March 24/More gold leaving the comex (25,720.oz)/gold and silver rise/Gold open interest rises but silver OI falls/Huge imports of gold into India so far in March equal to 130 tonnes/India expects monthly totals to exceed 150 tonnes/





Good evening Ladies and Gentlemen:



Here are the following closes for gold and silver today:


Gold:  $1191.70 up $3.70 (comex closing time)

Silver: $16.97 up 9 cents (comex closing time)


In the access market 5:15 pm


Gold $1189.50

Silver: $17.00


Gold/silver trading:  see kitco charts on the 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 106 notices for 530,000 oz .

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 245.34 tonnes for a loss of 58 tonnes over that period. Lately the removals  have been rising!


In silver, the open interest fell by 1527 contracts, due to short covering, as Monday’s silver price was unchanged. The total silver OI continues to remain extremely high with today’s reading at 174,123 contracts. The front month of March rose by 63 contracts to 604 contracts. We are still close to multi year high in the total OI complex despite a record low price. This dichotomy has been happening now for quite a while and defies logic. There is no doubt that the silver situation is scaring our bankers to no end.


We had  106 notices served upon for 530,000 oz.


In gold we had a huge rise in OI as gold was up by $3.20 yesterday. The total comex gold OI rests tonight at 447,773 for a whopping gain of 11,094 contracts. Today, surprisingly we again had 0 notices served upon for nil oz.


Today, we had no changes  at the GLD/  Gold Inventory rests at 744.40  tonnes


In silver, /SLV  we had a withdrawal of 835,000 oz of  inventory at the SLV/Inventory, at 325.323 million oz


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

1, Today we again had some short covering in the silver comex with the silver OI falling by 1527 contracts.  Gold OI again rises by a whopping 11,094 contracts.  Both gold and silver rose nicely today. Again we had 25,720 oz of gold leave the comex vaults.  (report Harvey)

2, Soros states that there is a 50:50 chance of a Greek exit as they are going down the drain  (Bloomberg)

3.On the weekend there was rioting on the streets of Spain.  They are calling for a national strike in October, one month before the general elections.


(courtesy common dreams)

4. Koos Jansen reports that India so far in the month of March has imported 130 tonnes.  They are heading for 150 tonnes this month.  What is strange is that the 10% tax of gold is still on which indicates that smuggling still must be taking place.  India will now rival China in importing the greater number of gold ounces

(Koos Jansen)

5. USA are sending in their muscle as they try to get Iran to an agreement on their nuclear ambitions.

(courtesy zero hedge.

6. Poor Chinese PMI numbers (manufacturing) seems to suggest China is heading for a hard landing.

(zero hedge)

7. Another poor manufacturing number in the uSA:  today the Richmond Fed mfg survey disappoints.


(zero hedge)


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 rose by a whopping 11,094 contracts from 436,679 up to 447,773 as gold was up by $3.20 yesterday (at the comex close). We are now in the contract month of March which saw it’s OI remain constant at 108 for a loss of 0 contracts. We had 0 notices filed upon on Friday so we neither lost nor gained any gold contracts that will stand for delivery in this delivery month of March. The next big active delivery month is April and here the OI fell by 11,701 contracts down to 180,814.  We have 7 days before first day notice for the April gold contract month, on March 31.2015. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 122,829.  (Where on earth are the high frequency boys?). The confirmed volume on yesterday ( which includes the volume during regular business hours + access market sales the previous day) was good at 218,038 contracts. Today we had 0 notices filed for nil oz.


And now for the wild silver comex results.  Silver OI fell by 1527 contracts from 175,650 down 174,123 despite the fact that silver was unchanged with respect to Friday’s trading and this is in total contrast to gold. We therefore again had some more short covering by our bankers. We are now in the active contract month of March and here the OI rose by 63 contracts rising to 604. We had 39 contracts served upon yesterday. Thus we gained 102 contracts or an additional 510,000 oz will stand in this March delivery month. The estimated volume today was simply awful at 19,520 contracts  (just comex sales during regular business hours.  The confirmed volume on Friday (regular plus access market) came in at 46,330 contracts which is good in volume. We had 106 notices filed for 530,000 oz today.


March initial standings

March 24.2015





Withdrawals from Dealers Inventory in oz  nil
Withdrawals from Customer Inventory in oz  25,720.000 oz (Manfra and Scotia???)
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)  108 contracts (10,800 oz)
Total monthly oz gold served (contracts) so far this month 8 contracts(800 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

 652,108.9 oz

Today, we had 0 dealer transaction

total Dealer withdrawals: nil oz

we had 0 dealer deposit

total dealer deposit: nil


we had 2 customer withdrawals


i) Out of Manfra:  225.05 oz  (7 kilobars)

ii) Out of Scotia:  25,494.95 oz (793 kilobars)

total customer withdrawal: 25.720.000 oz  (800 kilobars)

we had 0 customer deposits:


We had 1 adjustment


i) an accounting error subtraction from the customer side of JPMorgan for .032 oz


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 (8) x 100 oz  or  800 oz , to which we add the difference between the open interest for the front month of March (108) 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 (8) x 100 oz  or ounces + {OI for the front month (108) – the number of  notices served upon today (0) x 100 oz} =  11,600 oz or  .3608 tonnes


we neither gained nor lost any gold ounces standing in the March delivery month.

Total dealer inventory: 658,537.414 oz or 20.48 tonnes

Total gold inventory (dealer and customer) = 7,887,972.713 million oz. (245.34) tonnes) *** somehow the total gold position was changed last night, adding around 2 tonnes of gold.

Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 59.0 tonnes have been net transferred out. However I believe that the gold that enters the gold comex is not real.  I cannot see continual additions of strictly kilobars.







And now for silver




March silver initial standings

March 24 2015:





Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory 65,541.935 oz (Delaware, CNT,Scotia)
Deposits to the Dealer Inventory  541,586.36 oz (CNT)
Deposits to the Customer Inventory 59,381.231 oz (Delaware,CNT)
No of oz served (contracts) 106 contracts  (530,000 oz)
No of oz to be served (notices) 498 contracts (2,490,000)
Total monthly oz silver served (contracts) 2149 contracts (10,745,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month
Total accumulative withdrawal  of silver from the Customer inventory this month  7,015,598.4 oz

Today, we had 1 deposit into the dealer account:

i) Into CNT:  541,586.36 oz

total dealer deposit: 541,586.36   oz


we had 0 dealer withdrawal:

total dealer withdrawal: nil oz


We had 2 customer deposits:

i) Into Delaware;  1,076.021 oz

ii) Into CNT; 58,305.210 oz


total customer deposit: 59,381.231 oz


We had 3 customer withdrawals:


i) Out of CNT:  3075.335 oz

ii) Out of Delaware; 1998.800 oz

iii) Out of Scotia:  60,541.935 oz


total withdrawals;  65,541.935 oz


we had 1 adjustment:


i) out of CNT:  6097.910 oz was adjusted out of the customer and into the dealer at CNT.


Total dealer inventory: 70.569 million oz

Total of all silver inventory (dealer and customer) 175.346 million oz


The total number of notices filed today is represented by 106 contracts for 530,000 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 (2149) x 5,000 oz    = 10,745,000 oz to which we add the difference between the open interest for the front month of March (604) and the number of notices served upon today (106) x 5000 oz  equals the number of ounces standing.

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

2149 (notices served so far) + { OI for front month of March(604) -number of notices served upon today (106} x 5000 oz =  13,235,000 oz standing for the March contract month.

we gained an additional 510,000 oz of silver standing in this March delivery month.


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






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 24/ no changes in gold inventory at the GLD/Inventory 744.40 tonnes


March 23/we had a huge withdrawal of 5.37 tonnes of gold from the GLD vaults/Inventory 744.40 tonnes

march 20/we had no changes in  inventory at the GLD/Inventory at 749.77 tonnes

March 19/we had no changes in inventory at the GLD/Inventory 749.77 tonnes

March 18/ we had a withdrawal of .9 tonnes of gold from the GLD/Inventory at 749.77 tonnes

March 17.2015: no change in gold inventory at the GLD/Inventory 750.67 tonnes

March 16/no change in gold inventory at the GLD/Inventory 750.67 tonnes





March 24/2015 /  we had no changes in gold/Inventory at 744.40 tonnes

inventory: 744.40 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 : 744.40 tonnes.







And now for silver (SLV):


March 24.2015/ we had another withdrawal of 835,000 oz of silver from the SLV/Inventory rests tonight at 325.323 million oz


March 23./we had a huge withdrawal of 1.174 million oz of silver from the SLV vaults/Inventory 326.158 million oz

March 20/ no changes in silver inventory/327.332 million oz

March 19/ no change in silver inventory/327.332 million oz

March 18/ no change in silver inventory/327.332 million oz

March 17/ no change in silver inventory/327.332 million oz

March 16/no change in silver inventory/327.332 million oz



March 24/2015 we had a small withdrawal of 835,000  oz of  silver inventory at the SLV/ SLV inventory rests tonight at 325.323 million oz







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

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

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


1. Central Fund of Canada: traded at Negative  8.3% percent to NAV in usa funds and Negative 8.5% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.5%

Percentage of fund in silver:38.1%

cash .4%

( March 24/2015)


Sprott gold fund finally rising in NAV

2. Sprott silver fund (PSLV): Premium to NAV falls to + 1.26%!!!!! NAV (March 24/2015)

3. Sprott gold fund (PHYS): premium to NAV falls -.41% to NAV(March 24  /2015)

Note: Sprott silver trust back  into positive territory at +1.26%.

