning:

 

Eur/USA 1.1056 down  .0023

USA/JAPAN YEN 120.16  up .518

GBP/USA 1.5245 down .0017

USA/CAN 1.2430 up .0005

This morning in Europe, the euro is down again, trading now well below the 1.11 level at 1.1056 as the attempt at Europe being supported by other nations trying to keep the Euro afloat is failing. Europe is reacting to deflation, announcements of massive stimulation, the default at Austrian Hypo bank and the possible default of the Ukraine and Greece.   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 52 basis points and settling well above the 120 barrier to 120.16 yen to the dollar. The pound was down this morning as it now  trades just below the 1.53 level at 1.5245.(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 and now the HSBC criminal probe). The Canadian dollar was down again despite  the higher oil price and is trading  at 1.2430 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 48.24 points or 0.26%

Trading from Europe and Asia:
1. Europe stocks mostly in the green

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

Gold very early morning trading: $1202.00

silver:$16.22

Early Thursday morning USA 10 year bond yield: 2.13% !!!  par in basis points from Wednesday night/

USA dollar index early Thursday morning: 96.18  up 21 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: 1.79% down 10 in basis points from Wednesday

Closing Japanese 10 year bond yield: .40% !!! down 1 in basis points from Wednesday

Your closing Spanish 10 year government bond,  Thursday down 8 in basis points in yield from Wednesday night.

Spanish 10 year bond yield: 1.28% !!!!!!

Your Thursday closing Italian 10 year bond yield: 1.31% down 8 in basis points from Wednesday:

trading 3 basis points higher than  Spain.

IMPORTANT CURRENCY CLOSES FOR TODAY

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

Euro/USA: 1.1025  down .00544

USA/Japan: 120.16 up .520

Great Britain/USA: 1.5230 down .0032

USA/Canada: 1.2509 up .0083

The euro fell apart this afternoon as it was down  on the day by 54 basis points finishing the day well below the 1.11 level to 1.1025. The yen was down slightly in the afternoon, and it was down by closing to the tune of 52 basis points and closing well above the 120 cross at 120.16. The British pound lost some ground during the afternoon session and was down on the day closing at 1.5230. The Canadian dollar was well down again today with oil also down.  It closed at 1.2509 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: 2.11 down 1 in basis points from Wednesday

Your closing USA dollar index: 96.38 up 42 cents on the day.

European and Dow Jones stock index closes:

England FTSE  up 41.90 points or 0.61%

Paris CAC up 46.16 or 0.94%

German Dax up 113.63 or 1.00%

Spain’s Ibex up 73.100 or 0.66%

Italian FTSE-MIB up 269.00. or 1.22%

The Dow: up 38.82 or 0.21%

Nasdaq; down  15.67 or 0.32%

OIL: WTI 50.85 !!!!!!!

Brent: 60.65!!!!

Closing USA/Russian rouble cross: 60.83 up 1  1/8   roubles per dollar on the day.

end

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

Your New York trading for today:

Stocks Inch Higher As Draghi Dreams Trump Dismal Data

China growth slashed, more epically dismal US data, lack of clarity from Draghi, slumping oil prices, dropping yields, surging USD… now if that isn’t a recipe for buying US equities at record highs, we don’t know what is…

Stocks close unchanged from ECB…

And on the day only Trannies closed red (even as oil tumbled) thanks to an aftenoon push higher…

On the week, things are mixed – earlier in the day everything was red but the ubiquitous v-shaped recovery dragged high beta into the green… The S&P and Trannies remain red on the week and Dow closed unch…

VIX pushed back down towards 14.. because what do you do before a jobs print that basically assures a June rate hike OR NOT…

Across the sectors this week… Biotech sdriving heaklthcare to highs, and financials excited ahead of the stress tests…

as Financials tocks remain much more excited than credit…

As Draghi spoke so global bond yields compressed and the Treasury complex followed suit, having shrugged off the rate-lock weight from the Actavis deal earlier in the week…

The weakness in the EUR (1.09 handle against the USD at 12 year lows) sent the USD Index soaring to fresh highs, now up over 1% on the week…

Swiss Franc has been monkey-hammered this week…

Commodities were generally flat – despite the surge in the USD… apart from Crude…

As Crude finally woke up to what China did last night… or just algos…

Charts: Bloomberg

end

Challenger Christmas layoffs:  They surge 19% and of that over 38% is from the energy sector. The low price of oil is certainly having an effect on the jobs scene.  We wonder what the jobs report will look like tomorrow;

(courtesy zero hedge)

2015 Job Cuts Surge 19% Compared To 2014, Energy Sector Cuts 38% Of Total

A month ago we asked if, perchance, the BLS had simply forgotten to add any of the job losses in the energy sector in January, when it reported a drop of just 1900 jobs in the entire Oil and Gas Extraction space, compared to 18K actual announcements, and 21,300 job cuts in the sector as reported by Challenger. Moments ago, the latest Challenger data is out, and we really hope the BLS finally reads it because things in the energy sector are getting worse by the day, if only for its well-paid workers.

