April 24/The huge meeting in Riga today: a big failure/Greece to give poverty stricken individuals who cannot pay their debt 20,000 euros/Corinthia, the state which housed Hypo bank and guaranteed Hypo bonds officially asks for bailout money/Puerto Rico’s government may shut down in 3 months due to lack of liquidity/Our HFT traders wanted to remove our British flash crash trader as he was beating them at their own game/

Good evening Ladies and Gentlemen:

 

 

 

Here are the following closes for gold and silver today:

 

Gold:  $1175.60 down $18.90 (comex closing time)

Silver: $15.63 down 19 cents (comex closing time)

 

In the access market 5:15 pm

Gold $1179.30

Silver: $15.74

 

 

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

Monday is options expiry on the comex.  On Thursday we will have options expiry on the LBMA in London and on the OTC market as well.The bankers always whack the precious metals prior to and during options expiry week.  The boys are also very concerned about the high OI in silver.

 

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

 

At the gold comex today,  we had a poor delivery day, registering 0 notices served for nil 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 241.18 tonnes for a loss of 62 tonnes over that period. Lately the removals have been rising!

 

end

 

In silver, the open interest rose by another 1886 contracts despite the fact that Thursday’s silver price was up by only 3 cents. The total silver OI continues to remain extremely high with today’s reading at 186,164 contracts rising to multi-year record highs. The front April month has an OI of 22 contracts for a loss of 1 contract. 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 405,564 for a loss of 976 contracts despite the fact that gold was up by $7.50 yesterday. We had 0 notices served upon for nil oz.

 

 

Today, we had no changes in  gold inventory at the GLD/  Gold Inventory rests at 742.35  tonnes

 

Looks to me like London is out of gold.

 

In silver, /  /we had a small change (withdrawal) in silver inventory at the SLV/ and thus the inventory tonight is 326.226 million oz

 

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

 

1. Today we had the open interest in silver rise by another huge 1,615, contracts despite the fall in price on Wednesday (21 cents). Not only that but the OI for the front month of May fell by only 5,751 contracts as we have only 5 trading days left before first day notice.  The OI for gold fell by 976 contracts down to 405,564 contracts despite the fact that the price of gold was up by $7.50 on Thursday. No changes in GLD  and a slight withdrawal in SLV inventories.  The COT report was released at 3:30 pm and it is quite weird. Monday is options expiry.

(report Harvey)

 

2,Two important commentaries on Greece today:

i) The Greek government has passed a law which states that the Greek banking system will provide 20,000 euros to cash strapped, poverty stricken individuals. I can assure you that the ECB was not thrilled with this. Today’s meeting in Riga was a complete shambles. Either they come to an agreement fairly fast or Greece will turn eastward toward Moscow.

(zero hedge)

3. On Tuesday we reported on the arrest of a single trader who acted alone on that famous flash crash in May of 2010.  This trader resides in England.   The trader, Sarao will fight the extradition as he cites that many others are doing the same thing. Zero hedge writes his promised open letter to the CFTC on how spoofing and layering are manipulating the prices of commodities and stocks and he will document these illegal activities on a daily basis to the CFTC. Today Michael Lewis, author of the Crash Boys ridicules the CFTC.  Also zero hedge alleges that the reason the CFTC went after Sarao was due to the fact that he was eating into the HFT profits. The HFT crooks wanted Sarao removed..so they asked the CFTC to arrest him and they obliged.

(zero hedge, Michael Lewis)

4. The state of Corinthia, Austria officially asks for bailout funds

(zero hedge)

5.  For the past few years, I have been highlighting financial problems with USA vassal state Puerto Rico.  It now seems that the government may have to fold due to lack of liquidity.

(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 fell by 976 contracts from  406,540 down to 405,564 despite the fact that gold was up  by $7.50 yesterday (at the comex close). We are now in the active delivery month of April and here the OI fell by 31 contracts down to 440. We had 1 contracts filed upon on Thursday so we lost 30 gold contracts or 3000 ounces that will not stand for delivery in April. The next non active delivery month is May and here the OI fell by 5 contracts down to 436.  The next big active delivery contract month is June and here the OI fell by 1865 contracts down to 264,861. 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 65,298. The confirmed volume yesterday ( which includes the volume during regular business hours + access market sales the previous day) was poor at 123,934 contracts. Today we had 0 notices filed for nil oz.

And now for the wild silver comex results.  Silver OI rose by another 1886 contracts from 184,278 up to 186,164 despite the fact that the price of silver was up only 3 cents, with respect to Thursday’s trading.  Somebody big is willing to take on JPMorgan.  We are now in the non active delivery month of April and here the OI fell by 1 contracts down to 22.  We had 1 notice filed yesterday so we neither gained  nor lost any silver contracts standing  in this delivery month of April. The next big active delivery month is May and here the OI fell by only 4673 contracts down to 53,045.  We have less than 1 week before first day notice on Thursday, April 30.2015. The estimated volume today was good at 41,784 contracts (just comex sales during regular business hours. The confirmed volume yesterday (regular plus access market) came in at 69,709 contracts which is excellent in volume except we had many rollovers. We had 0 notices filed for nil oz today. The fact that very little silver contracts are leaving the May delivery month arena must scare the living daylights out of our banker friends.

 

 

April initial standings

April 24.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz  nil
Withdrawals from Customer Inventory in oz  160,384.771 (Manfra, Scotia)
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz nil
No of oz served (contracts) today 0 contracts (nil oz)
No of oz to be served (notices)  440 contracts(44,000) oz
Total monthly oz gold served (contracts) so far this month 2361 contracts(236,100 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   oz

Total accumulative withdrawal of gold from the Customer inventory this month

  556,667.6 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:  64.30 oz (2 kilobars)

ii) Out of Scotia: 160,320.471 oz

total customer withdrawal: 160,384.771 oz

 

we had 0 customer deposits:

total customer deposit: nil oz

 

We had 1 adjustment:

i) Out of Scotia:  35,167.632 oz was adjusted out of the customer and this landed into the dealer at Scotia.

 

 

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

To calculate the total number of gold ounces standing for the March contract month, we take the total number of notices filed so far for the month (2361) x 100 oz  or  236,100 oz , to which we add the difference between the open interest for the front month of April (440) and the number of notices served upon today (0) x 100 oz equals the number of ounces standing.

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

No of notices served so far (2361) x 100 oz  or ounces + {OI for the front month (440) – the number of  notices served upon today (0) x 100 oz which equal 280,100 oz or 8.712 tonnes of gold.

 

 

we lost 30 contracts or 3,000 oz will not stand for delivery in this April contract month.

 

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

 

 

 

 

Total dealer inventory: 603,095.383 or 18.758 tonnes

Total gold inventory (dealer and customer) = 7,751,973.171  oz. (241.18) tonnes)

 

 

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 241.18 tonnes for a loss of 62 tonnes over that period. Lately the removals  have been rising!

 

end

 

 

And now for silver

 

April silver initial standings

April 24 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil oz
Withdrawals from Customer Inventory nil oz
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory nil oz (Delaware)
No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 22 contracts(110,000 oz)
Total monthly oz silver served (contracts) 494 contracts (2,470,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  884,245.2 oz
Total accumulative withdrawal  of silver from the Customer inventory this month  11,176,887.9 oz

 

Today, we had 0 deposits into the dealer account:

total dealer deposit: nil   oz

 

we had 0 dealer withdrawal:

total dealer withdrawal: nil oz

 

We had 0 customer deposits:

 

 

total customer deposits: nil  oz

 

We had 0 customer withdrawals:

 

 

total withdrawals;  nil oz

 

we had 0 adjustments:

 

Total dealer inventory: 62.635 million oz

Total of all silver inventory (dealer and customer) 175.190 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 (494) x 5,000 oz    = 2,470,000 oz to which we add the difference between the open interest for the front month of April (22) and the number of notices served upon today (1) x 5000 oz equals the number of ounces standing.

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

494 (notices served so far) + { OI for front month of April(22) -number of notices served upon today (1} x 5000 oz =  2,580,000 oz standing for the April contract month.

 

we neither gained nor lost any silver ounces standing.

 

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

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

 

end

 

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

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

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

i) demand from paper gold shareholders

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

vs no sellers of GLD paper.

And now the Gold inventory at the GLD:

April 24. no changes in gold inventory at the GLD/Inventory at 742.35 tonnes

April 23. no changes in gold inventory at the GLD/inventory at 742.35 tonnes

April 22. no changes in gold inventory at the GLD/inventory at 742.35 tonnes

April 21.2015: a huge addition of 3.26 tonnes of gold inventory at the GLD/Inventory rests at 742.35 tonnes

April 20.2015: no change in gold inventory at the GLD/Inventory rests at 739.06 tonnes

April 17.2015/ we had a huge addition of 3.01 tonnes of gold inventory at the GLD.  It looks like the raids at the GLD have stopped.

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 24/2015 /  we had no change in gold inventory at the GLD/Inventory stands at 742.35 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 : 742.35 tonnes.

 

end

And now for silver (SLV):

April 24/ we had a small withdrawal of 88,000 oz of silver at the SLV/326.226 million oz

April 23.no changes in silver inventory at the SLV/326.334 million oz of inventory

 April 22/no changes in silver inventory at the SLV/326.334 million oz of inventory

April 21.2015/we had another huge addition of 1.434 million oz of silver into the SLV

April 20/ no change in silver inventory tonight/SLV 324.900 million oz.

April 17.2015: no change in silver inventory tonight at the SLV.324.900 million oz

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 24/2015 we had a small change (withdrawal) in inventory at the SLV / inventory rests at 326.246 million oz

 

end

 

 

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

 

Central fund of Canada data not available today/

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

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

1. Central Fund of Canada: traded at Negative 7.2% percent to NAV in usa funds and Negative 7.1% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 61.9%

Percentage of fund in silver:37.60%

cash .5%

( April 24/2015)

 

 

Sprott gold fund finally rising in NAV

2. Sprott silver fund (PSLV): Premium to NAV rises to + 1.17%!!!!! NAV (April 24/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to -.42% to NAV(April 24/2015

Note: Sprott silver trust back  into positive territory at +1.17%.