Sprott physical gold trust is back into negative territory at -.41%

Central fund of Canada’s is still in jail.





And now for your more important physical gold/silver stories:



Gold and silver trading early this morning



(courtesy Mark O’Byrne)


HSBC Not Closing Gold Vaults – Safety Deposit Boxes of Clients‏ Being Closed

– Incorrect rumors abound around blogosphere that HSBC is rapidly and quietly closing gold vaults
– HSBC are in fact closing down their safety deposit box facilities in vaults in branches
– Banks internationally closing boxes as not profitable and move to “cashless society”
– Incorrect speculation that HSBC move forcing gold clients to sell bullion
– Speculation understandable given poor communications from HSBC and manipulation of precious metal markets
– Salutary lesson to all – media and blogosphere – to be more rigorous
– Underlines vital importance of owning gold in allocated manner outside financial system

An incorrect rumor that HSBC is rapidly and quietly closing gold vaults where clients gold bullion was stored and gold in the GLD ETF is stored has been swirling around the internet.

Safety Deposit Boxes in Sentinel Vaults in Dublin, Ireland

After conversations with key players in the industry including a bullion dealer who used the safety deposit boxes for storage and delivery to clients, we can now confidently say that the speculation was incorrect.

What HSBC is actually doing is closing its safety deposit box facilities some of which are in vaults and strong rooms in branches. The vaults are not specialist gold vaults rather standard vaults or strong rooms which contain safety deposit boxes. These safety deposit boxes hold all sorts of valuables – from legal documents, to family heirlooms, to art works, to jewellery and of course bullion coins and bars.

Availability of safety deposit boxes is in decline in Britain and much of the world. Costs of security, insurance and opportunity to use such facilities in a more profitable manner are driving the closures. Banks in Ireland including the Bank of Ireland claim that the safety deposit boxes are “causing an unacceptable health, safety and security risk in some branches.”

While the move is understandable from a purely profit motive point of view, it must be remembered that this is a greatly needed service by many people including entrepreneurs and professionals who need to safe keep important legal documents that they are not comfortable keeping in a home or office. It is also a greatly needed service for the elderly and other people who have valuable jewelry and heirlooms that they are uncomfortable keeping in the house.

It is another case of banks blindly pursuing profit ahead of the interests of their own clients.

Banks and insolvent governments desperate for cash likely also dislike safety deposit boxes as they are means for people to protect and grow wealth and protect themselves from inflation and indeed bail-in and deposit confiscation. A percentage of box holders so store cash and bullion.

In our brave new  world of the ‘cashless society’, the financial independence and freedom that a safety deposit box confers upon the citizen is frowned upon.

As a consequence citizens are being deprived of the opportunity of having their savings, valuables and wealth stored outside of the increasingly precarious financial system and digital banking system.

The implications of the rumours were significant. Analysts speculated that a precious metals market disruption might be imminent and with it delivery calls by clients who believe they own physical gold in GLD which HSBC most likely could not meet.

Such an event would likely have a dramatic upward effect on the price of gold not to mention a catastrophic effect on the finances of those who believe they actually own physical gold in ETFs. Irish Finance Minister, Michael Noonan, being one recent buyer of the gold ETF.

The misunderstanding regarding HSBC closing its deposit box facilities had led to speculation by people familiar with the underlying dynamics of precious metals markets. HSBC was implicated in a gold price manipulation scandal last year, and has been fined numerous times in the past decade for an array of corrupt practices.

As “the largest COMEX/NYMEX depository”, according to their website, they are viewed by sceptics as having both a capacity and a track record to manipulate precious metals prices.

This view was compounded back in 2012 when respected analyst, Ned Naylor-Leyland, tracked the serial number of a gold bar that was presented on CNBC as belonging to the GLD ETF, of which HSBC is custodian.

Naylor-Leyland discovered that the bar, in fact belonged to a different ETF – ETF Securities – fuelling speculation that GLD did not have the gold it claimed to be in possession of and that gold is rehypothecated.

The recent misunderstanding regarding HSBC’s gold vaults, when viewed from this perspective, is understandable. Long time observers of the precious metals markets are aware of the price suppression actions that occur.

These include the dumping of contracts for massive volumes of gold onto the market at quiet periods – often after the close of business on the COMEX or after Asian trading and before European markets commence trading. In the absence of demand, the huge supply of paper contracts for gold overwhelms the market forcing the price down and triggering stop losses which then accelerate the sell-offs.

The sellers of these contracts are clearly not looking for the best price for their asset. The aim is to force down the price in illiquid markets. The seller can then buy back contracts for the same volume of gold at a greatly reduced price for a large profit.

The incorrect information regarding the HSBC vaults thus sparked intense speculation that some major developments were afoot in the gold market and HSBC was using the closures to force clients to sell their gold.

However, it is the case that those owning gold in HSBC’s safety deposit boxes do not have to sell their gold and most won’t. They have 60 days to find new secure storage and we are already seeing flows in this regard.

The rapidity with which this information became received wisdom is a salutary lesson for the alternative media and the gold blogosphere. Bloggers need to be rigorous in establishing facts as they will be held to a much higher standard by the mainstream media – higher, even, than the latter sometimes hold for themselves.

It also again underlines the vital importance of owning allocated and segregated gold outside the global banking system, in the safest vaults in the world.

How To Store Gold Bullion – 7 Key Must Haves


Today’s AM fix was USD 1,193.25, EUR 1,085.56 and GBP 798.96 per ounce.
Yesterday’s AM fix was USD 1,181.40, EUR 1,086.15  and GBP 791.77 per ounce.

Gold climbed 0.625 percent or $7.40 and closed at $1,190.60 an ounce yesterday, while silver surged 1.97 percent or $0.33 at $17.06 an ounce.

Gold in US Dollars - 1 Week

Gold remained firm near its two week high reached yesterday in spite of disappointing Chinese PMI figures. In Singapore, bullion for immediate delivery initially fell prior to gains and was $1,187.46 an ounce near the end of day. These gains continued in European trading.

Dollar weakness in recent days, the chance of Greece leaving the euro and the continuing crisis in the Ukraine are all supporting gold.

John Williams,  San Francisco Fed chief said in Australia yesterday that policymakers should wait no more than a

few months before considering raising U.S. interest rates from their current near-zero level. A Reuters poll of analysts show that they are expecting a U.S. interest rate hike in September now rather than June.

An Airbus operated by Lufthansa’s Germanwings budget airline crashed in southern France on this morning and all 148 on board were feared dead. French President Francois Hollande said he believed none of those on board had survived.”There were 148 people on board,” Hollande said. “The conditions of the accident, which have not yet been clarified, lead us to think there are no survivors.”
In London spot gold in late morning trading is at $1,194.96 or up 0.47 percent. Silver is $17.11 or up 0.25 percent and platinum is $1,147.96 or up 0.06 percent.





I was waiting for this to happen:


(courtesy GATA)


China’s Zijin in talks to buy gold, copper mines abroad


By Polly Yam
Monday, March 23, 2015

HONG KONG — China’s Zijin Mining Group Co. Ltd. is in talks to buy gold and copper mining assets abroad and expects to finalise some acquisitions this year, its chairman said on Monday.

Chen Jinghe said that current market conditions were favourable for acquisitions but did not identify targets.

Some talks “have almost reached maturity. … This year there will be some important results,” Chen told a news conference in Hong Kong after the company’s 2014 earnings. …

… For the remainder of the report:…






The following is huge.  India still has a 10% duty (and a very thorough smuggling scheme) with respect to gold and yet they have already imported 130 tonnes of gold so far in March.  They will probably import at least 150 tonnes this month.  At this rate, they will import 1800 tonnes.  Together with China who also demands 2200 tonnes we are looking at 4000 tonnes of gold demanded by just these two countries. We can also add an unknown quantity of Chinese sovereign gold demanded.  We know that demand for jewelry is around 3300 tonnes per year, so we have a huge differential in demand over supply and this must come from somewhere.  The USA has a maximum of 8,100 tonnes supposedly (USA owned gold) and the Federal Reserve bank of NY supposedly has around 6400 tonnes of gold (foreign owned gold). With demand this great it will not take long for the entire globe’s vaults to become completely bare.


(courtesy Koos Jansen)




Posted on 24 Mar 2015 by

Indian Gold Import Exploding In March

March has not even ended, though preliminary data indicates India has already imported over 130 tonnes of gold this month. A conservative estimate suggests total gross import can reach 150 tonnes of gold this month.

Because of a “current account deficit” the Indian government decided in March 2012 to raise to import duty on gold from 2 % to 4 %, in June 2013 from 4 % to 8% and in August 2013 from 8 % to 10 %. Additionally, in August 2013 the 80/20 rule was implemented, which was eventually withdrawn in December 2014.

The restrictions the Indian Government implemented on gold trade spawned new life to smuggling cartels with all due consequences. Official Import fell drastically, wiping out any revenues the government collected from the import of the yellow metal. In May 2013 Indian gross gold import accounted for 168 tonnes, by September 2013 a multi year low was reached at 15 tonnes. Premiums in India, over London spot prices, skyrocketed to a staggering 25 %.

Indian gold Premiums march 2015

For a close look at recent import data let’s start with January; India officially gross imported a meager 39 tonnes, though up 9 % year on year. In February gross import accounted for 50 tonnes, up 57 % y/y. Then, the real surprise came this month; as said previously preliminary data (derived from daily numbers at Infodrive) suggests gross import accounts for 130 tonnes (March 2 – 21). When India’s Directorate General of Commercial Intelligence & Statistics will publish official data somewhere around April 13, we know the exact imported tonnage for March.

