Good evening Ladies and Gentlemen:
We are entering options expiry week.
LMBA options expiry: noon London time July 31.2015
OTC options expiry: midnight July 31.2015
Here are the following closes for gold and silver today:
Gold: $1092.70 down $3.60 cents (comex closing time)
Silver $14.73 up 10 cents.
In the access market 5:15 pm
Gold $1097.40
Silver: $14.81
First, here is an outline of what will be discussed tonight:
At the gold comex today, we had a poor delivery day, registering 4 notices for 400 ounces . Silver saw 115 notices filed for 575,000 oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 243.94 tonnes for a loss of 59 tonnes over that period.
In silver, the open interest rose by 37 contracts as Tuesday’s price was up by 4 cents (and the gold price down by 20 cents). The total silver OI continues to remain extremely high, with today’s reading at 190,322 contracts now at decade highs despite a record low price. In ounces, the OI is represented by .951 billion oz or 135% of annual global silver production (ex Russia ex China). 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 as they continue to raid as basically they have no other alternative.
In silver we had 115 notices served upon for 575,000 oz.
In gold, the total comex gold OI rests tonight at 438,282 for a loss of 2,268 contracts despite the fact that gold was only down by 20 cents yesterday. We had 4 notices filed for 400 oz today.
We had no withdrawals in gold tonnage at the GLD / thus the inventory rests tonight at 680.15 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. I thought that 700 tonnes is the rock bottom inventory in GLD gold, but I guess I was wrong. However we must be coming pretty close to a level of only paper gold and the GLD being totally void of physical gold. In silver, we had a huge withdrawal of 2.005 million oz in inventory at the SLV / Inventory rests at 326.829 million oz.
We have a few important stories to bring to your attention today…
1. Today, we had the open interest in silver rise by 37 contracts up to 190,322 as silver was up by 4 cents yesterday. We again must have had some shortcovering by the bankers as they feared something was brewing in the silver arena. The OI for gold fell by 2,268 contracts down to 438,282 contracts as the price of gold was down 20 cents in yesterday’s trading.
(report Harvey)
2 Today, 4 important commentaries on Greece
(zero hedge, Bloomberg/)
3. Today, 2 stories on the faltering Chinese economy.
(zero hedge)
4. Gold trading overnight
(Goldcore/Mark O’Byrne/)
5. Graham Summers commentary tonight is titled:
“Is the $100 Trillion Bond Bubble About to Burst?”
(zero hedge)
6 Trading of equities/ New York
(zero hedge)
7. we have one oil related stories
(zero hedge)
8. USA stories:
i)pending home sales plummet
ii) FOMC results in which an interest rate hike may be delayed
(3 commentaries/zero hedge/Jon Hilsenrath/Craig Paul Roberts)
plus other topics…
9. Agnico eagle earns 9 cents per share and produces over 400,000 oz in the quarter, beating expectations of production at 400,000.
They will produce 1.6 million oz this year.
Here are today’s comex results:
The total gold comex open interest fell by 2,268 contracts from 440,550 contracts down to 438, 282 as gold was down by only 20 cents in price with respect to yesterday’s trading (at the comex close).For the past two years, we have strangely witnessed the gold comex collapse in OI as we enter an active delivery month, and today this again is the norm. What is interesting is that the LBMA gold is witnessing a 7.40 premium spot/next nearby month as gold is now in backwardation over there. We are now in the contract month of July and here the OI fell by 49 contracts falling to 4 contracts. We had 21 notices filed on yesterday and thus we lost 28 gold contracts or an additional 2800 oz will not stand in this non active delivery month of July. The next big delivery month is August and here the OI decreased by 38,747 contracts down to 65,080. We have 2 trading days before first day notice for the big August active gold contract (july 31). The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was excellent at 259,157. However today’s volume was aided by HFT traders. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was excellent at 284,528 contracts. Today we had 4 notices filed for 400 oz.
And now for the wild silver comex results. Silver OI rose by 37 contracts from 190,285 up to 190,322 as the price of silver was up by 4 cents in yesterday’s trading. We continue to have our bankers pulling their hair out with respect to the continued high silver OI as the world senses something is brewing in the silver arena. We are in the delivery month of July and here the OI fell by 5 contracts down to 158. We had 4 notices served upon yesterday and thus we lost 1 contract or an additional 5,000 ounces of silver will not stand for delivery in this active month of July. This is the first time in quite some time that we have not lost any silver ounces standing immediately after first day notice. The August contract month saw it’s OI fall by 18 contracts down to 145. The next major active delivery month is September and here the OI fell by 1731 contracts to 127,. The estimated volume today was fair at 19,510 contracts (just comex sales during regular business hours). The confirmed volume yesterday (regular plus access market) came in at 33,227 contracts which is fair in volume. We had 115 notices filed for 575,000 oz.
What is interesting with respect to comex silver OI, is that the open interest per day is hardly moving. In other words we have considerable silver trading, yet at the end of the day, the OI remains relatively constant as if everybody is standing pat.
