May 19/ECB to frontload purchases of sovereign bonds/Conditions inside Greece deteriorate/Walmart disappoints/

Good evening Ladies and Gentlemen:

 

 

Here are the following closes for gold and silver today:

Gold:  $1206.90 down $20.90 (comex closing time)

Silver $17.05 down 66 cents (comex closing time)

 

In the access market 5:15 pm

Gold $1207.80

Silver: $17.11

 

 

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

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

 

At the gold comex today, we had a poor delivery day, registering 0 notice serviced for nil oz.  Silver comex filed with 124 notices for 620,000 oz

 

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 242.39 tonnes for a loss of 61 tonnes over that period. Looks to me like the comex is bleeding profusely!!

 

In silver, the open interest fell slightly by 675 contracts as Monday’s silver price was up by 14 cents as some of the bankers covered their silver shortfall.  The total silver OI continues to remain extremely high with today’s reading at 177,854 contracts maintaining itself near multi-year highs 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.

 

In silver we had 124 notices served upon for 620,000 oz.

 

In gold,  the total comex gold OI rests tonight at 430,674 for a gain of 1,917 contracts as gold was up by $2.30 yesterday. We had 0 notices served upon for nil oz.

 

Today, we had no changes in inventory at the GLD. It rests tonight at 718.24  tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. 

 

In silver, /we lost another 1.195 million oz of  silver inventory at the SLV / and thus the inventory tonight remains at 317.93 million oz

 

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

 

1. Today we had the open interest in silver fall by a tiny 675 contracts as  silver was up in price yesterday by 14 cents.  The OI for gold rose by 5,475 contracts up to 423,191 contracts as the price of gold was up  by $7.00 yesterday. GLD had SLV had no changes to their inventory levels.

(report Harvey)

2,Today we had 1 major commentary on Greece:

(zero hedge)

3. Bill Holter delivers a commentary on Truth Bombs.

4. Jim Richards, on why China wants to hoard gold.

5. James Turk discusses the problems inside Greece as the ECB struggles with its huge hoard of Greek debt

(James Turk/Kingworldnews)

6. The Ukrainian default looms over the horizon

(zero hedge)

7. The mystery behind the Belgian purchases of USA treasuries: it is China

(zero hedge)

8.  The ECB announced today that they were going to front load purchases of European sovereign bonds.  Zero hedge discusses the reason why they need to do this.

(zero hedge)

9. Why the oil price will come down from our current levels

(Berman/OilPrice.com)

10. Walmart sales disappoint/another good bellwether on the global economy/ doesn’t matter Dow rises!

(zero hedge)

 

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

Here are today’s comex results:

The total gold comex open interest rose by 1917 contracts from 428,757  up to 403,675 as gold was up by $2.30 yesterday (at the comex close).  We are in our next non active delivery month of May and here the OI fell by 0 contracts remaining at  141. We had 0 notices filed on Friday.  Thus we neither lost nor gained any  gold contracts  standing for delivery in May. The next big active delivery contract month is June and here the OI fell by 5,131 contracts down to 187,705. 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 103,715. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day) was fair at 141,300 contracts as the bankers continued to use non backed paper against all of that demand. Today we had 0 notices filed for nil oz.

 

And now for the wild silver comex results.  Silver OI fell by 675 contracts from 178,529 down to 177,854 as the price of silver was up  in price by 17 cents, with respect to Monday’s trading. We no doubt had some considerable short covering by the banks. We are into the active delivery month of May where the OI rose by 84 contracts up to 424. We had 2 contracts filed upon with respect Monday’s trading.  So we gained 86 contracts or an additional 430,000 oz will stand for delivery in this May delivery month. The estimated volume today was poor at 28,477 contracts (just comex sales during regular business hours. The confirmed volume  yesterday (regular plus access market) came in at 45,338 contracts which is excellent  in volume. We had 124 notices filed for 10,000 oz today.

Today, somebody was in urgent need of physical silver.

 

May initial standings

May 19.2015

Gold

Ounces

Withdrawals from Dealers Inventory in oz    nil
Withdrawals from Customer Inventory in oz   nil
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)  141 contracts(14,100) oz
Total monthly oz gold served (contracts) so far this month 7 contracts(700 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month 164,151.8 oz
Total accumulative withdrawal of gold from the Customer inventory this month  53,054.3 oz

 Gold inventory movements not available today. If the boys decide to give us the data, I will amend my commentary

 

Today, we had 0 dealer transactions

 

 

total Dealer withdrawals: nil oz

 

we had 0 dealer deposit

total dealer deposit: nil oz
we had 0 customer withdrawals

total customer withdrawal: nil  oz

We had 0 customer deposit:

 

We had 0   adjustments:

 

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 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 May contract month, we take the total number of notices filed so far for the month (7) x 100 oz  or 700 oz , to which we add the difference between the open interest for the front month of May (141) 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 May contract month:

 

No of notices served so far (7) x 100 oz  or ounces + {OI for the front month (141) – the number of  notices served upon today (0) x 100 oz which equals 14,800 oz standing so far in this month of May. (.46 tonnes of gold)

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

 

Total dealer inventory: 372,835.022 or 11.596 tonnes

Total gold inventory (dealer and customer) = 7,792,944. (242.39) tonnes)

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 242.25 tonnes for a loss of 61 tonnes over that period. Lately the removals  have been rising!

end

 

And now for silver

May silver initial standings

May 19 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 17,298.500 oz ( HSBC)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  963,879.59 oz (CNT,Brinks, Scotia)
No of oz served (contracts) 124 contracts  (620,000 oz)
No of oz to be served (notices) 300 contracts (1,500,000 oz)
Total monthly oz silver served (contracts) 2672 contracts (13,360,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month  126,359.680 oz
Total accumulative withdrawal  of silver from the Customer inventory this month 3,699,925.5  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 3 customer deposit:

i) Into Brinks: 300,868.89 oz

ii) Into CNT: 19,721.000 oz ???

iii) Into Scotia: 643,289.700 oz

total customer deposits; 963,879.59 oz

 

We had 1 customer withdrawals:

i) Out of HSBC: 17,298.500 oz

total withdrawals;  17,298.500 oz

 

we had 1 adjustments

i) Out of CNT:

549,283.500 oz was adjusted out of the customer and this landed in the dealer account at CNT:

Total dealer inventory: 60.711 million oz

Total of all silver inventory (dealer and customer) 178.131 million oz

 

The total number of notices filed today is represented by 124 contracts for 620,000 oz. To calculate the number of silver ounces that will stand for delivery in May, we take the total number of notices filed for the month so far at (2672) x 5,000 oz  = 13,360,000 oz to which we add the difference between the open interest for the front month of April (424) and the number of notices served upon today (124) x 5000 oz equals the number of ounces standing.

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

2672 (notices served so far) + { OI for front month of April (424) -number of notices served upon today (124} x 5000 oz = 14,430,000 oz of silver standing for the May contract month.

we gained 86 contracts or an additional 430,000 silver ounces will stand for delivery in this active May delivery month.

 

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:

 

May 19/no changes in gold inventory at the GLD/Inventory at 718.24 tonnes

May 18/we lost another 5.67 tonnes of gold inventory at the GLD/Inventory rests at 718.24 tonnes

May 15./no change in gold inventory at the GLD/Inventory rests at 723.91 tonnes

May 14./ a huge withdrawal of 4.41 tonnes of gold/Inventory rests at 723.91 tonnes

May 13.2015: no change in inventory at the GLD/Inventory rests at 728.32 tonnes

May 12/no change in inventory at the GLD/inventory rests at 728.32 tonnes

May 11/ no changes at the GLD/Inventory rests at 728.32 tonnes

May 8/ they should call in the Serious Fraud squad as the owners of the GLD just saw 13.43 tonnes of gold leave its vaults heading for China:

Inventory tonight:  728.32 tonnes

May 7. no change in gold inventory at the GLD/741.75 tonnes

May 6/no change in gold inventory at the GLD/741.75 tonnes

may 5/no change in gold inventory at the GLD/741.75 tonnes

may 4/no change in gold inventory at the GLD./741.75 tonnes

May 1/ we had a huge addition of 2.69 tonnes of gold into the GLD/Inventory rests tonight at 741.75 tonnes

April 30/ no change in gold inventory/739.06 tonnes of gold at the GLD

April 29/no change in gold inventory/739.06 tonnes of gold at the GLD

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).

May 19 GLD : 718.24  tonnes.

 

end

And now for silver (SLV)

May 19.2015: we lost another 1.195 million oz of inventory at the SLV/Inventory rests at 317.93 million oz/

May 18.2015: we lost another 1.625 million oz of inventory at the SLV/Inventory rests tonight at 719.125 million oz

May 15./no change in silver inventory at the SLV/inventory rests tonight at 320.75 million oz

May 14/ a huge withdrawal of 1.912 million oz from the SLV/Inventory at 320.75 million oz.

May 13.2015: no changes at the SLV/Inventory rests at 322.662 million oz

May 12/no changes at the SLV/Inventory rests at 322.662 million oz

May 11/no changes at the SLV/Inventory rest at 322.662 million oz

May 8/ today we lost a huge 2.87 million oz of silver from the SLV/Inventory 322.662

May 7/no change in silver inventory/325.53 million oz

May 6/we had a huge withdrawal of 2.143 million oz of silver from the SLV/325.53 million oz

May 5/no change in silver inventory at the SLV/327.673 million oz

May 4/ no change in silver inventory at the SLV/327.673 million oz

May 1/no change in silver inventory at the SLV/327.673 million oz

April 30/no change in silver inventory at the SLV/327.673 million oz

April 29/ we lost 2.963 million oz of silver inventory from the SLV/inventory tonight 327.673 million oz

May 19/2015  a withdrawal of 1.195 million oz from the SLV/ inventory rests at 317.93 million oz

 

end

 

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

 

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

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

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

Percentage of fund in gold 60.4%

Percentage of fund in silver:39.3%

cash .3%

( May 19/2015)

 

2. Sprott silver fund (PSLV): Premium to NAV falls to+0.27%!!!!! NAV (May 19/2015)

3. Sprott gold fund (PHYS): premium to NAV falls to -.27% to NAV(May 19/2015

Note: Sprott silver trust back  into negative territory at +0.27%.

Sprott physical gold trust is back into negative territory at -.27%

Central fund of Canada’s is still in jail.

end

 

Early morning trading from Asia and Europe last night:

 

Gold and silver trading from Europe overnight/and important physical

stories

(courtesy Mark O’Byrne/Goldcore)

Gold Ticks Higher In GBP – Property Crash Looms In London?

– London property falls most in nine months in May
– Falls possibly due to pre-election fear of Labour housing policy
– Surge in sterling dampens demand
– Tory victory has led to surge of new sales
– London market still overheated
– Investors look for stores of value

Getty Images

High end London property prices crashed 6.3% in the last month while average prices in the city fell 2.3% – the largest fall in nine months, according to Bloomberg. Prices across the UK slipped 0.1% in the same period.

Gold has been moving steadily higher in the last week as the surging pound began to dip.

Media reports suggest that many buyers postponed closing deals in the run-up to the election due to fears over the implications of a labour victory on the property market.

Ed Miliband had indicated that labour would put a “mansion tax” on properties valued at over £2 million, which may have deterred investors from the market. International investors who, according to The Telegraph make up an entire half of all luxury property purchases in London, also feared “an attack on their non-domiciled status.”

Apparently, the Conservative victory has led to a surge in pent-up buying in the week following the election.

It is also suggested that the surging pound continues to dampen demand for London luxury property. The post-election spike has put a premium of roughly £33,000 per £1 million on properties bought by Americans, Chinese, Russians and investors from the Gulf states.

The Telegraph

Eurozone buyers pay roughly €130,000 more today to transfer £1 million to the UK.

The Telegraph reports that Russian property investment in London has largely declined since the rouble crisis began.

It adds that ultra-rich Russians, buying properties valued over £10 million, were still a strong presence in the high end of the London property market.

We believe the London property market in particular to be in bubble territory. The upward movement has been led by the high-end market.

*The fact that high-end property could plummet by 6.3% in a single month – on rumours of a policy change – reflects a high degree of fear in the market.

*We do not believe that the pre-election fear over a Miliband government and a surging pound are the only factors affecting the London property market.

*The woes of the Russian rouble have curbed Russian demand. Lower oil prices have curbed demand from Gulf states. China has cracked down on money being funnelled through tax havens into property in London.

These factors have removed a large chunk of demand and now it would appear prices in the high-end market – which were already bloated – are teetering. Fears over Labour policy may have been a catalyst for the move but we do not believe it to be the main cause.

Bloomberg report that “In London’s most expensive districts, prices plunged 6.3 percent this month to 1.44 million pounds, according to the report. That’s a 7.4 percent drop from a year ago.”

Average house prices in London dwarf those of the rest of the country. London prices average £581,074 – more than 15 times the median salary – whereas the national average is £285,891.

The media have chosen to focus on a reported surge in demand following the reelection of the Tories. The fact that high end prices fell so substantially has been explained away.

This kind of risk-averse exuberance often augurs a crash in a market. Reports gush at how investment from the U.S., India, Brazil and Singapore are expected this year.

This may be so but it has yet to materialise and the absence of a dissenting point of view suggests that caution has been thrown to the wind.

The surge in the price of high-end possessions – such as property in London and in other major cities as well as in high-end art – reflects a desire for stores of value outside of the markets.

High net worth individuals, families and institutions are seeking astore of value for the almost limitless amounts of cash created out of thin air, particularly since the crisis of 2008.

The inflation which has been seen in these markets may spread to other asset classes as investors seek stores of value which have not yet moved into bubble territory.

Among those asset classes, an obvious candidate is gold – history’s most reliable store of value. Investors would be wise to have an allocation of gold at the heart of their portfolio.

When currencies fail gold has always remained as a store of value with which to begin building wealth again.

 

GoldCore Insight: Is London’s Property Bubble Set to Burst?

 Click to read: Gold is a Safe Haven Asset


MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,219.65, EUR 1,090.24 and GBP 785.31 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,228.15, EUR 1,079.41 and GBP 784.12 per ounce.

Gold climbed $0.40 or 0.03 percent to $1,225.30 an ounce on yesterday, and silver rose $0.15 or 0.86 percent to $17.68 an ounce.

Gold pulled back after a five day rally as traders cashed in gains and the dollar grew one percent stronger against other currencies.

Gold in Singapore near the end of trading slid 0.4 percent to $1,220.93 an ounce.

U.S. Federal Reserve President of Chicago, Charles Evans, said yesterday that the central bank could look at a rate hike in June if the economy was strong enough.

Gold’s direction will be guided from tomorrow’s release of the U.S. FOMC minutes from its last meeting.

Gold ETFs have seen outflows and the SPDR Gold Trust has seen its holdings dip to a four-month low of 718.24 tonnes.

Greece is close to a cash-for-reforms deal with its European Union partners and the IMF that would help it meet debt repayments next month, the country’s finance minister said yesterday. However, the debt-ridden country is not out of the woods yet and there is still an underlying chance of an exit from the eurozone.

In late European trading gold is down 0.38 percent at $1,219.50 an ounce. Silver is off 1.62 percent at $17.41 an ounce and platinum is also down in U.S. dollars 0.59 percent at $1,165.20 an ounce.

 

end

 

 (courtesy Chris Powell/GATA)

China’s gold accumulation goes far beyond the vaults, Future Money Trends notes

Section:

11:25p ET Monday, May 18, 2015

Dear Friend of GATA and Gold:

A seven-minute video produced by Future Money Trends notes that China’s gold accumulation extends far beyond the vaulting of refined metal — that China is accumulating even more gold by purchasing mining properties around the world. The video is posted at You Tube here:

https://www.youtube.com/watch?v=Kl4D84YqTTY&feature=youtu.be

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

 

end

A very important commentary and discussion between James Turk and Eric King.  Turk explains that Greece has a debt to the ECB of 112 billion euros  (80 billion from the ELA and 32 billion of bonds purchased).  The total number of euros on deposit is around 138 billion euros.  The total amount of loans outstanding from the Greek banks is 218 billion euros. The amount of bad loans are around 40%.  So we witness the fact that there is very little collateral left for the Greek banks to give to the central bank of Greece in order to receive fresh euros:

(courtesy James Turk/EricKing/Kingworldnews)

 

Turk expects seizure of Greek bank deposits to trigger gold and silver breakout

Section:

10:30p ET Monday, May 18, 2015

Dear Friend of GATA and Gold:

GoldMoney founder and GATA consultant James Turk tells King World News today that he still thinks Greece will be the trigger for breakouts for gold and silver as the European Central Bank ends up seizing Greek bank deposits just as bank deposits in Cyprus were seized. Turk’s interview is posted at the KWN blog here:

http://kingworldnews.com/theft-of-greek-bank-deposits-to-send-shockwaves…

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

end

 

Jim Richards explains why China wants to hoard gold:

(courtesy Jim Richards/GATA)

Jim Rickards: China wants gold so it can share market-rigging power

Section:

8:50a ET Tuesday, May 19, 2015

Dear Friend of GATA and Gold:

In the latest edition of his newsletter, Strategic Intelligence, James G. Rickards elaborates on a point often made by your secretary/treasurer, as last week in an interview with Dave Kranzler and Rory Hall on their “Shadow of Truth” program:

http://www.gata.org/node/15341

That is, China is not acquiring gold because it wants to liberate the currency markets from rigging by Western central banks or because it wants to impose on itself the restraint of a gold standard but because it wants its own power to rig the currency markets.

Rickards writes: “China wants to do what the United States has done, which is to remain on a paper currency standard but make that currency important enough in world finance and trade to give China leverage over the behavior of other countries.

“The best way to do that is to increase its voting power at the International Monetary Fund and have the yuan included in the IMF basket for determining the value of the special drawing right. Getting those two things requires the approval of the United States because the U.S. has veto power over important changes at the IMF. The U.S. can stand in the way of Chinese ambitions.

“The result is a kind of grand bargain in which China will get the IMF status it wants, but the U.S. will force China to be on its best behavior in return. This means that China must keep the yuan pegged to the dollar at or near the current level. It also means that China can have gold but can’t talk about it. In order to ‘join the club,’ China must play by club rules.

“The rules of the game say you need a lot of gold to play, but you don’t recognize the gold or discuss it publicly. Above all, you do not treat gold as money, even though gold has always been money.

“The members of the club keep their gold handy just in case, but otherwise they publicly disparage it and pretend that it has no role in the international monetary system. China will be expected to do the same. … China will not act in the best interests of gold investors; it will act in the best interests of China.”

Rickards’ letter is posted at the Internet site of newsletter publisher Bonner and Partners here:

http://bonnerandpartners.com/weekend-edition-why-most-gold-bugs-are-dead…

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

end

(courtesy Forbes)

 

Book review: ‘The Floating Kilogram’ — the Federalist Papers for a gold standard

Section:

By Ralph Benko
Forbes
Monday, May 18, 2015

A recent article in The Week by progressive columnist Jeff Spross, “How Modern Capitalism Killed Self-Reliance,” observed that “the gold standard is a niche enthusiasm rejected by most economists.” Why that is so is curious. The hyperlink to his observation goes right to Episode 252 of NPR’s “Planet Money,” an interview with “charming curmudgeon” James Grant, which first aired in February 2011.

This is the same James Grant who furnished the foreword to Seth Lipsky’s delightful new book “The Floating Kilogram … and Other Editorials on Money from The New York Sun.”

T”he Floating Kilogram” was described by Steve Forbes: “This brilliant book is The Federalist Papers for a gold standard. It succeeds, dazzlingly — and convincingly — making the irrefutable case for re-linking the battered dollar to gold.” …

… For the remainder of the commentary:

http://www.forbes.com/sites/ralphbenko/2015/05/18/book-review-the-floati…

 

end

 

Dave Kranzler and Rory Hall interview Alasdair Macleod..

(courtesy Kranzler, Hall/Alasdair Macloed)

 

SoT Ep 28 Alasdair Macleod: The Coming Panic Into Physical Gold And Silver

The strategic reasons for are now about to change in the next six months. Anybody who doesn’t own physical silver or gold could miss out. I think there’s a big change coming on.  – Alisdair Macleod, Shadow of Truth

The Shadow of Truth interviewed Alisdair Macleod to get his take on the economic reports which show an economic contraction in the U.S., the recent move higher in precious metals prices and his thoughts on what China’s next move is with respect to their obvious hoarding of physical gold.

While the mainstream financial media and moronic Keynesian “economists” have chosen to ignore the high volume of negative economic reports, it’s become obvious to many that the U.S. economy appears to be in trouble.

When I look at what’s going on with the U.S. economy, they’re continually having to revise down growth expectations. Every bit of anectodal evidence that comes through…all indicates that things are slowing down very very sharply.

Many of us are now predicting another round of QE, quite possibly before the leaves are finished falling off the trees this fall around the country.

The one thing the Fed really is frightened of is contracting bank credit. And this idea of collateral liquidation leading to more selling of collateral by the banks to cover loans is sort of self-feeding into nasty collapse if you like in asset prices. Now that’s not going to happen because they are going to print money to insure it doesn’t happen. We are very very close to that sort of tipping point and I think that people who have an understanding of this are not going to hang around and wait for the Fed to print money. They are going to go quite quickly, I think, against the dollar.

After discussing the current rally going on in the price of gold and silver, we shifted our discussion to the ongoing shift of the global physical gold market from London to Shanghai. From his contacts with Swiss refiners, Alisdair discovered that Swiss refineries are taking in gold from Arab countries and recasting it from LBMA .995 400 oz bars into the new Chinese 1 kilo .9999 standard. And the Arabs are taking it back and putting it back into storage.

I find this fascinating because it tells me this market is slipping from London…it tells that the Arabs really do realize that their future is supplying oil to Asia rather than anywhere else, particularly China.

Based on this, it would appear that the Arabs are preparing themselves for a shift from a dollar-centric reserve currency world into one which is based on a gold-backed currency of some form, likely originating from the BRIC bank, which intends to issue a BRIC SDR that will contain gold in its currency “basket.”

Are the Chinese ready to start letting the price of gold and silver rise in value? Alisdair explains his view on this matter in this incredibly engaging and educational interview:

(courtesy Bill Holter/Holter/Sinclair Collaboration)

Here come the TRUTH BOMB(s)!

 

A few months back I theorized the rest of the world led by a Chinese/Russian alliance might let loose with a “truth bomb” or a series of them.  It is clear the U.S. has been on a pathway in the desire to start a war.  We have pressed in Syria and the Ukraine but so far to no avail.  From the standpoint of the U.S., it is my opinion that a war is “necessary” to point at and blame for the financial collapse surely coming because in no way can “policy” be blamed.

  The upcoming month of June will be a telling one as the situation in Greece comes to possibly a final head.  Tiny Greece is important for several reasons.  The first and most obvious, they are certainly a firing pin for the derivatives market.  Should they default, what will it be called?  Somehow, some way, a Greek default cannot be classified as one because a cascade of failures will immediately follow.  Financially, Greece can take the Western financial system down all on its own.
  Next, Greece is also a member of NATO, what will they do when the current economic and financial sanctions on Russia run out?  Will they vote to extend the sanctions or vote in their own interest against them?   Or, will they accept financial help and the cash flow from the proposed natural gas pipeline?  A lesser question is what will happen to their EU status?  Will they quit, get kicked out or remain as a black sheep in a dirty family?
  I ask these questions again because Greece now says they will run out of money on June 5th.  They have already pilfered pension funds and sequestered local agency monies, while pleading for the previously pledged but so far withheld aid.  Atop this and more important are the sanctions on Russia due to end also in June.  June is a very pivotal month!
 To this point, the Chinese and Russians have been patient but firm dealing with the U.S..  Russia has warned about arming western Ukraine and placing firepower on Russia’s borders.  China has sternly warned the U.S. regarding the disputed islands in the South Sea, a near spark incident was avoided last week.  My point is this, the U.S. has been pushing while Russia and China have stood their ground.  How long this can go on without some sort of “accident” morphing into conflict is questionable.  As an example are the recent events surrounding the Spratly islands in the South China Sea http://www.firstpost.com/world/u-s-china-clash-over-disputed-south-china-sea-reuters-2248272.html , can the U.S. really push China in their own back yard?    China and Russia are fully aware of the U.S. falling further and further into a weakened position in many ways, time is running out before a financial collapse and they know a wounded animal often strikes in desperaration.  They must in my opinion do something very soon to neutralize the U.S. or face the reality of fighting.
  As I began with, I believe the only form of neutralization is some sort of “truth bomb” or a series of them.  How best can this be done?  I believe it must and will be done “financially”, let me explain.  If the ROW can neuter the U.S. financially, they will seriously hamper  U.S. efforts to make war.  As a side note, “the truth” will also take most all public support away for making war.  I believe the process may have begun this past week.
  While you may react with “oh it’s just propaganda” because of the source, Pravda posted an article over the weekend speculating China will very soon announce their gold reserves.  The article http://english.pravda.ru/business/finance/15-05-2015/130611-china_gold_dollar-0/ speculates China has amassed 30,000 tons of gold.  This may or may not be true, but I can easily prove 10,000 tons just on the back of a napkin.  Whether the number is 10,000, 30,000, more or somewhere in between is moot in my opinion because it is MORE than the U.S. “claims” to have.  It would also call into question “where” exactly all of this gold came from.  As I have written before, China need not ask for an “audit” of Western gold, should they provide audited numbers, market participants will make the connection themselves.
  I believe there are several questions needing to be asked.  Is this a “30,000 ton bluff” by Russia?  I don’t think so but if it is, what is the upside?  Would Russia really throw this figure out publicly without clearing it with Beijing?  Would China really bluff about how much gold they have?  My opinion is no, they would not.  I have said all along I believed China would announce their holdings probably this year.  If this is the “pre pre announcement”, it is a very big number and one I believe only as an opening salvo.  Should China themselves make this announcement, please understand the “golden nuclear bomb” this would actually be.  The financial system of the West will be destroyed overnight!
  Before going any further, let me put a few of the various dots on the table.  First and maybe what they were waiting for, the Western credit markets have had two very big convulsions in the last 10 days, these flash crashes have occurred as nearly all liquidity was briefly lost.  While speaking of liquidity, this seems to be drying up across the board including the equity markets as volume has gone comatose.  U.S. economic numbers are unmistakably weak and recession will be known by the end of June or early July.  Another classic sign of illiquidity is the shortage of collateral available to the shadow banking systems in both the U.S. and in Europe,.  A “margin call” to a system undercapitalized and under collateralized is a deadly recipe.
  We also saw a story last week where several of the larger ETF’s have contracted for rather large credit lines to use in a “market event” causing mass liquidations.  This is an entire story in itself and a humorous one at that!  What makes the ETF’s believe their financial institution will be left standing and able to lend during a panic?  And even if standing, during bad times the old saying goes …”credit lines are made to be pulled”!  Worst of all, if they actually do use the credit lines because their various investments cannot be sold, won’t this ultimately injure remaining shareholders and make those who panicked first …the best?  And especially if their investments do not immediately snap back, they will be required to sell more and at lower prices just to pay the loans (if they get them) down!  Very poor “preparations” if you ask me.
  Other dots include, the AIIB, an alternative clearing system to SWIFT, currency hubs all over the world, physical metals exchanges and even the ABX which plans to arbitrage between Eastern and Western markets.  China has very rapidly recreated the “old silk road” trading route which includes both Iran and Greece, both sticking points in the side of the West.
  I believe the Sino/Ruso alliance now sees weaknesses in the West, it is exactly what Sun Tzu would look for.   The economy is slowing, liquidity is drying up and leverage is maxed out.  Volatility has now struck the all important credit markets of which are relied on to support the West’s way of life.  What is next?  I believe an announcement of China’s holdings will only be the beginning and put the U.S. on her heels as to our holdings.  Next, and I mentioned this previously, I would not be shocked if Edward Snowden has done a data dump similar to what was feared with Mr. Assange of Wikileaks.
  We already know of so many and various “dirty deals” which banks have pleaded guilty to, “proof” of Western deceit will be believed because of all the fines and “non” admissions of guilt already paid and entered.  In essence, it very well may be the East pulls the curtain back on the Wizard of OZ!  A data dump by the Russians and Chinese regarding the finances of the West (including a lack of gold), how markets are rigged and economic numbers “created”, along with information regarding various false flags and the misdirection of the public would go a long way.  The “questions” are numerous and may have a starting date of 9/10/01 when Donald Rumsfeld announced the Pentagon’s “missing” $2.3 trillion …which was never spoken of again after the following horrific day.
  Much, if not everything has a paper trail to it.  Enron’s misdeeds and hollow derivatives were conveniently washed away the following day as well as any paper trail to the “world bonds” issued during the Reagan years …and cashed in within the two weeks following 911.  Nearly everything since then still has a paper trail attached to it, should Russia/China have the ability to expose and prove some of it, our financial system will be toast!
  In the event of a little sunlight touching Western “dirties”, currencies and bonds will be smoked along with of course the precious Dow Jones.  An exposure would effectively cripple us financially, torpedo public support and effectively make it very difficult for the U.S. to run around the world further swinging a bat and stirring up war.  In essence, an exposure would take the ability to point blame elsewhere off the table …and the past policy itself will finally eat the blame it deserves!  Regards,  Bill Holter, for the Holter/Sinclair collaboration.
end
Bill Holter being interviewed by Sean from SGT report:
end

And now overnight trading in stocks and currency in Europe and Asia

 

1 Chinese yuan vs USA dollar/yuan weakens to 6.2069/Shanghai bourse green and Hang Sang: green

2 Nikkei closed up by 136.11 points or .68%

3. Europe stocks all in the green/USA dollar index up to 94.88/Euro falls to 1.1202/

3b Japan 10 year bond yield: slight remains at .39% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.04/

3c Nikkei still just above 20,000

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

3e WTI 59.90 and Brent:  65.89 

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. Last night Japan refused to increase it’s QE

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to 64 basis points. German bunds in negative yields from 5 years out.

Except Greece which sees its 2 year rate rise greatly to 22.89%/Greek stocks up 3.01%/ still expect continual bank runs on Greek banks./Greek default inevitable/

3j Greek 10 year bond yield rises to: 11.56%

3k Gold at 1222.40 dollars/silver $17.49

3l USA vs Russian rouble; (Russian rouble down 1/4 rouble/dollar in value) 49.36 , the rouble is still the best acting currency this year!!

3m oil into the 59 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!!

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9303 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0425 well below the floor set by the Swiss Finance Minister.

3p Britain’s serious fraud squad investigating the Bank of England/

3r the 3 year German bund remains in negative territory with the 10 year moving further away from negativity at +.64/the ECB losing control over the bond market.

3s Last week the ECB increased the ELA to Greece by another large 2.0 billion euros.This week, they raised it another 1.1 billion and thus at this point the new maximum was 80 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  paid the 700 million plus payment to the IMF last Wednesday but with IMF reserve funds.  It must be paid back in 24 days.

3 u. If the ECB cuts off Greece’s ELA they would have very little money left to function. So far, they have decided not to cut the ELA

4. USA 10 year treasury bond at 2.19% early this morning. Thirty year rate well below 3% at 2.98% / yield curve flatten/foreshadowing recession.

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

(courtesy zero hedge/Jim Reid Deutsche bank)

 

Stocks, Bonds Spike After ECB Pledge To Accelerate QE Ahead Of “Slow Season”

Less than a week ago, fresh from the aftermath of the recent dramatic six-sigma move in German Bunds, one of Europe’s largest banks openly lamented that so far the ECB’s QE had done absolutely nothing: “two months of QE for nothing. Well, not strictly true of course, for inflation expectations are up 30bp and Euro stocks are still up 15% since January even after investors withdrew $1.5bn last week. But look at the euro. EUR/USD yesterday returned over 1.1350, the highest level since the ECB announced QE on 22 January.”

And lo and behold, as if on demand, late last night the ECB confirmed (however for some reason it took over 6hours for the headlines to filter through to the newswires perhaps just to make it easier for hedge funds to frontrun the broader market ahead on ECB disclosures) it had heard the ECB’s lament when on the evening of May 18, ECB executive board member Benoit Coeure delivered a speech at the Brevan Howard Centre for Financial Analysis(appropriately named after a hedge fund) at Imperial College Business School (not to be confused with the July 26, 2012 Mario Draghi “whatever it takes” speech which also took place in London) in which he said that the ECB intends to “frontload” i.e., increase, its purchases of euro-area assets in May and June ahead of an expected low-liquidity period in the summer.

Quotes by Bloomberg, Couere said that “We are also aware of seasonal patterns in fixed-income market activity with the traditional holiday period from mid-July to August characterized by notably lower market liquidity… If need be, the frontloading may be complemented by some backloading in September when market liquidity is expected to improve again. The slightly higher purchase volume that market analysts may observe in the coming weeks is therefore unrelated to the recent episode of market volatility.

In other words, while the ECB may have been behind the recent Bund sell off (simply to buy itself more runway as the last thing Draghi wanted was a negative Bund yield some 15 months before the end of Q€), it was shocked by the speed and severity of the selloff, and now is damage control time, which will manifest itself in the ECB buying up bonds double speed in the market during what as we noted before, is a positive net issuance period, ahead of Germany returning once more to negative net issuance.

The post-mortem comments were just as expected: “That’s exactly what the market needs to calm down,” said Karsten Junius, chief economist at Bank J Safra Sarasin Ltd in Zurich. “It will take fear out of the market that high negative net issuance in the summer leads to less market volume in the summer.”

In other words, after two months of QE almost led to a bond market crash, the ECB will no longer engage in volatility acrobatics having realized just how “much” bond market liquidity there is, and the result will be slow, smooth buying, and yes: a return to a negative yield trendline for the entire Bund curve, whose drift back to -0.20% is now just a matter of time.

Of course, the real reason why the ECB is “front-loading purchases” is quite simple: in May the net supply of Eurozone bonds is greatest, and the ECB is desperate to soak it all up before the upcoming negative issuance dead zone which will send yields plunging.

In all the ECB confusion, the collapse in German ZEW which plunged to 41.9 in May, more than the 49 drop forecast and lowest since Dec., from 53.3 in April, was completely ignored by everyone.

Needless to say stocks were euphoria by this ECB update and following the Eurex open, European equities were seen higher across the board in a continuation of the sentiment seen yesterday on Wall Street with a record close for the DJIA and S&P 500 but more notably, there was an immediate spike higher in Bunds, pressure placed on EUR and further strength in Equities. Additionally, ECB’s Noyer said the central bank would be willing to continue purchases beyond September 2016 if required. All European equities trade firmly in the green, although there is some modest undperformance in the FTSE 100 with mining names weighed on by lower commodity prices, while Vodafone have been dragged lower in the wake of their earnings.

In terms of Greek assets, the 2yr yield trades lower by around 90bps while the ASE trades higher by around 1.8%. This comes slightly more upbeat reports for Greece with PM Tsipras stating that discussions with creditors are near the end, with the government willing to compromise to reach a deal. Furthermore, EU’s Juncker expects an aid agreement is to be reached on Greece by the end of this month or the beginning of June however, said that an aid deal will not be reached in Riga this week.

FX markets initially saw a tentative start to the session with the USD-index extending on yesterday’s gains, with the move to the upside given a boost by the aforementioned Coeure comments which saw EUR/USD break back below 1.1200, with EUR unreactive to the inline Eurozone inflation data and German ZEW survey despite a modest downtick in the DAX. In  terms of the UK inflation data, GBP weakened heading into the release with some participants expecting a negative Y/Y print, which turned out to be the case upon the release, with the metric now at -0.1%. However, one things for  consideration is that this is in-fitting with the findings of last week’s QIR.

In the commodity complex, the main source of traction has stemmed from the stronger USD with both WTI and Brent crude futures subsequently lower (WTI Jun’15 futures to expire at 1930BST today). In a similar manner, both spot gold and silver trade lower, while spot iron ore fell to 2 week lows amid a stall in restocking at Chinese steel mills and the strong USD. Goldman Sachs forecasts oil prices to retrace from lows, falling to USD 45/bbl by October; 12-month forecast at USD 55/bbl. (BBG)

In Summary: European shares remain higher though trading off intraday highs with the autos and real estate sectors outperforming and basic resources, telcos underperforming. ECB to moderately frontload QE in May, June, board member Coeure says. Greek leaders say deal within reach amid creditor doubts. U.K. inflation falls below zero for first time since 1960. German ZEW investor expectations below ests. European car sales rise for 20th straight month in April. The French and German markets are the best-performing larger bourses, Swedish the worst. The euro is weaker against the dollar. German 10yr bond yields fall; French yields decline. Commodities decline, with nickel, silver underperforming and natural gas outperforming. U.S. housing starts, building permits due later.

Market Wrap

  • S&P 500 futures up 0.3% to 2131.8
  • Stoxx 600 up 1.3% to 403.1
  • US 10Yr yield down 3bps to 2.2%
  • German 10Yr yield down 7bps to 0.58%
  • MSCI Asia Pacific up 0.1% to 153.5
  • Gold spot down 0.4% to $1220.4/oz
  • Eurostoxx 50 +1.1%, FTSE 100 +0.3%, CAC 40 +1.8%, DAX +1.7%, IBEX +1.3%, FTSEMIB +1.3%, SMI +0.8%
  • Asian stocks little changed with the Shanghai Composite outperforming and the ASX underperforming.
  • MSCI Asia Pacific up 0.1% to 153.5; Nikkei 225 up 0.7%, Hang Seng up 0.4%, Kospi up 0.3%, Shanghai Composite up 3.1%, ASX down 0.8%, Sensex down 0.2%
  • Euro down 0.98% to $1.1204
  • Dollar Index up 0.69% to 94.87
  • Italian 10Yr yield down 9bps to 1.8%
  • Spanish 10Yr yield down 10bps to 1.74%
  • French 10Yr yield down 8bps to 0.86%
  • S&P GSCI Index down 0.8% to 445.2
  • Brent Futures down 1% to $65.6/bbl, WTI Futures down 0.8% to $59/bbl
  • LME 3m Copper down 1.6% to $6281/MT
  • LME 3m Nickel down 2.5% to $13400/MT
  • Wheat futures down 1.2% to 515.5 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

  • Comments by ECB’s Coeure saying that due to seasonal factors QE purchases will be front loaded to May and
    June helped spur a move higher in Bunds and European equities, weighing on EUR
  • GBP is seen weaker in the wake of UK inflation falling into negative territory for the first time since 1960
  • Looking ahead, today sees the release of US housing starts, building permits, potential comments from BoC Governor Poloz, ECB’s Nowotny, Visco and earnings from the world’s largest retailer Wal-Mart at 1200BST/0600CDT.
  • Treasuries gain led by long end, following EGBs as ECB’s official Benoit Coeure says central bank intends to increase its purchases of euro-area assets in May and June ahead of an expected low-liquidity period in the summer.
  • Germany’s ZEW index of investor expectations fell to 41.9 in May, more than forecast and lowest since Dec., from 53.3 in April
  • Britain’s inflation rate fell 0.1%, dropping below zero for the first time in more than half a century, as the drop in food and energy prices depressed the cost of living
  • Greek leaders expressed optimism a deal to unlock bailout funds is within reach, in the face of continuing warnings by creditors that the country has yet to comply with the terms of its emergency loans
  • ECB, EFSF  would not immediately cut support to Greece if it failed to make a scheduled repayment to the IMF, Handelsblatt reported, citing unidentified central bank sources
  • Merkel is trying to head off a potential revolt from as much as a third of her bloc’s lawmakers as she tries to up line support for a compromise deal with Greece, party officials said
  • China is considering relaxing rules for bond sales in a bid to boost slowing economic growth, people familiar with the matter said Tuesday
  • Islamic State’s seizure of the Iraqi city of Ramadi threatens to unravel Obama’s strategy for defeating the Sunni extremist group without sending U.S. ground troops back to Iraq
  • About 55k pages of Hillary Clinton’s State Department e-mail would be made public in January 2016 after it undergoes an internal review, the agency said in a court filing
  • EU governments will go ahead with planning for a military mission to intercept refugee boats on the high seas or seize and destroy them in Libyan territorial waters — controversial steps that would require approval by the UN Security Council
  • Sovereign bond yields fall.  Asian stocks higher, European stocks, U.S. equity-index futures gain. Crude oil, gold, copper lower

 

DB’s Jim Reid Concludes the overnight recap

 

With regards to Greece, various headlines suggesting that both sides are coming close to some sort of agreement continued once again yesterday. Markets had initially got excited after Athens based newspaper To Vima reported that the EU Commission was said to propose a compromise for a deal, suggesting that Greece would receive a partial disbursement of funds in June in return for new targets for fiscal actions and a more lenient primary budget surplus. This was swiftly played down by an EC spokeswoman however who said that she was unaware of the report and that talks are instead continuing to focus on a comprehensive deal. In the meantime, the EC’s Moscovici commented that ‘we have moved closer to common understanding on reforms to be adopted in a number of areas’. The commissioner cited Greece’s value added tax system in particular, which according to Greek press Ekathimerini the Greek government yesterday submitted a reform proposal on to its creditors.

There was a similar trend in comments out of the Greece camp yesterday. Both PM Tsipras and Finance Minister Varoufakis reiterated that Athens will be unwilling to budge from its ‘red lines’. Earlier in the day, Tsipras, despite suggesting that negotiations are in the final stages, commented that an agreement with Greece’s creditors should include debt restructuring, lower primary budget surplus targets and no wage or pension cuts. Varoufakis confirmed much of the PM’s comments, noting that an agreement is ‘a matter of one week’ away and that Greece will not sign any deal which doesn’t include debt restructuring. The Finance Minister then went on to say that Greece will not default and that ‘we walked 2/3rds of the road, it’s time for creditors to walk 1/3rd’.

Away from Greece the other notable news story yesterday centered on a paper published by the San Francisco Fed which reported that the Q1 GDP estimate for the US was depressed due to a statistical anomaly. They suggest that, due to the effects of seasonal adjustments, Q1 GDP actually expanded 1.8% rather than the reported 0.2% (and likely negative post revisions). Despite the official GDP reading published by the Bureau of Economic Analysis being adjusted for seasonal variations, the San Francisco Fed argue that Q1 seasonally adjusted real GDP growth should not be consistently higher or lower than growth in any other quarter and so instead applied a second round of seasonal adjustments to correct the residual seasonality, resulting in the much higher reading. The paper does actually follow on from a similar report produced by the Philadelphia Fed four days ago which argued that the ‘BEA’s seasonal adjustment procedures are not filtering out all the intra-year movements in the data’. This is a theme that DB’s Joe LaVorgna has picked up on so it’s not new but it did grab some attention. However aside from employment indicators, data so far in Q2 is struggling to suggest that the US economy is set for a significant rebound – as the Atlanta Fed GDPNow forecast would attest to. Given the host of various first-tier data releases this week (including CPI on Friday), it’s probably fair to say that any calculation methodology arguments will be put to one side for the meantime as the market continues to adjust its rate liftoff date expectations as the data rolls in.

Before we take a look at yesterday’s price action, markets in Asia this morning are generally following the better tone out of the US and trading higher as we type. The Nikkei (+0.79%), Shanghai Comp (+2.72%), Hang Seng (+0.42%) and Kospi (+0.50%) in particular are all trading firmer. Bond yields are also higher across the region, led by 10y yields in Australia (+9.5bps). Treasuries are unchanged as we go to print.

Aside from Greece and the San Francisco Fed paper yesterday, news flow was fairly limited. If you didn’t put the move in bond markets yesterday in perspective with the moves of the last few weeks you’d probably think otherwise however. 10y Bunds (+2.5bps) gave up some of Friday’s gains to close higher in yield yesterday while similar maturity yields in Italy (+12.2bps), Spain (+9.9bps) and Portugal (+12.4bps) took a steep leg higher. The weakness in Europe appeared to filter over into Treasuries as both the 10y (+9.1bps) and 30y (+10.0bps) yields rose to 2.235% and 3.029% respectively. The Dollar pared back some of the weakness last week as the DXY closed +1.17%. Equities marched higher meanwhile as the S&P 500 (+0.30%) once again recorded a fresh record high while in Europe bourses were led by the DAX (+1.29%) while there were also gains for the Stoxx 600 (+0.41%) and CAC (+0.37%). Greek equities (+1.62%) rallied into the close on the back of the To Vima report however both 2y (+311bps) and 10y (+55bps) sold off significantly.

The move higher in Treasury yields came despite more dovish comments from the Chicago Fed’s Evans and weaker than expected housing market data. In terms of the data, the NAHB housing market index print for May came in below expectations at 54 (vs. 57 expected), declining 2pts from April’s reading. The Fed’s Evans meanwhile reiterated his call that the Fed should not raise rates until 2016, based on his expectation that ‘my forecast does not see inflation rising to our 2% target until 2018’. Evans went on to say that it would then be appropriate to raise rates ‘only gradually’ following the first move while reiterating the data dependency behind for the initial move.

It’s a busy day data wise today. We kick off this morning in the UK where we get the April CPI/RPI/PPI prints where we could see the first negative YoY inflation print since 1960. With the recent increase in Oil most will see this as a temporary dip into deflation. We also have the final April inflation reading for the Euro-area (current consensus is for no change to either the headline or the core at 0.0% yoy and +0.6% yoy respectively) as well as trade data for the region and the German ZEW survey reading for May. We’ll get important indicators for Q2 growth in the US this afternoon when we get housing starts and building permits data for April. This will provide early clues as to the magnitude of the growth bounce back. So a relatively busy day!!

 

end

 

Merkel faces revolt in her coalition partners as they defer as to how to handle Greece.  Merkel realizes that the default and a GREXIT will be catastrophic for Germany and Europe:

(courtesy zero hedge)

 

Merkel Faces German Parliament “Revolt” On Greece

On Monday we got the usual jawboning out of Greece’s embattled leadership, with both PM Alexis Tsipras and FinMin Yanis Varoufakis swearing that a deal with creditors is imminent. Here’s a sampling of the rhetoric:

  • TSIPRAS: GREECE HAS SUBMITTED CONCRETE PROPOSALS TO CREDITORS
  • VAROUFAKIS: GREECE IS `VERY CLOSE’ TO DEAL WITH CREDITORS
  • GREECE WILL NOT DEFAULT, FINANCE MINISTER VAROUFAKIS SAYS

As usual, it wasn’t long before EU creditors were out telling a different story.

  • EU SAYS MORE TIME, EFFORT NEEDED TO BRIDGE GAPS ON GREECE
  • EU SAYS SLOW-PACE PROGRESS BEING MADE TOWARD GREECE AGREEMENT

Perhaps most importantly, it appears as though Tsipras’ hopes of cementing a deal in Riga may be far-fetched:

  • JUNCKER RULES OUT POSSIBILITY OF GREECE AID DEAL IN RIGA

And while Juncker claims he is optimistic about a deal in “late May or early June”, it’s not at all clear that either Greece or its creditors truly appreciate the potential for the type of ‘accident’ that German FinMin Wolfgang Schaeuble has been warning about. That is, a sudden, acute cash crunch — triggered by an ECB decision to raise the haircut on collateral pledged by Greek banks for ELA, for instance — could quickly push the country over the edge before a political solution is agreed upon.

Meanwhile, in Germany, Angela Merkel is attempting to head off staunch opposition from lawmakers concerning further coddling of what they perceive to be a belligerent Greek government. As we reported earlier this month, the German Chancellor has been under pressure from members of her Christian Democratic bloc to essentially cut Greece loose. Now that pressure is building, leaving Merkel with the unenviable task of selling yet another Greek bailout to an increasingly hostile audience.

Via Bloomberg:

German Chancellor Angela Merkel is trying to head off a potential revolt from as much as a third of her bloc’s lawmakers as she tries to up line support for a compromise deal with Greece, party officials said.

Caucus leaders of Merkel’s party are working on the objectors, telling them they may be asked to approve further aid to ward off a default even if Greece refuses to implement all changes demanded by creditors, according to three officials. Merkel has been calling small groups of dissenters to the chancellery to tell them that Greece leaving the euro area would risk causing geopolitical instability in the region, one of the people said. All the officials asked not to be identified because the discussions are private.

Merkel’s desire to keep Greece in the euro is fraught with political risk given the level of exasperation in Germany with Prime Minister Alexis Tsipras after four months of brinkmanship. Her strategy depends on Greece’s government making enough concessions to allow her to sell the deal to lawmakers and the German public.

As European officials warn that time is running out for Greece’s finances, Merkel’s Christian Democrat-led caucus will discuss the way forward at its closed weekly meeting in Berlin on Tuesday. While some German policy makers have hardened their stance against helping Greece, others are hinting at more flexibility to avert a financial collapse…

Any substantial changes to the conditions for Greece’s 240 billion-euro ($271 billion) aid program need approval by the full German lower house, or Bundestag. As many as 100 of Merkel’s 311 lawmakers may still be holdouts, one of the officials said. 

Given the above, it would seem that Athens has, at least to some degree, been successful at leveraging the so-called ‘Russian pivot’, as we certainly imagine that when Merkel speaks of geopolitical instability and jeopardizing European influence, she is alluding to the multiple overtures (ranging from energy partnerships to development bank invites) that Moscow has made to Athens over the course of Greece’s tense discussions with European officials.

We’ll leave you with some soundbites from the Nobel laureate crowd (whose opinions we would normally view as a contrarian indicator, but this particular prize winner happens to be an HFT critic so we’ll let it slide). Here’s Joseph Stiglitz with his assessment of what a Grexit means for the future of the failed experiment that is the EMU:

“If Germany and the rest of Europe refuses to change the program, I think there’s no alternative [to Grexit] which would be really serious.” 

“You really are bringing more instability into Europe [and the monetary experiment would] go down the tubes.” 

end

 

The following gives a chilling account on how bad things are inside Greece.  With each passing day, 22 million euros are wiped off their GDP together with 613 full time jobs.

 

(courtesy zero hedge)

Each Day Without Debt Deal Costs Greek Economy €22 Million And 613 Full-Time Jobs

It’s no secret that the protracted negotiations between Athens and its creditors are taking a toll on the Greek economy in general, on the Greek banking sector more specifically, and on Greek citizens most tragically.

For banks, each day without a deal is one day closer to outright insolvency. Even if the ECB continues to raise the ELA ceiling and refrains from raising the haircut on the assets Greek banks pledge for emergency liquidity, the banking sector will run out of collateral by the end of next month.

As for Greek citizens, there are likely days when mental exhaustion sets in amid the constant stream of contradictory headlines and incessant media coverage, but any feelings of indifference are inevitably interrupted by stark reminders of a grim economic reality such as empty pensioner bank accounts and looped video clips of the Nazi occupation meant to rally the country behind a desperate war reparations claim on Berlin.

Now, thanks to a new report from the Hellenic Confederation of Commerce and Enterprises, we can quantify the daily economic toll of failed negotiations. Here’s more from Kathimerini:

An average of 59 enterprises close every day of the working week and 613 jobs are lost, while every day, with the market facing a cash crunch, the economy loses 22.3 million euros from its gross domestic product, according to a report published by the Hellenic Confederation of Commerce and Enterprises (ESEE).

The country reportedly needs billions in new financing…

A deal with the country’s creditors is more urgent than ever, ESEE stressed, but the economy would need as much as 25 billion euros in financing in order to restart, as losses from the first five months will be hard to cover over the rest of the year, argued ESEE.

 

This uncertainty has hit the local economy after five years of crisis, during which retail commerce turnover shrank by 26.2 percent. Things were worse for wholesale commerce, with turnover dropping 37.1 percent, while the car market crumbled by 61.9 percent in the same period, the confederation’s data show.

…and the banking sector is simply unable to make loans…

Liquidity is becoming an unfamiliar term in the market as 95 percent of applications for loans are rejected every day by commercial banks, while only one in 10 enterprises dares to ask for funding from the country’s four systemic lenders, the ESEE report showed. The absorption of funding tools for business liquidity stands at 40 percent, while in the funding of commerce the rate does not exceed 12 percent.

…meaning it may be time for Syriza to realize that giving up on campaign promises is preferable to forcing citizens to confront an economic situation which is quite literally getting worse by the day…

ESEE is urging the government in dramatic terms to reach a deal with Greece’s creditors even if it’s not a great deal.

 

“A final agreement, even if it is mediocre or below expectations, is certain to allow the Greek economy to feel free at last to operate for the remainder of 2015,” read Monday’s ESEE statement. “Financial and political time are running dangerously short, and reaching a sustainable agreement with our partners is vital as it is directly associated with the country’s capacity to draw liquidity from the European funding tools,” it added.

And meanwhile, support for the government which just four months ago was billed as the savior that would lead the Greek people out from under the thumb of overbearing EU creditors on the way to restoring a sense of Hellenic pride, is now seeing support for its mandate dwindle, suggesting that if a deal isn’t struck soon, Syriza may find itself facing pressure to cede power.

Via Bloomberg:

Support for Greek govt’s negotiating strategy in bailout talks with creditors falls to 35% in University of Macedonia poll, broadcast on Skai TV, from 72% in Feb. survey by same pollster, 45.5% in April.

*  *  *

end
For the past several months, I have indicated that we have 3 major problems on the horizon:
i) the inevitable Greek default
ii) the inevitable Ukraine default
iii) the repercussions from the fallout of the Austrian Hypo banks.
In the following commentary we see problems again surfacing with respect to the Ukrainian mess:
(courtesy zero hedge)

US Taxpayer On The Hook As Ukraine Prepares Moratorium On Debt Repayments, Increases Military Spending

It appears, thanks to the generous backing of US taxpayers, Ukraine is about to get its cake and eat it too. On the same day as Ukraine’s government unleashes a bill enabling a moratorium on foreign debt repayments – implicitly meaning default “in case of an attack from dishonest lenders” – the defense ministry unveils a plan to increase military spending by 17 billion hryvnia this year statuing that will “make efforts to find possibilities to finance needs” to secure country’s defense. Ukraine bonds are tumbling.

 

Military Spending is set to surge…

10 agencies, including Defense Ministry, that oversee defense and law enforcement asked Finance Ministry to increase defense spending by 17b hryvnia this yr, ministry in Kiev says on its website.

 

Finance Ministry will “make efforts to find possibilities to finance needs” to secure country’s defense.

 

Higher spending is needed because of increased army personnel.

But foreign debtors are set to lose… (as RT reports)

Ukraine’s government has submitted to parliament a bill that allows the introduction of a moratorium on foreign debt payments. The moratorium is to protect the assets of the state and the state sector in case of an “attack” from dishonest lenders.

 

“To protect the interests of the Ukrainian people, the Ukrainian government today has introduced to the Rada a bill that would give the government the right to suspend payment on Ukraine’s external debts and publicly guaranteed debts. In case of an attack from dishonest lenders on Ukraine this moratorium will protect the assets of the state and the state sector,” a statement on the Cabinet website said Tuesday.

 

The moratorium “will not affect domestic payments and will not affect the stability of the banking system,” the UNIAN news agency said citing s source. In also said the moratorium does not include debt to the IMF, the EBRD and other institutional creditors.

 

The Cabinet said the moratorium will not affect the bilateral and multilateral obligations of Kiev.

And Ukraine bonds are tumbling…

Specifically (as Bloomberg reports),

The eastern European nation is seeking permission to hold off on paying coupons, the first of which coming due is a May 21 payment of $33 million on a $1 billion note maturing in November 2016, according to data compiled by Bloomberg. Ukraine said cutting its debt burden is a question of justice, according to an e-mailed statement on Tuesday.

 

“This is a logical next step to show people they are serious,” Dray Simpson, the London-based managing director of emerging markets at Cantor Fitzgerald Europe, said by e-mail on Tuesday. “Up to now there has been a lot of talk and very little action and any confrontations have been won by creditors. If Ukraine are going to reverse that trend they need to be firm.”

 

Time is running out for the country and its bondholders to reach an agreement as a June 15 International Monetary Fund deadline for the restructuring approaches. Failure to strike a deal puts the next tranche of a $17.5 billion IMF loan at risk for Ukraine as it struggles to keep the economy afloat following a yearlong conflict with pro-Russian separatists in the nation’s east.

*  *  *

Thank you American taxpayer…

 
 end

We now have the identity of our mystery Belgian purchaser of USA treasuries:  it is sovereign China…

zero hedge explains..

 

(courtesy zero hedge)

 

Revealing The Identity Of The Mystery “Belgian” Buyer Of US Treasurys

A little over a year ago, we showed something quite unexpected: in the span of just a few months, the tiny nation of Belgium had become the third largest foreign holder of US Treasurys.

Of course, the buying wasn’t Belgium doing so for its own account, but someone using the custody services of Belgium-domiciled Euroclear. This is what we said last April.

it is quite clear that Belgium itself is not the buyer. What is not clear is who the mysterious buyer using Belgium as a front is. Because that same “buyer”, who to further explain is not China, just bought another whopping $31 billion in Treasurys in February, bringing the “Belgian” total to a record $341.2 billion, cementing “it”, or rather whoever the mysterious name behind the Euroclear buying rampage is, as the third largest holder of US Treasurys, well above the hedge fund buying community, also known as Caribbean Banking Centers, which held $300 billion in March.

In summary: someone, unclear who, operating through Belgium and most likely the Euroclear service (possible but unconfirmed), has added a record $141 billion in Treasurys since December, or the month in which Bernanke announced the start of the Taper, bringing the host’s total to an unprecedented $341 billion!

And while there had long been speculation that the mystery buyer using anonymous Belgian custody accounts is none other than China, the same nation which previously had used UK accounts precisely for the purpose of masking its purchases, there was never any proof.

Further confounding the analysis was that while “Belgium” was massively adding to its Treasury holdings over the past year, mainland China was telegraphing that it was dumping Treasurys. It got to the point that in February Japan officially surpassed China as the largest official US foreign creditor.

Then, on Friday we finally got if not direct, then certainly indirect, evidence from this month’s TIC data that “Belgium” was merely a front for China.

First, note that after dropping for 6 consecutive months, official Chinese holdings had a major countertrend move and rebounded in March, jumping by $37 billion to $1.261 trillion and regaining the top US creditor spot from China.

Even more curious was the Belgian Treasury holdings update, which after flatlining in the mid-$300 billion range for one year, also had a sharp countertrend move as they suddenly tumbled by $93 billion in the month of March, a 27% of the total “Belgian” holdings.

But the real surprise emerges when stacking the monthly Chinese and Belgian holdings on top of each other. One gets the following chart, which in itself is hardly shocking…

… but becomes so when one also overlays China’s offically reported monthly Forex reserves on top of the consolidated China+Belgium treasury holdings. Here one can easily see that indeed Belgium was nothing but an “anonymous” front for Chinese Treasury buying…

… and as the case has recently become, selling.

Because while we have previously commented on the dramatic capital outflow from China in recent months, which also explains why China is desperate to slam its currency but will not do it over fears of accelerating capital outflow, the combined Chinese and Belgian Treasury holdings reveal the true extent of China’s USD-denomination liquidation conundrum.

As the next and final chart shows, in March the monthly drop across China’s official and “anonymous” i.e., Belgian holdings, was the biggest on record!

So as a result of the latest TIC data we know know with almost complete confidence that:

i) “Belgium” is, or rather, was a front for China: either SAFE, CIC, or the PBOC itself.

ii) That Belgium’s holdings, after soaring as high as $381 billion a year ago, have since tumbled back to only $2532 billon as China has dumped the bulk of its Euroclear custody holdings, and that once this number is back to its historical level of around $170-$180 billion, “Belgium” will again be just Belgium.

iii) China’s foreign reserves tumbled and this was offset by a the biggest quarterly drop in Chinese pro-forma treasury holdings, which dropped by a record $72 billion in the month of March, and a record $113 billion for the quarter.

So why mask its offshore holdings? So when China proceeds to liquidate nearly $100 billion via its custody account, the US didn’t feel compelled to chastise Beijing. After all there is no official confirmation that Belgium is indeed China, and likely won’t be – it was merely a buffer account which China used to build up TSY holdings in, and now – to rapidly liquidate.

A better question perhaps is what is the use of funds of these tens of billions of liquidations: because what was once invested in the form of Treasurys is now invested in the form of something else… most likely real estate in San Francisco, Beverly Hills, or New York City, with a few billion left over to buy stocks.

Finally, the last thing China would want the world to know, is just how acute its capital flight truly is: a capital flight which is the only thing that is preventing the Politburo and the PBOC from cutting rates even more aggressively and/or engaging in even more outright QE than it currently does because should the chart above be matched with a comparably sharp drop in the Renminbi, and suddenly the VIX closing the day at 12 will be a very distant memory.

 

end

 

Early this morning, the ECB announced that it was going to front load and purchase more bonds in May June and taper later month purchases.

Why? European Macro data on their economies are faltering terribly:

(courtesy zero hedge)

 

When US Macro data started to crumble after QE3 ended last year, and with it US equities, The Fed unleashed Jim Bullard to suggest that QE4 was possible if things deteriorated… and in that moment, everything broke.

The last few months have seen expectations of a European recovery dashed as macro data has disappointed greatly – now weaker on the year.

So what is Draghi to do? Easy – Fed playbook: unleash Benoit Coeure to suggest moar QE sooner and maintain the illusion of future success in stock prices (even as data collapses)…

*  *  *

Stocks are up because… fundamentals.

end
An important commentary on the oil market and why the price of oil will fall as supply outstrips demand
(courtesy Berman/OilPrice.com)

Oil Prices Will Fall: A Lesson In Gravity

Submitted by Arthur Berman via OilPrice.com,

The oil price collapse is not over yet. It is more likely that the Brent price could fall back into the mid-$50 range than that it will continue to rise toward $70 per barrel.

That is because oil prices have risen based on sentiment alone. The fundamentals of supply and demand indicate a dismal reality: oil prices will fall and may fall hard in the near term.

Our present situation is like that of the cartoon character Wile E. Coyote. He routinely ran off of a cliff and as long as he didn’t look down, everything was fine. But as soon as he looked down and saw that there was no ground beneath him, he fell. Hope and momentum cannot overcome gravity.

WileE.Coyote

Figure 1. Wile E. Coyote cartoons. Sources: The Braiser, Dubsisms and Forbes.

Neither can ignoring the data.

When I look down from $60 WTI and almost $68 Brent, I see no support except sentiment. Like Wile E. Coyote, we need a gravity lesson about oil prices. What goes up for no reason, will come down sooner than later and it may fall hard.

Let’s examine the facts.

The principal reason for the oil-price collapse is a production surplus–more supply than demand for oil. The latest data from EIA (Figure 2) indicates that the surplus is the greatest since the current oil-price collapse began. In other words, the cause of the price collapse is getting worse, not better!

WorldLiquidsProductionSurplusDeficit

Figure 2. World liquids production surplus or deficit (production minus consumption), January 2011-April 2015. Source: EIA and Labyrinth Consulting Services, Inc.

(click image to enlarge)

The latest data from IEA indicates that the production surplus in first quarter of 2015 is the greatest of the last decade and much greater than during the 4 previous quarters (Figure 3).

WorldLiquidsProductionSurplusDeficit2

Figure 3. Quarterly world liquids production surplus or deficit (production minus consumption), 2006-2015. Source: IEA and Labyrinth Consulting Services, Inc.

(click image to enlarge)

With data like this from EIA and IEA, how can anyone be optimistic that even higher oil prices may be coming? How can anyone say that the price increase in recent months has any relationship to reality whatsoever?

Both IEA and OPEC offered grave concerns about persistent over-supply in their recent monthly reports that seem to have been ignored or dismissed in the jubilance of higher oil prices.

Analysts may be hopeful that the drop in U.S. rig counts–which has almost stopped in the last two weeks–will result in a decrease in tight oil production. I believe that is true but the U.S. is not the world and the world continues to add production.

With somewhat higher prices, some tight oil producers like EOG say they are ready to aggressively grow production again if prices stabilize around $65 per barrel. If other producers do the same, so much for the as-yet-to-be seen production decline from lower rig counts.

Many point to signs of increased oil demand because of low product prices as a positive trend. I agree, but as long as production is growing faster than consumption, we have an over-supply problem.

I hope that the rebound in oil prices over the past two months is sustainable and that prices continue to rise. But hope doesn’t count much for very long in global markets. The data so far says that the problem that moved prices to almost $40 per barrel in January has only gotten worse. That means that recent gains may vanish and old lows might be replaced by lower lows.

Wile E. Coyote never learned the lesson of gravity but that was in a cartoon. This is real.

 end

Your more important currency crosses early Tuesday morning:

Euro/USA 1.1202 down .0127

USA/JAPAN YEN 120.04 up .132

GBP/USA 1.5498 down .0163

USA/CAN 1.2165 up .0020

This morning in Europe, the Euro fell by a considerable 127 basis points, trading now just above the 1.12 level at 1.1202; 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, rising peripheral bond yields.

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 13 basis points and trading just above the 120 level to 120.03 yen to the dollar.

The pound was well down this morning as it now trades well below the 1.55 level at 1.5498,still celebrating a conservative victory but 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 down by a considerable 20 basis points at 1.2165 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 1.0425 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 : up 136.11 points or 0.68%

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

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

Gold very early morning trading: $1222.80

silver:$17.49

Early Tuesday morning USA 10 year bond yield: 2.19% !!! down 5 in basis points from Monday night and it is trading under resistance at 2.27-2.32%.

USA dollar index early Tuesday morning: 94.88 up 88 cents from Monday’s close. (Resistance will be at a DXY of 100)

 

This ends the early morning numbers, Tuesday morning

 

And now for your closing numbers for Tuesday:

 

Closing Portuguese 10 year bond yield: 235 down 7 in basis points from Monday (continual central bank intervention)

Closing Japanese 10 year bond yield: .38% !!! down 1 in basis points from Monday/

Your closing Spanish 10 year government bond, Tuesday, down 8 points in yield (massive central bank intervention/yet still losing control)

Spanish 10 year bond yield: 1.75% !!!!!!

Your Tuesday closing Italian 10 year bond yield: 1.81% down 8 in basis points from Monday: (massive central bank intervention/)

trading 6 basis point higher than Spain.

 

IMPORTANT CURRENCY CLOSES FOR TODAY

 

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

 

Euro/USA: 1.1150 down .0173 ( Euro down 173 basis points)

USA/Japan: 120.71 up .910 ( yen down 80 basis point)

Great Britain/USA: 1.5498 down .0163 (Pound down 163 basis points)

USA/Canada: 1.2231 up .0087 (Can dollar down 87 basis points)

The euro fell sharply today. It settled down 173 basis points against the dollar to 1.1150 as the dollar rose on all fronts.  The yen was down 80 basis points and closing well above the 120 cross at 120.71. The British pound lost some ground today, 163 basis points, closing at 1.5498. The Canadian dollar lost considerable ground to the USA dollar,87 basis points closing at 1.2231.

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: 2.29% up 6 in basis points from Monday (above the resistance level of 2.27-2.32%)

Your closing USA dollar index:

95.30 up 108 cents on the day.

European and Dow Jones stock index closes:

 

England FTSE up 26.23 points or 0.38%

Paris CAC up 104.99 points or 2.09%

German Dax up  259.05 points or 2.23%

Spain’s Ibex up 152.70 points or 1.35%

Italian FTSE-MIB  down 515.16 or 2.22%

 

The Dow up 13.51 or 0.07%

Nasdaq; down 8.40 or 0.17%

 

OIL: WTI 58.09 !!!!!!!

Brent: 64.18!!!!

 

Closing USA/Russian rouble cross: 49.49 down 5/10 rouble per dollar on the day.

end

 

And now your important USA stories:

NYSE trading for today

Crude Crushed, Bonds Battered, & Trannies Tank As Greenback Gains

Since the day was all about EUR-crushing Q€ front-loading and Germany’s “we are at an impasse” statements in Europe, we thought the following (h/t @DougKass) would entertain as while US investors believe it is ‘inconceivable’ that US stocks would quake at anything, it really is down to Germany vs Greece…

Before we get to stocks, there were bigger moves afoot today that must be focused on…

The best 2 days in USDollar since October 2011(driven by EUR’s plunge after Coeure’s comments)…

And the collapse in commodities – especially crude…

And an illiquid spike in Treasuries again…

As futures show stocks pumped and dumped on Q€, on good housing data and just on stop hunts

Trannies were really ugly today… MUST.CLOSE.S&P.GREEN!!! #FAIL!

AAPL down, WMT smacked.. then YHOO crashed and BABA popped on China import tariff news

Total Carnage in YHOO in the last few minutes…

Wal-Mart’s weakness chipped 22 points off the Dow (and that is after they still couldn’t beat earnings that had been crushed…

And on the week…Trannies end today in the red..

VIX surged in the mid-afternoon… it seems someone wanted to hedge ahead of tomorrow’s FOMC minutes… and don’t forget what Bob Pisani said today “you’re guaranteed to make money buying VIX”

Treasuries were all over the pace today as ECB headlines and US data ruffled an illiquid markets

While we noted earlier the 10 days in a row that US Treasuries have sold off (yields rise) from 1330-1400ET, the almost ubiqutous selling from early US morning to the European close is just as ‘oddly’ managed… 18 days yields was up in thelast 23 days…

The dollar ripped higher today…

On the back of a collapse in EURUSD… 350 pips below Friday’s highs… (3rd diggest drop since Oct 2011)

Commodities were smashed lower in general as the dollar strengthened… biggest drop in Silver in 3 months, biggest drop in copper in 4 months…

Crude crushed lower – erasing all gains post April’s inventory ‘draw’… as June went off the board…

Charts: Bloomberg

Bonus Chart: Still could be worse…

A lot worse…

end

Dave Kranzler talks about the USA economy and how March was the worst month since the 2008 recession:

(courtesy Dave Kranzler/IRD)

 

March Was The Worst Month For U.S. Economy Since The 2008 Recession

The broadest gauge of U.S. economic output, from the Commerce Department, tracks the economy on a quarterly basis. The private forecasting firm Macroeconomic Advisers provides a measure to track gross domestic product on a monthly basis…Macroeconomic Advisers on Thursday said its monthly estimate showed GDP fell an inflation-adjusted 1% in March, the largest drop since December 2008. – Wall St Journal – LINK

(click to enlarge)
EconomicPotholeThe Kool-aid drinking Keynesian economists are attributing the poor GDP report for Q1 to a drop in exports.  That’s an absurd notion, of course.  Especially if we were to re-adjust the GDP estimate with a true GDP-price deflator (inflation measure).    These guys always have some excuse, whether its the weather or the port strike on the west coast.

How about just the simple fact that the overleveraged, underemployed American middle class has finally hit a wall in its ability to consume beyond everyday necessities?

Yes, exports were down in Q1, but I guess that has nothing to do with the fact that the entire global economy is in the throws of an economic collapse.  Real imports of goods and services were estimated to be up 1.8% in Q1 vs. 10.4% increase in Q4 2014.  In other words, exports declined but the rate of imports slowed considerably.

About those retail sales (click to enlarge, source:  Bloomberg):

Retail SalesThis graph shows the monthly % change (left axis) and year over year % change (right axis, red line) in total retail sales.  As you can see from the blue line, there’s been a decleration in year over year retail sales since May 2013.  So much for the “polar vortex” fairytale.  Retail sales have been slowing down starting six months before (July 2013) the polar vortex allegedly affected the ability of consumers to use their credit cards in a manner which pleases the Keynesian central planners.  The red line shows us that the deceleration in retail sales growth accelerated in October 2014.  This includes three months in a row (red box) of negative monthly retail sales.

This next graph shows retails sales year over year ex-automobile sales (click to enlarge):

RetailSalesApril

As everyone knows, auto sales have been fueled by the a bubble in subprime auto loans – auto loans which are starting to go delinquent and default at an alarming rate. If you strip out this artificially induced demand for new cars, retail sales have been declining on a year over year basis since mid-2011.  No wonder the Fed implemented “Operation Twist” in late 2011, followed by QE 2 shortly thereafter.  Furthermore, the year over year decline in retail sales ex-autos started to accelerate downward in late 2014.

One last data point.  Construction spending.  To the extent that there’s been any “strength” in the economy, it’s come from auto sales and the housing market.  Auto sales have been fueled primarily by an explosion in subprime auto lending, market by extraordinarily easy lending standards and extending payment periods out to 84 months, which is longer than has been typical. Delinquencies are already rising quickly.  The other source has been 0-3.5% down payment mortgages made available by the Government-owned mortgage entities.  BOTH sources of economic activity have been funded by the Fed’s QE program.

But the trend in construction spending has been declining since May 2012:

ConstructionSpending

The Census Bureau provides the data input for the economic series. As you can see, by the Census Bureau’s own calculations, the decline in construction spending runs completely contrary to the wildly absurd housing starts report the agency released earlier today.  One would think the Census Bureau and the Government could at least manage some consistency among its data-reporting fabrications.

The bottom line is that the primary sources of economic activity, retail sales, the housing market and auto sales are all beginning to slow down – retail sales rather quickly.  This assertion is reinforced by the steady stream of economic reports released over the last few months which show that nearly all economic measurement data series are dropping at the same rate at which they were falling in the 2008-2009 period.

Regardless of the flood of Orwellian propaganda coming from Wall Street, the financial media and the various Government and quasi-Government agencies, by all valid economic activity metrics the U.S. economy is entering into crash mode.  The problem faced by all of us is that the crash that is in front of us will be many multiples more severe than what occurred in 2008.

 

end

 

Today the boys released data suggesting housing starts are skyrocketing. I did not provide the data to you because I know it is a phony.

The Dave Kranzler decided to write about the fictitious data:

(courtesy Dave Kranzler iRD)

 

 

Housing Starts? Census Bureau Reporting Reaches New Level Of Absurdity

Census Bureau definition of a housing “start:”   Start of construction occurs when excavation begins for the footings or foundation of a building.  Census Bureau

The Shadow of Truth did an interview with NY Post report John Crudele, who is the journalist who caught the Census Bureau fraudulently reporting employment data:  The Unemployment Rate In And Of Itself Is A Joke.

Crudele and the NY Post currently have six Freedom of Information Act requests with Census  Bureau, to which the CB refuses to respond or hand over documents.  Some of them are more than a  year old.  If the Census Bureau/Government does not have any foul play to hide, then why not respond the to the FOIA requests and dispel all doubt?

With this as the context, I think its safe to say that it is highly likely that the CB data with respect to housing starts is wildly inaccurate, especially in light of the collapsing price of lumber:

LumberCollapsing

In fact, when you examine the Census Bureau-generated “housing starts” number vs. the market price of lumber, the Census Bureau data has no credibility (source: Zerohedge, edits are mine):

20150519_starts2The fundamental economic data as measured by the market does not support the data being reported by the Census Bureau. If housing starts were flourishing, the demand for lumber from new homebuilders would be pushing the price of lumber higher.

Given that we know the Census Bureau has been fraudulently reporting employment data, it is highly probable that the Census Bureau’s data collection and reporting process with respect to housing starts and new home sales is corrupted.

As you can see from the way in which the Census Bureau defines a “housing start,” all that is required to be counted is basically any homebuilder sticking a shovel in the ground of a piece of property with an authorized building permit.   The CB has stated that if it can’t collect data on new home sales in certain regions, it will “estimate” the number of new home sales based on housing permits filed.  I would suggest the same absurd technique is utiltized with respect to “collecting” data on housing starts.

Regardless of whether the number reported today by the Census Bureau reflects any remote semblance of reality, if homebuilders are indeed building more homes, the result will be little more than the continued pile-up of homebuilder inventory.

In fact, as I’ve shown in my homebuilder research reports, new homebuilders have amassed a record level of inventory.  This inventory is piled on top of a unit sales run-rate that is roughly 1/3 the peak level of sales in 2005.

The question is, in the context of the rate of homeowership in ths country continuing to plunge to multi-decade lows, the continued lack of participation in home sales by the first-time buyer, and a massive pile-up on in high-end inventory, who in the hell is going to buy all of these supposed new homes being built?

 

end

 

Another Bellwether stock, Walmart gives us a good indicator as to how the USA economy is behaving:

(courtesy zero hedge)

Walmart Sales, Comps Miss; Operating Income Tumbles; Runs Out Of Scapegoats

In what may be the most cryptic press release from Walmart yet, the company just issued an 8-K whichconsisted all of 5 bullet points, a few charts, and precious little else. Perhaps the reason for the pithy transmission is that WMT had nothing good to say: Revenue declined from $115 billion to $114.8 billion, missing expectations of a jump to $116.2 billion, EPS also missed at $1.03, vs $1.05 expected, operating income tumbled 8.3% from $6.2 billion to $5.7 billion, and finally comp store sales also missed at 1.0%, below the 1.5% expected. With these results, anyone would be short and to the point.

After previously providing extensive explanations for why the massive Apple Sachs Industrial Member member missed, this quarter the firm almost didn’t even bother to scapegoat. This is what it said:

“Consolidated operating income declined 8.3%, due to impacts from currency fluctuations and investments in associate wages & training and e-commerce.”

As if it didn’t even bother to put in the effort to find a reason for the 8.3% plunge in operating income.

Finally, even the company’s guidance was berely there. From Charles Holley, Executive Vice President and CFO, Wal-Mart Stores, Inc.

“Based on our views of the global macro-economic environment, and assuming currency exchange rates remain at current levels, we expect second quarter fiscal 2016 earnings per share to range between $1.06 and $1.18. Our second quarter guidance includes the impact of approximately $0.04 per share from our previously announced investments in both U.S. associate wages and training, as well as $0.04 per share from currency.”

Wall Street currently expects a Q2 EPS print of $1.17.

And with this latest bellwether miss, expect the S&P to close at a recorder high today

end

 

Well that about does it for today.

Tomorrow will be another big test for gold/silver.  If they advance again, the bankers would definitely be losing control over our metals.

see you tomorrow

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One comment

  1. […] MAY 19/ECB TO FRONTLOAD PURCHASES OF SOVEREIGN BONDS/CONDITIONS INSIDE GREECE DETERIORATE/WALMART DI… […]

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