Sprott physical gold trust is back into negative territory at -.42%

Central fund of Canada’s is still in jail.

 

 

end

 

And now for our COT reports:

First gold COT

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
184,567 83,322 50,963 126,107 231,113 361,637 365,398
Change from Prior Reporting Period
-174 -3,022 6,006 -4,853 -3,440 979 -456
Traders
135 87 71 54 46 223 177
 
Small Speculators  
Long Short Open Interest  
35,742 31,981 397,379  
1,311 2,746 2,290  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, April 21, 2015

Our large specs:

Those large specs that have been long in gold pitched a tiny 174 contracts from their long side.

Those large specs that have been short in gold covered a rather large 3022 contracts from their short side.

Our commercials;

Those commercials that have been long in gold pitched a huge 4853 contracts from their long side

Those commercials that have been short in gold covered 3440 contracts from their short side.

Our small specs;
Those small specs that have been long in gold added 1311 contracts to their long side

Those small specs that have been short in gold added 2746 contracts to their short side.

 

Conclusion:  commercials go net short by 1413 contracts and thus bearish.

 

And now for silver

Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
60,848 36,523 24,995 73,151 106,987
-569 9,651 -2,731 6,125 -3,904
Traders
89 53 51 41 45
Small Speculators Open Interest Total
Long Short 182,633 Long Short
23,639 14,128 158,994 168,505
1,931 1,740 4,756 2,825 3,016
non reportable positions Positions as of: 156 129
Tuesday, April 21, 2015   © SilverSee

Our large specs:

Those large specs that have been long in silver pitched a tiny 569 contracts from their long side.

Those large specs that have been short in silver added a whopping 9651 contracts to their short side??????

Our commercials;

Those commercials that have been long in silver added a large 6125 contracts to their long side.

Those commercials that have been short in silver covered a large 3904 contracts from their short side.

Our small specs:

Those small specs that have been long in silver added a large 1931 contracts to their long side

Those small specs that have been short in silver added 1740 contracts to their short side.

conclusion: commercials go net long by 10,025 contracts and silver falls??/

 

 

 

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

 

Gold and silver trading early this morning

 

(courtesy Goldcore/Mark O’Byrne)

‘Timebomb’ UK Economy Will Explode After Election

UK economy a ’timebomb’ and will explode after election – Albert Edwards
– Telegraph warns of “Lehman Moment” stemming from possible election chaos
– Currency traders view pound as being particularly vulnerable
– Latest data shows UK poised to slip into deflation for the first time since 1960
– Polls place Labour and Tories neck and neck as election looms
– Hung parliament may force either side to enter coalition with potentially disliked partners
– Outright majority for either side would also lead to further uncertainty
Political uncertainty may impact sterling and UK assets
– UK has massive debt and vulnerable to Eurozone debt crisis

goldcore_chart1_24-04-15
With the British general election due in just under two weeks on May 7, concerns are growing about the outlook for the UK pound after the election and the long term outlook of the UK economy due to the extremely high levels of debt – particularly in the private sector in the UK.

UK debt has continued to rise throughout the recovery and has soared to an eye-watering £1.48 trillion. In recent days, a slew of foreign exchange analysts have warned that the pound is vulnerable to falling in value.

London’s Telegraph warned last week that election ‘chaos’ could lead to a “Lehman moment” for the pound. The pound has been in steady decline since July apparently due to traders pricing in uncertainty around the election. It is currently trading at $1.51, down from $1.71 in July.

USD per 1 GBP - January 1986 to April 2015 (Thomson Reuters)

The incumbent government have not reined in public and trade deficits and have been accused of juicing the property market and the economy to postpone a crisis until after the election. Indeed, the Guardian reports that the current account deficit “was the widest for more than 60 years in 2014″.

This is under a Tory government. The deficits would likely have been worse under a Labour or coalition government.

To compound the problem, data for February and March show that the UK is on the verge of deflation for the first time in over 25 years.

There was 0% inflation in both months. It was expected that data for March would show negative growth. In the event, the data was neutral which led to what is likely to be a temporary bounce for the pound.

The Telegraph quoted Forex.com analyst Kathleen Brooks as saying “If you got a big shock, say -0.3pc, I think that would be when the panic stations would ring and then we’ll get into a real parabolic phase when you just see the pound drop like a stone.”

Gold’s hedging properties would then come into their own and this would be bullish for gold in pound terms, after a period of consolidation around the £800 per ounce level in recent months.

Gold in Pounds - 10 Years

Election polls variously place both Labour and the Tories in the lead by a narrow margin. It looks likely that the UK is facing a hung parliament in May.

Under the British system only the party who gain 325 seats out of a total of 650 can form a government. Latest polls show that both the major parties are far short of the necessary majority.

A YouGov poll suggests both parties will have less than 290 seats and so concessions will have to be made with smaller parties to entice them into a coalition.

The same poll sees the Lib Dems gaining 53 seats which places them in the strongest position. Nick Clegg has indicated that he would enter into coalition with either major party and act as a buffer to protect against the excesses of either side.

In terms of seats the Scottish National Party are polling at 6 but at this point neither the Tories nor Labour appear willing to enter coalition with them with Cameron suggesting that the SNP would blackmail Labour if it formed a minority government with the SNP.

UKIP are polling well in terms of percentages although how it will translate into seats remains unclear. The YouGov poll sees UKIP with 13% of the vote. The two leading parties have around 35% while the LibDems score just 7%.

So UKIP are increasingly a force to be reckoned with. However, given that their policies are diametrically opposed to those of Labour and following a stream of defections from the Tories – and therefore posing a serious threat to the Conservatives – it seems certain that they will remain an opposition party.

Either way UKIP’s mandate is strengthening and the potential for a “Brexit” from the EU is a growing one.

However, much could change in the interim period. In the event of a hung parliament the incumbent Prime Minister will remain in office while negotiations begin between the various power brokers.

As London’s Independent explains,

“There is only one clear rule for forming a government in the hung Parliament, and even that is a loose one: the politician who can tell the Queen that he has a workable majority in the House of Commons is the one the Queen will authorise to form a government.”

Time will tell how it all unfolds. In the mean time the uncertainty stemming from a hung-parliament and a potential minority government is likely to affect confidence in the pound and UK assets as investors defer making decisions until Britain’s status within the EU, Scotland’s status within the UK and the fiscal policies of the next government are clarified.

Ironically, an outright majority for either side would also cause uncertainty for the pound.

The pall of uncertainty that would hang over a Tory government as the country awaits the “Brexit” referendum could gravely undermine the pound. Miliband’s more traditional Labour party is likely to exacerbate budget and current account deficits.

Albert Edwards,  Société Générale

Albert Edwards, head of global strategy at investment bank Société Générale has warned that the current coalition government has left a legacy of “grotesquely wide deficits” in both the public sector finances and on the UK’s current account – its overall trading position with the rest of the world.

He says that the Lib Dem Tory coalition has left the UK economy ‘up to its eyeballs in macro manure’ by failing to cut deficit, sterling will suffer and that the UK economy is a “ticking timebomb”.

Given the fragile nature of the London property market, the UK economy and uncertainty regarding a Grexit and new Eurozone debt crisis, such high levels of uncertainty could not come at a worse time.

Given the interlinked nature of so many financial institutions a “Lehman moment” for the pound and the UK could lead to widespread contagion and quickly morph into a Lehman moment for the world.

When this is viewed in the context of the widespread risks to the financial system globally, it would be prudent for UK investors and investors globally to have an allocation to physical gold to hedge against these risks.

Breaking Gold News and Research Here


MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,192.15, EUR 1,097.49 and GBP 788.04 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,187.75, EUR 1,107.92 and GBP 792.31per ounce.

Gold climbed 0.67 percent or $7.90 and closed at $1,194.70 an ounce yesterday, while silver rose 0.63 percent or $0.10 closing at $15.89 an ounce.

goldcore_chart4_24-04-15

Spot gold in Singapore  was $1,194.35 an ounce near the end of day trading and fell slightly more in European trading.

Gold looks set for its third weekly drop in spite of more mixed U.S. economic data. The weekly losses have been very marginal but this is bearish technically. Gold’s likely third lower weekly close and the poor technicals mean that gold looks likely to succumb to further weakness in the short term.

Gold is also marginally lower in euros and pounds this week. The short term trend is lower and momentum is a powerful thing.

Gold in U.S. Dollars - 1 Month

The same is the case with silver which is heading for 2.6 per cent loss for the week. Contrarian investors see silver as great value below $16 per ounce and are buying the dip. We continue to see flows into silver while gold has seen mixed flows with some buying this week but nearly as much liquidations as some gold owners throw in the towel.

U.S. weekly unemployment claims rose more than expected to 295,000 in April, against an estimate of 288,000. U.S. new home sales for March were lower than the previous month at  481,000 below the forecast of 514,000 and 11.4 percent less than last month.

 Potential ‘Grexit’ is still weighing on the markets and things appear to be getting worse between Greece and its creditors.

Greek Finance Minister Yanis Varoufakis was heavily criticised by his euro-area colleagues today amid mounting frustration at what they say is his refusal to deliver measures to fix his country’s economy and release financial aid, “three people familiar with the talks” told Bloomberg.

Greece offered further concessions today on reforms demanded by international lenders in return for new funding before Athens runs out of money, but euro zone creditors said negotiations needed to speed up to get a deal done by June.

goldcore_chart7_24-04-15

German Chancellor Angela Merkel commented yesterday that everything must be done to prevent Greece running out of money before it reaches a cash-for-reform deal with its international creditors, amid heightened concern that Greece is nearing the brink.

The Greek Prime Minister told Merkel that Greece has already done everything it can for the euro and eurozone and it was time for the eurozone partners to help Greece.

Investors have the U.S. Federal Open Market Committee meeting next week to try and gain more clues on the Fed’s much vaunted first interest rate hike in nearly ten years. Even a small interest rate will likely badly impact frothy risk assets such as bonds and stocks.

Gold could also be vulnerable in the short term but would benefit from renewed weakness in paper assets.

Chinese premiums are still above the global benchmark by $2. Although weaker than the prior session they show that Chinese demand remains robust. Sales from Akshaya Tritiya festival in India saw a 15 percent increase over the holiday.

Indian demand continues and looks set to be near the 1,000 metric tonnes again this year.

For now, markets are ignoring considerable geopolitical risk emanating from the Middle East and from tensions between the U.S. and Russia.

The Russian Defense Ministry said overnight that U.S. specialist troops were training Ukrainian forces in the conflict zone in eastern Ukraine. The Pentagon denied it, accusing Moscow of a “ridiculous attempt” to obscure its own activity in the region.

Interfax quoted Russian Defense Ministry spokesman Major General Igor Konashenkov as saying U.S. troops were training Ukrainian forces not only in western Ukraine “as Ukrainian TV channels show, but directly in the combat zone in the area of Mariupol, Severodonetsk, Artyomovsk and Volnovakha.”

This would appear to be an escalation and may result in deepening tensions and an intensification of the conflict.

In London in late morning trading gold for immediate delivery is at $1,191.64 an ounce or off 0.18%. Silver is down 0.16 percent at $15.86 and platinum is also down in U.S. dollars at $1,131.46 an ounce.

Download:  7 KEY GOLD STORAGE MUST HAVES

 

end

 

South African gold miners getting angry and they demand a huge wage hike. These guys are mining all the way down to 5,000 feet and they are receiving less than 1000 euros per month.  Once they go on strike they will cause a lot of gold ounces not to make it onto the market:

(courtesy GATA/Reuters)

 

South African gold miners union plans to demand wage hikes of 75%

Section:

By Ed Stoddard
Reuters
Thursday, April 23, 2015

JOHANNESBURG, South Africa — South Africa’s National Union of Mineworkers is planning to submit demands to the gold sector next week calling for a 75-percent hike in the basic pay for entry-level workers, according to union sources familiar with the matter.

“For the basic wage at the entry level, we are planning to demand a raise to 10,000 rand ($823) a month in the first year from 5,700 rand at present,” said a union source, who asked not to be named. This was confirmed by a second source in the union.

That would set the stage for tough negotiations and a potentially protracted dispute with companies in South Africa’s gold sector, where profit margins are under pressure. …

… For the remainder of the report:

http://www.reuters.com/article/2015/04/23/us-safrica-mining-labour-exclu…

 

end

 

Alasdair Macleod…

 

 

Gold, the SDR and BRICS

Last Monday there was a meeting in Washington hosted by the Official Monetary and Financial Institutions Forum (OMFIF) to discuss the future relationship, if any, of gold with the Special Drawing Rights1 (SDR).

Also on the agenda was the inclusion of the Chinese renminbi, which seems certain to be included in the SDR basket in this year’s revision, assuming that the United States doesn’t try to block it.

This is not the first time the subject has come up. OMFIF’s chairman, Lord Desai wrote a paper about it after the last Washington meeting on gold and the SDR exactly four years ago. The inclusion of the renminbi in the SDR was rejected in 2010 because of inadequate liquidity and is due to be reconsidered this year.

Desai pointed out in his paper that there are difficulties when it comes to including gold, because (and I think this is what he was trying to say) none of the SDR’s paper constituents are convertible into gold, but gold’s inclusion in the SDR would make them convertible through the back door. However, Desai seemed keen to re-examine the case for gold.

It should be pointed out that if gold is included in SDRs the arrangement cannot be long-lasting so long as the major central banks insist on printing money as an economic cure-all. However, China’s position with respect to gold and her own currency could be a different matter.

The Chinese government has almost certainly accumulated large amounts of gold yet to be included in her reserves, and she has also encouraged her own citizens to own gold as well. We can therefore be certain that China sees a monetary role for gold while at the same time she is pushing for the renminbi to be included in the SDR basket. There is no doubt, if you read the IMF papers from the last SDR review in 2010 that the renminbi does now fulfil the criteria for inclusion today. So the question then is will the advanced nations, which dominate the IMF’s membership, permit the renminbi’s inclusion, and will the US, which has dragged its heels on giving China and the other BRICS nations a greater shareholding in the IMF, relent and permit these reforms, which were accepted by the other members back in 2010?

The Americans’ blocking of reform signals her desire to preserve the dollar’s hegemony; but given she lost out spectacularly over the creation of the Asian Infrastructure Investment Bank, IMF reform could become the next serious threat to the dollar’s dominance. And if America does not back down over the IMF and the SDR, she will have no fall-back position; China on the other hand still has some aces up her sleeve.

One of them is gold, and another is her role in a rival organisation established by the BRICS. The New Development Bank (NDB) is in the final stages of being set up, driven by frustration at America’s attempts to protect the dollar’s role and to keep the IMF as an exclusive club for advanced nations. Instead, the NDB could easily issue its own version of the SDR with the gold lining Desai referred to in his original paper.

The reason this would work is very simple. The BRICS members, unencumbered by the cost burden of modern welfare states could exercise the monetary restraint required to tie their currencies to gold, perhaps running a Bretton-Woods-style2gold-exchange arrangement between member central banks to stabilise their currencies.

However, the NDB would almost certainly want to see the gold price considerably higher if it is to play any part in a new rival to the SDR. Other BRICS members would be encouraged to make sure they have sufficient gold on board by selling US dollar reserves to buy gold, ahead of any decision to go ahead with a new super-currency.

It would appear the era of the dollar’s global domination as a reserve currency is coming to an end, and the stage is now being set for gold to be officially accepted as the ultimate reserve money once again, this time by the next generation of advanced nations.

1 The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries’ official reserves. Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. As of March 17, 2015, 204 billion SDRs were created and allocated to members (equivalent to about $280 billion).

2 A now defunct system of monetary management that established the rules for commercial and financial relations among the world’s major industrial states. In 1971, the United States unilaterally terminated convertibility of the US dollar to gold, effectively bringing the Bretton Woods system to an end and rendering the dollar a fiat currency; many fixed currencies (such as the pound sterling, for example), also became free-floating at the same time.

Disclaimer: The views and opinions expressed in the article are those of the author and do not necessarily reflect those of GoldMoney, unless expressly stated. Please note that neither GoldMoney nor any of its representatives provide financial, legal, tax, investment or other advice. Such advice should be sought form an independent regulated person or body who is suitably qualified to do so. Any information provided in this article is provided solely as general market commentary and does not constitute advice. GoldMoney will not accept liability for any loss or damage, which may arise directly or indirectly from your use of or reliance on such information.

end

Good luck to them, as they will  never see gold again in their lifetime.

(courtesy GATA/El Nacional/Venezuela)

Venezuela pawns nearly $1 billion in gold reserves

Section:

By Blanca Vera Azaf
El Nacional, Caracas
Friday, April 24, 2015
(via Google Translator)

http://www.el-nacional.com/economia/BCV-empeno-oro-reservas-millardo_0_6…

The Central Bank of Venezuela has pawned nearly $1 billion of its gold reserves, sources close to the central bank say. The swap operation, as it is called in the financial markets, was signed with the US bank Citibank, which was chosen from a group of five international organizations, which also aspired to structure this financial instrument.

Although details of the operation are unknown, experts have estimated that the US bank will charge a fee of between 6 and 7 percent for preparing the swap. The gold remains in the vaults of the Bank of England. But it would be taken as collateral in case the Central Bank of Venezuela does not pay on time the amount borrowed from Citibank.

It was thought that the swap’s value would be $1.5 billion, but in the end a lower figure was achieved. The funds will be used to pay for imports, an unofficial source said.

International firms have calculated that in 2015 the Venezuelan government’s fiscal deficit could reach $25 billion. So far the government has chosen to cover part of this deficit by printing money without gold backing. This has caused an inflationary spiral that according to experts will put inflation in three digits.

Although the central bank did not formally announce the swap, information about it has filtered through international markets. This contributed to the rebound in oil prices in the world market.

On average, Venezuelan bonds rose between 3 and 4 percent, a percentage which is important considering that when a bond rises more than 1 percent in a day it is considered out of the ordinary.

Investors who have bonds of the republic or state oil company welcomed the swap, because they see the government closing its foreign exchange deficit, a source close to the financial sector said.

 

end

 

(courtesy Peter Cooper/Arabian Money.com)

 

Gold going higher than $5,000 an ounce ArabianMoney editor Peter Cooper says live on Canada’s BNN

Posted on 23 April 2015 with 1 comment from readers

ArabianMoney editor and publisher Peter Cooper appeared live on the Canadian business channel BNN today to explain why he thinks gold is about to jump in price and is heading beyond $5,000 an ounce in the near future.

He also expresses considerable optimism about recent geopolitical and military developments in the Middle East which bode well for the business outlook but is none too sure whether the recent hike in oil prices is sustainable…

For the video link click here!

Posted on 23 April 2015
end
Early morning trading from Asia and Europe last night:

1. Stocks mixed on major Chinese bourses as bubblemania is the name of the game in Shanghai (down) but Hong Kong up  /Japan bourse lowerer /yen lowers to 119.56/Shanghai to allow short selling to stop their bubble/China then cuts RRR by 1% and Chinese authorities sooth fears that they want to prick that huge bubble.  This morning lower Chinese  HSBC flash PMI manufacturing numbers also spells trouble for the Chinese economy.

 

1b Chinese yuan vs USA dollar/yuan strengthens to 6.1949

2 Nikkei down by 167.61  or 0.83%

3. Europe stocks all up/USA dollar index down to 97.22/Euro rises to 1.0826/

3b Japan 10 year bond yield .29% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 119.56/

3c Nikkei still  above 20,000

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

3e WTI  57.53  Brent 65.26

3f Gold down/Yen down

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

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt.  Fifty percent of Japanese budget financed with debt.

3h  Oil up  for WTI and up for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to 16 basis points. German bunds in negative yields from 7 years out.

Except Greece which sees its 2 year rate falls a bit to 24.85%/Greek stocks up 1.26%/ still expect continual bank runs on Greek banks.

3j  Greek 10 year bond yield:  12.41% (down 15 in basis point in yield)

3k Gold at 1188.00 dollars/silver $15.82

3l USA vs Russian rouble;  (Russian rouble down 1/4  rouble/dollar in value) 51.09 , the rouble is still the best acting currency this year!!

3m oil into the 57 dollar handle for WTI and 65 handle for Brent/Saudi Arabia increases production to drive out competition.

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation.  This can spell financial disaster for the rest of the world/China may be forced to do QE!! (on Monday they lowered its RRR it is effectively doing QE)

30  SNB (Swiss National Bank) still intervening again in the markets driving down the SF.  It is not working:  USA/SF this morning 95.41 as the Swiss Franc is still rising against most currencies.  Euro vs SF is 1.0332 well below the floor set by the Swiss Finance Minister.

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

3r the 7 year German bund remains in negative territory with the 10 year close to negativity at +.16/no doubt the ECB will have trouble meeting its quota of purchases and thus European QE will be a total failure.

3s Last week the ECB increased the ELA to Greece  by another large 1.5 billion euros.  The new maximum is 75.5 billion euros.  The ELA is used to replace depositors fleeing the Greek banking system.  The bank runs are increasing exponentially. The ECB is contemplating cutting off the ELA which would be a death sentence to Greece and they are as well considering a 50% haircut to all Greek sovereign collateral which will totally wipe out the entire Gr. banking and financial sector.

 

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

3 u. With the big meeting in Riga today,sheer anger developed between the Finance Ministers and the Greek contingent. There was no substance in the meetings to suggest that Greece was going to reform. In plain English, they will now reform their pension system and cut public employees from their payroll!!

If the ECB cuts off Greece’s ELA they would have very little money left to function.

4.  USA 10 year treasury bond at 1.96% early this morning. Thirty year rate well below 3% at 2.65%/yield curve flatten/foreshadowing recession.

 

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

 

 

(courtesy zero hedge/Jim Reid Deutsche bank)

 

Futures Fizzle After Greece “Hammered” In Riga, Varoufakis Accused Of Being “A Time-Waster, Gambler, Amateur”

Even though no rational person expected that the Greek situation would be resolved at today’s talks in Riga, Latvia, apparently the algos were so caught up in spoofing each other to new record highs that futures, after surging once more overnight following the latest Google miss which sent the company and the Nasdaq soaring, actually dipped modestly into the red following headlines that the latest Greek talks have broken down after a “hostile” Troika “hammered” the Greek finmin, who was accused by European finmins of “being a time-waster, a gambler and an amateur.

It appears Europe is not a fan of game theory.

Bloomberg has the best summary of the latest Greek “negotiation” farce, all of which at this point serves only to kick the can not by months but by weeks until Greece runs out of confiscated money and is forced to either fold completely to Troika demands, leading to new elections or a referendum or conclude its pivot to Russia, setting off the next phase of the second cold war:

Greek Finance Minister Yanis Varoufakis was heavily criticized by his euro-area colleagues amid mounting frustration at his refusal to deliver measures to fix his country’s economy and release financial aid, according to three people familiar with the talks.

Euro-area finance chiefs said Varoufakis’s handling of the talks was irresponsible andaccused him of being a time-waster, a gambler and an amateur, one of the people said. Another said the Greek complained of the hostile atmosphere in the meeting, as he was criticized from all sides. A Greek official in Riga, Latvia, for the meeting wasn’t able to comment on the talks when reached by phone.

Going into the talks, the 19-nation bloc’s finance ministers voiced their frustration over Greek Prime Minister Alexis Tsipras’s attempt to bypass their veto on financial aid with an appeal to Angela Merkel. “I demand very urgently that we get results on the table,” Austrian Finance Minister Hans Joerg Schelling said before sitting down for talks. “If you follow the media of the past days you hear time and again that ‘Tsipras says’ and ‘Tsipras thinks’, so apparently this has been moved to leaders’ level.”

With Greece running out of money and stalling over commitments to reform, euro-zone finance chiefs said the country’s authorities still haven’t shown sufficient progress on plans to revamp the economy to justify a loan payout.

Tsipras sought to circumvent the finance ministers’ authority less than 24 hours earlier, pleading his case with the German Chancellor and French President Francois Hollande on the sidelines of a summit on immigration in Brussels. Under euro-area procedures, it’s the finance ministers who have to sign off on any aid disbursement and Merkel said last month she’s not prepared to override those controls.

It could have been worse: someone could have literally beaten up VaroufakisL

  • SCICLUNA: INSTITUTIONS BEING PUSHED TOWARD HOSTILITY ON GREECE

End result of today’s meeting?

  • MOSCOVICI SAYS FAR FROM A GLOBAL AGREEMENT ON GREECE
  • DIJSSELBLOEM SAYS BIG, BIG PROBLEMS TO BE SOLVED FOR GREECE
  • DIJSSELBLOEM SAYS WIDE DIFFERENCES BETWEEN GREECE, CREDITORS
  • DIJSSELBLOEM: ASSESS GREECE AGAIN AT REGULAR MAY MEETING

Even the “apolitical” ECB hinted that stories leaked earlier of a surge in the collateral haircut may come true in the coming days:

  • DRAGHI: ECB MAY EXAMINE CHANGE IN HAIRCUTS FOR GREEK FUNDING

So with Greece again achieving nothing, and not securing any new funds (aside from the cash it confiscated from its mayors), expect another round of pivoting toward Russia, which will promise much in exchange for the Turkish Stream deal being concluded and assuring that European energy needs are “met” courtesy of Gazprom for the next decade while leaving Ukraine in gas transit limbo.

Expect the brief bout of Greek euphoria which sent Greek banks surging, i.e., Piraeus Bank: +16.6%, AlphaBank: +9.2%, National Bank of Greece: +9.6%, to promptly fizzle following this latest disappointment. The Euro is already feeling the brunt of the algo disappointment, and after surging over 1.08 on another stop hunt just before the Europen open, the EURUSD has pared nearly all its gains.

Elsewhere in Europe, on a stock specific basis, HSBC (+3.2%) has also been in the spotlight with the Co. contemplating whether it should move its headquarters away from the UK, with China a touted possibility. AstraZeneca (-3.1%) announced their earnings pre-market and have traded lower throughout the session as profits were negatively impacted as two of the Co.’s bestselling drug patents are due to expire and competition from generic sales.

Today’s pre market US earnings include: LyondellBasell (LYB), with results expected to show an increase in profits as a consequence of capacity expansion and management comments on potential buybacks and M&A deals; Biogen (BIIB), as investors eye Q1 financials after the drug maker reported positive updates in Alzheimer’s and MS and American Airlines (AAL), where focus will fall on PRASM outlook for Q2 to see if the airline will continue to experience improving margins.

In fixed income markets, Bunds (159.02) are underperforming USTs amid the strength in equity markets, while the GR/GE 10yr spread is tighter by around 10bps today ahead of the aforementioned European Finance Minister meeting.

Asian equities mostly rose with Chinese bourses at the forefront, in the wake of further disappointing Chinese data. Chinese HSBC flash Mfg PMI fell tumbled to a 12-month low at 49.2 vs. Exp. 49.6, the 4th consecutive month of contraction. Shanghai Comp (-0.5%) and Hang Seng (-0.2%) traded higher, the latter posting a fresh 7yr high, as the data supports the case for more government easing, before falling from their best levels towards the close to end the session in negative territory. Nikkei 225 (-0.5%) originally rose higher than yesterday’s 15yr peak after finishing yesterday’s session above 20,000 for the first time since Apr’00, before falling in tandem with the Shanghai Comp and Hang Seng prior to the close.

The energy complex sees Brent crude futures outperform their WTI counterparts and trade above the USD 65.00 handle, bolstered by ongoing Saudi strikes in Yemen, with the ongoing conflict inciting fears that supply from the region could be affected. Elsewhere, in the metals complex, copper is the best performer today as May’15 futures contracts broke above their overnight range of USD 2.70, while iron ore is on track to rise for the third consecutive week. UK miners Anglo American (+2.1%) and BHP Billiton (+1.8%) have outperformed on the back of commodity strength,  with the latter announcing BHP Billiton announced they are curbing plans to expand.

In Summary: European shares remain higher, though off intraday highs, with the bank and telco sectors outperforming and insurance, media underperforming. German IFO above estimates. HSBC starts review over where to be headquartered. Euro-zone finance ministers meet in Latvia today. Greek finance minister heavily criticized by his euro-area colleagues, according to three people familiar with the talks. The Spanish and Italian markets are the best-performing larger bourses, Swiss the worst. The euro is stronger against the dollar. Japanese 10yr bond yields fall; Portuguese yields decline. Commodities gain, with corn , WTI crude underperforming and nickel outperforming. U.S. durable goods orders, capital goods orders due later.

Market Wrap

  • S&P 500 futures up 0.1% to 2108.5
  • Stoxx 600 up 0.5% to 409.1
  • US 10Yr yield little changed at 1.96%
  • German 10Yr yield down 0bps to 0.16%
  • MSCI Asia Pacific up 0.3% to 155.7
  • Gold spot down 0.2% to $1191.6/oz
  • Eurostoxx 50 +0.7%, FTSE 100 +0.5%, CAC 40 +0.6%, DAX +0.8%, IBEX +1.4%, FTSEMIB +1.3%, SMI +0.2%
  • Asian stocks rise with the ASX outperforming and the Sensex underperforming.
  • MSCI Asia Pacific up 0.3% to 155.7; Nikkei 225 down 0.8%, Hang Seng up 0.8%, Kospi down 0.6%, Shanghai Composite down 0.5%, ASX up 1.5%, Sensex down 1.1%
  • Euro up 0.28% to $1.0854
  • Dollar Index down 0.2% to 97.08
  • Italian 10Yr yield up 1bps to 1.41%
  • Spanish 10Yr yield little changed at 1.37%
  • French 10Yr yield little changed at 0.42%
    S&P GSCI Index up 0.2% to 435.9
  • Brent Futures up 0.8% to $65.3/bbl, WTI Futures down 0.4% to $57.5/bbl
  • LME 3m Copper up 1.2% to $6014/MT
  • LME 3m Nickel up 1.7% to $12925/MT
  • Wheat futures down 0% to 501.3 USd/bu

Bulletin Headline summary from Bloomberg and RanSquawk

  • USD (-0.4%) has been the notable mover of the session so far, with the greenback paring all overnight gains to the benefit of major pairs, despite the USD moving off its worst levels later in the session.
  • EUR saw strength this morning after positive German IFO and a relatively conciliatory tone ahead of today’s Eurogroup Finance Minister meeting, however comments heading into the North American crossover have been less optimistic and EUR gains have been capped by the large option at 1.0900 (713mln) set to expire at today’s NY cut
  • Looking ahead, today sees US Durable Goods Orders (1330BST/0730CDT), comments from BoC’s Poloz and developments from the European Finance Minister meeting
  • Treasuries steady overnight, head for weekly decline; market focus on Fed meeting next week, 2Y/5Y/7Y note auctions.
  • Euro-area finance chiefs said Greek FinMin Varoufakis’s handling of talks was irresponsible and accused him of being a time-waster, a gambler and an amateur, according to people familiar
  • Another said the Greek complained of the hostile atmosphere in the meeting, as he was criticized from all sides
  • Eurogroup head Dijsselbloem says no chance of aid without comprehensive deal; Draghi says ELA will continue as long as Greek banks are solvent
  • HSBC Holdings Plc is reviewing whether to move its headquarters out of Britain after more than two decades because of rising tax and regulatory costs
  • Germany’s Ifo institute business climate index rose for a sixth month to 108.6 from 107.9 in March. The median estimate was for an increase to 108.4, according to a Bloomberg survey of 36 economists
  • BoJ policy makers are likely to forecast that inflation will reach 2% and hold that level for two straight years from the year starting in April 2016, said people familiar with central bank’s discussions’’
  • Meiji Yasuda Life, Japan’s third-largest life insurer. plans  to boost unhedged foreign bonds by over JPY1t in FY2015, it says in outline of investment for the year started April 1
  • A slew of negative stories raised yet more questions over donations to the Clinton Foundation and hefty speaking fees paid to Bill Clinton during his wife’s tenure as secretary of state, a steady rumbling that could prove detrimental to her presidential aspirations
  • Sovereign bond yields mostly higher. Asian stocks mostly lower, European stocks, U.S. equity-index futures gain. Crude oil mixed, gold lower, copper higher

 

DB’s Jim Reid completes the overnight recap

 

Despite risk assets shrugging it off, it was hard to ignore the softer data coming out of the US yesterday. The flash manufacturing PMI print of 54.2 fell 1.5 points from the March reading and was also below market expectations of 55.7. New home sales for March attracted plenty of attention as the -11.4% mom (vs. -4.5% expected) was the single largest monthly decline since July 2013. The oil-sensitive Kansas City Fed manufacturing activity index for April declined for the fourth consecutive month to a lower than expected -7 (vs. -2 expected) and the lowest since May 2009. Employment data was the lone bright spot yesterday with initial jobless printing another sub 300k print (295k), keeping the four-week average at 285k. Yesterday’s weaker data in fact means that the Bloomberg US economic surprise index has struck a fresh 6-year low after a modest rebound earlier in the month. The big release today is the often volatile durable goods orders and it’ll be interesting to see what we get as analysts firm up their Q1 GDP expectations ahead of next Wednesday. Just on that, it’s interesting to take an early look at expectations for the reading. With median estimates currently running at an annualized +1.0%, it’s the range that’s fairly impressive with analyst expectations anywhere from +0.1% to +1.7%. With the Atlanta Fed GDPNow model running at +0.1%, it’ll be an important release given the now data dependent Fed.

Moving on and in terms of earnings yesterday, it was a relatively mixed session as investors digested results out of Caterpillar (beat), Proctor and Gamble (miss), 3M (miss), PepsiCo (beat) and Dow Chemical (beat) in particular. There were some encouraging signs from earnings reports after the bell however as Microsoft and Amazon in particular reported above market, while Google rose 4% in after-market trading. We’ve highlighted the stronger Dollar effect this reporting period which again was highlighted in a lot of the management calls after, however it was also interesting to hear both PepsiCo and Caterpillar highlight weaker demand out of emerging markets, with both noting the instability in Brazil as a cause for concern. Caterpillar in fact also cautioned for a somewhat bleaker outlook for the remainder of the year, suggesting that demand in the remaining three quarters this year will be lower than Q1, with the impact from the downturn in oil markets potentially being felt more in the next quarter.

Having coming close to testing the 2% level intraday, Treasuries eventually ended 2.1bps tighter at 1.958%. The Dollar was a notable decliner meanwhile as the DXY finished 0.67% weaker for its second consecutive day of declines. CDX IG (-0.23bps) was a touch tighter but the main news in credit came post US close when AT&T announced that they had sold $17.5bn of debt in the third largest corporate bond offering on record and second biggest this year.

Elsewhere, a bounce yesterday in oil markets certainly aided energy stocks (+0.62%) as both WTI (+2.81%) and Brent (+3.38%) finished higher – the latter reaching a new YTD high. The news yesterday that a Saudi Arabia led coalition has resumed airstrikes on Houthi rebels in Yemen – after previous reports that they were halting the strikes – probably contributed with reports on Reuters suggesting that forces would continue to target the movements of the rebels.

Closer to home yesterday, the damper tone was largely as a result of some disappointing PMI indicators for the region. For the Euro-area a 0.3pts fall in the manufacturing print and 0.5pt fall in the services print caused to the composite to fall to 53.5 (vs. 54.4 expected). Regionally, it was a similar story as Germany’s composite fell 1.2pt to 54.2 (vs. 55.6 expected) and France’s composite reading dropped 1.3pts to 50.2 (vs. 51.8 expected). Our colleagues in Europe noted, however, that although the fall was disappointing, the Euro levels generally remained above their Q1 averages and are about in line with their GDP forecasts for Q1 (+0.5% qoq) and Q2 (+0.4% qoq). They also noted that the relative resilience of the Euro area PMIs compared to Germany and France, suggest that economics outside of the ‘big two’ performed well on average in April. Wrapping up the data, UK retail sales were slightly disappointing with both the headline (-0.5% mom vs. +0.4% expected) and ex-autos (+0.2% mom vs. +0.5% expected) coming in below market.

Continuing the theme of late, Greece remained firmly in the headlight yesterday. Ahead of today’s Eurogroup, headlines on the wires suggesting that Greek PM Tsipras is urging an acceleration of talks with creditors and claiming that ‘a big part of the distance has been covered’ in particular attracted some attention, however we still remain cautious around these sorts of headlines with comments from Euro officials conflicting. European Commission Vice President Dombrovskis said yesterday that ‘progress is not good’ and that ‘it will apparently take more time’ while another EC member, Katainen, noted that ‘you cannot negotiate if you don’t trust’. With the Eurogroup meeting today however, it’ll be interesting to see where talks currently stand.

Despite the fall most European equity markets yesterday, Greek equities (+2.39%) closed higher with the headlines yesterday while 3y (-242bps), 5y (-139bps) and 10y (-52bps) yields all rallied in hope. The Euro was also a beneficiary, finishing 0.92% higher. Elsewhere, bond markets took something of a breather in Europe after the huge moves on Wednesday as 10y yields in both Germany and France closed unchanged at 0.163% and 0.412% respectively. Peripherals were a tad more mixed as Portugal (-3.0bps) and Spain (-0.6bps) closed tighter, while Italy (+1.5bps) widened.

Taking a look at today’s calendar, the only notable release in the European session this morning is the German IFO survey for April. The Eurogroup meeting in Riga and the associated commentary surrounding Greece will require a lot of attention meanwhile. The aforementioned durable goods orders in the US this afternoon will be of much focus, we’ll also get capital goods orders at the same time. Earnings wise it’s the turn of American Airlines and Xerox.

end
It now seems that much of the ELA money is being used to cover up huge losses on Greek banks. In a new law passed, Greek banks will write off up to 20,000 euros for poverty stricken borrowers. With today’s meeting ending in shambles there seems to be only two choices left:
i) a complete agreement such that Greece obtains money and continues to kick the can down the road for a little longer
ii .  pivots to Russia and enters into formal agreements to participate in the Blue Stream gas pipeline aiding Russia and thwarting USA interests. As Varoukasis states:
 “anyone who pretends they know what would happen the day we’ll be pushed over the cliff is talking nonsense.”
a very important read…………..
(courtesy zero hedge)

Greek Bank Will Write Off Up To €20,000 In Debt For “Poverty-Stricken” Borrowers

Over the past several months, as a result of their lockout from capital markets, Greek banks’ reliance on the ECB’s Emergency Liquidity Assistance has soared, and at last check was somewhere in the mid-€70 billion range.

The conventional wisdom was that the ECB was merely plugging the hole created weekly (and often, daily) as a result of the chronic Greek bank run which has seen tens of billions in deposits withdrawn from Greek banks since Syriza officially took power earlier this year.

However instead of merely plugging the hole left from declining liabilities (deposits), what the ECB’s ELA funding appears to also be doing is compensating for a rapid write down in bank assets (loans) as well, in the form of charged off Non-Performing Loans.

According to Reuters, one of the leading Greek financial institutions, Piraeus Bank will write off credit cards and retail loans up to 20,000 euros ($21,484) for Greeks who qualify for help under a law the leftist government passed to provide relief to poverty-stricken borrowers, it said on Thursday.

As a reminder, the tension over the Syriza’s treatment of “austerity” is precisely the reason why the government, which is now insolvent and demanding another European bailout without calling it a bailout, is being generous with one hand – such as writing off unrepayable debts – while confiscating pension funds and municipal cash reserves with the other.

Greece has also been engaging in other, less savory check kiting schemes. Several days ago the NYT reported that “Greek banks have even begun to issue bonds to themselves and, after securing a government guarantee, have used the securities to secure short-term financing — a practice that was excoriated by Yanis Varoufakis before he became the Greek finance minister.”

On April 8, for example, the National Bank of Greece self-issued €4.1 billion of six-month bonds that carried state backing. But with Greece on the verge of default — Mr. Varoufakis has frequently said his country is bankrupt — those guarantees are no longer worth much.

Subsequently the ECB, which had previously encouraged precisely this scheme to keep insolvent Italian and Spanish banks operating in 2012 and 2013, made it quite clear that it frowns upon such a circular creation of money out of thin air, especially when the only “guarantee” is that of a bankrupt state.

In any event, the big question now is: how will Greece, which every day is engaged in constant negotiations with the Troika, come up with an extension to the unpopular bailout/austerity program that is the hated legacy of the previous regime without calling it precisely that, while on the other hand, how will Europe cover up the fact that Greeks are now openly receiving a gift in the form of a debt charge, and how will Germans react when the German press covers the front pages with more news of German-funded bailouts of Greeks (even though the underlying motive, of course, is to keep the Euro and avoid a return to the hated Deutsche Mark).

And just to hammer that point in once again, earlier today Greek FinMin Yanis Varoufakis told a French magazine that the risk that Greece would have to leave the euro if it has to accept more austerity is no bluff, saying that no one could predict what the consequences of such an exit would be.

Or, back to square one, which as we explained in February, is a battle of leverage: is the threat to Europe from a Grexit higher than the threat to Greece from ending up without funds.

In a conversation with philosopher Jon Elster conducted at the end of March and published in France’s Philosophie Magazine, Varoufakis, a specialist in game theory, said this was not the time to bluff over Greece’s debt talks.

“We cannot bluff anymore. When I say that we’ll end up leaving the euro, if we have to accept more unsustainable austerity, this is no bluff,” Varoufakis is quoted as saying.

Greek Prime Minister Alexis Tsipras called for a speeding up of work to conclude a reform-for-cash deal with euro zone creditors to keep his country afloat after talks with German Chancellor Angela Merkel on Thursday.

The leftist Greek premier met the conservative German leader a day before euro zone finance ministers meet in Riga to review progress – or the lack of it – in slow-moving negotiations between Athens and its international lenders.

Unfortunately for Greece, in contrast to the height of the debt crisis in 2012, when Grexit fears spurred panic selling of other weak euro zone sovereigns, investors now seem relaxed about the fate of Greece, which accounts for just 2 percent of the region’s economy. “Asked what would happen if Greece was to leave the euro, Varoufakis mentioned comments made by European policymakers who say any contagion effect could be avoided and added that, on the contrary, he believed the consequences would be unpredictable. ‎ “Anyone who pretends they know what would happen the day we’ll be pushed over the cliff is talking nonsense and is working against Europe,” he said.

Still with the Eurostoxx rising to record highs with every passing day even as the Greek financial situation deteriorates, the market has effectively called the Greek bluff. As a result, Greece has been forced to pull its last remaining trump card. Russia.

The increasing pivot by Greece toward the Kremlin has also been extensively covered here, most recently in the form of a near-agreement between Athens and Gazprom to launch the Turkish Stream pipeline, a deal that would also see Russia giving Greece a €5 billion loan. It is precisely the threat that Russia will bypass Ukraine entirely and provide all of Europe’s gas via the Turkish Stream, that has finally gotten Europe’s, and America’s, attention.

According to the Telegraph’s Ambrose Evans-Pritchard, “the US is scrambling to head off a Greek pipeline deal with Russia, fearing a disastrous change in the strategic balance of the Eastern Mediterranean as Greece’s radical-Left government drifts into the Kremlin’s orbit.

Ernest Moniz, the US Energy Secretary, said his country is pushing for an alternative gas pipeline from Azerbaijan that would help break the stranglehold that Russian state-controlled firm Gazprom has on European markets.

“Diversified supplies are important and we strongly support the ‘Southern Corridor’ to bring Caspian gas to Europe,” he told a group of reporters on the margins of CERAWeek oil and gas forum in Houston. He insisted that it was vital to uphold “collective energy security” in Europe.

The concern is that Syriza’s flirtation with Moscow goes beyond normal diplomacy and may evolve over time into a strategic shift, causing Nato’s Eastern flank to unravel, and dooming any chance of maintaining a united EU stance against Mr Putin.

The Greeks know this. They seem determined to extract the maximum political leverage from the new Cold War.

 

How this all plays out is still unclear with constantly moving pieces and negotiations in flux, although with Greece having run out of money and forced to impose soft capital controls, two things are certain: a conclusion will have to be reached soon and ii) should Greece complete its pivot toward Russia, everything in Europe will change, and in this case we wholeheartedly agree with the Greek finmin’s assessment that “anyone who pretends they know what would happen the day we’ll be pushed over the cliff is talking nonsense.”

 

end

 

Here is the huge Greek debt payment schedule for the next two months;

(courtesy zero hedge)

 

The ‘Relentless’ Greek Debt Payment Schedule

Greece, which owes €324 billion to the International Monetary Fund, the European Central Bank, and euro zone governments, faces a relentless debt payment schedule over the next few months.

As Bloomberg reports, little money has been coming into the country, however, and talks over the release of bailout funds are progressing slowly. The government has been meeting obligations by drawing on its cash reserves.

In a move that could keep the country afloat until the end of May, Prime Minister Alexis Tsipras ordered municipalities to transfer funds, estimated at about €1.5 billion, to the central bank.

Below, a sampling of debts due in May, June, and July.

Source: Bloomberg

end

 

(courtesy zero hedge)

 

The fun begins as the state of Carinthia officially asks Vienna for bailout help:

 

 

An Austrian Province Just Requested A State Bailout

One month ago we wrote about the ripple effects of the “mini-Greece going off in the heartland of Europe“, referring of course to the Viennese black swan, the bailed-in implosion of the Austrian Heta bad bank which nobodyhad anticipated because the numbers were so thoroughly cooked, nobody had even the faintest clue just how bad the truth was. We said that “while the acute pain came and went for Heta bondholders who have seen a nearly 50% loss in just a few short months, the bigger and far more diffuse pain is only just starting…. The first casualty: the beautifully picturesque southern Austrian province of Carinthia.”

As it was revealed in late March, the issues for Carinthia, the home province of doubly defunct lender Hypo Alpe Adria, is that the Heta bonds were guaranteed by the state of Carinthia which is now liable for the bail-in.

The problem is that Carinthia guarantee was equivalent to €10.2 billion, or nearly five times the state’s 2014 operating revenue.  As the Telegraph summarized it “what the Austrian government is doing is cutting loose an entire region, rather in the way the federal authorities in the US allowed Detroit to go bust a number of years ago. It’s a mini-Greece going off in the heartlands of Europe.”

Carinthia’s budgeted revenue in 2015 is just €2.36 billion, and as such the southern province of 556,000 would be unable to honor the guarantees if they came due now or in a year’s time.

Carinthia was then promptly downgraded by Moody’s from A2 to Baa2 with the rating agency stating that “the downgrade reflects an increased susceptibility to event risks, including litigation from Heta’s bondholders and further actions by the FMA, and greater than anticipated shortfalls of Heta’s assets. All these factors could lead to a crystallization of a significant portion of Carinthia’s guaranteed debt. This amount could exceed Carinthia’s liquidity resources, likely lead to increased financial leverage and could require some form of extraordinary central government support.”

We summarized this unexpected outcome as follows: “We now have a waterfall bailout chain whereby the state guaranteeing the debt of the insolvent entity that guaranteed yet another insolvent entity, will itself need to be bailed out by the sovereign, Austria! Or perhaps not: Finance Minister Hans Joerg Schelling has said repeatedly that the Austrian government isn’t liable to cover Carinthia’s guarantees.”

Herr Schelling’s warning is about to be tested.

Yesterday, Carinthia officially asked Vienna for financial support, saying it will run out of money by the beginning of June without external help Reuters reports.

The rest of the story is already known to regular readers:

Carinthia provided debt guarantees for years to fuel Hypo’s rapid expansion before the practice was stopped in 2007, but the last ones do not expire until around 2017.

With an annual budget of 2.2 billion euros ($2.36 billion), Carinthian officials have said the province cannot honour nearly 11 billion euros of backing for Hypo debt that creditors facing a “haircut” could demand.

Adding to the province’s woes, ratings agency Moody’s downgraded Carinthia last month to one notch above junk grade, making it more difficult to borrow in the open markets.

Carinthia’s cash needs are tiny by global insolvency standards: “In the current financial year, Carinthia needs 340 million euros and is hoping for loans from the capital, a spokeswoman for the province said. Carinthian politicians are meeting Chancellor Werner Faymann and Finance Minister Hans Joerg Schelling in Vienna on Thursday.

So while everyone is eagerly awaiting to find out on what day Greece runs out of (confiscated) money, one of Austria’s provinces – a country that is considered a pristine credit – may have beat the Mediterranean nation to the punch:

The spokeswoman said Carinthia would run out of money in June without help, confirming local media reports. No Austrian province has ever gone bankrupt and there is no legislation on how to handle such an event.

And to think all of this could have been avoided if only Carinthia had used any spare cash it has to just BTFD.

 

end

 

Michael Lewis, the author of the “Crash Boys” states that the regulators have totally blown the  Navinder Sarao case.

Michael asks:  why did it take 5 years? Here are the chronological events immediately after the May 2010 flash crash.  There is no question that the CFTC were fully aware of flash trading i.e. spoofing and layering

 

 

(courtesy Michael Lewis/author of Crash Boys/Bloomberg and Zero hedge)

 

“Crash Boys” – Michael Lewis Slays The Regulators In The Sarao Scapegoating Debacle

By Michael Lewis, originally posted in Bloomberg

Crash Boys

The first question that arises from the Commodity Futures Trading Commission’s case against Navinder Singh Sarao is: Why did it take them five years to bring it?

A guy living with his parents next to London’s Heathrow Airport enters a lot of big, phony orders to sell U.S. stock market futures; the market promptly collapses on May 6, 2010; it takes five years for the army of U.S. financial regulators to work out that there might be some connection between the two events. It makes no sense.

A bunch of news reports have suggested that the CFTC didn’t have the information available to it to make the case. After the flash crash, the commission focused exclusively on trades that had occurred that day, rather than orders designed not to trade — at least until some mysterious whistle-blower came forward to explain how the futures market actually worked. But this can’t be true.

Immediately after the flash crash, Eric Hunsader, founder of the Chicago-based market data company Nanex, which has access to all stock and futures market orders, detected lots of socially dubious trading activity that May day: high-frequency trading firms sending 5,000 quotes per second in a single stock without ever intending to trade that stock, for instance. On June 18, 2010, Nanex published a report of its findings.

The following Wednesday, June 23, the website Zero Hedge posted the Nanex report. Two days later the CFTC’s chief economist, Andrei Kirilenko, e-mailed Hunsader. “He invited me out to D.C. and I talked with everyone there (and I mean everyone — including a commissioner),” Hunsader says. “The CFTC then flew out a programmer to our offices where we showed him how to work with our data. Took all of a day. We sent him back with our flash crash data, and that was pretty much the last we heard about that project.”

In October 2010, Hunsader was still poring over data from the flash crash. “Between October 7 and October 14, I noticed Sarao’s spoofing,” he says. Hunsader assumed it to be the work of an algorithm of some large high-frequency trading firm — as this sort of deception had become common practice for big HFT firms. He told the CFTC about it in a phone call — but that they hadn’t discovered it already for themselves surprised him.

“It’s important to know the CFTC had our data, and the ability to use it in August 2010,” Hunsader says. “We were focused on stocks (the CFTC does futures), so they should have seen it right away.”

Which raises another obvious question: If you are going to sit on this information for five years, why not sit on it forever? The people at the CFTC who decided to come forth, five years after the fact, with this new and improved explanation for the flash crash, must have known they would be creating a controversy with themselves at the center of it. It’s actually sort of brave of them.

They’ve been ridiculed in the news media and will no doubt soon be hauled before various congressional committees. They’ll have annoyed their colleagues at the Securities and Exchange Commission, who now look like even greater fools than they did before, for not bothering to mention in their report on the crash the various nefarious activities of algorithmic traders, and instead offering up as the primary cause of the crash a stupid mistake made by a money manager in Kansas. The authors of the SEC report either consciously ignored or did not bother to acquire from the CFTC a lot of accessible, and damning, information about what was happening in the U.S. stock markets the day of the flash crash. The world will now want to know why they did this. (And why we should not instantly listen to Paul Volcker and fold these two regulators into one.)

But it’s unfair to dwell too long on the regulators. Financial regulators, like editorial writers, are at best the markets’ last line of defense; they are less inclined to join any battle than they are to wander in afterward and shoot the wounded.

Traders who seek to manipulate the U.S. stock market are meant to encounter resistance from the market itself. During the flash crash, Navinder Sarao apparently used Jon Corzine’s now defunct MF Global to place orders and clear trades. Why didn’t MF Global see what he was up to, or at least call him to ask him about it? There’s now a big business on Wall Street of firms renting out their HFT infrastructure to prop shops. Does that business depend on the brokers paying no attention to what their customers are doing? Do the big Wall Street firms that rent out their technology bear any responsibility for what their customers do with the weapons they’ve been given? For that matter, why don’t U.S. securities exchanges assume any responsibility for what happens on them?

Sarao’s manipulative orders were placed on the Chicago Mercantile Exchange. Why didn’t the CME notice what was going on? Or did they notice, and simply not care, as the behavior was standard practice for their high-frequency trading clients?

Then there is the biggest question of all: How can a guy working from his parents’ house in suburban England whose only actionable orders were to BUY stock market futures cause such a sensational collapse in U.S. stocks? On the day of the flash crash, Sarao never actually sold stocks. He was trying to trick the market into falling so that he could buy in more cheaply. But whom did he fool with his trick? Whose algorithms were so easily gamed that they responded to phony sell orders by creating a crash? Stupidity isn’t a crime. Still, it would be interesting to know who, at this particular poker table, on this particular day, was the fool.

It would also be interesting to know how it occurred to Sarao that his trick might work. There’s a fabulous yet-to-be-told story here, about a smart kid in the U.K. who somehow figures out that the machines that execute the stock market trades of others might be gamed — and so he games them. One day while he is busy trying to trick the U.S. stock market into falling, the market collapses, more sensationally than it has ever collapsed. And instead of digging some hole in Hounslow in which he might hide for a decade or so, or fleeing to Anguilla, where he has squirreled away his profits, he stays in his parents’ home and keeps right on spoofing the U.S. stock market — and then is shocked when people turn up to accuse him of wrongdoing. He’s not some kind of exception to the standard operating procedure in finance. He’s a parody of it.

 

end

 

The story gets better

 

Why Nav Sarao Had To Be Destroyed: He Found A Way To Beat The HFTs At Their Own Game

Now that the confusion and the initial smoke following the stunning CFTC/DOJ/FBI allegation that the entire Flash Crash was the result of just one high latency UK trader’s actions has cleared, several critical things have emerged.

First: Nav Sarao not a typical massively funded, connected and lobby-protected High Frequency Trader, such as Citadel or Virtu, using countless algos across numerous fragmented markets to frontrun size order blocks, but an old-school “point and click” prop trader. This is how he described his trading style in a response to the UK regulator:

I am an old school point and click prop trader. To this day I am still using the mouse to trade. That is how I trade, that is how I always have traded, admittedly very very fast because I have always been good with reflexes and doing things quick. My trading is for the most part very short term and for very small profits, a large proportion of my profits are 1 price movements, which in the eminiSP’s case would be a quarter of a tick. I have also take longer term positions In the past and my biggest day was actually made for the most part whilst I was sleeping!

I am a trader who changes his mind very very quickly, one second I am prepared to buy the limit of 2,000, the next second I may change my mind and get out. This is what is unique about my trading I trade very large but change my mind in a second. This is why MF Global had to speed up their systems for me, yes they have other hedge funds etc trading 2,000 lots, but they didn’t have anyone buying 2,000 and getting out seconds later and then going short a thousand ! All this traded volume was something that MF Global’s system was not prepared for and I remember at the start their system was too slow for me. And all this is done with the my hand and a mouse.

What makes me change my mind? Well it could be anything, a move in one of the other markets that I look at, a chart set up that I suddenly remember from my 11 years of trading, or simply the WAY I was filled made me doubt my position, or for the large part it is just my INTUITION.

And while nobody will ever accuse Sarao of being a fundamental trader, he worked on a time horizon that is infinitely longer than that of collocated algos: while HFTs deal in tiny oddlots on a constant basis (for fear of being actually hit or lifted thus never actually providing liquidity) Sarao held on to large lots of what in HFT terms is an eternity: seconds or longer.

My orders are 100% at risk, 100% of the time. If I want to trade 300 lots I clip 300 lots as one order, I do not trade 300 one lot trades (so that it counts as 300 orders) in order to fulfil the CME messaging policy like HFT’s have to do in order to make up for their 95% of orders which are neither genuine or possibly not even tradeable. Certainly not for a guy like me who is trading from the UK and whose system is miles too slow compared to these people due to the fact my orders have to travel further than everyone else’s who are trading In USA. No wonder they can manipulative (sic) on top of my orders without any risk, for even when I change my mind and decide to sell into my buy order, the manipulative orders on top of my initial buy order disappear in the 4 milliseconds It takes for my buy order to be cancelled and replaced with my sell order so that I do not trade with myself !!!!!

Second, as we first observed yesterday, the real reason Nav was picked as a scapegoat is because he threatened to expose the “mass manipulation of high frequency nerds.” This was validated last night when Bloomberg reported that “the sleuth who pieced together Navinder Singh Sarao’s pattern of spoofing isn’t an FBI agent or regulator. He’s an academic whose research has taken the view that high-frequency trading is good for markets.” Hence, Sarao is bad for the HFTs and should be “eliminated.”

Today, we find precisely how and why Sarao was singled out: he not only exposed out the parasitic trading strategies of the real culprits behind the broken market, the massive HFT firms (such as Virtu which went public 24 hours before the Sarao charges were filed) which gave the “regulators” no choice: one of them had to be put away for good, but found a way to capitalize on the algos’ stupidity, and actually make money by beating them at their own game.

As such, regulators and exchanges such as the CFTC and CME had no choice but arrest him and prevent him from trading ever again!

Here are the details from his May 29, 2014 email to a FSA regulator:

I don’t like the HFT arena and have complained to the exchange numerous times about their manipulative practices, please BAN IT, Another good rule change would be to increase the maximum clip size of the market from 2,000 to 5,000 lots. This would make people more wary of putting fake orders up and down the market depth because they would be more at risk of getting hit. I have asked the exchange a few times for this, and this was then proposed, but unfortunately rejected by the other people questioned !!!!

I have traded using a basic TT for numerous years. Due to the tact that there were some individuals In the emini SP who quite remarkably seemed to know WHERE 100% OF MY ORDERS WERE RESTING, even If they were over 90% partially filled !!! and hence made a concentrated effort to manipulate around those orders so they would not get filled, I decided to pay Edge Financial to build a program for me that would help disguise my orders more effectively. Initially 1 was told that the reason these individuals knew where all my orders were was because traded so big and was as such ‘the elephant in the room’. However, It is worth noting that further examination showed that their special manipulative activity occurred exactly the same if I did a 20 lot order or a 200 lot order.

In other words, precisely what we have claimed from day 1: HFTs do not provide any liquidity at all – they merely look for size orders and immediately seek to frontrun them, in the process actually soaking up market liquidity .

And while the world wonders how it is that Virtu can have 6 years of trading with just one trading day loss, Sarao not only figured out how to outmanipulate the manipulators, but how to profit from it.

Here is his explanation:

I asked Edge to design 3 more functions specifically to help try and hide my orders from these people. I do not know if this can be described as HFT, to me it is just giving me the ability to have some extra functions that my base trading software (TT) does not give me and it should be noted that I only use these functions intermittently and sometimes not at all. it is called Navtrader, but it could be called anything and I was the only one who helped design it, albeit my design ideas were 100% generated from what I had already seen other traders using already in the emini SP, Please note I believe I have only had this NavTrader since the beginning of 2013 at the very earliest.

I decided that the only way I could mask my orders, was to place them as the market changed price so that they may not be seen in the ‘chaos’ of a price change. So I would have my orders pending to be placed as the market went from bid to offer or offer to bid.

The 3 main functions are as follows:

JOIN : These are pending orders that will be joined anywhere requested along the order book and become active when the price changed. Remarkably, these orders were still subject to the insider trading I describe above, even when they are as small as a 50 lot!

SNAP : These are orders that are the same as JOIN but at the market best price so that they become traded almost immediately. I also have a function that lets you put in a minimum quantity so that the buy/sell SNAP order only becomes active when there is a minimum of that number of contracts on the offer/bid. This worked rather beautifully when the mass manipulator of the e-mini sp was doing his normal manipulative activity at price 1800,00 on Friday 24th January circa 12.23pm. The fake bids he had placed were being removed too quickly for me to hit If I had put a snap for 700 with 0 as minimum volume it would not have been filled because as soon the bid was more than 1 lot big the 700 would have been active. With my 699 then resting the normal forms of manipulation that occur on 100% of my orders EXCLUSIVELY would then have preceded to follow. So i put a 700 lot SNAP with a minimum volume of 6OO, et voila I got my full 70.

Here is Nanex’ Eric Hunsader showing precisely how he did it:

Sarao continued:

ICE : The iceberg function on the CME isn’t adequate for me, I hardly ever use it because it puts me at the back of the queue all the time. Hence, 2,000 needs to trade to get me out of 800 lots for example, My iceberg function is placed at a price and as soon as it is bid/offered at the price the iceberg will take all contracts at the price up to and including the number of my order. Again, there is a minimum volume box, so for example 1 can put 50 into it and put a sell ICE of 1,000 and then at that price every time the bid is more than 50, the ICE wilt take all contracts out until 1,000 is traded. This is a good way of catching spoofers, and et voila I can trade 1.000 lots at one price (following on from the above example),

The other orders I sometimes place during the day are slightly away from the market price and move up and down as the market moves with It. This Is to catch any blips up/down in the market so that I can make a small profit as the market comes back into line (almost immediately). These orders are placed rarely and only when I believe the market Is excessively weak or strong. Again, this was inspired by other traders I could see doing the exact same thing.

I am a member of the CME.

 

Alas, not any more, for one simple reason: you showed the broken system that it can be beaten, and explained how.

As a result, the only response the broken system had was to put you away for good.

Source

end
And now Zero hedge provides his daily letter to the CFTC outlining today’s illegal spoofing of just the S and P 500:
(courtesy zero hedge)

Dear CFTC… Here Is Today’s Illegal S&P 500 “Spoofing”

Dear CFTC commissioners:

Following this week’s first in a long series of articles showcasing the ongoing manipulation in the S&P courtesy of E-mini spoofing, we are delighted to inform you that even though you heroically used a whistleblower’s tip to capture the sole Flash Crash mastermind, Nav Sarao, five years after a flash crash which your peers at the SEC incorrectly claimed was the work of a small Kansas City-based mutual fund, the manipulation – as you called it – of the S&P 500 continues.

By way of example, here is some very clear evidence (courtesy of Nanex) showing “spoofing” – the very charge that Sarao is being scapegoated on – occurring twice in the space of a few minutes this morning…

 

 

And while we are confident that if Nanex can see this, so can you, here is the buy side:

 

And on the sell side:

 

Then again, we are certain that you have all this data already and are already preparing the case against the perpetrator(s): after all you are the CFTC – you know “everything” that happens in the futures market. As such we are confident you are already actively investigating the ongoing spoofing in both the US and Europe… unless of course, your interest is only awakened on days when the market drops.

Regards

Zero Hedge

P.S. We won’t stop this until you are forced to address the glaring hypocrisy and utter incompetence of everyone involved in the regulation of market microstructure.

end

Your more important currency crosses early Thursday morning:

 

Euro/USA 1.0826 up .0013

USA/JAPAN YEN 119.56 up .0100

GBP/USA 1.5113 up .0063

USA/CAN 1.2135 down .0014

This morning in Europe, the Euro rose a little by 13 basis points, trading now well above the 1.08  level at 1.0826; 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 down again in Japan by 10 basis points and trading just below the 120 level to 119.56 yen to the dollar.

The pound was well up this morning as it now trades just above the 1.51 level at 1.5113  ( still 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 up by 14 basis points at 1.2135 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). Swiss franc is now 1.0280 to the Euro, trading well above the floor 1.05.  This will continue to create havoc with the 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: this morning : down by 167.61  points or 0.83%

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

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

Gold very early morning trading: $1188.00

silver:$15.82

 

Early Friday morning USA 10 year bond yield: 1.96% !!!  flat  in basis points from Thursday night/

USA dollar index early Friday morning: 97.22 down 10 cents from Thursday’s close. (Resistance will be at a DXY of 100)

 

This ends the early morning numbers, Friday morning

 

And now for your closing numbers for Friday:

 

Closing Portuguese 10 year bond yield: 1.99% up 1 in basis points from Thursday

 

Closing Japanese 10 year bond yield: .29% !!! down 3 in basis points from Thursday

 

Your closing Spanish 10 year government bond,  Friday, up 2 in basis points in yield from Thursday night.

 

Spanish 10 year bond yield: 1.39% !!!!!!

 

Your Friday closing Italian 10 year bond yield: 1.44% up 3  in basis points from Thursday:

trading 5 basis points above Spain.

 

IMPORTANT CURRENCY CLOSES FOR TODAY

 

 

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

 

Euro/USA: 1.0870 down .0070  ( Euro up 70 basis points)

USA/Japan: 118.91 down .649  ( yen up 65 basis points)

Great Britain/USA: 1.5185 up .0135   (Pound up 135 basis points)

USA/Canada: 1.2177 up .0023 (Can dollar down 23 basis points)

 

The euro rose today.   It settled up 57 basis points against the dollar to 1.0870. The yen was up 65 basis points points and closing just below the 119 cross at 118.91. The British pound gained considerable  ground today, 135 basis points, closing at 1.5185. The Canadian dollar lost a lot of ground to the USA dollar, down 23 basis points closing at 1.2177.

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: 1.91% down 5 in basis points from Thursday

 

 

Your closing USA dollar index:

96.90  down 41 cents on the day.

 

European and Dow Jones stock index closes:

 

England FTSE up 17.03 or 0.24%

Paris CAC up 22.54 or 0.44%

German Dax up 87.27 or 0.74%

Spain’s Ibex up 79.60 or 0.70%

Italian FTSE-MIB up 227.92 or 0.98%

 

The Dow: up 21.45 or 0.12%

Nasdaq; up 36.02 or 0.71%

 

OIL: WTI 57.18 !!!!!!!

Brent: 65.34!!!!

 

Closing USA/Russian rouble cross: 50.41 up 1/3 rouble per dollar

 

 

end

 

 

And now your important USA stories:

 

NYSE trading for today.

Nasdaq Soars To Record Highs On Dismal Data & Vapid Volume

 

Humor required…

Despite a quiet week for macro data, what there was a disaster (from PMIs to housing to durable goods)… US Macro at new 6 year lows…

Which can mean only one thing… This week was the best for most major stock indices since Bullard’s mid-October “QE4” hint rescue…

On the day, early weakness was immediately BTFD and data just helped… with Nasdaq and S&P hitting new highs…

Trannies and Small Caps red today (but look how narrow today’s range was in Dow and S&P)

Decoupling started yesterday morning…

Volume was a total disaster!!

The Nasdaq won on the day – but went nowhere from the gap open… in fact – as the following chart shows, every major index closed below its opening level…

AMZN up 15% today! AMZN!!! the biggest single day move since April 2012

Bonds were bid again today (as rate-locks from the giant AT&T bond issue) stopped weighing on Treasuries. However, yields closed higher and steeper on the week…

The USDollar dropped 0.45% on the week (down 5 of the last 6 weeks) – Swissy did a big roundtrip after dumping midweek on SNB comments.

Despite Dollar weakness, all commodities ended the week lower (even crude) with a big dumpfest this morning dragging everything down. Note Copper’s miraculous recovery post RRR-Cut…

Crude oil prices were rangebound and algo-driven once again…

Charts: Bloomberg

 

end

 

This morning starts out with a huge drop in durable goods:

(courtesy zero hedge)

Worst Drop In Core Durable Goods Since December 2012

end
Then we get word that the Government in Puerto Rico may shutdown due to illiquidity.  in English: nobody wants to give them any money.
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