According to Challenger, the February total planned job cut were over 50,000 for the second month in a row, or a total of 103,620 in the first two months of 2015, up 19% from the same period last year, with a 38% of the total, or 39,621 of these job cuts, due to plunging oil prices and about to take place in the highest paid oil extraction space.

From the press release:

Employers announced 103,620 planned layoffs through the first two months of 2015, which is up 19 percent from the 86,942 job cuts recorded during the same period in 2014.

Once again, the energy sector saw the heaviest job cutting in February, with these firms announcing 16,339 job cuts, due primarily to oil prices.

Falling oil prices have been responsible for 39,621 job cuts, to date. That represents 38 percent of all recorded workforce reductions announced in the first two months of 2015. In February, 36 percent of all job cuts (18,299) were blamed on oil prices.

Here is the one chart that the BLS, if it ignored everything else, should look at:

To paraphrase John Challenger, it is unambiguouslyungood.

Oil exploration and extraction companies, as well as the companies that supply them, are definitely feeling the impact of the lowest oil prices since 2009. These companies, while reluctant to completely shutter operations, are being forced to trim payrolls to contain costs,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

While oil-related companies will see profits slide, the net impact of falling oil prices will likely be positive for the economy, as a whole. Some economists are estimating that GDP could see a 0.5 percentage point boost from low oil prices, due mostly to the extra spending power among consumers. Meanwhile, companies that are big users of oil, such as transportation firms, airlines, and manufacturers of plastic and paint products will see higher profits thanks to cheap oil,” noted Challenger.

Yes, in theory, plunging oil is great. In practice however…

Cheap oil does not yet appear to be helping stem the tide of job cuts in the retail sector, which saw the second highest number of job cuts in February with 9,163. Employers in the sector have announced 15,862 job cuts, so far this year. That is little changed from the 15,242 retail job cuts announced in the first two months of 2014.

So far, falling oil prices have not resulted in higher retail spending. However, that is not necessarily the cause behind ongoing job cuts in retail. Falling oil prices might stave off job cuts for some retailers but, the fact is, some retailers are beyond the point where cheap oil will help turn things around. For example, the heaviest retail job cuts last month were the result of RadioShack’s long decline, which culminated in bankruptcy and liquidation,” said Challenger.

And finally, here is how the YTD job cuts look when compared between the BLS and Challenger:

end
OH! OH!!   American Eagle Company trading now at .20 announced after the market close that it is defaulting on its bonds.  It did not make one payment on the 175 million dollars of debt raised:
(courtesy zero hedge)

Shale Company Defaults On $175 MM In Bonds Without Making Even One Coupon Payment

Update: And just to prove that people are indeed, idiots, moments ago this hits:

  • ENERGY XXI GULF COAST, INC. PRICES UPSIZED PRIVATE OFFERING OF $1.45
    BILLION OF 11.000% SENIOR SECURED SECOND LIEN NOTES DUE 2020

We set the odds at 75% that not even odd coupon payment will be made in this case either.

* * * * *

It was just this past June when a report on Seeking Alpha quizzically asked, “Can American Eagle Energy Corporation Fly High Like An Eagle Over The Next Months?”

The answer, it turns out, is no.

According to a Bloomberg report, the Colorado oil producer, whose stock is now trading at a very sub-eagle $0.20, or about $6MM in market cap (the stock was at $6.00 when the Seeking Alpha report came out) has announced it will not make even one coupon payment on its bonds issued less than seven months ago.

Bloomberg reports that after raising $175 million in a junk-bond offering, American Eagle Energy Corp. said Monday that it wouldn’t make its first interest payment on the debt. And instead of fulfilling its naive bondholders dreams that they will collect an 11% annual coupon for the next 5 years and then get repaid in full, the company hired bankruptcy advisers, Canaccord Genuity and Seaport, to negotiate a restructuring plan with the bondholders. Said bondholders now have two options: give the company more time to try to become profitable (i.e., hope that oil somehow soars from here) or push it into default, and become the new equity holders following a debt for equity.

None of this should be a surprise to anyone, and certainly not our readers, whom we warned on October 14 that “If The Oil Plunge Continues, “Now May Be A Time To Panic” For US Shale Companies.” We should have added bondholders of shale companies to the list of panickees.

