april 16/IMF refuses to extend loans from Greece/Rioting on the streets of Athens/Contagion spreads to the periphery of Europe as they suffer higher yields on their bonds/Chinese real GDP growth only 1.6%/Two big misses on the USA data today: Philly manufacturing and housing starts and permits/Saudi Arabia increases oil production to put a dent into USA shale production/German bunds in yield negativity out to 9 years, with year 10 only slightly positive/

Good evening Ladies and Gentlemen:



Here are the following closes for gold and silver today:



Gold:  $1198 down $3.50 (comex closing time)

Silver: $16.28 up 1 cent (comex closing time)


In the access market 5:15 pm

Gold $1198.50

Silver: $16.32



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:


At the gold comex today,  we surprisingly had a good delivery day, registering 334 notices served for 33,400 oz.  Silver comex filed with 0 notices for nil oz .


Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 243.05 tonnes for a loss of 60 tonnes over that period. Lately the removals  have been rising!




In silver, the open interest fell by a whopping 3,999 contracts with Wednesday’s silver price up by 12 cents. The total silver OI continues to remain extremely high with today’s reading at 173,878 contracts remaining close to record highs. The front April month has an OI of 170 contracts for a loss of 23 contracts. We are now at 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 0 notices served upon for nil oz.



In gold,  the total comex gold OI rests tonight at 396,575 for a gain of 89 contracts with gold up by a considerable $8.70 on Wednesday. We had 334 notices served upon for 33,400 oz.



Today, we had no change in  gold inventory at the GLD/  Gold Inventory rests at 736.08  tonnes


In silver, /  /we had no change in silver inventory at the SLV/ and thus the inventory tonight is 324.900 million oz


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


1. Today we had the open interest in silver fall by a huge 3999, contracts despite the rise in price on Wednesday (13 cents).  The OI for gold rose by 1486 contracts up to 396,575 contracts as the price of gold rose by a considerable  $8.70 on yesterday.

(report Harvey)


2.Greece paid the iMF on Thursday.  On Friday, it was announced that the ECB increased its ELA to Greece by 1.2 billion euros up to 73.2 billion euros as more depositors fled.  On Monday, the London’s Financial times has reported that Greece has decided that it will withhold the IMF payment in May and June so it can pay its pensioners. Also the reform package submitted by Greece is totally offside on its pension reform and on privatization. Contagion seems to be spreading as yields widen with the advanced risk of default. Also on Tuesday, the ECB advanced another 800 million euros of ELA as more depositors fled. Yesterday, it was announced that the Greek finance minister will visit a bankruptcy lawyer in the USA.  Greek yields skyrocketed northbound . Today, we were informed that Greece has informally asked the IMF to delay receiving its payment to which they immediately rejected the informal request. Yesterday the German Fin. Minister promised that there would be no contagion in peripheral yields but that was thrown out the window today. Rioting occurred on the streets of Athens.

2b.  Graham Summers delivers a terrific commentary explaining the real problem with the Greek debt

London’s financial times/goldcore/zero hedge/Bloomberg/Graham Summers/Phoenix Research Capital.

3.  China’s real GDP tumbles to a gain of only 1.6%/we highlight 3 other big misses.  These misses should showcase in reality how the USA economy is performing.

zero hedge

4.  a)Two big misses on data from the USA:


i.the Philly manufacturing index

ii Housing starts and permits

(BLS/zero hedge)

b) higher initial jobless claims

(BLS/zero hedge)


5. Bill Holter delivers a great paper on 5,000 dollar silver

(Bill Holter/Miles Franklin)


this is very important so you do not want to miss this.

6. German bonds reach negativity in yield out to 9 years.  the 10 year German bund is now only 8 basis points to the positive side.  The ECB s going to have trouble buying the number of bonds it needs for QE

(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 1486 contracts from 395,089 up to 396,575 with gold up by $8.70 yesterday (at the comex close).  We are now in the active delivery month of April and here the OI fell by 2 contracts down to 2,146. We had 2 contract filed upon yesterday so we neither gained nor lost any gold ounces standing for delivery in April. The next non active delivery month is May and here the OI fell by 25 contracts down to 524.  The next big active delivery contract month is June and here the OI fell by 1572 contracts down to 264.256. June is the second biggest delivery month on the comex gold calendar. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was poor at 99,437. The confirmed volume yesterday ( which includes the volume during regular business hours + access market sales the previous day) was poor at 142,753 contracts. Today we had 334 notices filed for 33,400 oz.

And now for the wild silver comex results.  Silver OI surprisingly fell by a huge 3,999 contracts from 177,877  despite the fact that silver was up by 12 cents, with respect to Wednesday’s trading. Somebody big is willing to take on JPMorgan and we must have lost a few nervous nellies along the way.  We are now in the non active delivery month of April and here the OI fell to 170 for a loss of 23 contracts.  We had 23 notices filed on Wednesday so we neither gained nor lost any silver ounces in this delivery month of April. The next big active delivery month is May and here the OI fell by 4575  contracts down to 72,819.  We have 2 weeks before first day notice on Thursday, April 30.2015. The estimated volume today was poor at 25,590 contracts (just comex sales during regular business hours. The confirmed volume yesterday (regular plus access market) came in at 59,632 contracts which is excellent in volume. We had 0 notices filed for nil oz today.



April initial standings

April 16.2015



Withdrawals from Dealers Inventory in oz  nil
Withdrawals from Customer Inventory in oz 50,052.166 oz (Manfra, Scotia)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 334 contracts (33,400 oz)
No of oz to be served (notices)  1812 contracts(181,200) oz
Total monthly oz gold served (contracts) so far this month 1023 contracts(102,300 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   oz

Total accumulative withdrawal of gold from the Customer inventory this month

  270,089.2 oz

Today, we had 0 dealer transaction

total Dealer withdrawals: nil oz


we had 0 dealer deposits


total dealer deposit: nil oz

we had 2 customer withdrawals

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

ii) Out of Scotia:  50,020.016 oz



total customer withdrawal: 50,052,166 oz


we had 0 customer deposits:


total customer deposit: 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 334 contracts of which 161 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 (1023) x 100 oz  or  102,300 oz , to which we add the difference between the open interest for the front month of April (2146) and the number of notices served upon today (334) x 100 oz equals the number of ounces standing.

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

No of notices served so far (1023) x 100 oz  or ounces + {OI for the front month (2146) – the number of  notices served upon today (334) x 100 oz which equal 283,500 oz or 8.18 tonnes of gold.


we neither gained nor lost any gold ounces standing.

This has been the lowest amount of gold ounces standing in an active month in quite some time.





Total dealer inventory: 567,831.90 or 17.66 tonnes

Total gold inventory (dealer and customer) = 7,815,647.348  oz. (243.09) tonnes)


Several weeks ago we had total gold inventory of 303 tonnes, so during this short time period 60 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


April silver initial standings

April 16 2015:



Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 50,992.768 oz (Delaware,Scotia)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory 1,191,275.67 oz (JPM)
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 170 contracts(875,000 oz)
Total monthly oz silver served (contracts) 343 contracts (1,715,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  548,169.5 oz
Total accumulative withdrawal  of silver from the Customer inventory this month  10,504,647.3 oz


Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz


we had 0 dealer withdrawals:

total dealer withdrawal: nil oz


We had 1 customer deposits:


ii) Into JPM: 1,191,275.67 oz  *  this is the 6th day out of 7 ,that JPMorgan has deposited a huge amount of silver in its customer account.  Something is seriously happening behind the scenes.


total customer deposits:  1,191,275.67  oz


We had 2 customer withdrawals:



i) Out of Delaware: 10,916.758 oz

iii) Out of Scotia; 40,076.010 oz


total withdrawals;  50,992.768 oz


we had 0 adjustments:



Total dealer inventory: 62.972 million oz

Total of all silver inventory (dealer and customer) 174.819 million oz


The total number of notices filed today is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in April, we take the total number of notices filed for the month so far at (343) x 5,000 oz    = 1,715,000 oz to which we add the difference between the open interest for the front month of April (170) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing.

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

343 (notices served so far) + { OI for front month of April(170) -number of notices served upon today (0} x 5000 oz =  2,565,000 oz standing for the April contract month.


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


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

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




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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.


And now the Gold inventory at the GLD:

April 16.2015: no change in inventory at the GLD/total inventory at 736.08 tonnes

April 15/ a huge addition of 1.79 tonnes of gold inventory added to the GLD/ Inventory tonight at 736.08 tonnes

April 14/ no change in gold inventory at the GLD/Inventory rests at 734.29 tonnes

April 13.2015: we had a withdrawal of 1.75 tonnes of GLD/Inventory at 734.29 tonnes

April 10/we had no change in inventory at the GLD/Inventory at 736.04 tonnes

April 9.2015 we have a huge addition of 2.98 tonnes of gold inventory/GLD inventory tonight stands at 736.04 tonnes

April 8.2015:no changes in the GLD/Inventory 733.06 tonnes


April 7. we had another withdrawal of 4.18 tonnes of gold at the GLD/Inventory rests at 733.06 tonnes

April 6. no changes in gold inventory at the GLD/Inventory at 737.24 tonnes

April 2/no changes in gold inventory at the GLD/Inventory at 737.24 tonnes

April 1/2015/ no changes in gold inventory at the GLD/Inventory at 737.24 tonnes

march 31.2015/ no changes in gold inventory at the GLD/Inventory at 737.24 tonnes



April 16/2015 /  we had no change in gold inventory at the GLD/Inventory stands at 736.08 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 : 736.08 tonnes.




And now for silver (SLV):

April 16.2015: no change in silver inventory tonight at the SLV/324.900 million oz

April 15.2015: no change in silver inventory tonight at the SLV/324.900 million oz is the inventory tonight.