India Gold trade 3-2015

Perhaps surging import is caused by a falling price since the beginning of the year combined with the relaxation of import restrictions. Remarkably, premiums are staying close to 12 % (including the 10 % import duty), sourcing the metal is no problem.

Indian Gold and Silver prices

From daily trade data we can see a lot of gold from Ghana going directly to India. Could it be there is some conflict gold coming from Ghana?

Screen Shot 2015-03-24 at 2.33.56 PM

Monetizing Gold

A new scheme the India government is looking at to obstruct gold import is through monetizing gold, comparable to the Turkish system (read this post for the Turkish Reserve Option Mechanism). The World Gold Council’s managing director in India, Somasundaram PR, stated:

Will they allow banks to hold a part of their reserves in gold because of this deposit monetization? It is one of the recommendations. You need to give huge incentives to the banks to operate this deposit monetization.

In short, the Indian people would be able to make a gold deposit at a commercial bank, which technically is always a loan to the bank, subsequently this bank can use the gold to meet its reserve requirements at the central bank – in this case the Reserve Bank Of India (RBI). The deposits would accrue interest (in Turkey denominated in gold), however, like every bank deposit, the gold can vanish if the bank becomes insolvent. The universal rule is; no risk, no return.

Furthermore, if the gold deposit scheme will be implemented, to the likes of the World Gold Council, I wonder how the RBI will treat the gold held as reserve requirement. The Turkish central bank (CBRT) counts these reserves as official gold reserves, which is double counting.

Turkish Official Gold Reserves

Increases in Turkish official gold reserves are not caused by CBRT purchases on the open market, but a reflection of the amount of gold held as reserve requirement by banks at the CBRT.

According to the blogger Yunus Emre, his gold deposits for a ‘Gold’ credit card  at his local commercial bank in Turkey didn’t have the option for withdraw. The gold can go into a bank, but it’s hard to get it out. Some way of monetizing gold. (please read his posts)

The World Gold Council has released two reports on gold monetization, (i) Why India Needs A Gold Policy, (ii) Turkey: gold in action. Both reports combined count nearly 90 pages, but not once are the risks of lending gold to a bank disclosed. Whereas most people own gold to explicitly avoid these banking risks.

Another plan from the Indian Government to prevent the circulation of “black money” is to require people doing gold purchases above 100,000 rupees, to show a so-called permanent account number (PAN), which is used to prevent tax evasion. This would be disastrous for the Indian jewelry industry as 80 % of the industry’s business comes from rural customers, who don’t have a PAN. Hence, Indian jewelers have threatened to go on strike against this plan.

Koos Jansen
E-mail Koos Jansen on:








(courtesy Bill Holter/Miles Franklin)

They all can see it …!
We showed you chart a yesterday suggesting markets are grossly overvalued, to me it is obvious and self explanatory.

  To make the point even more stark, take a gander at this chart of the “high yield” index.

                                                               (courtesy M. Stevens)
  For those who don’t know, it is proper to replace the words “high yield” with “junk bonds”.  These are THE most risky, lowest rated credits there are and have soared as investors have chased yield.  Does this look like a bubble to you?  Has your broker suggested this arena as a way to “diversify” or to strive for added yield …safely?  Do you think the smart money is chasing these blindly?
  A list of billionaires and very savvy investors must have already seen these or ones quite similar as over the last year or more they have been “lining up” and getting out.  The list is long, Carl Icahn, George Soros, Stanley Druckenmiller, Sam Zell, Ray Dalio, Kyle Bass, and even the quintessential establishment figure Alan Greenspan… and it’s getting longer.

  A couple of names were added to the list this past week, first, the famed hedge fund manager Paul Tudor Jones said the current “market mania will end in revolution, taxes or war”  Most importantly he said, “this gap between the 1% and the rest of America, and between the US and the rest of the world, cannot and will not persist. we’re in the middle of a disastrous market mania“.  Do you understand what he is saying?  Have you heard this before on many occasions …in my writings?  In plain English without actually using the word, Paul Tudor Jones is forecasting we have a “reset” in our future.
  Another name added to the list and far more shocking was former Dallas Fed member Richard Fisher.  He was interviewed one day after his retirement and it was a doozy!

Please watch this interview, for the first 2:10 it was mostly niceties and he towed the Fed line quite well.  The remainder, while not totally spilling the beans was VERY telling.  He said the Fed is “uber accommodative, and investors are lazy for relying on the Fed”.  He iced this cake when he said the markets are “hyper overpriced” amongst other goodies!

  … And to think, it only took him one day of retirement to start telling some very real truths!  (He also immediately joined the board of Pepsi Cola)  I could only think to myself, what does he really think?  I would love to play a round of golf with Mr. Fisher and get a little bit of cold Rocky Mountain (truth serum) Ale into him to hear the rest of the story.  Might the timing of his retirement say anything to the thoughtful?
  In any case, “they know”.  They all know and I would say they “have known” for years.  The truly bright knew before 2007 where this is all going but how do you stop a speeding freight train running toward a cliff where the tracks cease to even exist?  There is still time to correct your position.  You can still sell your stocks and bonds.  You can still buy gold and silver and have them delivered to you.  You can still move your bank balances into real assets with no leverage.
  You can still move to protect yourselves, the question is “how much” time is left?  I don’t know.  The list of names above probably don’t know either as some have been as boisterous as I have been since 2007.  The key is to look at the charts at the very top and understand “what” is coming.  This is not going to be a crash of the real estate markets.  It won’t be a crash of a “sector” of the stock market nor just the stock market.  We will not watch as the bond markets seize up singularly nor will we see our currency collapsed and not affecting any other asset class.
  No, what we have coming is a collapse of everything we have worked for and everything we have built and saved over our own lifetimes and that of our ancestors.  All of our financial markets are connected and none will be spared.  Another aspect is ALL foreign markets and their economies are tied together with everyone else’s …you could say “we are the world”!  Nothing will be left unaffected.  The only thing you need to know and understand is this, gold has always been money and always ultimately seen to be the most liquid safe haven on God’s green Earth.  Man has never before in history been involved in a more dangerous and all engulfing mania based on a Ponzi scheme.  It matters not when nor how it ends because it will end …badly  What matters is how you are positioned when it does!  Regards,  Bill Holter

And now for the important paper stories for today:



Early Tuesday morning trading from Europe/Asia



1. Stocks generally mixed on major Chinese bourses ( India’s Sensex and Shanghai higher)/yen rises to 119.39/Chinese PMI’s disappoint/European PMI rises (see zerohedge article below)

1b Chinese yuan vs USA dollar/yuan strengthens to 6.2050

2 Nikkei down by 40.91 or .21%

3. Europe stocks mostly in the green/USA dollar index down to 96.78/Euro rises to 1.0974

3b Japan 10 year bond yield .31% (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.39/

3c Nikkei still above 19,000

3d USA/Yen rate now below the 120 barrier this morning

3e WTI  47.75  Brent 56.15

3f Gold up/Yen up

3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion.  Japan’s GDP equals 5 trillion usa.

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.

3h  Oil up for both WTI and down for Brent this morning.

3i European bond buying continues to push yields lower on all fronts in the EMU

Except Greece which sees its 2 year rate slightly falls to 20.32%/Greek stocks up by a huge 2.02%today/ still expect continual bank runs on Greek banks.

3j  Greek 10 year bond yield:  11.49% (up  by 15 basis point in yield)



3k Gold at 1193.00 dollars/silver $16.99

3l USA vs Russian rouble;  (Russian rouble up  1 1/10 rouble/dollar in value) 57.76 rising with the higher brent price

3m oil into the 47 dollar handle for WTI and 56 handle for Brent

3n Higher foreign deposits out of China sees hugh risk of outflows and a currency depreciation.  This scan spell financial disaster for the rest of the world/China may be forced to do QE!!

30  SNB (Swiss National Bank) still intervening again in the markets driving down the SF

3p Britain’s serious fraud squad investigating the Bank of England/ the British pound is suffering

3r the 7 year German bund still is  in negative territory/no doubt the ECB will have trouble meeting its quota of purchases and thus European QE will be a total failure.

3s Saudi Arabia intent on restoring peace in Yemen/

3t Bloomberg calculates Greece’s shortfall in March at 3.5 billion euros.



4.  USA 10 year treasury bond at 1.91% early this morning. Thirty year rate well below 3% at 2.50%/yield curve flatten/foreshadowing recession.



5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.



Futures At Overnight Highs On China PMI Miss, Europe PMI Beat


It is a centrally-planned “market” and everyone is merely a bystander. Last night, following a dramatic China PMI miss, which as previously reported tumbled to the worst print since early 2014 and is flashing a “hard-landing” warning, the Shanghai Composite first dipped then spiked because all a “hard-landing” means is even more liquidity by the PBOC (which as we suggested a month ago will be the last entrant into the QE party before everyone falls apart). Then, this morning, a surprise beat by the German (and Eurozone) PMI was likewise interpreted by the algos as a catalyst to buy, and at this moment both European stock and US equity futures are their session highs. So, to summarize, for anyone confused: both good and bad data… a green light to buy stocks. In fact, all one needs is a flashing red headline to launch the momentum igniting algos into a buying spasm.