“American Eagle Energy’s small scale and relatively high drilling costs made it the one of the first victims of the drop in energy prices,” said Spencer Cutter, a credit analyst at Bloomberg Intelligence. “It was also unfortunate that oil prices dropped so much soon after the bond was issued, causing it to skip its first-ever interest on the debt.”

It won’t be the last. Recall that just over a month ago we laid out a matrix created by Goldman showing which shale companies will be the next to pop. AEE wasn’t even on the list:

As for AEE, its existing shareholders are now wiped out, while the yield-scrambling debt investors instead of pocketing a solid 11% yield for 5 years are now looking at an 80% loss – the $175MM 11%s of 2019 were trading at 20 cents of par at last check.

And since the company won’t have any cash to repay anyone, the bondholders will end up with the equity, the problem is that this is equity in a company which even post restructuring, will be unviable absent oil returning back to the $80+ ballpark (the first-lien debt trades at 40 cents on the dollar).

Marty Beskow, a spokesman at American Eagle Energy, didn’t respond to e-mailed messages and telephone calls seeking comment. Scott Davidson, a spokesman at Canaccord, and Tanya Alvear, a spokeswoman at Seaport Global, declined to comment.

It is somewhat ironic that Canaccord was also one of the bond deal underwriters…

The Littleton, Colorado-based company stopped drilling in
November and suspended its 2015 capital plan because of the drop in oil
prices, according to a statement Monday. West Texas Intermediate crude,
the U.S. benchmark, traded near $51 a barrel on Thursday, down from more
than $107 in June.

What is perhaps most odd is that American Eagle Energy actually had downside oil hedges: the only problem, they were not nearly enough!

The driller’s financial problems became apparent to lenders in December when its ability to borrow on a revolving line of credit, which was initially as much as $60 million, was canceled, according to a company statement on Dec. 31. To raise cash, American Eagle Energy closed out hedge positions that protected it from falling oil prices, raising $13 million that represented 414,000 barrels of oil at an average of $89.59 each, according to a Dec. 31 filing.

The company was insolvent 2 months later.

And since AEE is effectively in default without making a single coupon payment, all those bond traders who were alive in a happier and far less centrally-controlled time and recall the infamous case of Movie Gallery, which was the last such instance to issue debt only to go bankrupt without making even one payment (Goldman was the underwriter) can raise a toast to happier times and recall how that snowy day in early 2007 during the Movie Gallery roadshow which coincided with the peak of the last credit bubble, was the true harbinger (before even the subprime blow up) of the financial system collapse that would ensue just over a year later.

The question now is: is American Eagle Energy this generation’s Movie Gallery?

end

Now it is the uSA’s turn to show bad manufacturing numbers.
Today Factory orders decline for the 6th month in a row/the worst since Lehman.
(courtesy zero hedge)

US Factory Orders Drop For 6th Month In A Row – Worst Since Lehman

Must be the weather… since August. US Manufacturers New Orders tumbled 0.2% in January (missing expectations of a 0.2% rise for the 6th of the last 7 months). This extends the losing streak for factory orders to 6 months, something we have not seen since the great recession in 2008… The drop was led by a plunge in Consumer Goods – not exactly what one would expect from all those gas savings? Just add it to the growing list of missed macro data expectations since the start of Feb!

We suspect this puts a final nailk in the coffin of low oil prices being positive for consumers…

This extends the macro misses for US data to dismal levels.

Charts: Bloomberg

end

Jobless claims surge and in this year 2015, we are off to the worst start since 2000.

(courtesy zero hedge)

Initial Jobless Claims Surge To 10 Month Highs, Worst Start To A Year Since 2009

Following this morning’s dire Challenger Job Cuts data, it appears the hard reality that lower oil prices are not unambiguously good for America is setting in. Initial Jobless Claims surged last week (after a big jump the week before) to 320k (far worse than the 295k expectation) to the highest since May 2014. Non-seasonally-0adjusted claims surged 29,361 to 310,000 making 2015 the worst start to the year for claims since 2009. Continuing Claims also rose. Since the end of QE3 and the end of the government’s fiscal year, the trend of improvment has clearly ended and a new regime of weakening labor markets has begun.

The trend has changed…

This is the worst start to a year since 2009…

Charts: Bloomberg

end

Pure insanity!!

(courtesy CNBC/zero hedge)

Take Out A 7 Year Car Loan To Buy Stocks, CNBC Experts Advise

In what can only be described as a wanton display of absurdity, CNBC dedicated not one, not two, but three segments (and those are just the ones we noticed) to subprime auto lending on Wednesday producing, in the process, three of the most hilarious clips in recent memory.