April 14. we had another addition of .67 million oz of silver at the SLV/Inventory rests at 324.900 million oz

April 13.2015: a huge addition of 2.391 million oz of silver at the SLV/Inventory rests at 324.230 million oz

April 10/ no changes in silver inventory at the SLV/Inventory rests at 321.839 million oz

April 9/2015 no changes in inventory at the SLV/Inventory rests at 321.839 million oz/

April 8.2015: no changes in inventory at the SLV/Inventory rests tonight at 321.839 million oz

April 7.2015: no changes in inventory at the SLV/Inventory rests tonight at 321.839 million oz

April 6. we had a small withdrawal of 136,000 oz/inventory tonight rests at 321.839 million oz

April 2/2015: no changes in inventory/SLV inventory rests this weekend at 321.975 million oz

April 1.2015: we had a huge withdrawal of 1.913 million oz of silver from the SLV vaults/Inventory 321.975 million oz

March 31.2015: no changes in inventory at the SLV/Inventory at 323.88 million oz




April 16/2015 we had no change in inventory  at the SLV / inventory rests at 324.900 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 8.8% percent to NAV in usa funds and Negative 8.9% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.4%

Percentage of fund in silver:38.20%

cash .4%

( April 16/2015)



Sprott gold fund finally rising in NAV

2. Sprott silver fund (PSLV): Premium to NAV rises to + 0.35%!!!!! NAV (April 16/2015)

3. Sprott gold fund (PHYS): premium to NAV rises -.31% to NAV(April 16/2015

Note: Sprott silver trust back  into positive territory at +0.35%.

Sprott physical gold trust is back into negative territory at -.31%

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 Goldcore/Mark O’Byrne)

U.S. And Global Property Bubble Fears Mount


– “Renewed global property bubble” warned of by Financial Times
– Research company MSCI says returns on property last year averaged 9.9% globally
– “Best performance” since 2007 and fifth consecutive annual rise
– Rents have not increased in line with asset appreciation
– Speculators moving into more risky peripheral markets around the major hubs like London
– Demand being driven by lack of yield and ultra loose monetary policies
– Bubble is now fully dependent on record low interest rates in the U.S. and EU continuing …
– Bubble will burst as all bubbles do … question is not if but when …


Fears of a renewed global property bubble are rising as prices hit records last seen before the financial crisis.

New data shows real-estate returns in the UK surging 17.9% in 2014 and London returns of over 20% and global returns averaging 9.9%, the Financial Times has warned of a “renewed global property bubble”.


Drawing from a report by research company MSCI, the Financial Times‘s Kate Allen explains that the returns were driven primarily by “rapid capital value appreciation” saying it was “the best performance since 2007 and the fifth consecutive year of increasing returns” and driven by “frenzied buying.”

However, rents have not risen by the same extent. In the U.S. – where property investments saw returns of 11.5% – “investors’ returns from rental income are now lower than before 2008, when a crash in massively overleveraged property triggered an international banking slump.”

MSCI question the sustainability of the current trend. Rental revenue as a proportion of property values in “most global markets are at or close to historic low [yield] levels.”

The MSCI report states that leveraged capital is now flowing into the riskier peripheral property markets around some of the very highly priced U.S. cities and London and also into the peripheral European nations.

“In the past year investment cash has poured into continental Europe — particularly the periphery” according to MSCI. Dublin property prices went parabolic and saw record returns of 44.7%


“People are moving up the risk curve into riskier locations and taking on higher levels of debt and more challenging development activity,” says Peter Hobbs from MSCI.

The demand is being driven by a lack of high-yielding investment opportunities elsewhere. Against  “exceptionally low” bond yields and equity markets returning 10.4% on average globally, real estate companies generated returns of 19.5%.

MSCI suggest that the global property market is now dependent on the ultra-loose policies of the ECB and the Fed. “QE is sucking in real estate capital because debt finance is so cheap,” says Hobbs.

He adds “If the US keeps doing what it has been doing for the past five years and Europe catches up, then we are set for another strong year [in 2015].”

This should set alarm bells ringing. The recent boom in high-quality residential property was initially driven primarily by Gulf state oligarchs and high-net-worth Russian and Chinese investors looking to park cash in reasonably safe assets.

We warned back in January 2014 about the developing London property bubble and warned that the bubble would burst and then cautioned people should prepare for property prices to fall globally in January of this year.

Back in December we wrote with regard to London’s “super-prime” market,

“Western sanctions on Russia have led to a shuddering halt to Russian money entering the UK.  Since Xi Jinping came to power in China in November 2012 there has been a crack-down on corruption in China and the amount of Chinese cash being funnelled through tax-havens and into London property has been greatly reduced. The Fed’s QE has come to an end, for now at least, so U.S. sources of capital have waned.”

“Now the plummeting oil price is leading to a drop in demand from wealthy Middle Eastern elites. Many Gulf States are having difficulty financing their social programs due to the very low price of oil. Control over their countries restless populations is becoming more tenuous. So providing “bread and circuses” is a higher priority than pet investment projects in the UK.”

We cautioned that this would have consequences for the UK economy and sterling.

On Tuesday, Bloomberg confirmed that the Gulf States were indeed reigning in their overseas investments. Quoting BNP Paribas it stated,

“This is the first time in 20 years that OPEC nations will be sucking liquidity out of the market rather than adding to it through investments,” due to the depressed price of oil.

Investment into many property markets globally is now being driven by speculative leveraged buying based on near zero percent interest rate policies.

The primary driver of these markets is leverage and floods of cheap money being provided by the ECB, the BOJ, BOE and the Fed. It, once again, poses a major risk to the global financial and banking system.

A “soft landing” is unlikely and an allocation to safe haven goldwill protect investors from the bursting of this latest bubble.


Today’s AM LBMA Gold Price was USD 1,204.60, EUR 1,131.19 and GBP 811.40 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,189.85, EUR 1,123.56 and GBP 808.58 per ounce.

Gold climbed 0.84 percent or $10.00 and closed at $1,202.50 an ounce on yesterday, while silver rose 0.74 percent or $0.12 closing at $16.32 an ounce.


In  Singapore gold prices climbed 0.3 percent to $1,204.76 an ounce near the end of day trading.

Gold continues upward for its second session and has risen above $1,200 an ounce to near $1,209 an ounce after weak U.S. producer data and a soft U.S. dollar. U.S. economic data out yesterday saw a drop for industrial output in March with its largest fall in two and a half years.

FOMC members Dennis Lockhart and Stanley Fischer are scheduled to speak this evening.Expect more mixed messages from the Fed.

With half of the month gone, sales of gold American Eagle bullion coins by the U.S. Mint are on track to fall well short of both last April’s total, and the final figure for March according to Reuters. This month the Mint has sold just 10,000 ounces of gold Eagles, versus 46,500 ounces in March and 38,500 ounces in April 2014. Some 1.4185 million ounces of silver American Eagles have been sold, meanwhile, against 3.569 million ounces last April and 3.519 million ounces last month.

In late morning European trading gold is at $1,209.40 an ounce  or up 0.6 percent. Silver is at $16.56 an ounce or up 1 percent, while platinum is also up 0.34 percent at $1,167.89 an ounce .




Big discovery of silver on the ocean floor:

(courtesy GATA)

Record dive recovers $50 million in wartime silver from ocean floor


From the British Broadcasting Corp., London
Wednesday, April 15, 2015

In the deepest salvage operation in history, a British-led team has recovered a $50 million (L34 million, E47 million) trove of coins that has lain on the seabed since the steamship carrying them from Bombay to England was sunk in 1942.

The SS City of Cairo was torpedoed 480 miles south of St. Helena by a German U-boat and sank to 5,150 meters. Its precious cargo — 100 tonnes of silver coins — belonged to HM Treasury. The silver rupees had been called in by London to help fund the war effort.

But they never made it. The steamship’s tall plume of smoke was spotted by a U-boat on 6 November 1942 and it was torpedoed.

Ten minutes later, amid efforts to abandon ship, the City of Cairo was hit with a second torpedo which sealed its fate.

The ship and its cargo was presumed lost until 2011, when a team led by British salvage expert John Kingsford located an unnatural object among the ridges and canyons of their South Atlantic search area. …

… For the remainder of the report and some great photographs:


This story is fascinating:  Why? the state of Massachusetts has no gold mines:
(courtesy Boston Globe/GATA)

State’s exports enjoying a gold rush

Massachusetts shipped nearly $2 billion of the precious metal to far-flung markets last year

By Megan Woolhouse Globe Staff April 14, 2015

Massachusetts’ top export is not sleek medical devices, cutting-edge machinery, or life-saving pharmaceuticals. It is something more intriguing: gold.

In a state devoid of gold mines, Massachusetts exported nearly $2 billion in gold last year to places such as the United Kingdom, Switzerland, and Hong Kong, according to WiserTrade.org, a Leverett trade research group. And these were not paper transactions but 62,500 pounds of the glittery metal — roughly the weight of a herd of more than two dozen rhinoceros.

But exactly who is exporting this gold has stumped even specialists studying the Massachusetts economy, who can talk knowledgeably about almost any product that leaves the state, from semiconductors to seafood to colon cancer tests.

“I really would like to know, but I don’t,” said Northeastern University economics professor Alan Clayton-Matthews.

As it turns out, much of the gold leaving the state appears to be just passing through. In 2014, Massachusetts was not only the nation’s fifth-largest gold exporter but also its fourth-largest importer, accepting about $1.5 billion from countries such as Canada, Colombia, and Mexico.

The middle man appears to be the gold-refining industry, which understandably keeps a very low profile. Massachusetts has its own version of Fort Knox, the Metalor refinery, located in North Attleborough. Metalor, a subsidiary of a Swiss firm that makes gold bullion and parts for Rolex watches, is among the nation’s largest gold refiners.

The company did not return phone calls and e-mails. Juan Carlos Artigas, director of investment research at the World Gold Council, a trade association in London, also was tight-lipped about who here is buying and selling all that gold.

“There are bar and coin dealers in Massachusetts that basically function as a repository to sell gold to other parts of the country and parts outside the US,” Artigas said “But I don’t think I can expose names.”

Artigas has good reason to be careful. Last month, armed robbers stole $5 million in gold and silver from a truck headed from Miami to Boston. The FBI said the truck driver pulled over on a remote stretch of Interstate 95 in North Carolina when men who said they were “policia” ordered them out of the truck, then loaded barrels of gold and silver into a white getaway van.

The security guards were employed by TransValue Inc., a Miami transportation company that is offering $50,000 in addition to the FBI reward of $25,000 to anyone with information. FBI Special Agent Michael D. Leverock of the Miami bureau declined to discuss the truck’s exact destination.

Larry Nyborn, the second-generation owner of Precious Metals Reclaiming Service , a Westwood refiner, said much of the gold that arrives in Massachusetts comes through Miami.

His small firm opened a location in West Palm Beach, Fla., in recent years, extracting gold from old jewelry and electronics and selling it to other US metal refiners, including Metalor.

Metalor makes gold bars stamped with its name and “999.9,” representing the near-purity of the bars, and sells them internationally, according to the

Allan Nyborn of Precious Metals Reclaiming Service in Florida tested gold in preparation for melting.