Some more on the just announced Eurozone PMI numbers:

From Goldman:


The Euro area flash composite PMI rose by a robust 0.8pt to 54.1 in March, above our and consensus expectations of a more modest gain (Cons: 53.6, GS: 53.8). The expansion in the composite PMI was driven by similar robust gains in both the manufacturing and services subcomponents. The German flash composite PMI increased notably, while its French counterpart eased slightly after a strong gain in February.

  1. The expansion in the Euro area flash composite PMI was driven by similar stronger-than-expected increases in both the manufacturing PMI and the services PM; the manufacturing PMI showed a 0.8pt gain in March to 51.9 (Cons: 51.5) and the services PMI rose by 0.5pt to 54.3 (Cons: 53.9) (Exhibit 1).
  2. The breakdown of the March flash PMI release was positive. New orders rose by 1.3pt while stocks edged down by 0.8pt, leading to a solid 2.0pt increase in the stock-order difference. Other subcomponents of the manufacturing PMI were also on the positive side, with output and employment rising to 53.5 (+1.4pt) and 51.2 (+0.5pt) respectively. For services, the forward-looking subcomponents (which are not part of the headline services PMI figure) showed ‘incoming new business’ rising by a sizeable 2.9pt to 54.6, while ‘business expectations’ eased slightly by 0.3pt to 63.9.
  3. In addition to the Euro area aggregate PMI, Flash PMIs were released for Germany and France. The German composite PMI came in stronger than expected at 55.3 (Cons: 54.1). This was driven by a notable 1.3pt expansion in the manufacturing PMI as well as a 0.6pt increase in the services PMI. The French composite PMI fell slightly by 0.5pt to 51.7 in March, a touch weaker than expected (Cons: 51.9). The French PMI decline in March follows a forceful 2.9pt increase in February and was driven by a 0.6pt fall in the services PMI (to 52.8) outweighing a 0.6pt increase in the manufacturing PMI (to 48.2).
  4. The area-wide figure released today (as well as the German and French equivalents) suggests around a 1.0pt decline in the services PMI in Italy and Spain, and a 1.3pt improvement in the Euro area manufacturing PMIs outside Germany/France.
  5. Based on historical correlations, a reading of 54.1 is associated with +0.5%qoq (non-annl.) GDP growth. Our CAI points to small real GDP growth out-turn (+0.3%). Our judgmental GDP forecast remains at +0.4%qoq for Q1 (Exhibit 3).

So with any “favorable” data being cherrypicked at will, it was only expected that with this week’s latest API data on deck which is set to report anothet massive inventory build, that oil would rise, on however one wished to interpret the overnight data. WTI, Brent up for 2nd day amid weaker dollar and better-than-expected manufacturing data in Germany and Eurozone offset speculations of another build in U.S. crude stockpiles. Median est. in Bloomberg survey of EIA shows build of 4.75m bbl. Euro-zone PMI data “slightly positive but mainly as a result of the good German data — low oil prices giving Germany a boost,” Michael Hewson, analyst at CMC Markets. “With China and Japan showing some weakness in their economies upside likely to remain capped in the short term.” Well, not if it is seen as a signal of imminent more easing.

Looking at Asian stocks, these traded mostly lower following a lacklustre Wall Street close which saw the S&P 500 finish relatively flat, after touching within 4-points of its record high. The Hang Seng and Shanghai Comp both fell in the wake of a poor Chinese HSBC Mfg. PMI release, with the headline contracting to an 11-month low (49.2 vs. Exp. 50.5 (Prev. 50.7). The Nikkei 225 also fell amid JPY strength after the currency posted back to back gains against the USD, while ASX 200 was the only index to trade in the green buoyed by basic materials.

The USD has once again been this morning’s driver after breaking below yesterday’s low print and testing the low hit in the wake of last week’s FOMC statement at 96.63. Renewed selling pressure in the currency lifted EUR/USD to fresh highs and the pair tested 1.1000 as shorts continue to be squeezed out. At the same time as these moves this morning, the DAX rallied off lowest levels to fresh highs ahead of the German PMI reading which beat expectations and caused a further lift in equities and the EUR. Despite all this newsflow has been on the light side – markets have largely overshadowed weaker than expected Chinese PMI overnight and continue to digest and consolidate moved seen last week and what the latest policy statement means for global markets.

Fed’s Fischer (Voter, Dove) said rate lift-off is probably justified before end-2015, but lift-off in June, September or a different
month depends on data. (BBG) Separately Fed’s Williams (Voter, Dove) reiterated his view that rates will start to rise this year and
the Fed will lift them gradually, said that the US economy can handle a strong USD. (BBG)

UK traders were keenly awaiting this morning’s inflation data, however despite a lower than expected headline which came in flat at 0 and at the lowest since series began, GBP only saw minor weakness as several expected an uninspiring report. GBP and rates have continued to underperform their peers in a continuation from yesterday and with lingering concerns over the political landscape ahead of May’s general election, with long gilts up ~30 ticks compared to gains of just ~10 ticks in bunds. Volumes have been relatively light however and prelim month-end extensions fairly average.

Crude futures have pared most of the overnight weakness seen in the wake of weaker than expected Chinese PMI, driven by the slide in the USD index this morning, which also lifted precious metals to highs in early trade. Late yesterday Copper futures broke to fresh 11-week highs after a technical break above the 100 DMA, supported by a weaker USD and an output deficit forecast of 475K MT reported by the Copper Study Group however this strength was pared overnight following the Chinese data release.

In summary: European shares rise with the travel & leisure and media sectors outperforming and retail, utilities underperforming. European shares gain after earlier declines as Eurozone PMI beat ests., supported by expansion in Germany. Britain’s inflation rate dropped to zero in Feb., first ever stagnation in prices since data began almost 3 decades ago. The Italian and French markets are the best-performing larger bourses, Swiss the worst. The euro is stronger against the dollar. German 10yr bond yields fall; French yields decline. Commodities gain, with nickel, wheat  underperforming and WTI crude outperforming. * U.S. Markit U.S. manufacturing PMI, CPI, FHFA house price index, new home sales, Richmond Fed index due later.

Market Wrap

  • S&P 500 futures up 0.2% to 2099.1
  • Stoxx 600 up 0.2% to 402.2
  • US 10Yr yield little changed at 1.92%
  • German 10Yr yield down 1bps to 0.21%
  • MSCI Asia Pacific up 0.2% to 149
  • Gold spot up 0.1% to $1191.1/oz
    Eurostoxx 50 +0.4%, FTSE 100 +0.3%, CAC 40 +0.4%, DAX +0.3%, IBEX +0.3%, FTSEMIB +0.6%, SMI little changed
  • MSCI Asia Pacific up 0.2% to 149; Nikkei 225 down 0.2%, Hang Seng down 0.4%, Kospi up 0.2%, Shanghai Composite up 0.1%, ASX up 0.2%, Sensex down 0.1%
  • 8 out of 10 sectors rise with health care, utilities outperforming and consumer, financials underperforming
    Euro up 0.22% to $1.097
  • Dollar Index down 0.2% to 96.84
  • Italian 10Yr yield up 1bps to 1.3%
  • Spanish 10Yr yield up 1bps to 1.27%
  • French 10Yr yield down 1bps to 0.48%
  • S&P GSCI Index up 0.7% to 404.7
  • Brent Futures up 1.2% to $56.6/bbl, WTI Futures up 1.4% to $48.1/bbl
  • LME 3m Copper up 0.3% to $6136/MT
  • LME 3m Nickel down 1.1% to $14145/MT
  • Wheat futures down 0.9% to 529 USd/bu

Bulletin headline summary from RanSquawk and Bloomberg

  • The USD drives price action once again this morning as the index touches lows hit in the wake of last week’s FOMC statement and EUR/USD tests 1.1000
  • Several Fed speakers hit the tape overnight including Fischer and Williams who said they expected a hike this year and the US economy can handle a strong USD
  • Looking ahead there is quite a bit of US data due for release with CPI, US manufacturing PMI, New Home Sales and API inventories after the US close.
  • Treasuries steady before week’s auctions begin with $26b 2Y notes; WI yield 0.605% vs. 0.603% last month.
  • Feb. consumer prices also due, est. +0.2%, ex-food and energy +0.1%.
  • Markit’s euro-area composite PMI rose to 54.1 in March from 53.3, higher than expected; composite gauges for Germany and France were both well above the 50-point mark
  • Merkel encouraged Greece’s Tsipras to follow the path set out by the nation’s creditors, saying his country belongs in Europe and she wants its economy to succeed.
  • Greece is now a “lose-lose game” and the chances of it leaving the euro area are now 50/50; country could go “down the drain,” billionaire investor George Soros said in a Bloomberg Television interview due to air  Tuesday
  • Britain’s inflation rate dropped to zero in February, the first ever stagnation in prices since the data series began almost three decades ago
  • HSBC/Markit’s China preliminary manufacturing PMI was at 49.2 in March, missing the median estimate of 50.5 in a Bloomberg survey and down from February’s 50.7
  • SF Fed President John Williams said a discussion should happen mid-year about tightening policy, even as he lowered his economic growth forecast
  • European banks will offload EU100b of unwanted loans this year to cut costs and restructure their balance sheets, according to a report by PricewaterhouseCoopers LLP
  • Saudi Arabia and its Gulf partners will take “necessary measures” to restore stability in Yemen if peace talks fail to resolve the growing conflict there, the Saudi foreign minister said
  • Sovereign 10Y yields lower. Asian stocks mixed, European stocks mostly higher, U.S. equity-index futures gain. Crude, gold and copper gain


DB’s Jim Reid completes the overnight recap



Its also flash PMI day and already both Japan (50.4 vs. 52.0 expected) and China (49.2 vs. 50.5 expected) have disappointed. The sub-50 reading for China in particular was a new 11-month low with new orders appearing to be the main drag (49.3 from 51.2 previously) highlighting weak domestic demand. Our colleagues in China note that the reading reinforces their view of both a property slowdown and a fiscal slide starting to hit the economy. They’ve reiterated that GDP will slow in Q1 to 6.8% yoy (well below consensus of 7.2%) and a policy easing cycle will start soon. Bourses are weaker on the back of the data. The Shanghai Comp (-0.71%) and Nikkei (-0.11%) are both softer while the Hang Seng (-0.39%) is following suit.

Back to markets yesterday, there were interesting comments out of the Fed’s Fischer who said that a rate rise will ‘likely be warranted before the end of the year’ and that ‘a smooth path upward in the federal funds rate will almost certainly not be realized’. Such a comment shows the desire to raise rates is still there from the Fed but they have seemingly moved from targeting June a few months ago to signaling starting normalisation now before year end. There is definitely some timing slippage from the Fed. There were similar comments out of the Cleveland Fed President Mester too, who commented that ‘it would be appropriate to raise interest rates sometime this year’ before clarifying that this keeps June open, but doesn’t mean that this is the most necessary time frame. Meanwhile, early this morning the San Francisco Fed President Williams was quoted on Bloomberg as saying that ‘I think that by mid-year it will be the time to have a discussion about starting to raise rates’ with the article noting that the language used dropped the ‘serious discussion’ language Williams had used in a speech earlier this month’.

Markets yesterday appeared to initially react in a similar fashion to the post-FOMC trend last week. The Dollar tumbled, equity markets rose, credit markets were firmer and US Treasuries tightened. With the exception of a late sell-off in equity markets, the moves were more or less consistent with the earlier price action. The Dollar, as measured by the broader DXY, softened 0.93% for its second consecutive daily decline and 5th in 6 sessions. Treasuries extended their recent rally with the yield on the 10y benchmark closing 1.8bps lower at 1.912%. Equities, however, closed in the red following a sell-off in the last 15 minutes of trading. The S&P 500 (-0.17%) and Dow (-0.06%) finished down after both had traded some 0.3%-0.4% higher intraday. The late weakness appeared to be fairly broad-based and came despite a second consecutive positive day for oil markets with both WTI (+1.89%) and Brent (+1.08%) higher. Although taking something of a backseat, data disappointed once again with both the February Chicago Fed national activity index (-0.11 vs. +0.10 expected) and existing home sales (+1.2% mom vs. +1.7% expected) coming in below market consensus.

Closer to home yesterday, markets closed softer in Europe with Greece, Draghi and Spanish elections in focus. Just recapping the price action first, the Stoxx 600 ended -0.69% to bring a run of three consecutive daily gains to an end. The DAX (-1.19%) and CAC (-0.65%) also closed weaker. With the weakness in the Dollar yesterday, the Euro closed 1.16% firmer yesterday at $1.095. Government bond markets saw the most significant moves yesterday. 10y Bund yields bounced off their recent record lows to close 4bps higher at 0.222%, while yields in Spain (+8.0bps), Italy (+9.1bps) and Portugal (+11.1bps) were considerably wider.

Some of the weakness in peripherals could well be as a result of the latest Spanish regional election in Andalusia. Spanish PM Rajoy saw his party suffer a significant loss of voters, with the People’s Party getting just 26.8% of the votes – it’s worst election result in 25 years in the region and down from 40.7% in the last vote in 2012. The socialist party maintained its hold on the region, securing 47 seats to the PP’s 33 seats. Meanwhile, the anti-austerity focused Podemos party secured 15 seats in its first test since Syriza secured victory in Greece. The party in fact secured victory in the city of Cadiz, exceeding expectations according to the UK’s Guardian. With political uncertainty rising, coupled with further support for the Podemos party ahead of a national election at the end of the year, developments in Spain will be well worth keeping an eye on.

In Berlin yesterday, the meeting between Germany’s Merkel and Greece’s Tsipras offered little in the way of fresh headlines with the head to head meeting appearing to be a tension easing exercise more than anything else. The tone coming out of the meeting was fairly conciliatory with Merkel emphasizing shortly after that she ‘sensed an appetite for cooperation’ according to Greek press Ekathimerini before going on to state her desire for Greece to grow and overcome its high unemployment. Tsipras offered a similar tone, stating that both camps are trying to find common ground to reach an agreement soon on reforms. Despite the generally better tone, until we see evidence of further progress on the reform front in the face of a deteriorating liquidity position, we still remain nervous over the outcome even if compromise is still the base case.

Wrapping up the news in Europe yesterday, comments from the ECB President Draghi attracted some headlines. In a statement to parliament in Brussels, Draghi pushed back on suggestions that the ECB’s QE programme may run into a shortage of bonds to buy with Draghi in particular reinforcing that market liquidity remains ample. The ECB President also adamantly responded to accusations that the ECB is blackmailing Greece, in particular making reference to the ECB’s significant exposure to Greek debt as evidence of commitment. The President also made a cautious statement towards a reinstatement of the collateral waiver for Greece, specifically saying that ‘several conditions need to be satisfied and they are not there yet but we are confident they will be if this process of policy dialogue is being reconstructed’ (Reuters). Finally, the FT last night ran with the story of Draghi hitting back at accusations that the ECB’s QE programme will lead to governments scrapping economic reforms. Instead, Draghi argued that QE would produce an ‘additional benefit’ for eurozone countries when ‘complemented by structural reforms’.

In terms of today’s calendar, it’s a busy day for data releases and we start in Europe with the release of the preliminary March manufacturing, services and composite PMI’s for the Euro-area as well as regionally in France and Germany. The aforementioned CPI print in the UK will of course be of much focus. The market is expecting a headline +0.3% mom print and +0.1% yoy (down from +0.3% previously) reading while at the core consensus is for a +1.3% yoy (from +1.4%) print. The RPI and PPI prints in the UK are also due this morning. The inflation reading will of course take up much of our attention this afternoon in the US too with the market headline expected at +0.2% mom and -0.1% yoy (unchanged) while the core is expected at +0.1% mom and +1.7% yoy (from +1.6%) . Elsewhere, manufacturing PMI, new homes sales and the Richmond Fed manufacturing index round off the releases





The all important Chinese PMI falls badly as rail volume contracts.

China is now undergoing a hard landing;


(courtesy zero hedge)



China Lands Hard: Rail Volume Plunges, PMI Tumbles Into Contraction, Employment Worst Since Lehman


Chinese rail freight collapses 9.1% YoY; China Manufacturing PMI tumbled back to a contractionary 49.2 – lowest in 11 months; and the Employment sub-index plunged to its lowest since Lehman … yeah but apart from that, everything is awesome. And for those excited about just how disastrous Chinese data is (and thus how huge the next stimulus unleashing will be), think againChina now sees exactly where the last trillion dollar QE went… a de minimus and unsustained blip in the economy and liquidity-fueled rampage in stocks (which is not what a corruption-crackdown politburo wants to encourage).




Double Whammy: China Manufacturing PMI prints 49.2 – lowest in 11 months


Everything is un-awesome…


Triple Whammy: Employment collapses…


*  *  *

Copper prices have continued to collapse and retraced the entire US day session jerk higher…

*  *  *

Of course, HSBC and Markit are screaming for moar QE…

“The HSBC Flash China Manufacturing PMI signalled a slight deterioration in the health of China’s manufacturing sector in March. A renewed fall in total new business contributed to a weaker expansion of output, while companies continued to trim their workforce numbers. Meanwhile, manufacturing companies continued to benefit from falling input costs, stemming from the recent global oil price decline. However, relatively muted client demand has led firms to pass on savings in a bid to boost new work, and cut their selling prices at a similarly sharp rate.”

Charts: Bloomberg








George Soros warns that Greece is going down the drain and also warns about the Ukraine:


(courtesy George Soros/Bloomberg)



George Soros Warns Greece “Is Going Down The Drain”


“Right now we are at the cusp,” billionaire George Soros tells Bloomberg TV in this brief clip, the chances of Greece leaving the euro area are now 50-50 and the country could go “down the drain.” The 84-year-old fears that talks between Greece and ‘the institutions’ could “break down,” adding that  “Greece is a long-festering problem that was mishandled from the beginning by all parties,” concluding that the chances of Greece leaving the euro area are now 50-50 and the country could go “down the drain.” Finally, Soros notes, what worries him the most is Ukraine.

As Bloomberg reports,

The chances of Greece leaving the euro area are now 50-50 and the country could go “down the drain,” billionaire investor George Soros said.

“It’s now a lose-lose game and the best that can happen is actually muddling through,” Soros, 84, said in a Bloomberg Television interview due to air Tuesday. “Greece is a long-festering problem that was mishandled from the beginning by all parties.”

Greek Prime Minister Alexis Tsipras’s government needs to persuade its creditors to sign off on a package of economic measures to free up long-withheld aid payments that will keep the country afloat. Since his January election victory, he has tried to shape an alternative to the austerity program set out in the nation’s bailout agreement, spurring concern that Greece may be forced out of the euro.

The negotiations between Tsipras’s Syriza government and the institutions helping finance the Greek economy — the European Commission, European Central Bank and International Monetary Fund — could result in a “breakdown,” leading to the country leaving the common currency area, Soros said in the interview at his London home.

“You can keep on pushing it back indefinitely,” making interest payments without writing down debt, Soros said. “But in the meantime there will be no primary surplus because Greece is going down the drain.”

Soros said in January 2012 that the odds are in the direction of Greece leaving the euro region.

“Right now we are at the cusp and I can see both possibilities,” he said in Tuesday’s interview.

*  *  *


Soros explains…

And concludes with some thoughts on Ukraine…

the war in eastern Ukraine between government forces and rebel militia supported by Russia’s President Vladimir Putin concerns him the most.

Without more external financial assistance the “new Ukraine” probably will gradually deteriorate and “become like the old Ukraine so that the oligarchs come back and assert their power,” he said. “That fight has actually started in the last week or so.”

*  *  *




Huge demonstrations in Spain.  Many more of these to come with a general strike called for in October, one month before the general elections in November.


(courtesy and special thanks to Robert H for sending this to us)




‘Food, Dignity, and a Roof’: Thousands March Against Austerity in Spanish Capital

Protesters are mobilizing for a general strike ahead of national elections


“The government wants to deny reality, and that is why we are here,” said Javier Garcia, a spokesperson for the March for Dignity. (Photo: AP)



A “March for Dignity” drew thousands to the Spanish capital on Saturday in the latest show of mass opposition to the government’s harsh austerity policies that have slashed public goods—from education to public health to unemployment assistance.

As they marched through Madrid, protesters carried banners that read,“Food, jobs and a roof with dignity. Walking toward the general strike.”

“We have mobilized here for the young people because in Extremadura youth unemployment is almost 60 percent,” 28-year-old Antonio Laso, from southwestern Spain, told the Guardian.

“The government wants to deny reality, and that is why we are here,” Javier Garcia, a spokesperson for the March for Dignity, told VICE News.

He said protesters are fighting for “the recovery of some public services related to education and health, to protest against the payment of the debt, which we consider unfair and illegal as it has not been contracted by the people’s decision, and to position us against the TTIP (Transatlantic Trade and Investment Partnership), a free commerce treaty between both economic areas that is going to bring more poverty to our country.”

The rally, which follows a last year’s March for Dignity, is part of escalating mobilizations aimed at building towards a general strike in October—ahead of the national elections.

The demonstration came one day before Andalusia’s regional election on Sunday—which many say will be a test of popular support for the left-wing, anti-austerity Podemos party in the lead-up to the general election.

This region is stricken by poverty and joblessness, with more than a third of all people unemployed—a rate higher than the national average of 25 percent.








our humour story of the day:


(courtesy zero hedge)





Spy Vs. Spy: Obama Spies On Netanyahu, Discovers Netanyahu Spying On Obama


With the controversy surrounding Netanyahu’s inflammatory campaign rhetoric still simmering, and with Washington making it clear that the White House isn’t intent on “pretending like” the Prime Minister didn’t suggest that a two-state solution would happen over his dead body and that maybe Arab Israelis shouldn’t vote, tensions between the US and Israel don’t appear set to dissipate in the near-term. The Wall Street Journal is reporting that Israel secretly gathered information regarding nuclear talks between Iran and the US then shared the information with members of Congress in an attempt to undermine support for the talks. Here’s WSJ:

The spying operation was part of a broader campaign by Israeli Prime Minister Benjamin Netanyahu’s government to penetrate the negotiations and then help build a case against the emerging terms of the deal, current and former U.S. officials said. In addition to eavesdropping, Israel acquired information from confidential U.S. briefings, informants and diplomatic contacts in Europe, the officials said.

But it wasn’t really all the spying and eavesdropping and general sneakiness that irked Washington:

The espionage didn’t upset the White House as much as Israel’s sharing of inside information with U.S. lawmakers and others to drain support from a high-stakes deal intended to limit Iran’s nuclear program, current and former officials said.


“It is one thing for the U.S. and Israel to spy on each other. It is another thing for Israel to steal U.S. secrets and play them back to U.S. legislators to undermine U.S. diplomacy,” said a senior U.S. official briefed on the matter…


The U.S. and Israel, longtime allies who routinely swap information on security threats, sometimes operate behind the scenes like spy-versus-spy rivals. The White House has largely tolerated Israeli snooping on U.S. policy makers—a posture Israel takes when the tables are turned.

Where the story really gets amusing though is when The Journal explains how Israel says it actually got the information and how Washington learned about what the Israelis were up to:

Israeli officials denied spying directly on U.S. negotiators and said they received their information through other means, including close surveillance of Iranian leaders receiving the latest U.S. and European offers…


Current and former Israeli officials said their intelligence agencies scaled back their targeting of U.S. officials after the jailing nearly 30 years ago of American Jonathan Pollard for passing secrets to Israel.


While U.S. officials may not be direct targets, current and former officials said, Israeli intelligence agencies sweep up communications between U.S. officials and parties targeted by the Israelis, including Iran…


As secret talks with Iran progressed into 2013, U.S. intelligence agencies monitored Israel’s communications to see if the country knew of the negotiations. Mr. Obama didn’t tell Mr. Netanyahu until September 2013.

So breaking that down, the US spied on Israel and discovered that Israel was spying on the US, which under normal circumstances would be fine, but this time the Israeli spying was aimed at undermining US diplomacy, so this spying was unacceptable, but Israel contends that in fact, it did not spy on the US to obtain the sensitive information but in fact gathered it from spying on other countries. 

And while the prime minister’s office denies that it conducted any espionage against the US, the Israelis can’t for the life of them figure out why Washington would underestimate their ability to conduct espionage:

A senior official in the prime minister’s office said Monday: “These allegations are utterly false. The state of Israel does not conduct espionage against the United States”…


Israeli officials, who said they had already learned about the talks through their own channels, told their U.S. counterparts they were upset about being excluded. “ ‘Did the administration really believe we wouldn’t find out?’ ”

Maybe they’re right, Washington shouldn’t have been surprised because after all, the US probably built the system that Israel used to do the spying:

Americans shouldn’t be surprised, said a person familiar with the Israeli practice, since U.S. intelligence agencies helped the Israelis build a system to listen in on high-level Iranian communications.


Moving past the comedic value here, the allegations certainly aren’t doing anything to improve the relationship between The White House and Netanyahu in what was already an extremely contentious time for US-Israeli relations. And for anyone who thinks Washington is going to let this slide, here’s a quote from a senior US official:

“If you’re wondering whether something serious has shifted here, the answer is yes.” 







The USA showing their muscle against Iran?

Iran calling on Mr Putin!!


(courtesy zero hedge)



US Begins “Big Stick” Negotiations With Iran: Sends The “Big Ships” Into The Persian Gulf


Following its “visual to the world” message last night bytest-firing an ICBM, America appears to shifting to ‘big stick’ diplomacy. Following Iran’s naval drills last week (attacking a replica US aircraft carrier), Sputnik News reports that as the nuclear negotiations between Iran and the P5+1 nations come to a head, the US begins Eagle Resolve, a massive military exercise in the Persian Gulf. Eagle Resolve will involve tactical exercises from the US Army, Marines, and various other military branches “with simulated portions of the exercise based on a fictional adversary.” Careful to ensure Obama does not lose his Nobel Peace Prize, a CENTCOM official explained, “the exercise is not intended as a signal to Iran.”



As Sputnik News reports,

With the support of regional allies, the US moved nearly 3,000 military personnel, as well as “air, land, sea, and special operations components,” into the gulf. Taking place just off the coast of Kuwait, the exercise will continue through the end of the month, and is meant to improve the military’s response time should an incident occur in the region.


“Eagle Resolve 2015 will consist of a week-long series of simulated ‘injects’ to exercise participants’ ability to respond as a multinational headquarters staff, followed by a series of tactical demonstrations of land, maritime, and air forces from several nations,” reads a fact sheet provided to the Washington Free Beacon by US Central Command. “The exercise ends with a senior leader seminar to foster an environment for commanders to discuss issues of regional interest.”


Eagle Resolve will involve tactical exercises from the US Army, Marines, and various other military branches to test readiness in air defense, border security, counterterrorism, as well as “consequence management.” These include amphibious landing exercises and ship-based search and seizure operations.


Officials insist that the exercise has been in the planning stages for the last 14 months, and has nothing to do with the Iranian nuclear negotiations.


“The exercise is not intended as a signal to Iran,” a CENTCOM official said,according to the Free Beacon. “If there’s any message at all, it’s that all participants have a common interest in regional security.”


“It’s important to point out that this is a recurring exercise, with planning for this year’s exercise beginning over a year ago,” the official added. “The focus of the exercise is on bolstering capabilities useful in a wide range of scenarios to help preserve and bolster regional security, with simulated portions of the exercise based on a fictional adversary.”


Still, it’s hard to ignore which nation that “fictional adversary” may be in reference to. On Saturday, former CIA Director GeneralDavid Petraeus called Iran the greatest long-term threat to stability in the region.

*  *  *

And now the big oil stories for today:
The Chinese owned Nexen is closing down its huge oil trading platform:
(courtesy zero hedge)



Canada’s Biggest Oil Casualty To Date: Calgary’s Nexen Shutters Oil Trading Desk



Last December, traditionally permabullish energy trader Andy Hall shocked the world when he became the first casualty of the oil crash after Phibro, his 113 year old employer then owned by Occidental Petroleum after its sale by Citigroup, would liquidate in the US after it failed to buy a buyer. He wouldn’t be the last. Overnight, Nexen Energy, a wholly owned subsidiary of China’s CNOOC Ltd, reported it too would close its crude oil trading division following a round of job cuts announced last week, four market sources said on Monday.

It appears that unlike money-losing shale producers, who still have some balance sheet capacity to eek out funding for a few more weeks/months of operations and product dumping (which sends prices of oil lower not higher which is what those same producers need), oil traders who largely are self-funded no longer have that luxury, and as a result of the failure of oil to bounce, have no choice but to fold it in.

From Reuters:

The Calgary-based company, which was acquired by state-controlled CNOOC in 2013 for $15.1 billion, cut 400 jobs last week in North America and the United Kingdom in response to plunging global oil prices.


Three sources said Nexen was closing down its trading operations worldwide, although the majority of activity takes place in Calgary. The company will continue to market its own crude.


Nexen did not immediately respond to requests for comment.

Just how big is Nexen’s oil trading desk? It’s huge. Or was. “In Canada, Nexen’s crude oil desk is the biggest trading casualty so far of the global oil price rout. One market source said Nexen was among the top five physical crude trading shops in Calgary and the move would impact liquidity in the Canadian market. “There will be some unhappy brokers in town,” the source said. “But this is more consistent with the business model that CNOOC has.”

In 2010, Nexen sold its North American natural gas trading book to Goldman Sachs  for an undisclosed sum after Nexen earlier said it wanted its business to reflect production weighting toward crude oil. The deal gave Goldman a business that Nexen said was one of the top 10 in gas trading on the continent.

The good news is that with ever more levered speculators who trade puerly in the derivatives space, while hardly if ever actually taking physical delivery, the likelihood that oil will trade based on actual supply and demand dynamics of the underlying commodity grows by the day, which is to be expected: after all it was the relentless surge in oil price in the early 2000 that led to the explosion in commodity traders. Now, it’s payback time.





API inventories rise the fastest.  The all important Cushing Oklahoma inventory rises by 2 million barrels:


(courtesy API/Cushing)





API Signals Fastest Inventory Build In At Least 34 Years


Against expectations of a 4.75 million barrel build (according to Bloomberg), API reported a 4.8 mm barrel build overall but the Cushing build (2mm barrels) was less than last week’s 3mm build. This is the 11th weekly build in a row – the longest streak of builds since October 2004. The last 11 weeks have seen inventories build over 20% – the fastest pace on record.


Before the data hit, WTI popped after the data was released…


Crude Inventories are soaring at by far the fastest pace on record…


Charts: Bloomberg








Your more important currency crosses early Tuesday morning:



Euro/USA 1.0974 up .0030

USA/JAPAN YEN 119.39 down .370

GBP/USA 1.4901 down .0049

USA/CAN 1.2471 down .0050

This morning in Europe, the Euro continued on its upward movement, rising by 30 basis points, trading now well above the 1.09 level at 1.0074; Europe is still reacting to deflation, announcements of massive stimulation, and the ramifications of a default at the Austrian Hypo bank, and a possible default of 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 up again in Japan by 37 basis points and trading well below the 120 level to 119.39 yen to the dollar. (and again causing havoc to our yen carry traders)

The pound was  down this morning as it now trades just above the 1.49 level at 1.4901  (very worried about the health of Barclay’s Bank and the FX/precious metals criminal investigation/Dec 12 a new separate criminal investigation on gold, silver and oil manipulation).

The Canadian dollar is also up by 50 basis points at 1.2562 to the dollar trading in total sympathy to  the temporary higher oil price.

We are seeing that the 3 major global carry trades are being unwound.  The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies

2, the Nikkei average vs gold carry trade (still ongoing)

3. Short Swiss franc/long assets (European housing/Nikkei etc.  This has partly blown up (see  Hypo bank failure)

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral.  Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: Monday morning : down 40.91 points or 0.21%

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

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

Gold very early morning trading: $1193.00



Early Tuesday morning USA 10 year bond yield: 1.91% !!! down 1 in basis points from Monday night/


USA dollar index early Tuesday morning: 96.78  down 18 cents from Monday’s close. (Resistance will be at a DXY of 100)


This ends the early morning numbers, Tuesday morning



And now for your closing numbers for Tuesday:




Closing Portuguese 10 year bond yield: 1.80% up 5 in basis points from Monday  (despite QE???)


Closing Japanese 10 year bond yield: .31% !!! par in basis points from Monday/


Your closing Spanish 10 year government bond,  Tuesday up 4 in basis points in yield from Monday night.(despite QE)

Spanish 10 year bond yield: 1.29% !!!!!!


Your Tuesday closing Italian 10 year bond yield: 1.33% up 4 in basis points from Monday: (despite QE)



trading 4 basis points higher than  Spain.






Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond: 4 pm



Euro/USA: 1.0925 down .0020  (down 20 basis points)

USA/Japan: 119.68 down .073  ( yen up 7 basis points and killing more of our yen carry traders)

Great Britain/USA: 1.4848 down .0101  (down a huge 101 basis points)

USA/Canada: 1.2497 down .0025 (Can dollar up 25 basis points)



The euro fell a bit today to the tune of 20 basis points down to 1.0925 . The yen was down in the afternoon, but it was up by closing to the tune of 7 basis points and closing well below the 120 cross at 119.68. The British pound lost huge ground, 101 basis points, closing at 1.4848. The Canadian dollar was up today against the dollar. It closed at 1.2497 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 and huge losses on the USA dollar will no doubt produce many dead bodies.








Your closing 10 yr USA bond yield: 1.87 down 4 in basis points from Monday



Your closing USA dollar index:

97.16 up 20 cents   on the day.


European and Dow Jones stock index closes:



England FTSE  down 17.99 points or 0.26%

Paris CAC up 33.76 or 0.67%

German Dax up 109.85 or 0.92%

Spain’s Ibex up 126.50 or 1.10%

Italian FTSE-MIB up 276.08 or 1.20%



The Dow: down 104.90 or 0.58%

Nasdaq; down 16.06 or 0.32%



OIL: WTI 47.41 !!!!!!!

Brent: 55.00!!!!

Closing USA/Russian rouble cross: 57.80  up 2/5 roubles per dollar on the day.







And now your important USA stories:


First New York trading today:


“Not Off The Lows” – Stocks Slammed, Bonds Bid, & Copper Clubbed


Author’s impression of today’s copper, stock, and oil markets…


Trannies continue to tumble and even Small Cap exuberance faded…


From Friday’s exuberant close, stocks are weak…


Post-FOMC, Trannies remain notably red…


Financials are the biggest laggard post-FOMC still as Homebuilders soar…


AAPL skidded back below FOMC levels…


Bonds continue to rally post FOMC… long-end yields are back at 7 week lows… First 10Y yield close under 2% since Feb


The Dollar rose very modestly today (after early weakness) but remains lower on the week… Swissy continues to rally this week…


Stocks caught down to credit’s less exuberant bounce…


Commodities continue to notably outperform stocks post-FOMC…


As Commodities rose again today (outperforming USD weakness relatively speaking)…


Copper gave back all its spikegasm from yesterday as China opened…


Crude once again spiked early and gave it all back as traders await this evening’s API inventory data…


Charts: Bloomberg







So far this month, we had had misses in i) the Empire index (New York Manufacturing), ii) the Philly Mfg index and now today iii the Richmond Mfg. survey


(courtesy zero hedge)

Richmond Fed Manufacturing Survey Collapses To 2-Year Lows




Despite Markit’s PMI exuberance, it appears the awesomeness did not reach Richmond. Printing at a disastrous -8, against expectations of +3, Richmond Fed is the lowest since January 2013. The last 5 months have seen the index drop at its fastest rate since Lehman.


Not awesome…


Not awesome-er…


Charts: Bloomberg





David Stockman on the phony EPS scam:


(courtesy David Stockman/Contra Corner blog)


Why Yellen & The Feds Are Bubble Blind – They Apparently Believe Wall Street’s EPS Scam



Submitted by David Stockman via Contra Corner blog,

Surveying the Fed’s handiwork during last week’s press conference,  Janet Yellen noted that all was awesome except that stocks were now slightly “on the high side”of their historical range. You can say that again!

In fact, you can say that any one capable of uttering such tommyrot has been totally bamboozled by Wall Street’s sell-side con artists. Yes, the latter surely need to be monitored by the Feds.  But that would be the kind of “Feds” who operate Uncle Sam’s non-elective hospitality facilities.

Take the Russell 2000 stock index. That’s smack dab in the Fed’s wheelhouse because upwards of 90% of the sales and earnings of the Russell 2000 are from domestic sources. So among the various market indicators, the small and mid-cap stocks which comprise the index should best capitalize the good works emanating from the Eccles Building. After all, the  masters of the world’s reserve currency domiciled there profess no interest in the dollar’s exchange rate and aver that they can micro-manage the US economy because it is a closed bathtub not impacted by wages, prices and capital flows from abroad.

Well, the Russell 2000 closed at a new all-time high on Friday. At its index value of 1266 it is now up 260% from is post-crisis low. Undoubtedly, the nation’s labor-economist-in-chief believes that’s all to the good. But then surely no one told her it represents a valuation multiple of just about 90X LTM (latest 12 months) earnings reported by the 2000 companies which comprise the index, and which were certified as accurate by 4,000 CEOs and CFOs on penalty of jail time.