July initial standing
July 29.2015
| Gold |
Ounces |
| Withdrawals from Dealers Inventory in oz | nil |
| Withdrawals from Customer Inventory in oz | nil |
| Deposits to the Dealer Inventory in oz | nil |
| Deposits to the Customer Inventory, in oz | nil |
| No of oz served (contracts) today | 4 contracts (400 oz) |
| No of oz to be served (notices) | 0 contracts (nil oz) |
| Total monthly oz gold served (contracts) so far this month | 727 contracts(72,700 oz) |
| Total accumulative withdrawals of gold from the Dealers inventory this month | 203.60 oz |
| Total accumulative withdrawal of gold from the Customer inventory this month | 433,472.6 oz |
Today, we had 0 dealer transactions
total Dealer withdrawals: nil oz
we had 0 dealer deposits
total dealer deposit: zero
total customer withdrawal: nilo oz
We had 0 customer deposits:
Total customer deposit: nil oz
We had 2 adjustments
i) Out of Brinks: 1,675/37 oz was adjusted out of the dealer and this landed into the customer account of Brinks
ii) Out of Scotia: 95.01 oz was adjusted out of the dealer and this landed into the customer account at Scotia
JPMorgan has only 3.600 tonnes left in its registered or dealer inventory.
.
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 4 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 July contract month, we take the total number of notices filed so far for the month (727) x 100 oz or 72,700 oz , to which we add the difference between the open interest for the front month of July (xx) and the number of notices served upon today (4) x 100 oz equals the number of ounces standing.
Thus the initial standings for gold for the July contract month:
No of notices served so far (727) x 100 oz or ounces + {OI for the front month (4) – the number of notices served upon today (4) x 100 oz which equals 72,700 oz standing so far in this month of July (2.261 tonnes of gold).
We lost 28 contracts or an additional 2800 oz will not stand in this non active delivery month of JULY.
Total dealer inventory 376,905.714 or 11.723 tonnes
Total gold inventory (dealer and customer) = 7,842,682.724 oz or 243.94 tonnes
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 243.94 tonnes for a loss of 59 tonnes over that period.
end
And now for silver
July silver initial standings
July 29 2015:
| Silver |
Ounces |
| Withdrawals from Dealers Inventory | nil |
| Withdrawals from Customer Inventory | 830,403.76 oz (CNT, Brinks,Scotia) |
| Deposits to the Dealer Inventory | nil |
| Deposits to the Customer Inventory | nil |
| No of oz served (contracts) | 115 contracts (575,000 oz) |
| No of oz to be served (notices) | 43 contracts (2155,000 oz) |
| Total monthly oz silver served (contracts) | 3593 contracts (17,965,000 oz) |
| Total accumulative withdrawal of silver from the Dealers inventory this month | nil |
| Total accumulative withdrawal of silver from the Customer inventory this month | 10,837,972.8 oz |
Today, we had 0 deposits into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawal:
total dealer withdrawal: nil oz
We had 0 customer deposits:
total customer deposits: nil oz
We had 3 customer withdrawals:
i)Out of Scotia: 120,147.900 oz
ii) Out of CNT: 109,940.210 oz
iii) Out of Brinks:: 600,315.660 oz
total withdrawals from customer: 830,403.76 oz
we had 1 adjustment
From Scotia:
Total dealer inventory: 57.548 million oz
Total of all silver inventory (dealer and customer) 176.409 million oz
The total number of notices filed today for the July contract month is represented by 115 contracts for 575,000 oz. To calculate the number of silver ounces that will stand for delivery in July, we take the total number of notices filed for the month so far at (3593) x 5,000 oz = 17,965,000 oz to which we add the difference between the open interest for the front month of July (158) and the number of notices served upon today (115) x 5000 oz equals the number of ounces standing.
Thus the initial standings for silver for the July contract month:
3593 (notices served so far) + { OI for front month of July (158) -number of notices served upon today (115} x 5000 oz ,= 18,180,000 oz of silver standing for the July contract month.
We lost 5,000 oz that will not stand for delivery in this non active month of July.
for those wishing to see the rest of data today see:
http://www.harveyorgan.wordpress.comorhttp://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:
July 29/no change in inventory/rests tonight at 680.13 tonnes
July 28/no change in inventory/rests tonight at 680.13 tonnes
July 27/no change in inventory/rests tonight at 680.13 tonnes
July 24.2015/we had another massive withdrawal of 4.48 tonnes of gold form the GLD/Inventory rests at 680.13 tonnes.
July 23.2015: we had another withdrawal of 2.68 tonnes of gold from the GLD/Inventory rests at 684.63 tonnes
july 22/another withdrawal of 2.38 tonnes of gold from the GLD/Inventory rests at 687.31
July 21.2015: a massive withdrawal of 6.56 tonnes of gold from the GLD.
Inventory rests at 689.69 tonnes. China and Russia need their physical gold badly and they are drawing their physical from this facility.
July 2o.2015: no change in inventory
July 17./a massive withdrawal of 11.63 tonnes in gold tonnage tonight from the GLD/Inventory rests at 696.25 tonnes
July 16./we lost 1.19 tonnes of gold tonight/Inventory rests at 707.88 tonnes
July 15/no change in inventory/gold inventory rests tonight at 709.07 tonnes.
July 14.2015:no change in inventory/gold inventory rests at 709.07 tonnes
July 13.2015: a big inventory gain of 1.49 tonnes/Inventory rests tonight at 709.07 tonnes
July 10/ we had a big withdrawal of 2.07 tonnes of gold from the GLD/Inventory rests this weekend at 707.58 tonnes
July 29 GLD : 680.13 tonnes
end
And now for silver (SLV)
July 29/no change in silver inventory/326.829 million oz
July 28/we had a huge withdrawal of 2.005 million oz from the SLV/Inventory rests at 326.829 oz
July 27/no change in silver inventory/inventory rests tonight at 328.834 million oz
July 24/no change in silver inventory/inventory rests tonight at 328.834 million oz
July 23.2015; no change in silver inventory/rests tonight at 328.834 million oz
july 22/no change in silver inventory/inventory rests at 328.834 million oz.
July 21.we had a massive addition of 1.241 million oz into the SLV/Inventory rests tonight at 328.834 million oz.
Please note the difference between gold and silver (GLD and SLV). In GLD gold is being depleted and sent to the east. In silver: no depletions, as I guess this vehicle cannot supply physical metal.
July 20/no change
july 17.2015/no change in silver inventory tonight/inventory at 327.593 million oz
July 16./no change in silver inventory/rests tonight at 327.593 million oz
July 15./no change in silver inventory/rests tonight at 327.593 million oz/
July 14.2015: no change in silver inventory/rests tonight at 327.593 million oz.
July 13./an inventory gain of 1.051 million oz/Inventory rests at 327.593 million oz
july 10/no change in silver inventory at the SLV tonight/inventory 326.542 million oz/
July 9/ a huge increase in inventory at the SLV of 1.337 million oz. Inventory rests tonight at 326.542 million oz
July 29/2015: tonight inventory rests at 326.829 million oz
end
And now for our premiums to NAV for the funds I follow:
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 10.3 percent to NAV usa funds and Negative 9.9% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.9%
Percentage of fund in silver:37.7%
cash .4%
( July 29/2015)
2. Sprott silver fund (PSLV): Premium to NAV rises to -.24%!!!! NAV (July 29/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV rises to – .56% to NAV(July 29/2015)
Note: Sprott silver trust back into negative territory at- 0.24%
Sprott physical gold trust is back into negative territory at -.56%
Central fund of Canada’s is still in jail.
Sprott formally launches its offer for Central Trust gold and Silver Bullion trust:
SII.CN Sprott formally launches previously announced offers to CentralGoldTrust (GTU.UT.CN) and Silver Bullion Trust (SBT.UT.CN) unitholders (C$2.64)
Sprott Asset Management has formally commenced its offers to acquire all of the outstanding units of Central GoldTrust and Silver Bullion Trust, respectively, on a NAV to NAV exchange basis.
Note company announced its intent to make the offer on 23-Apr-15 Based on the NAV per unit of Sprott Physical Gold Trust $9.98 and Central GoldTrust $44.36 on 22-May, a unitholder would receive 4.45 Sprott Physical Gold Trust units for each Central GoldTrust unit tendered in the Offer.
Based on the NAV per unit of Sprott Physical Silver Trust $6.66 and Silver Bullion Trust $10.00 on 22-May, a unitholder would receive 1.50 Sprott Physical Silver Trust units for each Silver Bullion Trust unit tendered in the Offer.
* * * * *
>end
And now for your overnight trading in gold and silver plus stories
on gold and silver issues:
(courtesy/Mark O’Byrne/Goldcore)
Bail-Ins at “Bad Bank” Unconstitutional Says Austrian Court
– Austrian decision to renege on guarantees made to junior bondholders overturned
– Court does not overrule bail-ins per se
– Bail-in legislation still in place across Europe
– EU deadline to implement bail-in legislation by end of this month
– Depositors – savers and capital of SMEs exposed to bail-ins
An attempt by Austria to bail-in junior bondholders at the Heta “bad bank” has been overturned by the highest court in the country.
Last year Austria passed legislation which annulled guarantees previously given by the state of Carinthia to bondholders of Heta, effectively writing off €890 million.
Heta was set up to manage the assets of failed lender Hypo Alpe-Adria-Bank. Carinthia state had guaranteed around €10 billion of Heta debt – a figure which dwarfed its own revenue more than four fold, which eventually forced the Federal government to cover the guarantee.
The ruling does not outlaw “bail-ins” per se. It simply ensures that guarantees given to bondholders cannot be retrospectively revoked.
The Austrian government has ploughed €5.5 billion of taxpayers’ money into Heta. When auditors found a €7.6 billion hole in its balance sheet in March the government said it would not pay “one single euro” more to the bad bank which is to be wound down.
A debt moratorium is in place – based on the Bank Recovery and Resolution Directive (BRRD) which makes “bail-ins” the norm across the EU – while the process is worked out. The bondholders who had been burned will now enter that program.
However, court president Gerhardt Holzinger says “he expects to deal with more complaints about…Heta’s debt moratorium,” according to Bloomberg.
Bail-in legislation is still in place across Europe. The European Commission recently threatened to take legal action against those nations who had not yet ratified the BRRD and gave them just two months (until the end of July) to adopt the new EU bail-ins rules. The BRRD purports to protect taxpayers from the need to bail out banks but appears to be again favouring the interests of large banks over those of prudent savers and indeed small and medium size enterprises who could have their savings confiscated.
Under the legislation, government guarantees on bank deposits – usually up to a value of €100,000 – are being quietly disposed of. In their place will be a type of insurance fund paid into by the banks which will be woefully inadequate.
Must read guides on bail-ins:
From Bail-Outs To Bail-Ins: Risks and Ramifications – Includes 60 Safest Banks In World
Protecting Your Savings In The Coming Bail-In Era
MARKET UPDATE
Today’s AM LBMA Gold Price was USD 1,096.75, EUR 991.01 and GBP 701.65 per ounce.
Yesterday’s AM LBMA Gold Price was USD 1,095.60, EUR 990.06 and GBP 702.13 per ounce.
Gold/Euro FX Rate – 2000 to July 2016 (Thomson Reuters)
Gold and silver on the COMEX both rose marginally yesterday – to $1,095.60/oz and $14.68/oz.
Global gold demand fell in the second quarter as China poured funds into equities which had promised better returns according to GFMS. Chinese stocks have collapsed by 30% in recent weeks – a real case of out of the frying pan and into the fire.
Imports by India dropped to the lowest in five quarters, the quarterly report said yesterday.
A plunge in Chinese share prices from mid-June has not helped bullion in the short term according to the report. However, we believe that the plunge in Chinese stocks will be bullish in the long term as the Chinese again realise the importance of gold as a safe haven asset.
GFMS is optimistic that global demand and prices could start to pick up in the final quarter of the year. China and Indiaa are the world’s top gold buyers and demand for the entire year is expected to be elevated and near record levels seen in recent years.
This morning in European trading, silver for immediate delivery is 0.4 percent lower at $14.70 an ounce. Spot platinum rose 0.3% percent to $990 an ounce, while palladium rose 0.5% percent to $626 an ounce.
Learn the importance of owning allocated, segregated gold that you can take delivery of here
Bron Suchecki: Gold market liquidity and manipulation
8:34a ET Wednesday, July 29, 2015
Dear Friend of GATA and Gold:
Perth Mint research director Bron Suchecki today disputes financial letter writer Clif Droke’s assertion yesterday that the gold market is too large to be manipulated. To the contrary, Suchecki writes, the gold market can be moved by strategic trading of just a few tonnes, and, unlike Droke, he cites authority for his assertion. Suchecki’s commentary is headlined “Gold Market Liquidity and Manipulation” and it’s posted at the Perth Mint’s Internet site here:
http://research.perthmint.com.au/2015/07/29/gold-market-liquidity-and-ma…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
end
An interesting story…
Caught On Tape: The Moment Diver Discovers $1 Million In Gold From 300-Year-Old Spanish Shipwreck
Following the latest mass media assault on gold, capped with such trollbait pearls as “Gold is doomed” or the classic “Let’s Be Honest About Gold: It’s a Pet Rock” by the inimitable Jason Zweig (imitable perhaps only by the September 2011 version of Jason Zweig when, days after gold hit its all time high just shy of $2000, he famously said “Is Gold Cheap? Who Knows? But Gold-Mining Stocks Are“… since then gold-mining stocks are down 80%) we were more shocked that someone would actually bother to look for the worthless pet rocks (of which China allegedly just bought 600 tons) than actually finding them during a random dive in the sea.
Which is precisely what happened.
For several weeks the Schmitt family had a million-dollar secret on their hands. Last month, it recovered $1 million worth of sunken Spanish coins and jewels off the Florida coast.
The Schmitts are subcontractors to 1715 Fleet-Queens Jewels LLC which since 2010 has the salvaging rights to a fleet of Spanish ships, aka the “1715 Fleet“, that wrecked off the Florida coast some 300 years ago. While $50 million has been pulled in from the fleet’s resting place so far, this is so far the biggest single haul.
“One of the most amazing recoveries in 1715 Fleet History. Congratulations to the entire Schmitt family and the crew of the Aarrr Booty,” said 1715 Fleet on its Facebook page Monday.
Some more details from the Fleet Society’s website: “Gold and silver in great quantity was homeward bound to Philip V when a hurricane destroyed his fleet along Florida’s coast. Some recovery in the aftermath still left much to be recovered beginning in the 1960’s and ongoing to this day.”
“The treasure was actually found a month ago,” said Brent Brisben of 1715 Fleet-Queens Jewels LLC. Keeping the news under wraps was “particularly hard for the family that found it. They’ve been beside themselves.”
The timing of 1715 Fleet’s announcement coincides with the 300th anniversary of the Spanish treasure fleet’s shipwrecks off the coast of Florida.
Among the precious items recovered:
- 51 gold coins
- 40 feet of ornate gold chain
- A single coin called a Royal made for the king of Spain, Phillip V. Only a few are known to exist, and the coin — nicknamed “Tricentennial Royal” — is dated 1715. Brisben said the extremely rare silver-dollar-sized coin is worth “probably around half a million dollars itself.”
Queens Jewels owner Brent Brisben told the Daily News this discovery is of the biggest single hauls taken from the ship.
Or, as the WSJ would call it, a whole bunch of pet rocks.
Brisben gives 20% of everything found to the state of Florida and then splits the remaining treasure equally with the contractor that finds it. Brisben said he and his family will keep everything they have and save it for a special collection for the public.
It’s believed there is still $400 million worth of treasure located below, he said.
As the WSJ’s sister publication, MarketWatch adds, “the discovery comes almost 300 years to the day that the fleet wrecked. As for the history, the ships were sent to America to fetch gold and silver and under pressure to get back quickly, as the Spanish crown needed to replenish its coffers to finance wars. Sailing from Havana, Cuba on July 24, 1715, the ships crashed during a hurricane a week later near present-day Vero Beach, Fla. The Spaniards returned a few times, salvaging a great chunk of that treasure.”
Three hundreds years later wars are financed by long strings of 1s and 0s, backed by the full faith of a government whose total unfunded obligations amount toover 5x the total amount of goods and services produced by said government.
Back to the discovery, whose key components are shown below.
Fifty-one gold coins and 40 feet of gold chains were found from a Spanish ship of the 1715 Fleet
The total value of the haul is more than $1 million.
About $50 million worth of treasure has been discovered since the 1960s.
* * *
But the biggest drama was the actual moment when Schmitt discovered the gold, captured conveniently in the video below.
Dear Bloomberg News: Central banks manipulate gold prices too
— If central banks ARE in the gold market for policy purposes, are these the traditional purposes of defeating a potentially competitive world reserve currency, or have these purposes expanded?
— If central banks, creators of infinite money, ARE surreptitiously trading a market, how can it be considered a market at all, and how can any country or the world ever enjoy a market economy again?
A summary of the most important documentation developed by GATA over the years, some of it quite recent, complete with links to the documents themselves, is posted at our Internet site here:
http://www.gata.org/node/14839
To correct your commentary’s error today, please review this documentation and pursue it in future commentary. Of course I’ll be glad to provide more information.
I’ll be grateful for an acknowledgment of this note, which I’m copying to your editor, Mary Duenwald, as a request for Bloomberg News to pursue this documentation as a news story. I’ll be hoping to get an acknowledgment from her as well.
With good wishes.
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
Wednesday, July 29, 2015
Mark Gilbert
Bloomberg News
731 Lexington Ave.
New York City, NY 10022
Dear Mark (if I may):
While your commentary today, “True Gold Bugs Care about Value, Not Price” —
http://www.bloombergview.com/articles/2015-07-29/true-gold-bugs-care-abo…
— was excellent for noting that central bank interventions increasingly are determining asset prices, you were in error when you asserted that gold’s value “appears to move freely depending on the whims of its buyers and sellers, rather than on the interventions of policy makers.”
In fact, central bank manipulations encompass gold as well, probably more so than the prices of other assets.
end
(courtesy Bill Gross/CNBC/GATA)
Central banks are manipulating ‘all’ markets, Bill Gross tells CNBC
3p ET Wednesday, July 29, 2015
Dear Friend of GATA and Gold:
Zero Hedge this afternoon calls attention to comments made on CNBC today by former PIMCO bond buyer Bill Gross, now working for Janus Capital, who says all markets now are artificial, the products of central bank manipulation, and that real market prices cannot be discovered. By “all” markets, one might assume Gross meant to include the market that in mainstream financial journalism must never be associated by manipulation, the gold market. But somehow Gross wasn’t wearing a tin-foil hat. Zero Hedge’s posting, which includes the CNBC video excerpt, is here:
http://www.zerohedge.com/news/2015-07-29/bill-gross-explains-90-seconds-…
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org
end
With continual attacks on gold, it is surprising that Agnico Eagle is producing over 1.6 million oz at a profit. These guys are one of the better ones amongst the majors. They reported today:
(courtesy Agnico Eagle)
TORONTO , July 29, 2015 /CNW/ – Agnico Eagle Mines Limited (NYSE:AEM, TSX:AEM) (“Agnico Eagle” or the “Company”) today reported quarterly net income of $10.1 million , or net income of $0.05 per share for the second quarter of 2015. This result includes non-recurring losses of $12.9 million ( $0.06 per share), unrealized gains on financial instruments of $9.4 million ( $0.04 per share), non-cash foreign currency translation losses of $4.8 million ( $0.02 per share), non-cash stock option expense of $4.1 million ( $0.02 per share), a non-cash foreign currency translation gain on deferred tax liabilities of $3.2 million ( $0.01 per share) and various mark-to-market and other adjustment gains of $0.8 million ( $0.01 per share). Excluding these items would result in adjusted net income of $18.5 million or adjusted net income of $0.09 per share for the second quarter of 2015. In the second quarter of 2014, the Company reported net income of $22.2 million or net income of $0.12 per share.
For the first six months of 2015, the Company reported net income of $38.8 million , or $0.18 per share. This compares with the first six months of 2014 when net income was $119.3 million , or $0.66 per share. Financial results in the 2015 period were negatively impacted by lower gold prices (approximately 8% lower) and lower by-product metals revenues.
Second quarter 2015 cash provided by operating activities was $188.3 million ( $152.8 million before changes in non-cash components of working capital). This compares to cash provided by operating activities of $182.7 million in the second quarter of 2014 ( $136.5 million before changes in non-cash components of working capital). The increase in cash provided by operating activities before changes in working capital during the current period was mainly due to an increase of 24% in gold production.
For the first six months of 2015, cash provided by operating activities was $331.8 million ( $329.6 million before changes in non-cash components of working capital), as compared with the first half of 2014 when cash provided by operating activities was $433.1 million ( $343.6 million before changes in non-cash components of working capital). The decrease in cash provided by operating activities before changes in working capital during the period was mainly due to a decrease of 8% in gold prices compared to the 2014 period, which more than offset a 17% increase in gold production.
“With continued strong operating performance, favourable local currency foreign exchange rates, and near-term opportunities to increase production at several of our mines, we remain well-positioned to manage the current price volatility in the gold market”, said Sean Boyd , Agnico Eagle’s Chief Executive Officer. “In these challenging times, we will continue to focus on reducing costs and we will remain measured in our approach to managing and growing our business”, added Mr. Boyd.
Second Quarter 2015 highlights include:
- Quarterly gold production – Payable gold production 1 in Q2 2015 was 403,678 ounces of gold at total cash costs 2 per ounce on a by-product basis of $601 and all-in sustaining costs 3 (“AISC”) on a by-product basis of $864 per ounce
- Second consecutive record quarter of precious metal production from Mexican operations – In the second quarter of 2015, payable gold and silver production from Mexican operations was 92,056 ounces and 685,869 ounces, respectively. Total cash costs per ounce of gold on a by-product basis averaged $394
- 2015 production guidance maintained and cost forecasts reduced – Expected gold production for 2015 is maintained at approximately 1.6 million ounces with total cash costs on a by-product basis of $600 to $620 per ounce (previously $610 to $630 ) and AISC of approximately $870 to $890 per ounce (previously $880 to $900 )
- Vault Extension and Goldex Deep 1 approved for mining; 2015 capital for both projects increased by a total of approximately $36 million – The Vault extension is expected to reduce the potential production gap between the end of production at Meadowbank and the start of production at Amaruq (not yet approved for construction) by approximately one year. Goldex Deep 1 adds approximately seven years of production at approximately 100,000 ounces of gold per year
- Drilling at Amaruq’s Whale Tail deposit confirms grades and thicknesses; mineralization extended to depth – Highlights include: 13.2 grams per tonne (“g/t”) gold over 14.3 metres at 133 metres depth, and 13.9 g/t gold over 11.0 metres at 194 metres depth. The deepest intercept to date on the property yielded 8.8 g/t gold over 6.0 metres at 568 metres depth, almost 200 metres deeper than previous intercepts
- Continued focus on debt reduction – In Q2 2015, $25 million was repaid under the Company’s credit facility, C$20 million (reflecting the Company’s 50% interest) was repaid under the Canadian Malartic General Partnership (the “Partnership”) secured loan facility, and the Canadian Malartic senior unsecured convertible debentures ( C$37.5 million , reflecting the Company’s 50% interest) were fully converted by the holders. As a result, the Company’s indebtedness was reduced by approximately $70 million
- A quarterly dividend of $0.08 per share was declared
end
And now your overnight trading in bourses, currencies, and interest rates from Europe and Asia:
1 Chinese yuan vs USA dollar/yuan remains constant at 6.2089/Shanghai bourse: green and Hang Sang: green
2 Nikkei down 25.98 or 0.13%
3. Europe stocks mostly in the green /USA dollar index down to 96.63/Euro down to 1.1054
3b Japan 10 year bond yield: rises to 42% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.62
3c Nikkei still just above 20,000
3d USA/Yen rate now just below the 124 barrier this morning
3e WTI 47.70 and Brent: 53.06
3f Gold up (options expiry on LBMA/OTC on Friday) /Yen down
3gJapan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa.
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil down for WTI and down for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund slightly rises to .698 per cent. German bunds in negative yields from 4 years out.
Except Greece which sees its 2 year rate rises to 21.30%/Greek stocks this morning: still expect continual bank runs on Greek banks /stock markets not allowed to be open as per ECB
3j Greek 10 year bond yield rises to: 11.99%
3k Gold at $1096.30 /silver $14.65
3l USA vs Russian rouble; (Russian rouble up 4/5 in roubles/dollar) 59.51,
3m oil into the 47 dollar handle for WTI and 53 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 .9618 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0629 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.
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 +.698%
3s The ELA rose another 900 million euros to 90.4 billion euros. The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”. Greece votes again and agrees to more austerity even though 79% of the populace are against.
4. USA 10 year treasury bond at 2.27% early this morning. Thirty year rate below 3% at 2.98% / yield curve flatten/foreshadowing recession.
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Violent Government Buying Spree Sends Chinese Stocks Soaring At Close Of Trading; Yellen On Deck
China is slowly learning.
On a day when market participants will care about only one thing – how hawkish (or dovish) the FOMC sounds at 2:00 pm (no Yellen press conference today) – Chinese stocks provided the usual dramatic sideshow and traded unchanged or modestly negative for most of the day despite the latest $100 billion injection, the close of trading on Wednesday was a mirror image of what happened in the last hour on Monday, as various Chinese “plunge-protection” mechanism went into a furious buying frenzy and government-backed funds rushed to buy anything that trades in the last 60 minutes of trading in what may be the most glaring example of banging the close yet, something which the Fed and Citadel have shown is the most efficient way of “setting” market expectations and getting the most bang for your manipulating buck.
As a reminder, “banging the close” is illegal if it sends the price lower. When it pushes prices higher, it is perfectly acceptable.
What was the reason for this latest blatant intervention when according to SCMP’s George Chen, about 400 stocks hit 10% daily limit today, “mostly in last 30 mins of trading.” Alas nobody knows such answers in centrally planned markets: “No clear reason to explain why the magical bullish last 30mins trading happened; Rumors say Gov is keen to push index back above 4000 points.” Chen further adds that “many local analysts now believe 3600 points is so-called “policy bottom”. Below that Gov feels like losing face. Next target is 4000 points.”
In other words, after 2 epic crashes in just one month, China is hoping the retail traders will forgive and forget how they lost everything (and more), and just keep putting their hard earned money into a rigged casino. China just may get it.
Other Asian markets traded mostly higher taking the impetus from a positive Wall Street close , as participants focused on upbeat corporate earnings. ASX 200 (+0.9%) outperformed amid gains in miners, following a rebound in commodities. The Hang Seng and Shanghai Comp traded between gains and losses as officials stepped up measures to calm markets, after Chinese press suggested that the government injected USD 100bn in its sovereign fund in order to buy assets abroad. Elsewhere, Nikkei 225 (-0.2%) was the sessions laggard underpinned by index heavyweight Fanuc (-11%) after the Co. lowered its FY profit guidance by 1 7%.
Stocks in Europe failed to hold onto best levels of the session and heading into the North American open are seen mixed, as market participants positioned for the upcoming FOMC release. Gains were led by the health care sector, following earnings by Bayer (+3.9%), with telecommunications sector also performing well following earnings by the likes of KPN (+3.6%) and Telefonica Deutschland (+2.9%).
In spite of the looming risk events, the absence of tier-1 data releases in Europe this morning translated into a somewhat muted price action by fixed income products, while peripheral bond yield spreads tightened, albeit marginally.
Heading into the North American open, EUR/USD and GBP/USD trades marginally higher, with the USD index little changed as market participants sit on the side-lines ahead of the key risk events. In terms of price action overnight, NZD was the session’s biggest mover after RBNZ Governor Wheeler reiterated that further easing is likely and additional NZD depreciation is necessary. However, NZD/USD found support after Wheeler stated that the economy is not weak enough to warrant large cuts in the OCR.
The release of the latest API oil inventories yesterday (-1.9mln vs. Prey. +2.3nnln) failed to boost WTI prices, as expectations for the DOE data due out later today still remain for a build in crude, cushing OK, gasoline and distillate inventories. ING has decreased it Q3 brent crude forecast by USD 10 to USD 60 per bbl from USD 70 per bbl citing oversupply, Co. also cuts its Q4 forecast by USD 5 from USD 80 per bbl to USD 70 per bbl. (BBG/RTRS) Turkish energy minister says the Iraq-Turkey oil pipeline which was closed because of an attack is due to be reopened on Sunday. (RTRS)
Today in the US the key report is pending home sales data from the always entertaining NAR, before the FOMC statement this afternoon. On the earnings front Facebook, Goodyear and Metlife are the notable reporters.
In summary: European shares remain higher with the telco and personal & household sectors outperforming and autos, construction underperforming. Companies including LafargeHolcim, HeidelbergCement, Bayer, Peugeot, KPN, Barclays, BATS, Volkswagen, Total release sales/earnings statements. Brent crude falls for 6th day. Russia ends foreign currency purchases in move which may lay groundwork for 5th interest-rate cut this year on Friday. The Swiss and U.K. markets are the best-performing larger bourses, Italian the worst. The euro is little changed against the dollar. German 10yr bond yields rise; Greek yields increase. Commodities decline, with nickel, corn underperforming and natural gas outperforming. U.S. mortgage applications, FOMC rate decision, pending home sales due later.
Market Wrap
- S&P 500 futures up 0.2% to 2091.3
- Stoxx 600 up 0.4% to 391.6
- US 10Yr yield up 2bps to 2.27%
- German 10Yr yield up 3bps to 0.72%
- MSCI Asia Pacific up 0.5% to 140.9
- Gold spot up 0.1% to $1096.4/oz
- 13 out of 19 Stoxx 600 sectors rise; telco, personal & household outperform, autos, construction underperform
- Eurostoxx 50 +0.1%, FTSE 100 +0.4%, CAC 40 +0.3%, DAX +0.1%, IBEX -0.2%, FTSEMIB -0.9%, SMI +0.8%
- Asian stocks rise with the Shanghai Composite outperforming and the Nikkei underperforming; MSCI Asia Pacific up 0.5% to 140.9
- Nikkei 225 down 0.1%, Hang Seng up 0.5%, Kospi down 0.1%, Shanghai Composite up 3.4%, ASX up 0.7%, Sensex up 0.4%
- 9 out of 10 sectors rise with telcos, staples outperforming and industrials, tech underperforming
- Solvay Agrees to Buy Composite Maker Cytec for $5.5 Billion
- HeidelbergCement Plans to Purchase Italcementi for $4.1 Billion
- Billionaire Ambani Said to Weigh Sale of U.S. Shale Gas Holdings
- Euro up 0.03% to $1.1063
- Dollar Index down 0.16% to 96.62
- Italian 10Yr yield up 1bps to 1.88%
- Spanish 10Yr yield up 3bps to 1.94%
- French 10Yr yield up 3bps to 1.01%
- S&P GSCI Index down 0.3% to 382.4
- Brent Futures down 0.3% to $53.1/bbl, WTI Futures down 0.4% to $47.8/bbl
- LME 3m Copper up 0.3% to $5315/MT
- LME 3m Nickel down 1.2% to $11185/MT
- Wheat futures down 0.7% to 507 USd/bu
Bulletin Headline Summary from RanSquawk and Bloomberg
- Stocks in Europe failed to hold onto best levels of the session and heading into the North American open are seen mixed, as market participants positioned for the upcoming FOMC release.
- Apart from the FOMC release, the focus will also be on the release of the latest US pending home sales report and the weekly DOE data release.
- In terms of earnings, Facebook, MasterCard and Altria are only some of the large-cap stocks due to report later today
- Treasuries decline before FOMC decision as Chinese stocks rise for first time in four days and week’s auctions continue with $35b 5Y notes; WI 1.620% vs 1.710% in June.