Jessica Rinaldi/Globe Staff

Allan Nyborn of Precious Metals Reclaiming Service in Florida tested gold in preparation for melting.

Metalor’s suppliers include mining companies, central banks, dealers, recyclers, and industries producing precious metal waste, according to the company’s most recent annual report.

“They’re one of the big boys,” Nyborn said. “They could account for a big amount of [gold exports], but I don’t have any way to know. And I don’t think they’re going to tell you.”

Neither will the US Census Bureau, which tracks specific goods and the companies that export them. A spokesman said the names of those businesses are confidential.

Metalor’s 2013 annual report, the most recent available, offers few clues, other than to say that the company’s sole US plant “gained market share” in recent years. Metalor board chairman Scott Morrison told Bloomberg News in 2013: “Right now we can’t keep up with demand in terms of investors in Asia purchasing gold.”

In 2013, Massachusetts shipped about $1 billion in gold to Hong Kong, up from less the $1 million in 2011, according to WiserTrade.org. Last year, the state exported about $217 million in gold to Hong Kong.

Commodities specialists said a modernizing global economy is creating affluence in nations such as China and India, where demand for gold has spiked. “Part of having more wealth is you’re able to purchase more jewelry,” said KC Chang, a senior economist at IHS Global Insight, a Lexington forecasting firm. “Gold benefits from a rising middle class in Asia.”

The price of gold doubled from 2006 to 2010 before peaking in 2011 at about $1,900 an ounce, helping the precious metal become one of the state’s top dollar-value exports. Gold is now trading at about $1,200 an ounce.

Daniel Hodge, director of the Donahue Institute, a policy and economic research arm of the University of Massachusetts, said state economists have concluded that a single company, located near Attleboro, is responsible for the gold passing through the state.

But that’s as far as the research went, he said, because gold doesn’t have a big impact on the state’s broader economy. Technology, pharmaceuticals, and manufacturing employ more workers and offer a better barometer of international trade and the state’s economic health.

“There are other sectors we think are more telling about how well Massachusetts companies are trading with Europe and Asia,” Hodge said. “But gold is one of the larger categories of commodities that we export.”
Jason Nyborn (right) of Precious Metals Reclaiming Service in Westwood tested the content of a computer part that was brought in by Wesley Bucklin of MW Recycling in Biddeford, Maine.



Mike Kosares: Don’t be a Mr. or Mrs. Unicorn


2:40p ET Thursday, April 16, 2015

Dear Friend of GATA and Gold:

Perpetuating “quantitative easing,” USAGold’s Mike Kosares writes today, will be inflationary and tend to support the gold price, while ending QE likely will shake the markets and support the gold price as well. Kosares’ commentary is headlined “Don’t Be a Mr. or Mrs. Unicorn” and it’s posted at USAGold here:


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



$5,000 Silver?
A catchy title this “$5,000 Silver?” don’t you think?  Am I crazy?  Is this even possible?  In who’s lifetime? Ours or our great, great grandchildren long after we are dead and buried?  The best way to look at this I believe is to briefly look at silver’s big brother gold and then postulate whether it’s possible or not.

  To begin, let’s look at what happened in 1980 and why gold traded up to $875 in the first place.  As Jim Sinclair has said many times, gold “moved in a manner to cover the value of foreign held debt of the U.S.”.  He has also said “$50,000 gold is possible and it may turn out that this figure is far too low”.  Before you laugh and start firing spitballs at me or Mr. Sinclair, I remind you of his call of “gold at $1,650 per ounce by Jan. 2011”.  He said this when gold was $350 per ounce or so and the year was around 2004 if memory serves me correctly.  He was called a nutjob and far worse …he was correct in retrospect and off in his timing by about eight months …SEVEN YEARS AHEAD OF TIME!
  To refresh your memory, let’s do some basic mathematics.  The U.S. purportedly has 262 million ounces of gold.  (As a side note, if you understand how much gold China has imported just over the last six years and compare that to global production, then you understand the U.S. has in all likelihood “dishoarded” much of this gold).  We can compare this 262 million ounces to our national debt rounded off at $18 trillion.  Doing the math, if we had to back our debt with the gold we supposedly have, the number currently comes up to $68,700 per ounce!
  Before you call me nuts, I have one question for you.  Were foreigners to decide that “dollars” for any (many!) reason was no longer acceptable, what would we “pay” with?  Remember, since the dollar is the reserve currency, the U.S. holds almost NOTHING in foreign reserves.  Why should we have to hold foreign reserves, we issue THE reserve currency?!  And yes, I understand the debt is “contracted” in dollars so all we have to do is print more to make the payment.  All I am saying is this, if the U.S. was forced somehow to actually settle the debt …in gold, our gold would need to be valued at $68,700 per ounce “now”.  I say “now” because our debt burden will only grow larger, our gold holdings (IF they truly still exist) will not grow or “breed” making our stash larger with new little goldlings.  My point is this, $68,700 is a credible number only assuming we do have the gold we claim to have.
  Now let’s look at silver.  Silver is taken out of the ground at roughly a 10-1 ratio to gold production.  This number includes “by-product” silver.  The current price ratio is 70-1 or thereabouts, nonsensical when you factor in the price to produce silver is higher than the market price.  This situation argues for severe supply cutbacks in the future unless the price goes higher to allow for a mining profit.  Silver is also a very miniscule market when looked at from a dollar standpoint.  There are roughly 800 million ounces produced globally which in dollar terms is less than $15 billion.  In today’s world, $15 billion is nothing!  Individual companies are bought and sold for more every day.
  Another aspect to silver is the “low hanging fruit” has already been found and mined.  Many companies have high graded production just to stay in business.  New silver deposit exploration has found very little over the last 5-10 years, current new exploration today is almost non existent because the funds from operations have turned into losses.  The capital to look for new silver deposits simply does not exist.
  New “uses” for silver, be they electrical, industrial, solar, medical or other seem to be popping up regularly.  Demand will increase over time.  And speaking of time, it is estimated that silver may become the next “extinct element” in about 20 years.  Does this mean there will be no silver left on the planet?  No, new silver will be found and dug up but probably not enough to satisfy the fledging demand of 100’s of years ago unless new mining technology becomes available.
   What comes our way is a once in hundred’s of years currency event.  Never before has the world not had a single currency backed by silver or gold.  There is no place to hide from the currency derivatives/debt/currency meltdown except in the actual metals themselves, “receipts” will not do this time!
  To finish, I would like to paraphrase something from the Bible.  In Matthew 25, verses 14-30, the “Parable of talents” is written.  It speaks of a master going on a trip and leaving three of his servants bags of gold to care for while he is away.  To one he gave 10, another he gave two and the third servant just one bag.  He did so based upon his judgment of their abilities to handle money.  When the master returned, the servant who was given 10 bags, returned 20 and the servant given two bags returned four.  The last servant, who dug a hole in the ground and buried his bag of gold, dug it up and returned it intact.  The last servant was scorned and called lazy for doing nothing with his “talent”.  Please understand in those days, “talent” was considered weight or coinage but can be looked at today as one’s talent or ability, it should not be wasted.
 In my opinion, because the “moneychangers” have so rigged and fraudulently ruined the global monetary system, now is not the time to “earn interest”.  Now is not the time to try to “make money”.  The system is on the verge of a mathematically certain collapse where institutions and governments themselves stand to perish.  Believe this or not, mathematics don’t lie.  Now is the time for you to be the third servant and bury you bag of whatever you have accumulated.  Get it out of the system and thus out of the way of the financial carnage coming.  You will have something to “start over” with and give you a head start.  As Richard Russell has said, right now is NOT about making money, it is all about not losing everything.
  Will silver go to $5,000 per ounce?  Who knows, we may have a completely different currency in short order and nothing will be quoted in “dollars” anymore.  All I can tell you is that when gold and silver are remonetized back into the system, their purchasing powers will be at least equal to if not many times higher than these depressed levels.  In “dollar terms” they may approach infinity!  Regards,  Bill Holter
Early morning trading from Asia and Europe last night:

1. Stocks higher on major Chinese bourses as bubblemania is the name of the game in Shanghai and Hong Kong  /Japan bourse higher /yen rises to 119.04/

1b Chinese yuan vs USA dollar/yuan  strengthens to 6.1967

2 Nikkei up by 16.01  or 0.08%

3. Europe stocks down/USA dollar index down to 97.99/Euro rises to 1.0721

3b Japan 10 year bond yield .33% (Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.04/

3c Nikkei still  above 19,000

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

3e WTI  55.37  Brent 62.23

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 down  for WTI and down for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund below 10 basis points. German bunds in negative yields from 9 years out.

Except Greece which sees its 2 year rate rises to a monstrous 27.75%/Greek stocks down another 0.78%/ still expect continual bank runs on Greek banks.

3j  Greek 10 year bond yield:  11.91% (down 25 in basis point in yield)

3k Gold at 1207.80 dollars/silver $16.48

3l USA vs Russian rouble;  (Russian rouble down 1/4  rouble/dollar in value) 50.05 , the rouble is the best acting currency this year!!

3m oil into the 55 dollar handle for WTI and 62 handle for Brent/Saudi Arabia increases production to drive out competition. (see zero hedge)

3n Higher foreign deposits out of China sees huge 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 9 year German bund now enters negative territory with the 10 year close to negativity/no doubt the ECB will have trouble meeting its quota of purchases and thus European QE will be a total failure.

3s  The ECB increased the ELA to Greece today by another  large 800 million euros.  The new maximum is 74.0 billion euros.  The ELA is used to replace depositors fleeing the Greek banking system.  The bank runs are increasing exponentially.

Greece repaid the IMF last Friday.  There will be nothing left April 24..


3t Greece informally asks the IMF to delay its payment for May 1 and they refuse.

4.  USA 10 year treasury bond at 1.87% early this morning. Thirty year rate well below 3% at 2.53%/yield curve flatten/foreshadowing recession.


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



(courtesy zero hedge/Jim Reid Deutsche bank)


With Futures On The Verge Of A Major Breakout, Greece Drags Them Back Down; German 10Y Under 0.1%


Just as the S&P appeared set to blast off to a forward GAAP PE > 21.0x, here comes Greece and drags it back down to a far more somber 20.0x. The catalyst this time is an FT article according to which officials of now openly insolvent Greece have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, but were told that no rescheduling was possible.  The result if a drop in not only US equity futures which are down 8 points at last check, but also yields across the board with the German 10Y Bund now just single basis points above 0.00% (the German 9Y is now < 0), on its way to -0.20% at which point it will lead to a very awkward “crossing the streams” moment for the ECB.

Oil is lower as well because also overnight we learned that the recent surge in crude prices is precisely what Saudi Arabia wanted to boost production to a new record high. with March production up another 659k b/d to 10.29m b/d (a fresh all time high) amid slower growth forecast for non-OPEC supply and better global demand outlook, OPEC says in its monthly Oil Market Report. “Higher global refinery runs, driven by increased seasonal demand, along with the improvement in refinery margins, are likely to increase demand for crude over the coming months.” And the Saudis will do everything in their power power to paint the streets black… and slick.

As a result, European equities entered negative territory with the DAX earlier breaking below yesterday’s low as ECB positions are unwound and concerns surrounding Greece continue to linger with discussions between Greece and the IMF set to begin today. The ongoing uncertainty has resulted in the short end of the Greek yield curve to climb, with 3y and 5yr yields both surging over 100bps. Furthermore, S&P downgraded Greece’s credit ratings to CCC+ from B-; outlook negative, while German Finance Minister Schaeuble downplayed expectations for a breakthrough in Greek/Eurogroup negotiations by saying ‘nobody expects that there will be a solution.

Shortly after the Eurex open flows were seen into fixed income and Bund futures caught a mild bid which led to the German 10y and 30y yield fell below 0.1% and 0.5% respectively for the first time in history, meanwhile UST’s trade slightly higher tracking its German counterpart.

Asian investors had no Greek headlines, or fundamentals to worry about, and as a result Asian stocks mostly rose led by energy stocks following yesterday’s rally across the energy complex. Shanghai Comp (+2.7%) outperformed after peaking near its 7yr highs, as yesterday’s declines and continued easing speculation triggered a round of fresh buying. Hang Seng (+0.4%) also rose after erasing earlier losses bolstered by a rally across railway stocks. Nikkei 225 (+0.1%) was the session’s laggard weighed on by a strong JPY, strengthening the most this month against the greenback.

In FX markets, the USD-index has begun to retrace some of yesterdays’ US Empire & Industrial Production inspired losses which has weighed on the EUR, with EUR/GBP breaking back below the low printed yesterday at 0.7167. Elsewhere, GBP/USD trades steady with attention turning to tonight’s UK Election debate which will be close watched as the market looks to observe any impact on the latest election polls. AUD strengthened the most in 3-weeks and outperforms its major pairs in the wake of a stellar Australian employment report, which prompted participants to pare May RBA rate cut calls. Unemployment rate fell to a 3-month low as the participation rate rose to an 8-month high, with the headline reading more than double expectations (37.7k vs. Exp. 15.0k (Prev. 15.6k, Rev. 42.0k). As such, markets are now pricing in a 56% chance of a 25bps May RBA rate cut vs. 74% prior to the report.

In the energy complex, WTI and Brent crude futures are unable to hold onto the gains seen after the DoE and API crude inventories data with overnight comments from the Iraqi oil minister Mehdi stating that oil exports should reach a record 3.1mln bpd in April as output from the country’s southern fields stays strong and weather conditions improve. In precious metal markets, spot gold trade firmer above the USD 1200/oz level as yesterdays’ lacklustre US data continues to add to the risk off sentiment observed in the market.

In summary: European shares fall, though are off intraday lows, with the media and chemicals sectors underperforming and autos, resources outperforming. European car sales rose 11% in March. The Spanish and German markets are the worst-performing larger bourses, the Dutch the best. The euro is weaker against the dollar. German 10yr bond yields fall; Greek yields increase. Commodities decline, with natural gas, Brent crude underperforming and copper outperforming. U.S. jobless claims, continuing claims, Bloomberg consumer comfort, Bloomberg economic expectations, Philadelphia Fed index, housing starts, building permits due later.

Market Wrap

  • S&P 500 futures little changed at 2099
  • Stoxx 600 down 0.2% to 413.2
  • US 10Yr yield up 0bps to 1.89%
  • German 10Yr yield down 2bps to 0.09%
  • MSCI Asia Pacific up 1.1% to 154.3
  • Gold spot up 0.2% to $1205.6/oz
  • Eurostoxx 50 -0.6%, FTSE 100 -0.1%, CAC 40 -0.2%, DAX -0.7%, IBEX -0.8%, FTSEMIB -0.3%, SMI +0%
  • Asian stocks rise with the Shanghai Composite outperforming and the Sensex underperforming.
  • MSCI Asia Pacific up 1.1% to 154.3; Nikkei 225 up 0.1%, Hang Seng up 0.4%, Kospi up 0.9%, Shanghai Composite up 2.7%, ASX up 0.7%, Sensex down 0.7%
  • Euro down 0.43% to $1.0638
  • Dollar Index up 0.3% to 98.62
  • Italian 10Yr yield up 4bps to 1.3%
  • Spanish 10Yr yield up 3bps to 1.3%
  • French 10Yr yield down 2bps to 0.34%
    S&P GSCI Index down 0.2% to 429.8
  • Brent Futures down 1% to $62.7/bbl, WTI Futures down 0.7% to $56/bbl
  • LME 3m Copper up 1.2% to $6029/MT
  • LME 3m Nickel up 0.9% to $12790/MT
  • Wheat futures up 0.1% to 489.3 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities reside in negative territory and German 10yr and 30yr yields print fresh record lows as the 10y yield falls below 0.1%
  • Looking ahead, sees the release of US Initial Jobless Claims, Housing Starts, Building Permits, Philadelphia Fed Business Outlook, EIA NatGas storage change, UK party elections debate as well as a loaded speaker slate featuring the likes of Fed’s Lacker, Lockhart, Mester, Rosengren and Fisher
  • Treasuries steady overnight as 10Y yields of Germany, France, Belgium, Netherlands, Austria, Finland and Ireland declined to record lows yday and French 30Y yield fell below 1% for first time.
  • The average yield on German government debt dropped below zero for the first time, an indicator of how the ECB’s bond-buying program has made the previously unthinkable a reality
  • For Norway’s $890 billion sovereign-wealth fund, the investment risks stemming from monetary policy have never been greater
  • U.K. bond investors have bigger concerns than who wins the election on May 7, with the past five years showing that central bankers, not politicians, hold power for financial markets
  • Ben Bernanke will become a senior adviser to the Citadel Investment Group, he will offer his analysis of global economic and financial issues and meet with investors
  • Fed will only know demand for its O/N RRP facility once it starts to move away from the zero bound; usage could stay steady or be “much greater than what we’ve seen at higher levels of interest rates,” Simon Potter, executive vice president at the New York Fed, said in speech
  • Sovereign bond yields mixed with Greek 10Y yields rising 77bps. Asian stocks rise, European equities drop, U.S. equity-index futures fall. Crude oil drops, copper and gold higher


DB’s Jim Reid concludes the overnight recap


In our 2013 long-term study “A Nominal Problem” we highlighted how one of the biggest concerns facing the global economy was how low Nominal GDP was relative to the past. Well this problem has intensified across most of the world over the last couple of quarters and China is a prime example. In the pdf today we show that Chinese NGDP is back down (5.7%) to within 0.1% of where it was at the lows in Q1 2009. While QE and ZIRP around the world is clearly keeping the ‘plates spinning’ successfully in terms of financial markets, policy is being less successful in promoting growth (real or nominal). This is important as the longer NGDP stays low the longer extremely high debt burdens will remain and even increase and the more vulnerable the economy stays to an outside shock. China’s low NGDP also must have an impact on their external demand which in turn impacts the rest of the globe. So difficult times still for growth but perhaps allowing more financial market stimulus ahead.

Our Chinese economist Zhiwei Zhang also highlights how outside of the main releases, other non-mainstream numbers such as electricity production growth dropped to -0.1% yoy (Jan-Feb: 1.9%, 2014: 3.2%). Elsewhere cement output growth dropped to -20.5% (Jan-Feb: 11.2%, 2014: 1.8%) and the number of migrant workers dropped 3.6% yoy in Jan-Feb. Zhiwei maintains his view that China faces the risks of a mini-hardlanding, and the government will have to loosen policies significantly in Q2 to stabilize growth. He now expects three more RRR cuts in the rest of this year, with two in Q2 and one in Q3. They also continue to expect one interest rate cut in Q2, but see the possibility of more cuts in H2 should the economic growth continue to disappoint.

The Shanghai Comp and CSI 300 are rebounding +1.95% and +2.33% this morning respectively, no doubt helped by stimulus hopes after the poor data. Elsewhere, the Nikkei (-0.19%) is lower and the Hang Seng (+0.20%) is a touch higher. The ASX (+0.55%) is higher after Australia reported better than expected employment data.

Staying with stimulus the ECB reiterated that they see no imminent problems in sourcing bonds in their QE program and continue to expect it to be ongoing until inflation shows clear signs of meeting their objectives. In response the 10 year bund countdown to zero hit a new landmark as it dropped another 3bps to trade at 0.105% yesterday. Other Euro Govt bond yields dropped broadly similar amounts with the peripheral generally slightly out-performing as 10y yields in Spain (-2.9ps), Italy (-4.7bps) and Portugal (-5.2bps) dropped to 1.257%, 1.256% and 1.686% respectively.

Draghi’s comments certainly helped the better tone in markets yesterday, however it was a rally in oil markets which again provided much of the direction for risk assets and helped offset more soft data out of the US and more negative comments out of Greece, which we’ll come to shortly. Indeed, the S&P 500 (+0.51%) and Dow (+0.42%) both rose for the second consecutive day as energy stocks (+2.30%) rallied in line with a rise for WTI (+5.82%) and Brent (+5.87%). The rally in WTI in fact to $56.39/bbl marked the highs for 2015 so far, with the price now over $10 off the 6-year lows we saw roughly a month ago. The latest bounce appears to be as a result of the latest EIA data showing crude supplies increasing last week at the slowest pace since January.

Greece was the other notable headliner yesterday as comments from German Finance Minister Schaeuble in particular attracted attention. Having downplayed earlier reports in German press Die Zeit that the German government was working on a plan to keep Greece in the Euro-area if the country defaulted, Schaeuble went on to say that ‘no one’ expects a solution for Greece at the Eurogroup meeting next Friday and that the current government in place has ‘destroyed’ previous progress. Data released yesterday also showed that Greece missed its +1.5% budget surplus target for 2014 after posting +0.4%. S&P became the latest credit agency to act, downgrading Greece one notch to CCC+ (negative outlook).

Back to markets, Treasuries were fairly unmoved for the most part yesterday as the benchmark 10y yield in particular traded in a tight range before eventually closing a basis point tighter at 1.889%. The Dollar was weaker meanwhile as the DXY closed 0.40% lower. Yesterday’s data did little to help. In particular, the April print for the NY Fed empire manufacturing (-1.19 vs. +7.17 expected) was a significant miss – dragged down by new orders in particular – and more or less in line with the 18 month low seen back in December. Industrial production (-0.6% mom vs. -0.3% expected) was also soft having fallen more than expected for the biggest fall since August 2012. Manufacturing production makes for modestly better reading however with the +0.1% mom reading in line and up from (-0.2%) last month. Elsewhere, the NAHB housing market index rose 3pts to 56 and capacity utilization was more or less in line (78.4% vs. 78.6% expected)

There was little to surprise markets following the release of the Fed’s Beige book yesterday. The release showed that the economy grew at a ‘modest’ or ‘moderate’ pace in eight of the twelve regions from Mid February to end March. References to a harsh winter was unsurprisingly a theme, which, combined with a stronger Dollar and falling oil prices was blamed as the cause for weakening activity. Labour markets were said to be ‘stable or continued to improve modestly’ however the Districts reported only ‘modest’ upward wage pressure. On the subject of the Fed, St Louis Fed President Bullard (non-voter) was vocal again yesterday, this time highlighting the risk of asset price bubbles should rates be left near zero for too long.

Before we move on, a WSJ article out late last night caught our eye. In it, former Fed Chair Bernanke was quoted as saying that the control of monetary policy ‘might be more, rather than less effective’ should the Fed move away from the target Fed Funds rate and instead focus on the repo rate in a bid to maintain a larger balance sheet than before the crisis. Bernanke highlighted that the fed funds market is ‘small and idiosyncratic’ and noted that regulatory action should help ease wariness around reverse repo programs.

Moving on, as well as the strength in bond yields in Europe yesterday, equities also maintained their strong run as the Stoxx 600 (+0.57%) recorded a fresh record high while the DAX (+0.03%,) CAC (+0.70%), IBEX (+0.63%) and FTSE MIB (+1.17%) all finished higher. Despite a brief hold up from the invasion of a protestor, Draghi’s comments that there is ‘clear evidence that the monetary policy measures that we’ve put in place are effective’ and that ‘we expect the economic recovery to broaden and strengthen gradually’ certainly helped support confidence in markets. Elsewhere, the final March inflation reading out of Germany was unchanged at +0.3% yoy, while France stayed in deflation mode after its -0.1% yoy reading came in a touch below expectations of 0.0%.

The IMF’s Global Financial Stability Report was also released yesterday. In it, IMF Director Vinals warned of a ‘super taper tantrum’ and rising bond yields in the face of a first rate rise from the Fed. The report suggested that a 100bps rise in 10y Treasuries was ‘quite conceivable’ upon a move by the Fed, while ‘shifts of this magnitude can generate negative shocks globally, especially in emerging market economies’.

Looking at today’s calendar, it’s quiet in the European timezone this morning with no significant releases due out. Focus will again be on the US data where we get housing starts, building permits, initial jobless claims and the Philadelphia Fed business outlook. It’s a busy day for Fed commentary also where we have Lacker, Lockhart, Mester and Fischer all due to speak. Earnings season will of course remain a focus as well with Goldman Sachs, Citigroup and Schlumbeger due to report – an interesting contrast between the financial and energy space



The following is extremely important.  The real growth in China is only 1.6% as we will indicate with the following parameters:

i. lower house prices

ii. lower industrial production

iii. lower retail sales

iv. lower auto sales.

and this should give a good picture as to what the USA economy has done in the last 6 months


(courtesy zero hedge)


China’s True Economic Growth Rate: 1.6%

While the world gasped last night when China’s production-based, and goalseeked GDP number came in at 7.0% – the lowest in 6 years…

… the truly scary numbers were in the details, which revealed unprecedented deterioration. The key among these were shown previously, and are as follows:

Plunging consumer sentiment: oddly this hasn’t been offset by China’s unprecedented stock bubble.

The worst retail sales in 9 years:

Tumbling auto sales:

The weakest fixed asset investment (recall that in China capex spending accounts for over half of GDP growth) in the 21st century

Industrial production worse since the Lehman crisis:

And of course, home prices:

Which brings us back to China’s “7.0%” GDP. Because as Cornerstone Macro reports, “Our China Real Economic Activity Index Slowed To Just 1.6% YY In 1Q.”

The indicator in question looks at many of the components shown above, such as retail sales, car sales, rail freight, industrial production, and several others, to determine an accurate indicator of the true state of China’s economy.

It finds that not only is China’s economic growth rate not rising at a 7.0% Y/Y rate, but is in fact the lowest it has been in modern history!

And a 1.6% growth rate by what was formerly the world’s most rapidly growing (and largest according to the IMF) economy explains perfectly what happened with the US economy over the past 6 months. Hint: it has nothing to do with the winter, and everything to do with China hard landing into a brick wall.

* * *

Ok, so China’s economy is cratering yet its stock market is the best performing in 2015 in dollar terms (Russia may be the only exception). How does one reconcile these two seemingly incompatible concepts?

The answer is simple, and GaveKal’s note today, titledSlumping Growth, Booming Market, touches on it.

The equity market’s performance has been driven mostly by the government’s policy response, rather than by the economic data. While economic growth has continued to weaken, Chinese stock markets have enjoyed the biggest rally since 2007, with a huge run-up in the domestic A-share market, which has now spilled over to Hong Kong. The flows last week were especially heavy, forcing the Hong Kong Monetary Authority to intervene in the currency market to offset huge capital inflows—despite a big gain in the US dollar. A strong US dollar usually means a weak Hong Kong stock market, but the relationship has broken down because this time Chinese funds, rather than global investors, are driving the bull run.

Actually it’s much simpler than all that. As we explained over a month ago, “QE In China Is Now Inevitable.” The Pavolovian algos are merely frontrunning it.

Which, incidentally is good news. Because once China also goes all in, and nobody else is left, then the real fun begins.




Early this morning, Greek bonds tumble on news that the IMF rejected an unofficial Greek proposal to delay the IMF payment on May 9:

(courtesy zero hedge)


Greek Bonds Tumble On News IMF Rejected “Unofficial” Greek Request To Delay Payment


On Wednesday, reports out of Germany indicated that Berlin was drawing up plans to keep the Greek banking sector from crumbling in the event Athens missed one or more of its upcoming payments to the IMF (i.e. in case Greece defaults). Yesterday evening, we went on to highlight a UBS note which cautioned investors not to use bond yields as a proxy for contagion risk because monetary policy has served to strip sovereign spreads of any meaning when it comes to price discovery and conveying risk to investors. It’s bank runs triggered by depositors’ conception of redenomination risk that are the real fear and a Greek exit could well cause periphery depositors to “take it to the mattresses” so to speak.

Today, we learn that earlier this month (so around the time Athens was busy denying reports of an imminent default), Greek officials floated the idea of delaying payments to the IMF due shortly after the government runs completely out of cash at the end of April. Here’s more via FT:

Greek officials have made an informal approach to the International Monetary Fund to delay repayments of loans to the international lender, highlighting the parlous state of Greek finances, but were told that no rescheduling was possible.


According to officials briefed on the talks by both sides, Athens was persuaded not to make a specific request for a delay to the Fund, which is owed almost €1bn in two separate payments due in May.


Although Athens was rebuffed, the discussions, which occurred in private earlier this month, are a sign that the Greek government is finding it increasingly difficult to scrape together enough money to continue to pay wages and pensions while meeting its debt payments to external lenders.


Yields on Greek bonds soared on Thursday following the news, with yields on three-year paper rising 134 basis points to 25.10 per cent, the highest since the country’s restructuring. Its 10-year yields climbed 45 basis points to 12.18 per cent…


MF officials have repeatedly said that a rescheduling of repayments can only come as part of a completely renegotiated new bailout programme. Were it to miss a payment, Greece would become the first developed economy to go into arrears at the Fund, something only counties like Zaire and Zimbabwe have done in the past…


One source briefed on the approach said the proposal was to “reshuffle the repayment schedule for the IMF loan over the coming months,” allowing the new Greek government led by Alexis Tsipras to have the money to pay bills for pensions and public sector salaries while negotiating with European creditors over payment of the next tranche of bailout loans.

So it’s either pay salaries and pensions or pay the IMF which is tragically ironic because Athens has already gone the route of plundering pensions to make payments to its creditors, the only difference is that now, instead of “borrowing” money from the public coffers and hoping to pay it back in the interim before anyone actually gets shorted, you’re talking about simply not paying people at all (or paying people with IOUs which would be the hilarious rough equivalent of conducting repos with individual citizens) which needless to say could turn into an untenable social and political issue virtually overnight, not to mention the fact that if the government defaults you would almost certainly see the imposition of capital controls in order to stem the inevitable deposit flight. Athens owes nearly €2 billion in public sector wages and pensions at the end of the month.

As a reminder, here is the creditor repayment schedule:

Meanwhile, Athens is looking at “creative” ways to boost liquidity such as the following scheme to “exploit” church property (via Bloomberg):

Greece to set up special committee to investigate possibilities of exploiting property of the Greek Orthodox Church, PM Alexis Tsipras says in letter to Archbishop Hieronymos today.


Revenue will be used to boost country’s liquidity: Tsipras

*  *  *

And on the one-year anniversary of the Greek 5-year bond (which you’ll recall attracted voracious demand):




UBS states that the world should not be complacent with a GREXIT. They claim that Europe risks huge bank runs a short time after the GREXIT occurs.
(courtesy zero hedge)

“Bonds Don’t Bring Breakups, Banks Do”; UBS Says Europe Risks Bank Runs On Grexit

Earlier today, we reported that Germany is preparing a contingency plan to deal with the fallout from a Greek default, the odds of which analysts are now putting at even money. According to Die Zeit, Berlin is looking at options to keep the Greek banking sector solvent (i.e. make sure there are still euros in the ATMs) even in the event Athens misses a payment to the IMF next month. Germany also indicated it was prepared to let Greece go should Tsipras, Varoufakis, and their merry band of Syriza socialist saviors be unwilling to adopt reforms in exchange for assistance to the banking sector. In the event the Greek government remains steadfast in its “where’s our money” approach to negotiations, Brussels will reportedly assist the country in transitioning back to the drachma. In the midst of the (continuing) drama, UBS is out with a new note which warns against adopting the idea that a Grexit would prove to be an isolated event. Here’s more:

Investors seem to have embraced the belief that if Greece were to walk away from the Euro, it would walk alone with minimum contagion to other countries. This belief is dangerous. UBS does not believe Greece will leave the Euro as our base case scenario. However, if Greece were to depart, there a distinct possibility that other countries would join Greece in exiting the monetary union. This is because of the way contagion is spread in a monetary union breakup, and it could happen within months of a Greek departure…

The chart gives some indication of the complacency of markets. Interest in a Greek exit from the Euro (as signified by Google searches for the somewhat irritating portmanteau “Grexit”) recently reached an all-time high, but the relative concern for a wider Euro area problem has seemingly fallen far below the levels of 2011 and 2012. 

UBS goes on to caution investors against attempting to take anything away from an assessment of eurozone sovereign spreads vis-a-vis GGB yields. The logic is simple: spreads simply don’t mean anything in the face of excessive monetary easing:

The complacent suggest that while Greece continues to have significant fiscal problems, other member states in the Euro area have fewer significant fiscal problems (as reflected by bond prices), and thus a Greek exit from the Euro would not provoke a reaction in other bond markets…

This syllogism seems appealing, but it ignores the distorted nature of modern bond markets. Indeed it is a moot point as to whether a bond yield today contains any useful information about the real economy or the risks that surround it, given the consequences of financial repression acting in concert with quantitative policy…

Bond markets are unlikely to be the catalyst for a monetary union breakup, and probably not a terribly good signal of the threat. Investors should take little comfort from the current narrowness of bond spreads or the behaviour of Euro area government bond markets. 

The simple fact of the matter is that it is redenomination risk that could fuel an EMU breakup. That is, if people no longer believe that the union is indissoluble and instead begin to view the whole ill-fated experiment as little more than a set of fixed exchange rates, all bets are off and it won’t even matter who is solvent and who isn’t when the depositors are beating down the doors.

When examining the risk of contagion from any possible Greek exit from the Euro we come back again and again to the fact that in every monetary union collapse of the last century, the trigger for breakup was not the bond markets, current account positions, or political will, but banks. If ordinary bank depositors lose faith in the integrity of a monetary union they will hasten its demise by shifting their money out of their banks – either into physical cash, or into banks domiciled in areas of the monetary union that are perceived as “stronger”. Both of these traits were evident in the US monetary union breakup, and have been in evidence in more recent events this century. The contagion risk after a possible Greek exit arises if bank depositors elsewhere in the Euro area believe that a physical euro note held “under the mattress” at home today is worth more than a euro in a bank – because a euro in a bank might be forcibly converted into a national currency tomorrow. In a breakup scenario it is more likely that retail bank deposits withdrawn will end up as physical cash, owing to the difficulties of opening and using a bank account in a different country.

This is not a question of banking system solvency. Highly solvent banks will be subject to deposit flight if it is the value of the currency in that country that is uncertain…

The contagion story is serious. Even if a depositor thinks that there is only a 1% chance their country will exit the Euro, why take a 1% chance that your life savings are forcibly converted into a perceived worthless currency if by acting quickly (and withdrawing deposits) one can have 100% certainty that your life savings remain in Euros?

If Greece were to walk away from the Euro, then the policy makers of the Euro area would have to convince bank depositors across the Euro area that a Euro in their local banking system was worth the same as a Euro in another country’s banking system, and that the possibility of any other country exiting the Euro was nil. If that double guarantee was not utterly credible, then the risk of other countries joining Greece in exiting the Euro would be high.

This suggests that financial markets are treating the risks around Greek exit with too little regard for the probable dangers. 



The German Finance Minister yesterday stated that there is no risk to contagion with respect to the widening of peripheral bonds as risk rises with a potential for a GREXIT.  He was wrong, bond risk soars!!


(courtesy zero hedge)


Contagion Arrives: European Peripheral Bond Risk Soars

Just yesterday, German FinMin Schaeuble bent the truth, proclaiming that there was no sign of contagion from Grexit concerns. Today, it appears, he will be eating his words, as Italian, Spanish, and Portuguese bond spreads have exploded higher (up 15-30bps this week) amid the collapse of Greek sovereign and bank bonds.

It’s not just Greek Sovereigns that are plunging, Greek Bank Bonds have collapsed…

and here is the contagion that Schaeuble is in denial about…

It’s not just Schaeuble that doesn’t see any problems. Stan Druckenmiller, the Chairman and CEO of Duquesne Family Office, said that with regard Greece leaving the euro:

“Draghi has QE at his disposal.  My guess is there won’t be contagion, but even if there is, he can contain it, and soon as market participants see that, you won’t get contagion.”

However, it’s no longer about bonds or Draghi, it’s about redenomination risk once again and who gets what idea next (because if there is one thing that is not allowed in the EU, it’s thinking for yourself).

*  *  *

All we need now is for some EU leader to claim “Grexit risk is contained,” and we know trouble is ahead.

Charts: Bloomberg

Even the bookies are not taking bets:
(courtesy zero hedge)

For Greece All Bets Are (Literally) Off: Bookie Closes Grexit Market


You know it’s over when the bookies are closing their markets.

From bookmaker William Hill

*  *  *

No More Bets On Grexit


Bookmakers William Hill have closed their markets on whether Greece will leave the Eurozone during 2015 and on which country would be first to leave the Eurozone.


‘Greece had been heavily backed down ro 1/5 to be the first to quit the Eurozone, and we’d also been shortening the odds for Greece to leave during 2015. They’d come down from 5/1 to 3/1.’ said William Hill spokesman Graham Sharpe, ‘It is now looking increasingly likely that they could begin the process of departing very shortly’


‘No one is interested in backing Greece to stay in the Eurozone until the end of the year, so we decided to pull the plug on the markets until either the decision to leave is taken, or the crisis point passes and a plan is put in place enabling the country to remain in’ added Sharpe.

*  *  *
As a reminder, Thursday morning, reports indicated that Athens has appealed to the IMF for a reshuffling of its debt repayment schedule so that the government can pay pensions and public sector wages while attempting to negotiate a deal with creditors — Tsipras was rebuffed.
Which reminded us…



The following is what Bill Holter and I have been pounding the table on for many months. The sovereign debt of Greece which was originally in the hands of big French and German banks were swapped for Euros in 2012 (LTRO i and LTRO 2).  The ECB then did a deal with Greece for new bonds such that the ECB would not receive a haircut on this new debt. Private holders were killed. Thus default by Greece will bring those bonds back onto the balance sheet of the big French and German banks. Graham Summers of Phoenix Research Capital correctly states that these banks used Greek sovereign bonds as Tier one assets on their balance sheet and then leveraging these bonds as collateral massaging the gigantic derivative trades, leveraging their original collateral to 24 times the original bond value.  So you can now visualize why a default will cause catastrophic derivative and other losses onto the big banks and onto the ECB, that which neither could afford.

The following is a must for you to read…

(courtesy Graham Summers/Phoenix Research Capital)


The REAL Issue With a Grexit/ Greek Default

The situation in Greece boil down to the single most important issue for the finacial system, namelycollateral.

Modern financial theory dictates that sovereign bonds are the most “risk free” assets in the financial system (equity, municipal bond, corporate bonds, and the like are all below sovereign bonds in terms of risk profile). The reason for this is because it is far more likely for a company to go belly up than a country.

Because of this, the entire Western financial system has sovereign bonds (US Treasuries, German Bunds, Japanese sovereign bonds, etc.) as the senior most asset pledged as collateral for hundreds of trillions of Dollars worth of trades.

Indeed, the global derivatives market is roughly $700trillion in size. That’s over TEN TIMES the world’s GDP. And sovereign bonds… including even bonds from bankrupt countries such as Greece… are one of, if not the primary collateral underlying all of these trades.

Lost amidst the hub-bub about austerity measures and Debt to GDP ratios for Greece is the real issue that concerns the EU banks and the EU regulators: what happens to the trades that EU banks have made using Greek sovereign bonds as collateral?

This story has been completely ignored in the media. But if you read between the lines, you will begin to understand what really happened during the previous Greek bailouts.


1)   Before the second Greek bailout, the ECB swapped out all of its Greek sovereign bonds for new bonds that would not take a haircut.

2)   Some 80% of the bailout money went to EUbanks that were Greek bondholders, not the Greek economy.

Regarding #1, going into the second Greek bailout, the ECB had been allowing European nations and banks to dump sovereign bonds onto its balance sheet in exchange for cash. This occurred via two schemes called LTRO 1 and LTRO 2 which happened in December 2011 and February 2012 respectively. Collectively, these moves resulted in EU financial entities and nations dumping over €1 trillion in sovereign bonds onto the ECB’s balance sheet.

Quite a bit of this was Greek debt as everyone in Europe knew that Greece was totally bankrupt.

So, when the ECB swapped out its Greek bonds for new bonds that would not take a haircut during the second Greek bailout, the ECB was making sure that the Greek bonds on its balance sheet remained untouchable and as a result could still stand as high grade collateral for the banks that had lent them to the ECB.

So the ECB effectively allowed those banks that had dumped Greek sovereign bonds onto its balance sheet to avoid taking a loss… and not have to put up new collateral on their trade portfolios.

Which brings us to the other issue surrounding the second Greek bailout: the fact that 80% of the money went to EU banks that were Greek bondholders instead of the Greek economy.

Here again, the issue was about giving money to the banks that were using Greek bonds as collateral, to insure that they had enough capital on hand.

Piecing this together, it’s clear that the Greek situation actually had nothing to do with helping Greece. Forget about Greece’s debt issues, or protests, or even the political decisions… the real story was that the bailouts were all about insuring that the EU banks that were using Greek bonds as collateral were kept whole by any means possible.

This is why the current negotiations in Greece boil down to one argument: whether or not it will involve an actualrestructuring of Greek debt that will affect bondholders across the board.

Greece wants this. The ECB and EU leaders don’t for the obvious reasons that any haircut of Greek debt that occurs across the board will:

1)   Implode a small, but significant amount of EU bank derivatives trades.

2)   Be immediately followed by Spain, Italy and ultimately France asking for similar deals… at which point you’re talking about over $3 trillion in high grade collateral being restructured (collateral that is likely backstopping well over $30 trillion in derivatives trades at the large EU banks).

Remember, EU banks as a whole are leveraged at 26-to-1. At these leverage levels, even a 4% drop in asset prices wipes out ALL of your capital. And any haircut of Greek, Spanish, Italian and French debt would be a lot more than 4%.