There was Phil Lebeau with the latest numbers from Experian which show that average monthly payments hit a record high in Q4 at nearly $500 and the average amount being financed is up 4% Y/Y to nearly $24,000. It gets worse. Fully a quarter of new car loans carry terms of at least 73 months.That may sound bad, but Experian’s director of automotive finance Melinda Zabritski — the same Melinda Zabritski who last month said we are looking at a “remarkably stable automotive-loan market” — isn’t ready to pass judgement quite yet. “I haven’t quite made up my mind on 84 month loans,” she noted, although she did say she is “concerned.”

We also got a classic interview with AutoNation CEO Mike Jackson who notes that if you include leasing (which is of course different from buying, but why quibble over the details), loan terms are actually only 56 months. The rest of the clip can be summed up in three words: “Trucks, trucks, trucks.” 

http://player.theplatform.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=3000359051&size=530_298

We saved the best for last. Watch below as Bill Griffeth and Kelly Evans host WSJ’s Jonathan Clements and Premier Financial Advisors’ Mark Martiak for a discussion on what we’re calling the car-stock arbitrage wherein you are (literally) encouraged to take out a 7 year loan with a rapidly amortizing asset as collateral in order to buy stocks.

Enjoy.

http://player.theplatform.com/p/gZWlPC/cnbc_global?playertype=synd&byGuid=3000359186&size=530_298

end
And now for your review since the beginning of February here are the misses and beats on USA economic indicators:
(courtesy zero hedge)

Ridiculous-er And Ridiculous-er

Since the start of February, 48 US macro data items have missed expectations and 8 have beaten. Since then the S&P 500 has risen over 5.5% (and the Nasdaq even more) and 10Y yields are up 50bps. Bloomberg’s US Macro Surprise index is now as weak as it was just after Lehman and is falling at the fastest pace since Summer 2012. While everyone is well aware that markets can stay irrational longer than a trader can stay liquid, one has to wonder just how long this farce can continue before even the most effusive talking head has to admit… things ain’t great.

The divergence is growing…

as Macro weakness accelerates…

From the start of February…

MISS

  1. Personal Spending
  2. Construction Spending
  3. ISM New York
  4. Factory Orders
  5. Ward’s Domestic Vehicle Sales
  6. ADP Employment
  7. Challenger Job Cuts
  8. Initial Jobless Claims
  9. Nonfarm Productivity
  10. Trade Balance
  11. Unemployment Rate
  12. Labor Market Conditions Index
  13. NFIB Small Business Optimism
  14. Wholesale Inventories
  15. Wholesale Sales
  16. IBD Economic Optimism
  17. Mortgage Apps
  18. Retail Sales
  19. Bloomberg Consumer Comfort
  20. Business Inventories
  21. UMich Consumer Sentiment
  22. Empire Manufacturing
  23. NAHB Homebuilder Confidence
  24. Housing Starts
  25. Building Permits
  26. PPI
  27. Industrial Production
  28. Capacity Utilization
  29. Manufacturing Production
  30. Dallas Fed
  31. Chicago Fed NAI
  32. Existing Home Sales
  33. Consumer Confidence
  34. Richmond Fed
  35. Personal Consumption
  36. ISM Milwaukee
  37. Chicago PMI
  38. Pending Home Sales
  39. Personal Income
  40. Personal Spending
  41. Construction Spending
  42. ISM Manufacturing
  43. Domestic Vehicle Sales
  44. ADP Employment
  45. Challenger Job Cuts
  46. Initial Jobless Claims
  47. Continuing Claims
  48. Factory Orders

BEAT

  1. Markit Services PMI
  2. Nonfarm Payrolls
  3. JOLTS
  4. Case-Shiller Home Price
  5. Q4 GDP Revision (but notably lower)
  6. Markit Manufacturing PMI
  7. ISM Services
  8. Unit Labor Costs

*  *  *

Only one thing for it…

 end

We  will see you on Friday.

bye for now

Harvey,

Advertisements

One comment

  1. SLV reported the addition of 1.34 million oz today.

    Also, Harvey do you have any insight on the resolution of the cash drain on PSLV? The website apparently now shows a negative cash balance, as the Total NAV of the trust is quoted as being actually less than the market value of the silver held in the trust. Normally the NAV would be the silver value plus the cash balance. Mr Sprott is either going to do a secondary offering to beef up the cash position or will have to start selling off the physical silver to pay the bills.

    PSLV Units Outstanding 127,360,215
    Previous Closing Price $6.41
    Trading Volume 428,270
    Total Ounces of Silver held within Trust 49,287,870
    Total Market Value of Silver held within Trust $799,079,600
    Total Net Asset Value of Trust $799,051,476
    (In U.S. Dollars. Data last updated Thursday, March 05, 2015 6:00 PM EST)

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: