May 20/Another huge fall in GLD gold despite huge demand from India, China and Russia/China continues to see net outflow of investment dollars/The EU throws off the gloves in their attack on Greece/FOMC minutes and results/

Good evening Ladies and Gentlemen:

 

 

Here are the following closes for gold and silver today:

Gold:  $1208.90 up $2.00 (comex closing time)

Silver $17.09 up 4 cents (comex closing time)

 

In the access market 5:15 pm

Gold $1209.50

Silver: $17.13

 

 

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 8 notice serviced for 800 oz.  Silver comex filed with 1 notices for 5,000 oz

 

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 243.60 tonnes for a loss of 59 tonnes over that period. 

 

In silver, the open interest fell considerably by 3,517 contracts as Tuesday’s silver price was down by 66 cents as more  bankers covered their silver shortfall.  The total silver OI continues to remain extremely high with today’s reading at 174,337 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 1 notice served upon for 5,000 oz.

 

In gold,  the total comex gold OI rests tonight at 428,597 for a loss of 2,077 contracts as gold was down by $20.90 yesterday. We had 8 notices served upon for 800 oz.

 

Today, we had another big changes in inventory at the GLD. We had another withdrawal of 2.98 tonnes and thus the new inventory rests tonight at 715.26  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 had no change in silver inventory at the SLV/Inventory rests at 317.930 million oz 

 

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

 

1. Today we had the open interest in silver fall able 3517 contracts as  silver was down in price yesterday by 66 cents.  The OI for gold fell by 2077 contracts down to 428,597 contracts as the price of gold was down  by $20.90 yesterday.

(report Harvey)

2,Today we had 3 major commentary on Greece:

(zero hedge and Michael Snyder)

3.Greg Hunter interviews Rob Kirby on what would happen if China tells the world it has 30,000 tonnes of gold.

4. China has a major dilemma as each passing month more and more investment dollars are leaving the country

(zero hedge)

5. FOMC minutes (Beige book) released/

(Beige book/Hilsenrath)

 

6. Dave Kranzler on the train wreck of the USA economy

(Dave Kranzler/IRD)

7. Caterpiller/continues to falter and thus a bellwether for the global economy.

 

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

Here are today’s comex results:

The total gold comex open interest fell by 2077 contracts from 430,674 down to  428,597 as gold was down by $20.90 yesterday (at the comex close).  We are in our next non active delivery month of May and here the OI fell by 2 contracts falling to 139. We had 0 notices filed yesterday.  Thus we lost 2 gold contracts or an additional 200 oz will not stand for delivery in May. The next big active delivery contract month is June and here the OI fell by 11,784 contracts down to 175,921. 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 67,828. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day) was good at 208,737 contracts as the bankers continued to use non backed paper against all of that demand as they knocked off a few speculators. Today we had 8 notices filed for 800 oz.

 

And now for the wild silver comex results.  Silver OI fell by 3,517 contracts from 177,854 down to 174,337 as the price of silver was down in price by 66 cents, with respect to Tuesday’s trading. We are into the active delivery month of May where the OI fell by 127 contracts down to 297. We had 124 contracts filed upon with respect Tuesday’s trading.  So we lost 3 contracts or an additional 15,000 oz will not stand for delivery in this May delivery month. The estimated volume today was poor at 15,356 contracts (just comex sales during regular business hours. The confirmed volume  yesterday (regular plus access market) came in at 63,541 contracts which is excellent in volume with mucho help from the high frequency boys.. We had 1 notice filed for 5,000 oz today.

 

 

May initial standings

May 20.2015

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 4600.19 HSBC, Scotia)
No of oz served (contracts) today 8 contracts (800 oz)
No of oz to be served (notices)  131 contracts(13,100) oz
Total monthly oz gold served (contracts) so far this month 15 contracts(1500 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

 

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 2 customer deposits:

i) Into HSBC: 4500.000 oz  ???? (not divisible by 32.15

ii) Into Scotia:  100.19

Total customer deposit:  4600.19 oz

 

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 8 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 (15) x 100 oz  or 1500 oz , to which we add the difference between the open interest for the front month of May (xxx) and the number of notices served upon today (8) 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 (15) x 100 oz  or ounces + {OI for the front month (139) – the number of  notices served upon today (8) x 100 oz which equals 14,600 oz standing so far in this month of May. (.458 tonnes of gold)

we lost 200 oz of gold standing in this May delivery month. 

 

Total dealer inventory: 372,835.022 or 11.596 tonnes

Total gold inventory (dealer and customer) = 7,831,817.010. (243.60) tonnes)

Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 243.60 tonnes for a loss of 59 tonnes over that period. Lately the removals  have been rising!

end

 

And now for silver

 

May silver initial standings

May 20 2015:

Silver

Ounces

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 6250.21 (CNT,Delaware)
Deposits to the Dealer Inventory  nil
Deposits to the Customer Inventory  783,763.410 oz (CNT,Scotia)
No of oz served (contracts) 1 contract  (5,000 oz)
No of oz to be served (notices) 296 contracts (1,480,000 oz)
Total monthly oz silver served (contracts) 2673 contracts (13,365,000 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 3,706,175.7  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 2 customer deposits:

i) Into CNT: 594.716.100 oz

ii Into Scotia; 189,047.310 oz

total customer deposit:  783,763.410 oz

 

We had 2 customer withdrawals:

i) Out of CNT:  5252.1100 oz

ii Out of Delaware;  998.100

total withdrawals from customer;  6250.21 oz

 

we had 0 adjustments

 

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 1 contract for 5,000 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 (2673) x 5,000 oz  = 13,365,000 oz to which we add the difference between the open interest for the front month of April (xxx) and the number of notices served upon today (1) x 5000 oz equals the number of ounces standing.

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

2673 (notices served so far) + { OI for front month of April (2) -number of notices served upon today (1} x 5000 oz = 14,845,000 oz of silver standing for the May contract month.

We lost 3 contracts or an additional 15,000 oz. will not 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 20./we had another withdrawal of 2.98 tonnes of gold leaving the GLD. Inventory rests tonight at 715.26 tonnes

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 20 GLD : 715.26  tonnes.

 

end

 

And now for silver (SLV)

May 20/no changes at the SLV. Inventory rests at 317.93 million oz/

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 20/2015   no change in inventory/SLV inventory 317.930 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 7.7% percent to NAV in usa funds and Negative 7.9% to NAV for Cdn funds!!!!!!!

Percentage of fund in gold 60.7%

Percentage of fund in silver:38.9%

cash .4%

( May 20/2015)

 

2. Sprott silver fund (PSLV): Premium to NAV falls to-0.18%!!!!! NAV (May 20/2015)

3. Sprott gold fund (PHYS): premium to NAV rises to -14% to NAV(May 20/2015

Note: Sprott silver trust back  into negative territory at -18%.

Sprott physical gold trust is back into negative territory at -.14%

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)

It’s Time to Hold More Cash and Buy Gold

 

– Bank of America advises owning gold
– Markets in “Twilight Zone” transition period
– Fed policy normalisation poses risks
– Own gold and cash to protect against “cleansing drop in asset prices”
– Data show markets disconnected from reality
– Fragile system vulnerable to shock
– Gold is hedge against systemic risks

goldcore_chart3_20-05-15
Gold is a regarded as a hedge against market turbulence by Bank of America who, in a note to clients, advised holding gold and paper currency at this time.

Bloomberg report that Bank of America Merrill Lynch describe the markets as being in a “Twilight Zone” – the zone between the end of QE and the Fed beginning to raise rates to try to bring normality back into the markets.

The note highlights two problems with raising rates which are prolonging this sojourn in the Twilight Zone. The first is that the real economy in the U.S. is not currently strong enough to withstand a rise in interest rates.

The second is that raising rates could cause a shock to the markets and the economy as the practically free money juicing the markets comes at a more realistic cost and some government, corporate and household debts become unserviceable.

For these reasons, Bank of America believe that the Fed is far from taking action to return the markets to normality and “the investment backdrop will likely continue to be cursed by mediocre returns, volatile trading rotation, correlation breakdowns and flash crashes.”

To deal with this they advocate adding gold to one’s portfolio along with higher levels of cash. Citing factors such as liquidity, profits, technological disruption, regulation, and income inequality they say there exists a potential for a “cleansing drop in asset prices.”

goldcore_chart1_20-05-15

The note also indicates that data shows that the stock markets in the U.S. are somewhat disconnected from reality. While investors are apparently optimistic there is a large amount of cash “on the sidelines”. Their chart shows that the high levels of cash currently in reserve actually correspond to periods of extreme pessimism in recent years.

They note the anomaly of near record high stock prices while equity funds haemorrhage cash. “U.S. equity funds have suffered $100 billion of outflows in 2015 while the S&P 500 is near all-time highs”. They put the outflow down to U.S. investors putting cash into European and Japanese equities.

On the other hand, “buying from those not captured in flow data (sovereign wealth funds, pension funds and central banks) could be what’s giving U.S. equity indices a boost.”

goldcore_chart2_20-05-15

The note concludes that the outlook for the markets over the summer is not favourable,

“The summer months offer a lose-lose proposition for risk assets: either the macro improves and the Fed gets to hike, which will at least temporarily cause volatility; or more ominously for consensus positioning, the macro does not recover, in which case EPS downgrades drag risk-assets lower.”

For a host of disparate reasons we cover here consistently – ranging from geopolitical tensions and currency wars to gargantuan unpayable debt and other macro-economic fundamentals – we believe the entire interconnected global economic, financial and monetary systems to be extremely fragile.

As policy makers lurch from crisis to crisis it seems certain that, at some point, their ability to control the outcome of a particular shock will be wanting. History shows that crises usually spring from seemingly minor events. A correction in the stock markets – should it occur – may turn out to be a “cleansing”. But it may precipitate a larger, unforeseen crisis given the fragile state of the system.

In the event of such a crisis – and given the insane levels of debt now extant across the globe there is potential for a serious crisis – physical gold stored outside of the banking system will perform its time-honoured function of protecting wealth.

We offer clients fully, segregated accounts with the most reliable vaults in the world in safe jurisdictions such as Switzerland and Singapore.

Read the storage guides below:

Essential Guide to Gold Storage in Switzerland

Essential Guide to Gold Storage in Singapore

MARKET UPDATE

Today’s AM LBMA Gold Price was USD 1,206.75, EUR 1,085.33 and GBP 777.57 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,219.65, EUR 1,090.24 and GBP 785.31 per ounce.

Gold fell $17.40 or 1.4 percent to $$1,208.20 an ounce on yesterday, and silver slid $0.56 or 3.17 percent to $17.12 an ounce.

Yesterday, the gold price slipped for the first time in five days after an upside surprise in US housing data bolstered the U.S. dollar.

April building permits came in at 1.14 million surpassing the estimate 1.06 million and housing starts also beat expectations  at 1.135 million versus the analyst forecast of 1.02 million. In addition to the housing data the U.S. dollar was also strengthened on the news that the EU is going to ramp up their QE to buy more bonds in the next two months.

The U.S. FOMC meeting minutes from the April 28-29 meeting will be released this evening at 1800 GMT. Investors will be looking for any clues on the timing of the Fed’s first interest rate hike in nearly ten years.

Gold in Singapore near the end of trading fell 0.3 percent to $1,204 an ounce.

Greece’s next deadline is June 5th for a 305 million payment due to the IMF. They will not be able to meet the deadline without a cash for reform deal with their European Union counterparts and the IMF.

In late morning European trading gold is at $1,208.30 an ounce down 0.10%. Silver is off slightly 0.01 percent at $17.12, an ounce, while platinum is up 0.10 percent at $1,154.50 an ounce.

 

end

 

Indian citizens are too smart to fall for this scheme:

(courtesy First Post/India/GATA)

Why India’s latest gold paperization scheme will fail like the last one

Section:

Gold Monetization: Tax-free Interest on Deposits Is Good but Scheme May Fall Short on Many Counts

By S. Murlidharan
Firstpost, Noida, India
Wednesday, May 20, 2015

http://www.firstpost.com/business/gold-monetisation-tax-free-interest-on…

From a forbidding level, except for temples and rich persons, of 500 grams, the just released draft paper allows one to deposit gold as low as 30 grams with banks and earn interest reckoned also in gold.

To wit, if a bank offers to pay 1 percent interest and you have deposited 100 grams, at the end of the year, which is the minimum term for which a lot of 30 grams and more has to be deposited, your gold account would have grown to 101 grams.

There will not be any tax on the monetary value of one gram of gold earned as interest. Nor would there be any capital gains tax on the redemption amount or gold received.In other words, if you had deposited 100 grams valued at Rs 2,500 a gram for one year at the end of which you get back the same gold valued now at Rs 2,600 a gram either in gold or in cash, the extra Rs 100 per gram will not attract capital gains tax.

While exemption from capital gains tax is a continuation of the same policy, the exemption proposed on interest is new, and could be the much-needed sweetener to an extent.

Banks are free to choose the rate of interest which is good for competition and depositors. So far so good.

The moot question is will the inhibitions that marred the earlier gold deposit scheme vanish. The answer sadly is in the negative.

The metal would be melted as hitherto much to the dismay and chagrin of women folk, to whom melting mangal sutra for example is abshagun, inauspicious and a strict no-no. That our ladies routinely lose out to the wicked jewelers on account of wastage but are finicky about melting on sentimental grounds need not detain us.

The tax exemptions mean a lot for those in the 30% income tax bracket as it would heighten the post-tax return on investments but temples and shrines like Tirumala Tirupati Dewastanam (TTD), Shirdi Sai Baba Trust, Mata Vaishneo Devi trust etc. are in any case tax-exempt.

And there is no guarantee that tax sleuths will not come calling hot on deposit, asking for the source, the irritant that bedeviled the earlier schemes as well.

Black money in this country finds sanctuary in real estate and gold. Gold has never come tumbling out of cupboards, lofts, and lockers enticed by interest, which pales before the tax consequences.

It is not also clear why an account holder should state upfront at the time of deposit what he wants on redemption — cash or gold. In all fairness, she should have been allowed this choice at the point of redemption.

There could be other avoidable troubles as well when the process is initiated. First, one has to find the nearest BIS-approved hallmark assaying center for valuation.

The valuation certificate along with KYC norms fulfillment at the bank would lead to the next step — melting. It is not clear if bank branches operating the scheme would all have melting facilities. It would have been better if assaying centres did the job of melting as well.

In any case, it is heartening to note from the draft that melting will not take more than 3 to 4 hours which is a vast improvement over the huge time taken in sending jewelry and gold to smelters in Italy, France, etc. earlier.

All in all it’s old wine in new bottle except that the bottle is a more conveniently sized 30-gram container. But it is unlikely that even a minuscule part of the guessstimated 20,000 metric tonnes of gold the country has is going to come into circulation and apply the brakes on gold imports that accentuate our current account deficit.

Under the extant scheme, hardly 4,000 kilograms have reportedly been mobilised, a drop in the ocean. Would higher interest engendered by competition do the trick?

But banks would be skating on thin ice, with wafer-thin margins that additionally depend on the price of the yellow metal in the interregnum between deposit and redemption when banks get freedom to play around with depositors’ gold.

 

end

(courtesy Chris Powell/GATA)

Correspondence: How do the market riggers rationalize what they do?

Section:

Tuesday, May 19, 2015

Dear GATA:

I just listened to GATA Secretary/Treasurer Chris Powell’s interview with Dave Kranzler and Rory Hall on last week’s “Shadow of Truth” program —

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

— in which, at the end, Powell gave reasons for what GATA is doing: free markets, democracy, and transparency in central banking, rather than just making money on a currency reset.

I must admit that I would like to make some money with my gold and silver but agree with those higher reasons.

My question: Why are the guys on the other side so evil and how do they rationalize what they are doing? And are there people who are just as powerful as “the boyz” who can fix this mess? Have we just lost our way? Do we care anymore?

I care and so does GATA, so thanks for all you do.

— T.W.

* * *

Dear T.W.:

Thanks for your kind note. GATA’s people also are hoping to make some money as a result of doing the right thing, though of course lately it has not been very successful.

As for the people on the other side, it would be odd if they were consciously evil. Maybe they sincerely believe that countries and the entire world should be ruled by a secret and unaccountable elite. Since they are the elite, it may be easier for them to believe this, and, after all, with so much social disintegration around us, democracy isn’t as persuasive as it once was.

I’m sure that for the people at the Federal Reserve and Treasury Department it’s also their conception of patriotism, though I think they confuse it with imperialism. If we as Americans are true to our national principles, those principles will be enough for us to lead the world and we won’t need currency market rigging, which corrupts us as badly as it oppresses others.

Who has the power to set things right? I think the great mass of the people always has the power. See the reflection by Orwell’s Winston Smith in “1984” at the beginning of the chapter here:

http://www.george-orwell.org/1984/6.html

But more likely things will be set right, or at least set in a different direction, as the result of strife among almost equally unattractive governments.

Weak as we in the middle are, we may be able to exploit this division. In any case we do what we can and will press on in the morning.

Thanks again for your support.

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

 

end

 

Turd Ferguson reports on the acceleration in the physical gold drain at the GLD of which I report on everyday.

(courtesy TF Metals/Turd Ferguson/GATA)

 

TF Metals Report: GLD drain accelerates again

Section:

1p ET Tuesday, May 19, 2015

Dear Friend of GATA and Gold:

Reported gold inventory in the exchange-traded fund GLD continues to seem like a clue to stress in the gold market, the TF Metals Report’s Turd Ferguson writes today, with that inventory possibly being raided by bullion banks to quell rallies in the gold price. Ferguson’s commentary is headlined “GLD Drain Accelerates Again” and it’s posted at the TF Metals Report here:

http://www.tfmetalsreport.com/blog/6855/gld-drain-accelerates-again

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

end

 

Dave Kranzler on gold and silver:

(courtesy Dave Kranzler/ iRD)

Silver – And Gold – Are Both Acting Very Bullish

Reader tesitmonial:  You’ve written a great report about the “Emerging Silver Producer.” The key is higher silver price but i am concerned about the price of silver though.

I hold my accounts with Sprott and as you know they are super bullish on silver. You have written a couple articles about silver with a positive outlook yourself. I still see the forces who is in control of the prices as too powerful, look what happened yesterday. The ability to drive prices down within one trading (below 17) and extremely negative corresponding move in the mining shares. Its hard to see how silver can be fairly traded in the current system. If you are a producer, you are completely helpless, their fate lies in the goodwill of a view entities who can destroy the business if it suits them.   

This person just read my “Emerging Silver Producer” research report but is concerned about the market manipulation of the precious metals.  This apprehension is very understandable.

However, after 14 years of full-time involvement in the precious metals sector, I believe the next big move – the second leg of the bull market, if you will – is  in its nascence.  This was my reply:

The key to yesterday’s price action was that silver held above $17 going into the Comex close.  Gold, and especially silver, are behaving differently right now (click to enlarge).
10minSilver
Whereas since their respective peaks in 2011, the market action was characterized by “short all moves higher and cover manipulated price smashings,” now it appears and “feels” like smacks are being bought and and rallies traded but not shorted (other than by the bullion banks feeding paper into the market to cap rallies).

Also, many of us believe that there is a supply issue with silver and gold.  12.7 million ounces of silver have been removed from the SLV vaults since April 27th.  55 tonnes of gold have been removed from GLD since Feb 5th.  This is despite the fact that both metals have moved higher in the time period.

The metals have been moving higher in that time period and the GLD/SLV inventories should have, worst case, remained flat.  The Comex gold o/i has shot up 107 tonnes since Feb 5.  This means there’s investor/trader demand.  It also means that GLD more than likely should have been adding gold.

For the last 4 years, the financial media has made a point of broadcasting “investor selling” in precious metals by pointing at the metal decline in GLD.  Why is the price going up, investor demand going up, yet the metal stock in GLD is going down?  Where is the media on this?

This is not supposed to happen.  Higher prices mean more investor demand.  More investor demand means that the inventories of SLV and GLD should be at best flat, but more likely increasing – not being liquidated.  Someone wants/needs that physical metal. 

Yes, the bullion banks are still somewhat in control of the price of gold/silver using paper derivatives.  But it appears as if they are losing their ability to cap the prices.  I was chatting with john Embry yesterday and we both agree on that.  We can’t figure out where the silver is coming from to make deliveries other than from SLV.  The massive withdrawals from SLV in the last 3 weeks would confirm that.

Is the next leg about to start?  Who knows…BUT, I vividly recall back in 2003 or thereabouts, right before gold was ready to launch over $400 and start an 8 year rally to $1900, Robert Prechter was overtly vociferous about calling for gold to fall to $50.

 Currently, Harry Dent – who for reasons unbeknownst to me has an avid following – is loudly proclaiming that gold’s next move is down to $700.  “The lady doth protests too much, methinks.”  Harry Dent, like Robert Prechter, is a scam artist who’s sole purpose is to sell research.  By the way, where has Prechter been lately on gold…

end

 

Rob Kirby discusses what would happen if China states that they have 30,000 tonnes of gold:

 

(courtesy Rob Kirby/Greg Hunter/USAWatchdog)

China Gold Could Cause Tsunami of Dollars in US-Rob Kirby

4thBy Greg Hunter’s USAWatchdog.com

Gold expert Rob Kirby arranges deliveries of the yellow metal to his clients measured by the ton.  Kirby says news that China may disclose it has 30,000 tons of gold will be devastating for the West.  Kirby contends, “We could be fast approaching the moment when the tide is going to turn and go out, and we are going to find out who’s wearing a bathing suit.  I think that time is fast approaching, if it is not here already.”  Kirby also says, “I think the implied message is we are going to show you how much we have, and then you are going to have to show us how much you have. . . . America, very likely doesn’t have, in my view, doesn’t have the gold they claim to have.  They also probably spent a lot of other people’s gold in safe keeping.”

What would happen to the U.S. dollar if China revealed a vast holding of physical gold?  Kirby contends, “If this would destabilize the dollar enough . . . it could cause a sudden drop in the U.S. dollar, which could signal a tsunami of dollars coming back to America and could set off a very, very ugly, ugly bout of inflation, which could build into a hyperinflation in America.  This would bring social unrest in America.  This is the social unrest the U.S. military and the Pentagon have been saying is inevitable and is coming to America.  This is exactly the kind of backdrop you would expect to have before this would occur.”

Kirby points out, “The problem is our global capital markets have become criminal cesspools.  Our global capital markets right now are crime scenes.  The regulatory regime installed by the leadership of America to prevent this all from happening has been vacant.  They are derelict, and they are part of the problem.  It starts with the repeal of the Glass Steagall Act back in the late 1990’s.  You got to look back to see the context of where this train left the tracks.  This is not a derailment.  The derailment occurred a long time ago.  Right now, the engine of the train is in the middle of a corn field, and it’s still moving.”

On Secretary of State John Kerry’s recent meeting with Russian President Vladimir Putin, Kirby says, “I think increasingly the West is trying to finesse a very bad card hand.  When you know you are playing a weakened hand . . . your bets are going to become less aggressive, and you are going to adopt more of a defensive posture and possibly a pleading, and it might get to a begging posture at some point in time. . . . I feel they may want to find some sort of diplomatic track other than what the neocons have been prescribing all along.  I think this bellicose belligerent track leads us down the road to nothing but war.  I think maybe it’s beginning to hit home . . . how real and palpable the possibilities of war are becoming.  If we get war, it will be total war.  This is the track the neocons have put America on and the rest of the world.  Maybe they are having a come-to-Jesus moment.”

On the timing of the next financial calamity, Kirby says, “It wouldn’t have shocked me if it happened last fall.  The only thing I can say empirically is we have been kicking the can down the road for a long time, and when you kick cans down roads . . . none of them go forever, and it comes to a point you run out of road to kick the can, that is assuming that nobody comes in and takes the can away.”

Kirby warns, “People who have their net worth solely in financial assets, paper instruments, are going to witness, at some point, an extreme reduction in their standard of living.  That is a fait accompli.  It is going to happen.  I don’t know what day that is going to happen, but that is a guaranteed outcome from where we are today from the trajectory we are on right now.”

Join Greg Hunter as he goes One-on-One with Rob Kirby who gives what he calls “proprietary macroeconomic research” on KirbyAnalytics.com. 

(There is much more in the video interview.)

After the Interview:

Kirby says anyone who is not aware and prepared for what is coming is going to feel like they have been “hit by a train.”  Kirby has a newsletter by subscription for a fee of $145 per year.  If you are interested in subscribing please click here.  

end

 

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

 

1 Chinese yuan vs USA dollar/yuan strengthens to 6.2063/Shanghai bourse green and Hang Sang: red

2 Nikkei closed up by 170.18 points or .85%

3. Europe stocks mixed/USA dollar index up to 95.55/Euro falls to 1.1098/

3b Japan 10 year bond yield: slight rises to .40% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.96/

3c Nikkei still just above 20,000

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

3e WTI 58.63 and Brent:  64.92

3f Gold up/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 up for WTI and up for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to 60 basis points. German bunds in negative yields from 4 years out.

Except Greece which sees its 2 year rate fall slightly to 22.78%/Greek stocks up 0.65%/ still expect continual bank runs on Greek banks./Greek default inevitable/

3j Greek 10 year bond yield rises to: 11.02%

3k Gold at 1208.60 dollars/silver $17.15

3l USA vs Russian rouble; (Russian rouble down 1/4 rouble/dollar in value) 50.03 , 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 .9390 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0424 well below the floor set by the Swiss Finance Minister.

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

3r the 4 year German bund remains in negative territory with the 10 year moving further away from negativity at +.60/

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 2.26% early this morning. Thirty year rate well above 3% at 3.05% / yield curve flatten/foreshadowing recession.

 

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

 

(courtesy zero hedge/Jim Reid Deutsche bank)

 

Futures Flat With Greece In Spotlight; UBS Reveals Rigging Settlement; Inventory Surge Grows Japan GDP

 

The only remarkable macroeconomic news overnight was out of Japan where we got the Q1 GDP print of 2.4% coming in well above consensus of 1.6%, and higher than the 1.1% in Q4. Did it not snow in Japan this winter? Does Japan already use double, and maybe triple, “seasonally-adjusted” data? We don’t know, but we do know that both Japan and Europe have grown far faster than the US in the first quarter.

And yet after briefly sliding on this “better than expected” news, the USDJPY ramped up to a multi-month high as the algos seemingly smelled a rat. And indeed, even a cursory look behind the numbers revealed that just like in the US, well over 80% of the “growth” was as a result of a massive inventory restocking, which contributed to 2.0% of the final 2.4% print, suggesting that Q2 GDP may once again be negative if imports continue to be a substantial detractor to growth.

Aside from Japan, it has been a quiet session, with an odd plunge in the EURUSD right around the time the ECB released its delayed press release from the Coeure private meeting with hedge funds the day before. One wonders what the ECB may have leaked to asset managers this time. We will never know, of course, until the “people’s” central bank decides to advise its non-hedge fund clients.

Volumes remain depressingly low which as even the dumbest algo by now know is a green light to resume levitation, and sure enough, after treading water overnight, the ES is now starting its gradual, daily climb higher.

On the key news front, we finally got the terms of the latest and greatest UBS as a “recidivist” settlement with the US government, over Libor, Gold, FX rigging, this time paying $545 million, getting slapped with a 3 year probation this time – one which the bank will promptly flaunt – and not getting criminal charged. In other words, business as usual.

The main other newsflow continues to revolve around Greece, which again reiterated it will not make its June 5 payment to the IMF without more aid (from the IMF) and where the ECB’s Governing Council is set to meet today to debate whether to tighten rules on Greek access to Emergency Liquidity Assistance as the country veers toward default. As Bloomberg reports, the ECB may “imminently” raise discount it applies to collateral Greek banks pledge in exchange for Emergency Liquidity Assistance, Kathimerini newspaper reports, without citing anyone; ECB will, at the same time, expand pool of assets it accepts as collateral.

According to an MNI leak, which lately have been 100% wrong as they serve merely some conflicted hedge fund “source” to exit positions, the Bank of Greece has been said to accept an extra €6 billion in ELA, with the ECB somehow agreeing to accept government-guaranteed bank bonds as collateral. Somehow we very much doubt this.

Far more notable was a note by Moodys, which offloaded on Greek banks and said there is a high likelihood of a deposit freeze for Greek banks. Now even the rating agencies are desperate to accelerate the Greek bank run in hopes of overthrowing the government.

The key event looking ahead will be the FOMC Minutes for the April 28-29 meeting. Look for any instance of “double seasonal adjustment” which will be codeword that the Fed will raise rates oblivious of what the actual data represents.

Asian equities traded mixed following a lacklustre Wall Street close (S&P: -0.06%), as investors squared positions ahead of the FOMC minutes release. Shanghai Comp (+0.65%) continued to outperform, as participants eye the April 28th highs (4,572.39), this time lifted by IT, while the Hang Seng (-0.39%) was dragged lower by energy stocks. Nikkei 225 (+0.85%) touched a fresh 15yr high underpinned by Japanese Q1 Prelim GDP data, which showed the fastest quarterly growth in a year (0.6% vs. Exp. 0.4%, Prev. 0.4%). The ASX 200 (-0.09%) briefly broke below its 200 DMA in volatile trade, after a technical break below long-term support at 5,600.

Ahead of tomorrow’s Eurogroup two-day showdown on Greece, reports this morning in Greek press suggested raising haircuts and widening the asset pool accepted by the ECB are to be discussed at today’s ECB non-monetary policy meeting. This, as well as comments from the Greek Parliamentary Speaker that if a deal is not reached, Greece will not pay its June 5th debt obligation to the IMF weighed on equities, while bolstering Bunds.

Major European equity indices all now trade in the red (Euro Stoxx: -0.35%) after opening in mixed territory as news surrounding Greece guides sentiment, with the European calendar fairly light with the exception of this news and BoE minutes. US earnings today include Target and Lowe’s premarket and Salesforce.com aftermarket.

In fixed income markets, Bunds (+16 ticks) continue to outperform their US equivalent with USTs (-3 ticks) remaining weighed on by the large corporate issuance this month. Any source comments regarding Greece throughout the session could prove significant as the ECB are not expected to make any official statement, with any potential decisions to make their way to the market via source comments.

EUR/USD broke below its May low this morning after falling 90 pips on the aforementioned headline regarding Greece, however pared some of these losses throughout the session helped by corporate demand following the news that Altice (+7.5%) are to acquire Suddenlink in a deal which could be worth USD 8bln-10bln including debt. Elsewhere, BoE minutes proved slightly hawkish, stating that two members on the committee have stated their decision was finely balanced between pushing for a rate hike and keeping rates on hold thereby seeing some upside in GBP, despite the vote itself showing 9-0 as expected.

Of note, Fed’s Evans (Voter, Dove) stated this morning that if wage growth were to increase, it could be persuasive of an earlier rate rise however he does not anticipate strong wage growth.

The commodity complex has seen strength in WTI and Brent crude futures this morning on the back of a larger drawdown than previous in yesterday’s API inventory (-5200K vs. Prev. -2000K) ahead of today’s DoE inventories scheduled for 1530GMT, with the headline expected to show a drawdown of 1750. Deutsche Bank became the latest investment bank to adopt a bearish stance on oil after Goldman Sachs earlier in the week and expect the recent rally to subside as the bounce back in oil prices will be mitigated by the stronger USD, with OPEC expected to maintain their output in June.

In Summary: European shares little changed having risen from intraday lows with the real estate and autos sectors underperforming and basic resources, telco outperforming. Japanese 1Q GDP ahead of expectations. Euro declines for third day against dollar. Portugal sells 6-month bills at negative yield for first time. Bank of England says interest-rate vote was unanimous. The German and French markets are the worst-performing larger bourses, the Swiss the best. Japanese 10yr  bond yields rise; U.K. yields increase. Commodities gain, with nickel, zinc underperforming and Brent crude outperforming. U.S. mortgage applications due later.

Market Wrap

  • S&P 500 futures unchanged at 2124
  • Stoxx 600 down 0.1% to 404.6
  • US 10Yr yield down 2bps to 2.27%
  • German 10Yr yield down 1bps to 0.59%
  • MSCI Asia Pacific little changed at 153
  • Gold spot up 0.1% to $1208.5/oz
  • Eurostoxx 50 -0.3%, FTSE 100 -0%, CAC 40 -0.4%, DAX -0.4%, IBEX -0.1%, FTSEMIB -0.3%, SMI +0.1%
  • Asian stocks little changed with the Kospi outperforming and the Hang Seng underperforming; MSCI Asia Pacific little changed at 153
  • Nikkei 225 up 0.8%, Hang Seng down 0.4%, Kospi up 0.9%, Shanghai Composite up 0.7%, ASX down 0.1%, Sensex up 0.7%
  • 6 out of 10 sectors rise with health care, utilities outperforming and energy, materials underperforming
  • Euro down 0.3% to $1.1117
  • Dollar Index up 0.23% to 95.48
  • Italian 10Yr yield up 1bps to 1.81%
  • Spanish 10Yr yield up 2bps to 1.77%
  • French 10Yr yield down 0bps to 0.87%
  • S&P GSCI Index up 0.6% to 439.9
  • Brent Futures up 1.3% to $64.9/bbl, WTI Futures up 1% to $58.6/bbl
  • LME 3m Copper down 0.2% to $6210/MT
  • LME 3m Nickel down 1.5% to $12900/MT
  • Wheat futures down 0.4% to 508.3 USd/bu

Bulletin Headline Summary from Bloomberg and RanSquawk

  • Greek press suggest raising haircuts and widening the asset pool accepted by the ECB are to be discussed at today’s ECB non-monetary policy meeting
  • BoE minutes proved slightly hawkish, stating that two members on the committee have stated their decision was finely balanced between pushing for a rate hike and keeping rates on hold
  • Today’s highlights include Fed minutes, DoE inventories and earnings from Target and Lowe’s
  • Treasuries gain before Fed releases minutes of April FOMC meeting; may be seen by some as leaning dovish and/or slightly more optimistic, based on published research.
  • ECB’s Governing Council meets today to debate whether to tighten rules on Greek access to Emergency Liquidity Assistance as the country veers toward default
  • ECB may “imminently” raise discount it applies to collateral Greek banks pledge in exchange for Emergency Liquidity Assistance, Kathimerini newspaper reports, without citing anyone; ECB will, at the same time, expand pool of assets it accepts as collateral
  • Greek government said to mull imposing 0.1%-0.2% fee on bank transactions, Kathimerini newspaper reports, without citing anyone. Fee won’t include ATM withdrawals, transactions up to EU500; Greek govt projects EU300m-EU600m annual revenue from measure
  • Portugal sale of $300m 182-day bills drew an average yield of -0.002%, first time the debt has drawn a negative yield
  • UBS Group AG said its main unit will plead guilty to fraud in the U.S. for manipulating Libor and pay $203m in fresh fines after the Swiss bank violated an agreement that had allowed it to avoid prosecution
  • Japan’s economy expanded 2.4% in 1Q, more than forecast, as businesses increased spending and built up inventories after a recession last year
  • Yemen’s exiled leaders met in Saudi Arabia’s capital to discuss conflict resolution and post-war rebuilding, as analysts warned that their plans suggest a growing disconnect from the realities in the country
  • The Obama administration threatened to veto trade legislation if it includes a proposed amendment aimed at preventing currency manipulation, with Treasury Secretary Jacob J. Lew recommending such action in a letter to Senate leaders
  • Sovereign bond yields mostly higher.  Asian stocks gain, European stocks, U.S. equity-index futures decline. Crude oil higher; gold little changed, copper lower

 

DB’s Jim Reid completes the overnight recap

 

We started the week speculating that it’s possible (although not the most likely scenario) that the US economy may have shrunk in H1 2015. 48 hours later and we’ve seen the San Fran Fed paper on faulty Q1 seasonals gather traction and yesterday we saw blockbuster housing starts and permits so perhaps we’re actually in boom time? However before we crack open the champagne its worth pointing out that the Atlanta Fed Q2 GDPNow has stayed at 0.7% after the housing numbers partly because of a big downgrade in real business fixed investment growth (-0.6% to -2.3%) following last Friday’s IP report.

So clarity on the US economy remains elusive for now and no doubt the FOMC minutes from April meeting released later today will add to the confusion. It was another day to not trade/ or trade bonds depending on which side of the swing you were. As before the housing related sell-off we saw a big rally in the early European session due to remarks from ECB executive board member Benoit Coeure that they are going to be accelerating bond buying ahead of expected low liquidity in the summer. European bonds stayed well bid into the close but US Treasuries were a lot more volatile as the initial 5bps of tightening post Coeure comments to an intraday low of 2.181% was quickly pared back following the housing data to reach an intraday high of 2.301%. Yields eventually closed near these highs at 2.289%, a +5.5bps move higher on the previous close but with an intraday range of 12bps. 10y Bund yields actually fell some 10bps immediately following Coeure’s comments to an intraday low of 0.550%, before then retracting slightly as Treasury yields moved higher to eventually close at 0.592% – still 5.4bps lower on the day. Other core European markets followed a similar trend in price action as similar maturity yields in France (-6.3bps), Netherlands (-6.0bps) and Switzerland (-3.8bps) moved lower. The peripherals generally outperformed, closing 7-9bps lower.

Before we dig further into yesterday’s data, refreshing our screens this morning markets in Asia are off to a strong start, supported partly by a better than expected Q1 GDP reading in Japan. The +2.4% annualized qoq print came in well ahead of market expectations of +1.6% qoq, and is up from 1.1% last quarter. Our colleagues in Japan note however that despite the healthy headline reading, the contents are perhaps more disappointing with weak growth in real final sales as a result of a build-up of inventories, as well as a temporary boost in nominal GDP growth as a result of a fall in oil prices in particular. The Nikkei (+0.98%) and Topix (+0.78%) are both higher as we type, in turn helped by a fifth consecutive day of weakness for the Yen, while the Shanghai Comp (+1.33%) and CSI 300 (+1.23%) have continued their strong run. The Kospi (+0.75%) is also firmer while 10y Treasury yields (-1.8bps) have retraced some of yesterday’s move higher.

Staying in the region, our China Chief Economist Zhiwei Zhang noted yesterday that he now believes that the risks of a hardlanding in H2 have been reduced in light of the loosening of control on financing of local government financing vehicles last Friday. He highlights in particular that the move is more important that a rate cut as its boosts investment much more effectively, reduces policy risk and had a certain ‘surprise element’ to it. Zhiwei continues to expect growth recovery in H2 to 7.1% as a baseline case, but now notes that risks are no longer tilted to the downside and are instead more balanced. Keeping with our ‘plate spinning’ analogy it seems China are the latest country to give the plates another big spin trying to offset the natural effects of gravity. It should see some success in the near-term but will it just make the end game more damaging to have another big stimulus round now?

Back to the data in the US yesterday, the April readings for both housing starts (+20.2% mom vs. +9.6% expected) and building permits (+10.1% mom vs. +2.1% expected) came in well above market expectations to paint a rosier picture for the sector so far this quarter and appears to have put an end to the weather-related weakness that affected much of the housing market data in Q1. The monthly reading for housing starts saw the annualized rate jump to 1.14m from 944k back in March which marks the highest level since November 2007. The bumper building permits reading saw the annualized rate tick up to 1.14m, from 1.04m back in March to mark the highest rate since June 2008.

Yesterday’s data certainly helped support a stronger day for the Dollar as the DXY closed +1.11% for its second consecutive day of gains and also the second consecutive +1% move higher. The two-day move higher for the Dollar has in fact taken the DXY back into positive territory (+0.71%) for the month of May. US equities were a tad more mixed yesterday as indices traded between gains and losses for the most part. The Dow (+0.07%) ended slightly higher, however the S&P 500 (-0.06%) declined modestly off Monday’s record high as energy stocks (-1.23%) in particular helped drag the index lower following a fall for both WTI (-3.74%) and Brent (-3.40%). Gold (-1.44%) also added to the weakness in the commodity complex yesterday.

In the European session yesterday, stocks were certainly given a lift post Coeure’s comments as the Stoxx 600 (+1.68%), DAX (+2.23%) and CAC (+2.09%) all continued their stronger start to the week. The comments also sent the Euro lower as the single currency ended the day -1.46% versus the Dollar at $1.115. Touching on Coeure’s comments in more detail, the ECB board member said that the ECB is set to ‘moderately frontload its purchase activity in May and June, which will allow us to maintain our monthly average of €60bn, while having to buy less in the holiday period’ given the seasonal liquidity issues around that time. He then when on to say than the frontloading before summer may well be complemented by some backloading in September when liquidity is expected to improve again. Coeure also noted that the recent moves in the bond market are ‘no cause for concern’ and instead ‘reflects a market correction, recreates two-way risk in the market and reflects the fact that, as our program takes effect, some of the more pessimistic assumptions of future growth and inflation trends are being revised’.

With the bulk of the headlines being taken up by the US data and Coeure’s comments, yesterday’s negative CPI print out of the UK was put to one side somewhat. The lower than expected +0.2% mom (vs. +0.4% expected) reading for April was enough to push the annualized rate down to -0.1% yoy. This was the first yoy deflation reading for 55 years having teetered on the edge over the previous two months. The core meanwhile fell to +0.8% yoy, below market consensus of +1.0% with transport services and air and sea fares in particular having the biggest downward effect. The drop in the core is to the lowest since 2001. Sterling declined around 0.8% against the Dollar following the reading while 10y Gilts initially fell as much as 8bps lower in yield, only to then pare those moves and end the day more or less unchanged at 1.946%. Given the expectations that the weakness in inflation is temporary and expected to unwind later this year, the print will unlikely shift rate hike expectations materially from the mid-2016 timeframe, although it perhaps puts greater focus on today’s BoE minutes.

In terms of other data releases yesterday, there were no changes to the final April CPI report for the Euro area with the headline at 0.0% yoy and core at +0.6% yoy. Had it not been for Coeure’s comments meanwhile, the German ZEW survey expectations (41.9 vs. 49.0 expected) for May would have likely had a bigger effect on price action yesterday, however markets were relatively unmoved following the print. The current situations (65.7 vs. 68.0 expected) print also disappointed to the downside however still remains at high levels for the recent range.

Staying in Europe, talks between technical teams from Greece and its creditors continued again yesterday. The ECB’s governing council will today discuss access for Greek banks to the ELA facility which is coming under greater scrutiny as the weeks pass. Yesterday we heard from both German Chancellor Merkel and French PM Hollande pushing for acceleration in talks and citing an end-May deadline. The urgency was reiterated by German finance minister Schaeuble who, while praising Greece for making progress in ‘sub-areas’, also said that negotiations are too slow. Bloomberg headlines suggesting that Greek PM Tsipras had told lawmakers that the proposed tax overhaul plan won’t gain creditors approval and another offer will need to be submitted will only weigh on the time pressures.

In terms of today’s calendar the bulk of today’s focus will of course be on the FOMC minutes of the April meeting due out at 7.00pm BST. This meeting took place before the April payrolls print and weak retail sales report so it’s a little out of date. Before this and in the European timezone we’ve got more Central Bank attention with the Bank of England minutes due out. The only notable data release meanwhile will be German PPI due out first thing this morning.

 

end

 

Beijing has a big problem as investment funds are moving out of China. If they lower the peg rate to the dollar the flow of funds out of the country will increase but will help with exports.  If they raise the rate, then exports will fall but funds will remain in the country.  Quite a dilemma:

(courtesy zero hedge)

Beijing We Have A Problem: China Suffers Record Capital Outflow In Q1

Back on April 18 in “China Sees Largest Capital Outflow In Three Years,” we noted that according to JP Morgan estimates, China saw its fourth consecutive quarter of capital outflows in Q1, bringing the total over the last 12 months to some $300 billion. This is part and parcel of what we have called China’s “currency conundrum” wherein Beijing needs to devalue in order to support the export-driven economy, but can’t for fear of exacerbating capital flight and/or jeopardizing an IMF SDR bid (assuming China is still interested in the latter after Washington’s abject refusal to reform the Fund’s structure), or to put as simply as possible, “devalue too much, and the capital outflows will accelerate, not devalue enough, and the mercantilist economy gets it.”

The official numbers for the first three months of the year are now in and sure enough, China reported a record $159 billion deficit on its capital and financial accounts.

More, via UBS:

FX reserves shrank sharply by USD 113 billion in Q1, following last Q4’s contraction of USD 45 billion and 2014’s annual increase of USD 22 billion. PBC’s FX asset also shrunk by RMB 252 billion in Q1 (vs. last Q4’s fall of RMB 134 billion). Our preliminary estimates show that China saw non-FDI capital outflows of around USD 190 billion in Q1 on a BoP basis. Recent data release showed that China’s capital & financial account (excluding reserve assets) recorded a deficit of USD 159 billion in Q1…

 

In Q1 2015, China saw an even sharper pace of FX reserve contraction, with a negative valuation effect (of around USD 34 billion) and non-FDI capital outflows (of around USD 190 billion) more than offsetting a still sizable trade surplus of goods & service (USD 77 billion) and largely stable net FDI. The main types of non-FDI capital flows include the usual portfolio investment flows, trade credit flows, other foreign borrowing and foreign lending, domestic banks interbank borrowing and offshore lending, interest rate arbitrage flows, and capital flight.

 

Factors driving recent persistent capital outflows likely include: corporates’ increasingly holding on to their FX proceeds due to weaker RMB appreciation expectation; growing market concerns over China’s property downturn and recent weak economic data; weakening or unwinding of interest rate arbitrage capital flows due to the anticipated rise in global interest rates and fall in domestic interest rates; an increased desire by domestic residents to diversify their assets globally; among others.

And as we noted last month, this marks four consecutive quarters of outflows. For Beijing, the implications of the above are clear, although the proper course of action is anything but. Here’s FT:

Capital outflows are complicating efforts by the People’s Bank of China to support the economy through monetary easing. For the past decade, central bank purchases of foreign exchange inflows were the main source of base money creation in China’s banking system. Now, with outflows threatening to shrink the money supply, the central bank is turning to new mechanisms to expand it. 

 

The most important of these is cuts to banks’ required reserve ratio. The PBoC once used RRR rises to restrain excess money growth by forcing commercial banks to keep a chunk of newly created base money on reserve at the central bank, where it is unavailable for lending. Now the PBoC is doing the opposite: cutting the RRR to offset the loss of liquidity caused by capital outflows. 

 

Yet even after RRR cuts totalling 1.5 percentage points this year, the ratio for big banks, at 18.5 per cent, remains far higher than in any other large economy. Most economists believe that for the PBoC to meet its broad M2 money growth target of 12 per cent, further RRR cuts will be necessary.

 

“From the start of this year, capital inflows have been negative. We believe the key factor now restricting effective monetary easing is that the required reserve ratio remains at a high level,” said Liu Liu, macroeconomic analyst at China International Capital Corp.

 

In addition to RRR cuts, the central bank has slashed benchmark rates three times since November. But lower rates could exacerbate capital flight by making Chinese assets less attractive, especially in comparison to the US, where the Federal Reserve is expected to raise interest rates this year.

 

The PBoC’s signal to the market that it intends to hold the renminbi stable has helped prevent the trickle of outflows from becoming a flood.

For those who prefer a visual explanation and are interested to know why all of the above means QE in China is getting more likely by the month, read on.

With each passing data point, we get still more evidence that China’s economy is in trouble…

…but thanks to rising capital outflows…

…Beijing has favored policy rate cuts over devaluation…

…but three benchmark rate cuts since November and two RRR cuts this year aren’t working…

*  *  *

What all of this means — just as we said more than two months ago in “How Beijing Is Responding To A Soaring Dollar” — is that QE in China may be inevitable. Since then, the PBoC has indeed moved in that direction, while still maintaining that outright QE will not be necessary given the number of policy tools at Beijing’s disposal. Shortly after explaining all of the above in March, we went on to suggest that the likely form Chinese QE would take would be the purchase of local government debt (which totals 35% of GDP).

Sure enough, the PBoC ended up announcing a program whereby banks will be allowed to pledge local government bonds for cash which can then be re-lent to the broader economy. While this doesn’t quite constitute QE (it’s akin to the ECB’s LTROs), it is nevertheless a definitive step in that direction and unquestionably represents a foray into “unconventional” policy.

If capital outflows persist over the coming quarters and if economic data continues to come in soft (which it likely will), China will likely first move to cut policy rates further, with sell-side desks projecting at least three more cuts in 2015. Eventually however, that avenue will be exhausted and at that point, we will see if the PBoC’s contention that Chinese QE “doesn’t exist” holds up under pressure.

 

end

 

A good review on the whole Greek situation from Michael Snyder

(courtesy Michael Snyder/EconomicCollapseBlog)

 

Are They About To Confiscate Money From Bank Accounts In Greece Just Like They Did In Cyprus?

Submitted by Michael Snyder via The Economic Collapse blog,

Do you remember what happened when Cyprus decided to defy the EU?  In the end, the entire banking system of the nation collapsed and money was confiscated from private bank accounts.  Well, the nation of Greece is now approaching a similar endgame.  At this point, the Greek government has not received any money from the EU or the IMF since August 2014As you can imagine, that means that Greek government accounts are just about bone dry.

The new Greek government continues to insist that it will never “violate its anti-austerity mandate”, but the screws are tightening.  Right now the unemployment rate in Greece is over 25 percent and the banking system is on the verge of collapse.  It isn’t going to take much to set off a panic, and when it does happen there are already rumors that the EU plans to confiscate money from private bank accounts just like they did in Cyprus.

Throughout this entire multi-year crisis, things have never been this dire for the Greek government.  In fact, Greece came this close to defaulting on a loan payment to the IMF back on May 12th.  And with essentially no money remaining at all, the Greek government is supposed to make several large payments in the weeks ahead

Athens barely made its latest payment(May 12) to the International Monetary Fund (IMF), and it managed to do so only when the government discovered that it could use a reserve account it wasn’t aware of, according to the Greek media.

 

Kathimerini, a Greek daily newspaper, reports that Prime Minister Alexis Tsipras wrote to the IMF’s Christine Lagarde warning that Greece would not be able to make that May payment, worth €762 million ($871 million, £554.2 million).

 

Pension and civil-servant pay packets are due at the end of the month, and based on this news Athens may struggle to pay them. Even if it does manage that, on June 5 the country owes another €305 million to the IMF.

 

In the two weeks following June 5 there are another three payments, bringing the June total to the IMF to over €1.5 billion.

The Germans and the other financial hawks in the EU are counting on these looming payment deadlines to force Greece into a deal.

Meanwhile, Greek banks also find themselves in very hot water.  Many of them are almost totally out of collateral, and without outside intervention some of them could start collapsing within weeks.  The following comes from Bloomberg

Greek banks are running short on the collateral they need to stay alive, a crisis that could help force Prime Minister Alexis Tsipras’s hand after weeks of brinkmanship with creditors.

 

As deposits flee the financial system, lenders use collateral parked at the Greek central bank to tap more and more emergency liquidity every week. In a worst-case scenario, that lifeline will be maxed out within three weeks, pushing banks toward insolvency, some economists say.

 

“The point where collateral is exhausted is likely to be near,” JPMorgan Chase Bank analysts Malcolm Barr and David Mackie wrote in a note to clients May 15. “Pressures on central government cash flow, pressures on the banking system, and the political timetableare all converging on late May-early June.”

If no agreement is reached, by this time next month Greece could be plunging into a Cyprus-style crisis or worse.

And if that does happen, there are already rumblings that a “Cyprus-style solution” will be imposed.  Just consider what James Turk recently told King World News

The troika of the EU, ECB and IMF have not yet pulled the plug on the Greek banks, but the following quote in the Financial Times from this weekend should be a warning to anyone who still has money on deposit in that country: “The idea of a “Cyprus-like” presentation to Greek authorities has gained traction among some eurozone finance ministers, according to one official involved in the talks.”

 

The ECB is up to its eyeballs swimming in unpayable Greek debt that it holds. The ECB is not going to take a loss on this Greek paper on its books. Because Greece does not have the financial capacity to repay what is now about €112 billion of credit exposure to Greece on the ECB’s books, the ECB has only two alternatives.

 

It can push the €112 billion of Greek debt it holds to the national central banks of the Eurozone and on to the backs of the taxpayers in those countries, which it politically untenable. Or it can confiscate depositor money in Greek banks, like it did in Cyprus and as the FT has now reported.

Needless to say, such a move would be likely to set off financial panic all over Europe.

Could we actually see such a thing?

Well, let’s recall that back in April we already saw the Greek government forcibly grab “idle” cash from the bank accounts of regional governments and pension funds.  The following is from a Bloomberg report about that event…

Running out of other options, Greek Prime Minister Alexis Tsipras ordered local governments and central government entities to move their cash balances to the central bank for investment in short-term state debt.

 

The decree to confiscate reserves held in commercial banks and transfer them to the Bank of Greece could raise as much as 2 billion euros ($2.15 billion), according to two people familiar with the decision. The money is needed to pay salaries and pensions at the end of the month, the people said.

 

“It is a politically and institutionally unacceptable decision,” Giorgos Patoulis, mayor of the city of Marousi and president of the Central Union of Municipalities and Communities of Greece, said in a statement on Monday.“No government to date has dared to touch the money of municipalities.”

Grabbing cash from the bank accounts of private citizens is just one step farther.

And what happened in Cyprus just a couple of years ago is still fresh in the minds of most Greeks.  That is why so many of them have been pulling money out of the banks in recent weeks.  The following comes from Wolf Richter

Greeks remember very well what happened in Cyprus in 2013, when local banks were given a big thumbs-up from Europe to help themselves to their depositors’ accounts. Cyprus and Greece are very closely tied, and many Greeks consider the island a “sister-nation.”

 

What little trust remained in banks in Greece died that day. People have been nervously looking for signs something similar may happen again in their home country.

 

And they resolved to act at the first sign of danger: banks cannot confiscate money you have under your mattress. Cash can be hidden away.

Let’s certainly hope that what happened in Cyprus does not happen in Greece.

But right now, both sides are counting on the other side to fold.

The Germans believe that at some point the economic and financial pain will become so immense that it will force the new Greek government to give in to their demands.

The Greeks believe that the threat of a full blown European financial crisis will cause the Germans to back down at the last moment.

So what if they are both wrong?

What if both sides are fully prepared to stand their ground and take us over the cliff and into disaster?

For a long time I have been warning that a great financial crisis is coming to Europe.

This could be the spark that sets it off.

 

end

 

Greece may start to tax bank transactions as the first of many controls on their banking sector:

(courtesy zero hedge)

Greece To Tax Bank Transactions, Says IMF “Won’t Get Any Money” On June 5

On Monday we got still more bad news for Greece. Around one-third of Angela Merkel’s Christian Democratic bloc opposes further aid for Athens meaning the Chancellor faces an uphill battle in convincing German lawmakers to keep Greece on life support. Meanwhile, a new report from the Hellenic Confederation of Commerce and Enterprises suggests that each day without a deal costs the Greek economy €22.3 million.

Not to put too fine a point on it, but Tuesday’s headlines are even worse.

First, up is parliamentary speaker Nikos Filis confirming what the IMF leaked on Saturday: without a deal, Greece will default on June 5.

Via Reuters:

Greece will not be able to make a payment to the International Monetary Fund that falls due on June 5 without a deal with its international lenders, the government’s parliamentary speaker said on Wednesday.

 

Athens faces several payments totalling about 1.5 billion euros (1 billion pounds) to the IMF next month and is in talks with the European Union and the International Monetary Fund to clinch a cash-for-reforms deal before it runs out of money.

 

“Now is the moment that negotiations are coming to a head. Now is the moment of truth, on June 5,” parliamentary speaker Nikos Filis, from the ruling Syriza party, told ANT1 television.

While everyone should by now be desensitized to the sheer ridiculousness inherent in this circular funding scheme, as you can see from the following, the absurdity never ceases to amaze:

“If there is no deal by then that will address the current funding problem, they won’t get any money. There is no money for the foreign (lenders) when they have not given us any funds for a year,” Filis said.

Basically, it’s not clear to Filis why these  “foreign lenders” expect to get their money back when they haven’t sent Greece the money to repay them.

Varoufakis is still confused about a few things himself, notably that his superior intellect never seems to trump Schaeuble’s de facto status as EU paymaster when the two discuss billion-euro bailouts for Greece.

Via Bloomberg:

German Finance Minister Wolfgang Schaeuble wrongly views previous Greek govts as “reflecting the character of all Greeks,” German weekly Die Zeit quotes Greek Finance Minister Yanis Varoufakis as saying in interview.

 

Asked if Schaeuble making mistakes in his analysis of Greece, Varoufakis says yes: Zeit

 

Varoufakis says regrettable that “relative power” trumps arguments when he and Schaeuble talk: Zeit

While Greek officials leisurely ponder such things, the central bank is begging for another increase in the ELA ceiling…

  • GREEK CENTRAL BANK SAID TO REQUEST EU1.1B INCREASE IN ELA

…while the banks themselves mull the imposition of a levy on all transactions above €500…

Via Kathimerini:

Athens is promoting the idea of a special levy on banking transactions at a rate of 0.1-0.2 percent, while the government’s proposal for a two-tier value-added tax – depending on whether the payment is in cash or by card – has met with strong opposition from the country’s creditors.

 

A senior government official told Kathimerini that among the proposals discussed with the eurozone and the International Monetary Fund is the imposition of a levy on bank transactions, whose exact rate will depend on the exemptions that would apply. The aim is to collect 300-600 million euros on a yearly basis.

 

Fee won’t include ATM withdrawals, transactions up to EU500; in this case Greek govt projects EU300m-EU600m annual revenue from measure.

It looks like things are about to get a lot worse for Greeks as capital controls may be just around the corner. We wonder if the next shoe to drop will be a good old fashioned ‘Cyprus’ing’ for depositors.

end

 

The gloves are now off: Moody’s warns of a deposit freeze as citizens will not be able to access their funds. Moody’s warns that the Greece banking sector is in disarray. Schauble also will not rule out default:
(courtesy zero hedge)

The Gloves Come Off: Moody’s Warns Of Greek “Deposit Freeze” As Schauble “Won’t Rule Out Default”

Ever since Syriza took over the Greek government and has refused, at least until now, to concede to every Troika demand of perpetuating a status quo which it was elected with a mandate to overturn, Europe has done everything in its power to make not only Syriza’s life increasingly difficult and hostile, but has taken every opportunity to turn the Greek population against its rulers, in hopes that a more “moderate”, technocrat government would replace the “radical leftists.” So far it has failed, despite the best attempts by the ECB and the European Commission to sput a terminal bank run.

The problem for Greece is that the government has run out of cash. Long ago in fact, and as reported earlier, the country has just two weeks of cash left and the next IMF payment will certainly not be made unless the IMF first finds a way to inject some more money into Greece (so the IMF can essentially repay the IMF), which however won’t happen without a deal first being implemented.

The other problem is that Greece has run out of time to get a deal in order, especially since with every incremental negotiation, the Syriza government repeats it has substantial “red lines” it won’t cross, something the Troika takes as a direct ultimatum. And the ECB, the IMF and the European Commission are not good at handling ultimatums.

Which is perhaps why the push to force a terminal bank run in Greece took on an added urgency today when first Moody’s and then Schauble, did everything in their power to strongarm Tsipras into agreeing with Troika demands, or else suffer the consequences of a Grexit: one which will have dire consequences for all of Europe, but which Europe is naively ignoring just because the recent launch of the ECB’s QE is making the underlying tension in the economy and financial markets (which no longer exist courtesy of precisely this QE).

The gloves officially came off just before the market open today when Moody’s released a report titled “Outlook for Greece’s banking system is negative” in which it did the unthinkable: it explicitly said that the worst case for Greece is now an all but certain outcome if the government doesn’t concede to the Troika, or Institutions, or whatever they are called today.

To wit:

The outlook for the Greek banking system is negative, primarily reflecting the acute deterioration in Greek banks’ funding and liquidity, says Moody’s Investors Service in a new report published recently. These pressures are unlikely to ease over the next 12-18 months and there is a high likelihood of an imposition of capital controls and a deposit freeze.

Ordinarily, a statement like that by Moody’s would be unthinkable, and would lead to an immedate, business-ending lawsuit by any other country, except for Greece which right now can’t even afford the legal fees. And remember: the catalyst for everything getting better and Greece getting new cash is i) either a new government, ii) the current government conceding to Troika demands or iii) Grexit, and in neither case will Greece retaliate.

In other words, Moody’s is great when it comes to picking on defenseless “credits.” It would never say the same thing about any other country of course.

And then, perhaps just the confirm that both gloves are off, moments ago the WSJ reported that German FinMin, Wolfgang Schauble, said he couldn’t rule out a Greek default, a stance that will add pressure on Athens as negotiations over much-needed financing enter their final stretch.

Asked whether he would repeat an assurance he gave in late 2012 that Greece wouldn’t default, Wolfgang Schäuble told The Wall Street Journal and French daily Les Echos that “I would have to think very hard before repeating this in the current situation.”

“The sovereign, democratic decision of the Greek people has left us in a very different situation,” he said, referring to the January election that delivered a radical-left government bent on reversing five years of creditor-mandated austerity and painful economic overhauls.

Yes, it’s funny how “sovereign, democratic” decisions of any people leave a regime catering exclusively to supernational, technocratic banking oligarch elites leaves everyone in a very different situation.

What does all of this mean? Two things:

First, the Greece drama is almost over – indeed, having emptied its last remaining piggybank in the form of its IMF reserve capital, Greece now has no more funds and it can no longer raid its municipals and pensioners as they too are out of money. So one way or another, the endless Greek headlines will cease at midnight on June 4, when Greece either has a deal in hand with Europe or its fails to pay the IMF, which will being a 30 day grace period countdown, after which Greece will be officially in default, leading to a prompt expulsion from the Eurozone once the ECB yanks its ELA funds which now account for nearly two-thirds of all Greek deposits.

Second, both outcomes are now equally likely, which means volatility – currently dormant – will pick up in the next 2 weeks. It is unclear if said vol will be realized, but the front VIX contract, current at an artificially depressed level of just under 15, will likely be a good hedge if anyone is still long Greek bonds.

There is one outstanding question: perhaps after all this, the Greeks should just ask themselves if this is the kind of “European” partner they want to bind their fate to: a partner that will do everything in its power to subvert a democratically elected government, even if, or rather especially if, it means a wholesale “bail-in” for Greek depositors, who may lose as much as 70 cents on every Euro: an outcome we predicted over two years ago when the Cyprus blueprint showed just how effectively it could be done.

And after Greece is done soul searching, the people of Spain, Italy, Portugal and Ireland should ask the same question, because if we have a Grexit in two weeks, then these PIIS countries are next.

end
UBS gets another fine for criminally rigging Libor.  They are on probation for a few years. Now we need the gold rigging to bring these crooks down.  All the 5 major banks paid 5.6 billion uSA in criminal fines and yet they all get waivers so they can continue to defraud their customers ad infinitum…
(courtesy zero hedge)

UBS Gets Probation For Rigging $5 Trillion-A-Day FX Market

UBS was “confounded” last week when the Justice Department decided to void a 2012 agreement under which the bank would escape prosecution for its role in manipulating the world’s most important benchmark rate in exchange for ratting out its FX rigging co-conspirators.

As a reminder, the DoJ is set to extract guilty pleas from a number of TBTF bank logos sometime in the supposedly near future (reportedly later today). The settlements were supposed to have been announced last week but because that didn’t give banks enough time to negotiate all of the fine print and SEC waivers that will serve to strip the agreements of any and all meaning, the announcements had to be postponed.

As we’ve outlined on several occasions this month, JP Morgan, Citi, Barclays, and RBS will almost certainly be allowed to skirt punishments that should by law accompany their guilty pleas including provisions that make it more cumbersome to raise capital and limit participation in private placements. Those inconveniences, the banks say, would pose a systemic risk and so must be avoided at all costs if they agree to admit to rigging forex markets.

For UBS, whose assistance was supposedly key to the FX rigging investigation, the squealing rat reputation isn’t completely for naught after all because as you can see from the below, the bank will pay just $342 million to the Fed for rigging FX markets “engaging in unsound business practices” (and nothing to the DoJ), $203 million to the Justice Department in connection with rigging LIBOR, and plead guilty to one count of wire fraud.

Via WSJ:

UBS will plead guilty to wire fraud and pay a fresh $203 million fine related to the Libor case. In addition, the bank will pay a $342 million penalty to the U.S. Federal Reserve, for “engaging in unsound business practices” related to its foreign-exchange business.

 

The Wall Street Journal previously reported that U.S. prosecutors took into account UBS’s promise not to break the law in its 2012 nonprosecution agreement for Libor, and believed misconduct by bank’s employees trading in foreign currencies violated those terms.

So while UBS may still be confused as to why rigging forex markets counts as a violation of an agreement that originally came about because the bank manipulated LIBOR with the same other banks with which it conspired on the currency shenanigans, one thing is clear: $545 million is a great deal.

Here’s Reuters:

The Swiss bank’s payment is part of what is expected to be a combined $5 billion settlement by five of the world’s biggest banks with U.S. and British authorities over alleged manipulation of the $5-trillion-a-day forex market…

 

The bank said the new fines, which were much lower than expected, would not affect its earnings. The bank’s shares rose over 2 percent in early trade in a relief rally.

 

“It couldn’t have been better … Most of it was already priced in but something around $1 billion was expected, including the Libor fee,” Andreas Brun, an analyst with Zuercher Kantonalbank, said.

Just in case the above isn’t clear enough…

*  *  *

And the punchline:

The bank is now under a three year “probation” period with the DOJ.

end
Crude initially tumbles despite a 3rd weekly inventory draw down, together with a production plunge.

Crude Tumbles Despite 3rd Weekly Inventory Draw & Production Plunge

Following last night’s 5.2 million barrel inventory draw reported by API, crude prices surged once again (bouncing off levels before the first inventory draw at the end of April). Consensus appears confused since Bloomberg median estimates were for a 1.75mm draw while survey respondents expected a 3.82 million barrel draw this morning.DOE data showed a disappointly lower than API, 2.67 million barrel draw – which initially sent crude prices tumbling… machines bid them back, and now they are plunging again. Production dropped 1.2% overall – its biggest weekly drop since July 2014.

3rd weekly inventory draw in a row…

 

And production plunged by the most in 10 months…

 

Which sent crude falling – then soaring – then dumping…

 

Retracing gains post API – as it appears the market was disappointed that the DOE draw was not as big as API had predicted

 

 

 end

Your more important currency crosses early Wednesday morning:

 

Euro/USA 1.1098 down .0047

USA/JAPAN YEN 120.96 up .319

GBP/USA 1.5522 up .0010

USA/CAN 1.2232 up .0002

This morning in Europe, the Euro fell by a considerable 47 basis points, trading now just below the 1.11 level at 1.1098; 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 32 basis points and trading well above the 120 level to 120.96 yen to the dollar.

The pound was up this morning as it now trades well above the 1.55 level at 1.5522,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 2 basis points at 1.2232 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 170.18 points or 0.85%

Trading from Europe and Asia:
1. Europe stocks mixed

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

Gold very early morning trading: $1208.60

silver:$17.15

 

Early Wednesday morning USA 10 year bond yield: 2.26% !!! down 3 in basis points from Tuesday night and it is trading under resistance at 2.27-2.32%.

 

USA dollar index early Wednesday morning: 95.55 up 29 cents from Tuesday’s close. (Resistance will be at a DXY of 100)

 

This ends the early morning numbers, Wednesday morning

 

And now for your closing numbers for Wednesday:

 

Closing Portuguese 10 year bond yield: 2.42 up 7 in basis points from Tuesday

Closing Japanese 10 year bond yield: .40% !!! up 2 in basis points from Tuesday/

 

Your closing Spanish 10 year government bond, Wednesday, up 5 points in yield

Spanish 10 year bond yield: 1.80% !!!!!!

 

Your Wednesday closing Italian 10 year bond yield: 1.86% up 5 in basis points from Tuesday: (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: 1.1121 down .0021 ( Euro down 21 basis points)

USA/Japan: 121.09 up .450 ( yen down 45 basis point)

Great Britain/USA: 1.5546 down .0032 (Pound up 32 basis points)

USA/Canada: 1.2182 down .0046 (Can dollar up 46 basis points)

The euro fell today. It settled down 21 basis points against the dollar to 1.1150 as the dollar was mixed against the various major currencies. The yen was down 45 basis points and closing well above the 120 cross at 121.09. The British pound gained some ground today, 32 basis points, closing at 1.5546. The Canadian dollar gained back some ground to the USA dollar,46 basis points closing at 1.2182.

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: 2.24% down 5 in basis points from Tuesday (above the resistance level of 2.27-2.32%)

Your closing USA dollar index:

95.38 up 5 cents on the day.

 

European and Dow Jones stock index closes:

 

England FTSE up 12.16 points or 0.17%

Paris CAC up 16.00 points or 0.31%

German Dax down 4.86 points or 0.04%

Spain’s Ibex up 76.40 points or 0.66%

Italian FTSE-MIB  up 59.35 or 0.25%

 

The Dow down 26.99  or 0.15%

Nasdaq; up  1.71% or 0.03%

 

OIL: WTI 58.91 !!!!!!!

Brent: 64.95!!!!

 

Closing USA/Russian rouble cross: 49.67 down 1/10 rouble per dollar on the day.

 

end

 

And now your important USA stories:

 

NYSE trading for today

Stocks Pump-And-Dump After Ministry Of Truth ‘Manipulation’ Trumps Spoofing Algos

There is nothing else for it…

Thanks to the spoofing, stocks soared to record highs after the FOMC Minutes to prove that everything is awesome but then CNBC broke the news that BEA will double-seasonally-adjust GDP data – implicitly enabling Q1 to look better and thus giving Janet more room to hike in June  – and stocks sunk…

 

Which dragged AAPL up… and thus everything else… until the BEA news…

 

On the day, stocks were deadstick until the US Open BTFD and the FOMC/BEA debacle…

 

But by the close, Trannies were the biggest losers – worst day since January

As Airlines crashed….

Leaving stocks mixed for the week…

 

Credit remains unimpressed…

 

Bond yields leaked lower all day…

 

The Dollar trod water all day, with some vol around the European open and a small drop around the minutes.,..

 

Commodities were also very dull

 

Though Crude bounced around in the last 24 hours on inventory and p[roduction data… Narrow range but look at the swings…

 

The bottom line: stocks were so obvioulsy manipulated higher today after FOMC to prove the Fed is right it was disgusting… not just the actual indications of spoofing but the fact that stocks entuirely decoupled from the “DEADNESS” of every other asset class after the minutes hit.

Then when BEA hit with their agreement over double-seasonal-adjustments, the farce was complete, stocks tanked on the bad news (it’s bad news as we discussed here).

 

 

end

Now we have the official minutes on the last FOMC meeting. Something for both sides.  The Fed fears a post hike volatility.  They state that the first quarter fall to -1% is just a blip and they will not rule out a June hike.  What on earth are these guys smoking?

(courtesy Beige Book/the Fed)

Fed Doesn’t Rule Out June Liftoff As FOMC Minutes Show Fed Fears Post-Hike Volatility, Dollar Drag

Summing it all up…

With all eyes focused on the minutes – as markets play “tightening chicken” with The Fed with stocks flat, gold flat, and short-end bonds flat since the April FOMC – any hint that, despite the terrible data, The Fed has to move, will surely be met with horror…

  • FED OFFICIALS GAVE NUMBER OF REASONS WHY 1Q WEAKNESS TRANSITORY
  • MANY FED OFFICIALS SAW JUNE RATE RISE AS UNLIKELY
  • FED OFFICIALS SAW DOLLAR EXERTING DRAG ON GROWTH ‘FOR A TIME’
  • FED OFFICIALS HIGHLIGHTED RISKS OF VOLATILITY AFTER LIFTOFF

And yet:

  • FED OFFICIALS GENERALLY DIDN’T RULE OUT RATE RISE AT JUNE FOMC

So, once again, just enough there for both bulls and bears from doves and hawks as it becomes increasingly clear that The Fed is cornered.

Pre-FOMC Minutes: S&P Futs 2123, 10Y 2.24%, EUR 1.1100, Gold $1210

Since the April 29th FOMC meeting, Trannies are ugly but the rest are holding modest gains…

Gold is unchanged, Silver and Copper higher…

And while the short-end is flatish, the long-end of the bond curve has been hammered…

*  *  *

Here are the minutes highlights:

June. June. June.

A few anticipated that the information that would accrue by the time of the June meeting would likely indicate sufficient improvement in the economic outlook to lead the Committee to judge that its conditions for beginning policy firming had been met. Many participants, however, thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, although they generally did not rule out this possibility. Participants discussed the merits of providing an explicit indication, in postmeeting statements released prior to the commencement of policy firming, that the target range for the federal funds rate would likely be raised in the near term. However, most participants felt that the timing of the first increase in the target range for the fed-eral funds rate would appropriately be determined on a meeting-by-meeting basis and would depend on the evo-lution of economic conditions and the outlook. In keeping with this data-dependent approach, some participants further suggested that the postmeeting statement’s description of the economic situation and outlook, and of progress toward the Committee’s goals, provided the appropriate means by which the Committee could help the public assess the likely timing of the initial increase in the target range for the federal funds rate.

The Fed is clearly terrified of bond market volatility. So much so, it finally admits we were right all along, and invokes the dreaded “high-frequency trader” phrase for the first time in FOMC history

In their discussion of financial market developments and financial stability issues, policymakers highlighted possi-ble risks related to the low level of term premiums. Some participants noted the possibility that, at the time when the Committee decides to begin policy firming, term premiums could rise sharply—in a manner similar to the increase observed in the spring and summer of 2013—which might drive longer-term interest rates higher. In this connection, it was suggested that the tendency for bond prices to exhibit volatility may be greater than it had been in the past, in view of the increased role of high-frequency traders, decreased inventories of bonds held by broker-dealers, and elevated assets of bond funds.

Good luck controlling not only that volatility, but the only mandate the Fed has had since 2009: the S&P 500.

The Minutes word cloud:

Full minutes below: see zero hedge for full minutes.

end

 

The mouthpiece for the Fed: Jon Hilsenrath confirms the hawkish tone of the Fed.  They see first quarter weakness as transitory and thus a june rate liftoff is possible:

 

(courtesy Jon Hilsenrath)

Hilsenrath Confirms Hawkish Fed Sees Q1 Weakness As A Blip, June Liftoff Possible

Issued with light-speed typing and proofing, The Wall Street Journal’s Jon Hilsenrath explains what we should think about the Fed’s minutes…

Federal Reserve officials meeting in late April doubted they would be ready to raise short-term interest rates by midyear, according to minutes of the meeting released Wednesday.

Fed officials are trying to make sense of a first-quarter economic slowdown. Many at the April 28-29 policy meeting believed temporary factors were holding the economy back. Before they lift rates, they want to be confident growth is on track, unemployment will keep falling and inflation will gradually rise toward their 2% goal.

The minutes, released with the regular three-week lag, showed that only a few Fed officials thought they would have enough confidence those conditions would be met by the June 16-17 meeting.

A few anticipated that the information that would accrue by the time of the June meeting would likely indicate sufficient improvement in the economic outlook to lead the Committee to judge that its conditions for beginning policy firming had been met,” the meeting minutes said.

“Many participants, however, thought it unlikely that the data available in June would provide sufficient confirmation that the conditions for raising the target range for the federal funds rate had been satisfied, althoughthey generally did not rule out this possibility.”

Many Fed officials began the year believing they might start raising short-term interest rates from near zero by midyear, but the winter slowdown has sidetracked their plans. The Commerce Department reported last month that the economy expanded at a small 0.2% annual rate in the first quarter and many analysts expect that estimate to be revised down. The second quarter is off to a mixed start.

Fed officials and Fed staff were generally upbeat about the medium-run outlook, even though the economy had clearly stumbled in the first quarter.Fed staff, according to the minutes, revised up its growth outlook because the dollar had weakened—which could help exports—and interest rates were expected to stay low longer than previously expected.

Many officials wrote off the first-quarter stumble to temporary factors.

“The severe winter weather in some regions had reportedly weighed on economic activity, and the labor dispute at West Coast ports temporarily disrupted some supply chains,” the minutes said.

Furthermore, a pattern observed in previous years of the current expansion was that the first quarter of the year tended to have weaker seasonally adjusted readings on economic growth than did the subsequent quarters. This tendency supported the expectation that economic growth would return to a moderate pace over the rest of this year.”

However longer-term factors might also be at play weighing on growth.

“A number of participants suggested that the damping effects of the earlier appreciation of the dollar on net exports or of the earlier decline in oil prices on firms’ investment spending might be larger and longer-lasting than previously anticipated,” the minutes said.

Since the April meeting, Fed officials have confronted a mix of economic data. Though job growth picked up in April and the jobless rate declined, some indicators of economic output—including industrial production and retail sales—have been disappointing. In the process many private forecasts have revised down their estimates for second-quarter growth.

 

end

 

My favourite bellwether for global growth:  Caterpillar.

It sure looks like global growth has been stymied.

(courtesy zero hedge)

 

Dave Kranzler talks about the financial condition inside the uSA and he refers to it as a “train wreck”

(courtesy Dave Kranzler/IRD)

 

“The Financial Condition Of Most Of America Is A Train Wreck”

Consumer liquidity woes remain the basic constraint on broad economic activity in the United States, which remains heavily consumer oriented.  Without real growth in income and/or debt expansion and willingness to take on new debt, and with consumer confidence and sentiment at levels consistent with a significant portion of consumers under financial stress, there has been no basis for a sustainable economic expansion since the Panic of 2008.  – John Williams,  Shadowstats.com

The lively retailing industry expert Howard Davidowitz was on Bloomberg Tuesday (May 19) to discuss retail sales and Walmart’s quarterly results.

We’re closing a record number of stores. We’re going to close a record number of malls. Vacancies are gonna be up. More chains are going bankrupt than I’ve ever seen.

Davidowitz is known specifically for his remarkable insight on the retail industry and consumer behavior.  And he’s known for having an unfiltered willingness to call it like is, which probably why he has not been a guest on CNBC for quite some time.

Everybody is in the tank, I mean the whole economy is in the tank. We’ve had five months straight of down [negative] industrial production – you gotta watch that number. The biggest thing we got going up is the [Treasury] debt.

You can watch part of his segment on CNBC by clicking on the pic below:

Davidowitz

They spend time comparing Walmart’s on-line business to Amazon.com.  Davidowitz asserts that Walmart can’t compete with Amazon because AMZN has an enormous technology advantage.   He states that AMZN has spent billions on its technology.

This is indeed true.  However Howard has not spent time dissecting AMZN the way I have.  As I’ve demonstrated painstakingly in my AMAZONdotCon research report, AMZN’s business model loses money because it does not charge enough per sale to cover the entire “cost accounting” all-in cost of getting a product from the AMZN’s website to the customer’s mailbox.  The more it spends on technology and fulfillment, the more it loses.

Of course Walmart can’t compete with AMZN.  No one can compete with AMZN because AMZN plays the game to lose money.  It has been forced to issue $9 billion in debt over the last two years in order to fund its money-losing operations.  AMZN has been in business for 20 years and it still has not figured out how to make money.  In fact, its operating margins and net income have been steadily eroding  since 2004.   It lost money on a net income basis in 2014.

And now Walmart has announced that it will ramp up its spending on e-commerce into the billions, including testing free shipping:  WalMart Eyes Costly E-Commerce Battle With Amazon.   This is a spending war that could put a dagger in AMZN, given that AMZN is bleeding cash flow (per my research report).

You can access my research rreport here – AMAZONdotCON – to understand why AMZN will be an incredible short-sell play when reality finally grips the stock market.  In fact, the S&P 500 has recently been hitting all-time highs again and AMZN has declining since it’s absurd spike up to $450 in late April.

 

end

 

Well that about does it for today.

 

see you tomorrow

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