The next round of the great crisis is coming. The ECB bought two years of time with its pledge to do “whatever it takes,” but the global bond bubble is still going to burst. And when it does, it’s going to make 2008 look like a joke.

Now riots in the streets of Athens:

(courtesy zero hedge)


Meanwhile, In Greece — Live Feed

The honeymoon is officially over in Greece for the Syriza socialist saviors who, after a series of dramatic pledges to free Greeks from the bonds of austerity have been forced to abandon the very promises which got them elected as the “institutions” (no one is allowed to speak of the “troika” any longer) have refused to budge on demands that Athens institute serious fiscal reforms.

Now, with time running dangerously short, and with looming payments to the IMF and to public sector employees and pensioners, the people are growing restless.

In today’s protest, perhaps just as much to celebrate the arrival of spring, 4,000 miners demonstrated in Athens against job cuts they fear will result from the hard-left government’s opposition to continued exploitation of their gold mine in northern Greece.

According to AP, “scores of buses transported miners from the Halkidiki region of Greece – about 600 kilometers (370 miles) north of Athens – to protest the SYRIZA-led government’s decision last month to review the concession granted to the mines Canadian operator, Eldorado Gold.

Though the mine represents one of the biggest foreign investments projects in Greece today, the government opposes further operation of the mine amid environmental and legal questions surrounding the concession.

A harbinger of more anger at the “radical leftist” government? The march represents one of the biggest labor protests since SYRIZA took power in January on promises of throwing off austerity and using public spending to spark economic growth.

The mine is located in a wooded area near the Mount Athos tourist destination. It has long been the source of repeated clashes between police and environmentalists backed by local residents, who claim the mine poses an ecological threat.

Opponents also denounce the financial terms of the concession granted by previous governments to Eldorado Gold – objections the SYRIZA cabinet shares as it reviews the contract.

But the thousands of miners who descended on Athens Thursday to march by government ministries and parliament warned that putting the mines future into question will lead to mass job cuts.

They noted that in a nation suffering 25.7 percent unemployment – the highest level in the European Union – Greece can scarcely risk provoking new job losses by meddling with the mines operation.

“The honeymoon is over” said Nikos Marantzidis, a pollster and political science professor at the University of Macedonia as Bloomberg reported earlier. “This doesn’t mean that Syriza’s hegemony is under dispute but we’re done with the period when Greek public opinion would agree with everything that the government does.”

The public opinion is only going to get uglier as the government is forced to do whatever the Troika demands.

Meanwhile, as miners shouted anti-government slogans outside the parliament, victims of terrorist attacks protested inside the building against a bill submitted by the justice ministry that would pave the way for the release of a convicted assassin from prison.

Savvas Xiros, who has been sentenced to life imprisonment for killing five people as a member of the guerrilla group November 17, may spend the rest of his sentence detained at home if the bill allowing prisoners with severe disabilities to exit jail under certain restrictions passes. Xiros was maimed after a bomb he was about to plant in 2002 exploded in his arms.

“The case of Xiros would be irrelevant in itself,” Marantzidis said. “But in conjunction with other moves, it reinforces the perception that the government is soft on crime.”

In other words, things are now fully back to normal in Greece.

Live feed.

…and some additional visuals…

*  *  *

And if you think it’s bad now, here’s what’s coming (Via Capital Economics):

Greece may resort… to IOUs to pay public sector workers and pensioners and free up money to repay its debts. But this could cause economic chaos if fears that the IOUs would never be paid sparked riots or public sector employees simply refused to work.

NATO, Europe and the USA will not be happy campers with this development:
(courtesy zero hedge)

Europe Will Be Very Angry When It Learns Greece Is About To Buy Russian Anti-Aircraft Missiles

Just days after Russia lifted sanctions on providing anti-aircraft missiles to Iran, Reuters reports that The Greeks are in talks with Russia to purchase missiles for the S-300 defense system. Greece, a NATO member, has been in possession of the advanced Russian-made systems since the late 1990s and in a defiant show of independence towards Troika, is now negotiating with Russia for the purchase of additional missiles and for their maintenance.

As Reuters reports,

Greece is negotiating with Russia for the purchase of missiles for its S-300 anti-missile systems and for their maintenance, Russia’s RIA news agency quoted Greek Defense Minister Panos Kammenos as saying on Wednesday.

The report followed a visit by Greek Prime Minister Alexis Tsipras last week to Moscow, where he won pledges of Russian moral support and long-term cooperation but no fresh funds to help avert bankruptcy for his heavily indebted nation.

NATO member Greece has been in possession of the Russian-made S-300 air defense systems since the late 1990s.

“We are limiting ourselves to replacement of missiles (for the systems),” RIA quoted Kammenos, who is in Moscow for a security conference, as saying.

“There are negotiations between Russia and Greece on the maintenance of the systems … as well as for the purchase of new missiles for the S-300 systems,” he said.

The Greek defense ministry in Athens later issued a statement quoting Kammenos as saying: “The existing defense cooperation programs will continue. There will be maintenance for the existing programs.”

*  *  *

*  *  *

Two questions spring to mind:

1. Where is Greece – which is scratching around for every penny to repay The IMF – going to find the cash to pay for these missiles? We suspect the answer will be a loan from Russia (perhaps for more than the cost) as a roundabout way to provide Tsipras with funds upfront… and

2. Will The ECB accept new missiles as collateral? We suspect no…

*  *  *

Perhaps, given Juncker’s call for an EU Army, Greece is deciding it needs to strengthen its defenses from its Union counterparts?


Another former IMF head arrested today:
While the IMF orchestrates the “bail” ins, Rato had trouble today with his “bail” as he was short of cash..
have fun with this…
(courtesy zero hedge)

Another Former IMF Head Arrested: Rodrigo Rato Perp Walked In Madrid

As we reported earlier, the former chief of the IMF Rodrigo Rato, who was succeeded in 2007 by another scandalous figure, Dominique Strauss-Khan, was recently put under investigation by Spanish authorities for money-laundering, benefiting from a tax amnesty to repatriate previously undeclared offshore funds. This is in addition to at least one previous investigation into his role as chairman of Caja Madrid, the failed savings bank, and its successor Bankia.

And, unlike every single JPM banker pretty much ever, moments ago Rato became the second former IMF head in several years (following DSK), to be placed under arrest.

From El Pais, google translated::

The former vice president of the Government and former director general of the International Monetary Fund, Rodrigo Rato, has been arrested after a search of his home, practiced by the Tax Agency at the request of the Office of Madrid, according to EFE. Rato has left his home accompanied by several officers who have gotten into a police car waiting at the door of his house in a quiet street in the Salamanca district of Madrid.


Upon his release, he was not handcuffed but one of the officers, introduced him in the car, grabbing the neck. “Sinverguenza” was one of the few words he was heard during transport. Then the agents who carried out the registration, for more than three hours, have come out with at least four boxes of documents. Subsequently, there have been directed by the former minister, the Castelló street, where the former vice president’s office and which follows the record. In this building, agents have covered the windows with cardboard.


According to reported sources of the investigation, the judge had to sign an arrest warrant for former IMF chief could leave his home in a police car and continue logs out of your home.


The charges are levied on Rato fraud, concealment of assets and money laundering.

While it is notable that Rato apparently did not have enough cash with which to pay off the prosecuting judge and have the case against him dropped, one wonders what the odds are for Christine Lagarde to complete the trifecta of arrests of people who are in the one position which has become the most cursed in the New Paranormal world.

Because while the IMF was originally created to pay for “bail outs”, in recent years its former heads are far more concerned with paying just the “bail.”

His arrest caught on tape:

Oil related stories:
The Saudi’s are determined to destroy the USA’s shale industry.
They have just increased production again dramatically:
(courtesy zero hedge)

Saudi Oil Production Hits All Time High, Surges By ‘Half A Bakken’

As hopeful US investors buy everything oil-related on the back of a lower than expected crude build this week (after the biggest build in 30 years the week before), The Kingdom has stepped up overnight and ruined the dream of supply-restrained price recovery as it announced asurge in production output in March to yet another record high. The nation boosted crude output by 658,800 barrels a day in March to an average of 10.294 million a day, which as Bloomberg notes, is about half the daily production from the Bakken formation. WTI Crude prices have slipped by around 2% from yesterday’s NYMEX Close ramp highs as it appears Saudi Arabia is not willing to just let this effort to squeeze Shale stall.

Saudi Arabia output surged and hit a new all time high.

And so Crude is sliding… for now.

The Saudis did suggest demand would rise (but again would be offset by increased production):

“Higher global refinery runs, driven by increased seasonal demand, along with the improvement in refinery margins, are likely to increase demand for crude oil over the coming months,” OPEC’s Vienna-based research department said. “Given expectations for lower U.S. crude oil production in the second half of the year, these higher refinery needs will be partially met by crude oil stocks, reducing the current overhang in inventories.”

And as a reminder, Saudi oil production is already record high. Now it is recorder.

As reported last week, instead of leaving its own production flat in an attempt to stabilize oil prices and hit its “optimistic” outlook sooner rather than never, Saudi Arabia would boost production quite sharply to claw back market share. Specifically al-Naimi, revealed that the kingdom’s oil production in March was 10.3-million barrels a day – a record high. “Saudi Arabia is going for it,” Olivier Jakob of the Swiss energy consultancy PetroMatrix said on Wednesday as Brent crude fell by about 1.3 per cent.

So what is Saudi Arabia’s reasoning to “make up in volume what it loses in price”? Here is Globe and Mail’s explanation:

Why is Saudi Arabia opening the spigot? There is no doubt that country’s own domestic demand is rising, thanks to heavy investment in new refineries, requiring more production.But it also appears that Saudi Arabia is making renewed push for market share for fear that a gusher of Iranian oil will soon hit the export markets as the Iranian embargo is ratcheted back. “They will not want to abandon any market share to Iran,” Mr. Jakob said.

The problem for oil producers and investor is that the Saudis are not acting in isolation. In March, both Iraq and Libya managed to boost production in spite of the violence and chaos in those countries. As a result, OPEC production in March was about 31.5-million barrels a day, an increase of 1.2-million barrels over February and 2-million barrels over March, 2014. The March figure is well above the second-quarter estimate put out by the International Energy Agency.

At the same time, U.S. production is surging, creating burgeoning stockpiles of oil. Thecombination of rising U.S. production and rising Saudi production can only be bearish for oil prices. The prospect of oil testing its January low should not be ruled out, especially if Iran is given the green light to ramp up exports.

The good news for oil investors is that low prices could well trigger a repeat of the consolidation round seen in the late 1990s, which was another period of extremely low prices. In that era, the biggies – BP, Chevron and Exxon – all did monster deals that significantly boosted their global clout. The trick, of course, is to pick the right company. The premium paid on BG’s share was 50 per cent over BG’s closing prices on Tuesday.

Which means higher 2015 highs for oil are likely imminent as physical supply and demand are once again utterly irreelvant for this most financialized of commodities. 


Oh this is great.  Many shale oil players in the uSA are going bankrupt. So what does the USA do?  The USA taxpayers will backstop a 5 billion bond issue from Iraq to help that country who is suffering from lower oil prices.
(courtesy zero hedge)

After Rescuing Ukraine, US Taxpayers To Bail Out Iraq Next

Having generously (if not obliviously) stepped up to the plate to bail out Ukraine (with open-ended bond guarantees), US taxpayers are opening their wallets again – this time for Iraq. As Reuters reports, cheap oil has ravage Iraq’s state finances just as the government faces rising military spending from the war it is waging against ISIS; and so it has decided to issue $5 billion in international bonds. However, Iraq is considering other ways to cover its budget deficit, including asking the IMF (i.e. US taxpayers) for relief funding and alsorequesting the controversial U.S. Export-Import Bank (US Taxpayers) finance the purchase of 10 planes from Boeing Co, which cost the government $500 million.

Cheap oil is ravaging Iraq’s state finances, just as the government faces rising military spending from the war it is waging against Islamic State militants. As Reuters reports, Iraqi Finance Minister Hoshyar Zebari said the government was facing a budget deficit of $25 billion, out of a budget of approximately $100 billion. Iraq’s 2015 budget is based on an oil price of $56 per barrel, he said.

Iraq has decided to issue $5 billion in international bonds and is negotiating the terms as one of several measures as it seeks to relieve the pressure of low oil prices on its finances.

Iraq is considering a number of other measures to cover its budget deficit, including asking the International Monetary Fund for relief funding of between $400 million and $700 million, Zebari said.

“We haven’t made a decision, but I think they (the IMF) are willing to provide that support, but they need the government to do more cuts on the public spending,” he said. “Not as a precondition, but really they have advised that is the way to release these funds.”

Iraq is also requesting the U.S. Export-Import Bank finance the purchase of 10 planes from Boeing Co, which cost the government $500 million, Zebari said.

“We are seeking to finance those planes … through the Ex-Im Bank, and they (Boeing) will pay us back the money we have paid already,” Zebari said.

Iraq has also been building up debts to the companies developing its oilfields.Zebari said Iraq had started paying back its debts to the international oil companies, but declined to say how much.

“We are paying them actually, not according to their expectation but at least we started paying them,” he said.

The government has also managed to borrow some $7 billion from semi-state-owned Iraqi banks to cover its shortfall, Zebari said.

What is perhaps even more worrying, for a nation in such chaos already, is the Iraqi people’s dependence on government handouts…

Though Iraq’s finances are no longer in a panic state, Zebari said, fundamental changes are needed to ensure Iraq’s economic health in the future, including reforming a bloated government bureaucracy that he said employs some four million Iraqis at a cost of $3.5 billion per month for wages.

“This rentier state government has been overburdened by this social commitment … to a large section of the population,”he said.

And what that means should the money dry up…

We wonder how struggling Shale Oil producers will feel as they approach bankruptcy when US taxpayer funds are bailing out Iraqis suffering from low oil prices.



Your more important currency crosses early Thursday morning:





Euro/USA 1.0721 up .0045

USA/JAPAN YEN 119.04 down .096

GBP/USA 1.4924 up .0025

USA/CAN 1.2282 down .0025

This morning in Europe, the Euro rose  again by 45 basis points, trading now well above the 1.07  level at 1.0721; Europe is still reacting to deflation, announcements of massive stimulation, a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, a possible default of Greece and the Ukraine.

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 10 basis points and trading well below the 120 level to 119.04 yen to the dollar.

The pound was up this morning as it now trades just above the 1.49 level at 1.4924  (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 well up by 25 basis points at 1.2282 to the dollar

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: Thursday morning : down by 38.92  points or 0.20%

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

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

Gold very early morning trading: $1207.80




Early Thursday morning USA 10 year bond yield: 1.87% !!!  down 2  in basis points from Wednesday night/


USA dollar index early Thursday morning: 97.99 down 40 cents from Wednesday’s close. (Resistance will be at a DXY of 100)




This ends the early morning numbers, Thursday morning




And now for your closing numbers for Thursday:



Closing Portuguese 10 year bond yield: 1.89% up 18 in basis points from Wednesday  (Contagion hits Portugal)

Closing Japanese 10 year bond yield: .33% !!! par in basis points from Wednesday

Your closing Spanish 10 year government bond,  Thursday, up 9 in basis points in yield from Wednesday night.

Spanish 10 year bond yield: 1.35% !!!!!!  (contagion hits Spain)


Your Thursday closing Italian 10 year bond yield: 1.38% up 12 in basis points from Wednesday: (contagion hits Italy)


trading 3 basis points above Spain.






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


Euro/USA: 1.0785 up .0108  ( Euro up 108 basis points)

USA/Japan: 118.93 down .206  ( yen up 21 basis points)

Great Britain/USA: 1.4955 up .0127   (Pound up 127 basis points)

USA/Canada: 1.2165 down .0140 (Can dollar up 140 basis points)


The euro rose  during the afternoon, stopping any further losses as the uSA dollar was whacked from all sides again today.  It settled up 108 basis points to 1.0785. The yen was up 21 basis points points and closing well below the 119 cross at 118.73. The British pound gained considerable  ground today, 127 basis points, closing at 1.4955. The Canadian dollar made a monster move northbound to the USA dollar, up 140 basis points closing at 1.2165.

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 2 in basis points from Wednesday


Your closing USA dollar index:

97.54 down 55 cents on the day.



European and Dow Jones stock index closes:




England FTSE down 36.33 or 0.51%

Paris CAC down 29.86 or 0.57%

German Dax down 232.48 or 1.90%

Spain’s Ibex down 166.70 or 1.42%

Italian FTSE-MIB down 419.73 or 1.75%



The Dow: down 6.84 or 0.04%

Nasdaq; down 3.23 or 0.06%



OIL: WTI 56.45 !!!!!!!

Brent: 63.80!!!!



Closing USA/Russian rouble cross: 49.63 up   1/4 rouble per dollar

the best advancing currency so far this year.








And now your important USA stories:



NYSE trading for today.

Fed-Speaker Confusion Sparks Dollar Slump, Stocks Pump’n’Dump

The Farce is strong in this market (so there was only one clip possible today)… as flip-flopping Fed Presidents, Greek risks, and more crappy data turmoiled the markets…

Equity futures did their usual v-shaped recovery in an algo stop-run to yesterday’s highs before falling back… as Fed Vice Chair said


Somewhat signaling rate hikes sooner no matter what…

Cash indices opened gap down, filled the gap as we predicted then faded – very narrow range trade in cash today(NOTE: Nasdaq twice bounced off 5000, S&P perfectly bounced off 2100 and The Dow stayed well above 18000) – Only Trannies closed green

Homebuilders hammered after weak Starts & Permits data…

On the week…Trannies remain red, Small Caps the best performer…

Virtu Financial closed below its post-IPO open price… (priced at $19, opened at $23)

JPY-Carry and Bonds decoupled from stocks soon after the European close….

The Dollar was dumped again as EURUSD surged up towards 1.08… biggest 3-day drop in USD in a month and second worst week since July 2013


Treasury yields had a wild day… yields droppped into the US open (on weak housing), were ramped higher as markets opened and a bevy of Fed speakers flip-flopped around…

Gold and Silver were dumped early on but closed unch; copper and crude rallied…

Gold dumped on Fischer’s comments that markets need to stop relying on The Fed to be there forever…

Crude soared over $57 despite Saudi Arabia pushing production up to record highs.. and then tumbled (as usual) after the NYMEX close…

Charts: Bloomberg

This morning initial jobless claims in the USA by the most in 2 month. However continual claims drop to the lowest levels since Dec 2000.  No doubt these guys just dropped out of the labour pool:

Initial Jobless Claims Miss By Most In 2 Months, Continuing Claims Collapse To Lowest Since Dec 2000


(courtesy Philly Fed index/zero hedge)


Philly Fed Limps Higher After “Weather” Crash, New Orders Tumble To 2 Year Lows


In March housing starts and permits miss badly again.  They cannot blame the weather this time:

(courtesy zero hedge)


Housing Starts And Permits Miss Badly As “Warm Weather” Rebound Fails To Materialize

Overnight, when previewing today’s housing starts number, SocGen forecast that “housing starts to rebound; On the data front, housing starts in March should increase by 17% mom, reversing the steep drop in February.”

Bank of America added:

We look for housing starts to rebound sharply to 1.035 million in March after the disappointing drop in February. The decline in February was concentrated in the Northeast which witnessed a 57% decline in the month. This seems extreme and likely a function of poor weather conditions, which should support a recovery with the start of spring. Moreover, building permits are running at 1.102 million in February, suggesting starts should rebound to be more in line with the pace of permits. Much of the gain in permits has been in multifamily, which will likely show through in the starts figures in March.However, we also expect an improvement in single family starts, consistent with the strong gain in new home sales in February and low inventory levels.


Moments ago the Department of Commerce reported March starts and permits data, which after the February collapse was expected by everyone to rebound strongly because, well, it didn’t snow as much in March as it did in February. Apparently it did, because not only did Housing Starts miss massively, and just as bad as in February, printing at 926K, on expectations of a 1.040MM rebound from last month’s revised 908K, but permits also missed and in fact declined from last month’s 1102K to 1039K, which as Joe Lavorgna “explained” last month is confusing:

Worse, while single family starts continue to drag along a level that is largely unchanged since the end of 2012, multi-family starts tumbled to the lowest since September 2013 at 287K, suggesting the rental boom is truly finished.

Not surprisingly, the same thing happened with permits which dropped by 5.7% from March, driven by a 16% plunge in multi-family permits to 378K as the rental boom is now slowing down across all stages of production.

And now we await for all those who, until yesterday saw a surge in housing data, to promptly remember what the weather was in March and blame their inability to forecast one month into the future, on that.

Which is ironic because the average March temperature was far higher than normal…

(courtesy Wolf Richter/WolfStreet)



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