The mystery of how the Fed remains so stubbornly bubble blind—-just like it did during the dotcom and housing bubbles—is thus revealed. The self-evident reason is that the purported geniuses who comprise our monetary politburo drink the Wall Street Cool-Aid about forward ex-items EPS.

In the case of the Russell 2000, this Wall Street confected version of the EPS multiple as of last Friday was 19.9X—–or just like the lady said, a tad on the high side but nothing to sweat about. Why not keep the pedal-to-the-metal awhile longer?

But here’s the thing. We have a yawning gap here.After sell-side analysts got done tracing their all-seasons hockey sticks several quarters into the future and finished deleting any expected charges to earnings that might plausibly be dismissed as “non-recurring”, the implied forward ex-items EPS for the Russell 2000 disseminated by Wall Street was exactly$63.87 per share.

By contrast, the actual 4-quarter GAAP result through December 2014 reported to the SEC was $14.18 per share. Needless to say, to blithely ignore this blinding difference—as surely Yellen did—-is an egregious dereliction of duty.

And the reason is this: The Fed has caused two thundering stock market bubbles and crashes already this century—–which resulted in $8 trillion and $10 trillion of devastating losses, respectively.Moreover, these cliff-diving crashes happened suddenly and were consummated within a matter of months, meaning that the Wall Street insiders and fast money traders got out and then returned to scavenge the bottom, while the main street homegamers took it in the chin twice.

So you would think that people who believes a few places to the right of the decimal point on the CPI make a big difference might wonder about $14 per share versus $64; and, most certainly, investigate whether this yawning GAAP is some type of temporary aberration or simply par for the course in the casino.

Indeed, they most surely should wonder about the following: One year ago, the LTM GAAP earnings for the Russell 2000 was exactly $14.10 per share for CY 2013. So the $14.18 per share reported for 2014—– on GAAP earnings numbers that you won’t go to jail for—-means that the Russell 2000 has gained the munificent sum of eight pennies or 0.6% during the past year.

That’s right. America’s hometown stock index is trading at 90X based on an earnings growth rate of less than 1%. A tad “on the high side” indeed.

Moreover, none of the Wall Street defenses for using the forward ex-items profit figures can withstand serious scrutiny. The casino has become so corrupted and bubbled up that the numbers are not worth the paper they are printed on.

Consider a brief history of Wall Street’s ex-items projection for S&P 500 earnings for CY2014. Exactly two years ago, that figure was about $125 per share. At the time, it was just another case of look ma, everything’s normal.

The S&P was then trading at 1560—–so the implied two-year forward multiple was 12.5X. By one year-ago, the Wall Street hockey stick had shrunk to $120 per share—–which then represented just 15.5X the nine-month forward earnings figure for 2014 based on an index price of 1870.

Needless to say, any CNBC talking head would have told you that these multiples were completely normal and that stocks still had “room to run”.  And that part would have been true. Last Friday the S&P 500 closed at 2108 or up by 35% from two years-ago and 13% from March 2014.

Alas, the ex-items earnings figure for 2014 is now actually recorded, and its the part which isn’t up.  All those bottoms-up hockey sticks turned out to be a tad optimistic because the number actually came in at $113 per share or 10% lower than its two-year ago outlook.  And as to the GAAP stay-out-of-jail version of profits, the number for 2014 came in at $102 per share.

So it turns out the S&P 500 is being capitalized at 20.6X actual GAAP EPS. Other than during recession quarters, the only time the S&P multiple was recently even close to that was in Q3 2007, when the LTM multiple was 19.4X.  Even the Fed heads recall what happened next.

And, no, the difference between honest GAAP earnings and Wall Street’s ex-items version is not a matter of subjective preference. Non-recurring charges for asset write-offs, goodwill reductions, employee severance and other so-called restructuring costs are real expenses that consume cash and/or destroy corporate capital. For any given company honest GAAP earnings can be “lumpy” from period to period, but that can be solved by amortizing, not eliminating, these charges.

And as to the S&P 500 basket as a whole, even the “lumpy” canard is not really an issues because for many years now the difference between GAAP earnings and ex-items profits has ranged consistently between 8-15%. The lumps wash out when it comes to the entire index.

Over any reasonable period of time, however, this 8-15% gap adds up to some real money. During the eight years encompassing 2007 through 2014, in fact, GAAP earnings reported to the SEC by the S&P 500 companies have cumulated to about $5 trillion—–while ex-items earnings ballyhooed by Wall Street have totaled around $6 trillion. There is a distinct possibility that this $1 trillion difference is not just a rounding error when it comes to valuation!

More importantly, as the Fed’s bubble cycles get long-in-the-tooth, the forward ex-items hockey sticks tend to get steeper; and over the decades, the creativity of the sell-side in deleting “non-recurring” charges has gotten considerably more acute. Accordingly, comparisons of today’s ex-items multiples with purported long-term average multiples is a proverbial case of apples and oranges.

Some sense of that is evident in the graph below, which is based on trailing earnings on a GAAP basis.It shows that as of June 2014, the median PE multiple for all NYSE stocks with positive earnings was at an all-time high——even exceeding the lofty heights of the dotcom bubble years.

And that’s not the half of it. In today’s Fed sponsored casino there are far more companies with negative earnings and large capitalizations than in those benighted times decades ago when “price discovery” still existed. So that brings us to the stupendous biotech bubble that even Yellen claims to have recognized back in June of 2014.

Since then the NASDAQ biotech index is up another 50%—–bringing the index to 6X its March 2009 bottom. But even then the real valuation absurdity is not fully apparent on the surface. As Zero Hedge documented the other day, the 150 companies in the index have a collective market cap of $1.06 trillion, but only $21 billion of LTM earnings, implying a PE multiple of 50X.

But rollover Russell 2000—–you haven’t seen nothing yet. The 5 big cap biotechs in the index—-Gilead, Amgen, Shire, Biogen and Celgene—had net income of $25.5 billion during the most recent LTM period—-or well more than the index total. If you add in the next 20 positive earners, you get to $30.5 billion of net income or 145% of the $21 billion reported by the entire basket of 150 companies.


So the internals shape up this way. The Big 5 had a market cap of nearly $550 billion or did last Friday before today’s Gilead stumble which took the index down by about $20 billion. And the next 20 traded at a collective value of $230 billion, meaning that the market cap of the top 25 companies in the index (which accounted for 145% of total earnings) was about $780 billion.

Needless to say, the math here implies something rather astounding. Namely, that there are 125 companies in the NASDAQ biotech index which are valued at $280 billion, but posted aggregate losses of nearly $10 billion in the most recent LTM reporting period.

So yes, Janet, there is a bubble in biotech and its a doozy. It amounts to well more than one-quarter trillion dollars of bottled air. Its a direct result of six years of free ZIRP money to the carry trade gamblers and Wall Street’s self-evident confidence that the Fed is petrified of a hissy fit and will not hesitate to keep the juice flowing indefinitely—– even if it’s called a 25 bps increase in the money market rate, eventually.

The stupendous extent of the biotech bubble—and its merely representative—–can be seen in the free market contrafactual. That is to say, what would these 125 negative earners in the biotech index have to generate when they grow-up in order to earn-out there current $280 billion market cap?

Well, the Big 5 trade at 21X earnings and with $68 billion of combined revenues they reported a five-year sales growth rate of 16.5% per annum. So when you get to quasi-stable maturity even in the Fed’s casino it takes one small sized mountain of sales to earn even a middling sized multiple. But whoops——half of the big 5 LTM profits were accounted for by Gilead, which had an LTM net profit rate of 49% on $25 billion of sales. By contrast, the more typical net income margins of Biogen and Amgen were 30% and 25%,respectively.

Even more to the point, the net income margin of the next 20 companies—–represented by names like Mylan, Alexion, Biotechnic and Luminex was 17.5%, while the PE multiple of these earlier stage companies was a frisky 47X. And frisky is indeed the correct term because their 5-year revenue growth rate was only slightly higher than the Big 5 at 21%.

In short, give these 125 cash burning negative earners and virtually salesless biotechs a grown-up PE multiple of 20X and a net income margin of 20%. That means they would need to generate $70 billion of sales from today’s cold start.  Good luck with that, and with the near ZIRP discount rate that is implied by the amount of time that would be required to get from here to there.

Indeed, speaking of the amount of time required to get from zero to 60 mph, Elon Musk has finally explained why Tesla is worth $35 billion. That is, despite the fact that it has never generated a dimes of net income; has in fact posted net losses of $1.4 billion since Goldman started flogging it in 2007; and can’t possibly compete with the likes of Toyota and BMW in scaling up to the mass market volume that is implied in its current infinite multiple.

It turns out that Musk believes Tesla is actually peddling a death trap, and foresees a world in which the testosterone-riven rich men who buy his vehicles today will be prohibited from even driving their own cars.Stated differently, he is now admitting that the market is capitalizing his driverless car vision——-to go along with his Mars Shuttle and warp speed trains:

So what happens when we get there (to driverless cars)? Musk said that the obvious move is to outlaw driving cars. “It’s too dangerous,” Musk said. “You can’t have a person driving a two-ton death machine”.

No less than investment guru Jim Cramer now gets the joke. Back in early February, Cramer issued his own broadside:

“Clean up your act, Musk—Tesla’s a total disaster!…….. No way the balance sheet can support the investment needed……. Musk confirmed that it will be spending staggering amounts of money on capital expenditures….. Where the heck is this money going to come from?”

That about sums up the “high side”. The Fed is driving a two-ton bubble machine, but has no clue that it has become a financial death trap.



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