- Economists remain somewhat divided over when Fed will begin to hike rates after this week’s FOMC mtg in Washington, though most see Sept. liftoff, based on published research; Fed decision day guide
- Shanghai Composite rebounded in last hour of trading to halt a three-day, 11% slide amid signs of waning interest by retail investors and margin traders; turnover was the weakest in almost in two months
- China’s actions in the past month adds a new conundrum for central bankers after the dependence of it stock market on official support was exposed Monday with the biggest drop since 2007 amid speculation aid had been dialed back
- The U.S. Senate Permanent Subcommittee on Investigations, which has used its power for more than a decade to scrutinize corporations and financial institutions for wrongdoing, is shifting its focus to keeping tabs on the government
- Top officials from 12 Asia-Pacific nations formally kicked off a four-day bid to hammer out a massive but so far elusive free-trade agreement that has been in the works for 6 years
- U.K. mortgage approvals climbed to 66,582, more than expected. from an upwardly revised 64,826 in May, the Bank of England said in London on Wednesday
- Sovereign 10Y bond yields higher. Asian stocks gain; European stocks, U.S.equity- index futures rise. Crude oil lower, copper and gold gain
DB’s Jim Reid completes the overnight recap
As DB’s Peter Hooper has suggested, the FOMC statement (no press conference) is likely to give themselves maximum flexibility to react to data in the weeks ahead, including two employment reports, the employment cost index, and a host of data on consumer and business spending, as well as inflation-related developments. The Q2 GDP numbers and historical revisions (tomorrow) will be of interest for what they show about PCE inflation as well as spending and output. Having said all this it will surely be odd if they don’t acknowledge the recent fall in commodities. As DB’s Joe LaVorgna points out the current -29% year-over-year drop in the CRB index implies YoY headline CPI inflation falling from 0.1% to -0.9% (all other things being equal) over the next couple of months, which would be the largest year-over-year drop since September 2009 (-1.3%) and one of the lowest prints in modern history. However core YoY CPI inflation is likely to edge above 2% in the months ahead which complicates matters. So the Fed have plenty to think about but today they’ll likely defer the decision.
Onto the hot topic at the moment – namely China. Bourses have fluctuated into the midday break, albeit with less volatility than we’ve seen of late. Having opened about 1.5% firmer, the Shanghai Comp has since crossed between positive and negative territory nine times and as we go to print is slightly down at -0.21%. The CSI 300 and Shenzhen are -0.36% and -0.56% despite the July consumer sentiment reading bouncing 2.2pts during the month to 114.5, the highest level since March.
Yesterday our economics team in China highlighted the recent surge in pork prices for the country in recent weeks. They noted that having stayed negative for 14 consecutive months since the beginning of 2014 (averaging -4.2% in the time), the yoy growth of pork prices turned positive in March (+2%) and averaged nearly 7% in Q2 (8.3% in April, 5.3% in May and 7.0% in June). Pork prices have typically been the driving force for CPI in past cycles and they expect prices to remain on the rise for the next 6 to 12 months, reinforcing their view that CPI will be on an upward trend in H2. Our colleagues also point that in the past 15 years, the PBoC has never cut interest rates when inflation was picking up (whether driven by food or more broad-based) and so believe that this could constrain the room for further easing beyond one cut (and one further RRR cut) in Q3 this year. They then expect the policy stance to turn from loosening to neutral in Q4 as inflation rises and growth picks up slightly.
Another member of the BRIC group, Brazil, is also generating plenty of noise at the moment after the news that S&P has revised the outlook of Brazil’s BBB- sovereign rating to negative from stable and in turn moving them one step closer to losing their investment grade status. The rating agency cited the ongoing corruption investigations which are ‘increasingly weighing on Brazil’s fiscal and economic outlook’. The move will likely lead to greater focus on today’s rate decision for the COPOM with the market expecting the Selic rate to be raised 50bps to 14.25%.
Glancing over the rest of markets this morning outside of China, it’s a mixed picture across most of Asia with the Nikkei (-0.05%) ande Hang Seng (+0.05%) more or less unchanged but the Kospi (+0.43%) and ASX (+1.03%) firmer. Commodity markets are fairly muted with Gold +0.16% but WTI (-0.27%) and Brent (-0.32%) both lower. S&P 500 futures are unchanged while credit indices in Asia, Japan and Australia are around a basis point tighter.
Back to the price action yesterday, risk assets finally got a much needed rebound as a decent day for corporate earnings, coupled with an intra-day recovery in Chinese equity markets (albeit still finishing down) and a calmer day in the commodity complex which seemingly all contributed to a positive day across equity and credit markets. In the US we saw the S&P 500 rise steadily over the session before eventually closing +1.24%, aided by energy (+2.99%) and materials (+2.15%) stocks in particular and snapping a five-day losing streak in the process. Before this in Europe a strong opening helped the Stoxx 600 (+1.07%), DAX (+1.06%) and CAC (+1.01%) also close higher. Credit markets received a boost too with Crossover closing 5bps tighter and CDX IG finished nearly 2.5bps tighter in the US. It was a much calmer day in the commodity complex meanwhile. Gold (+0.14%) led a modest recovery for precious metals, helping lift Silver (+0.88%) and Platinum (+0.22%) while Copper (+2.11%) bounced off Monday’s 6-year low to record its first up day since July 16th. WTI (+1.24%) rose off the recent lows to close just shy of $48/bbl (at $47.98) although Brent (-0.32%) pared some earlier strength into the close to extend the latest bear-market run. The Bloomberg commodity index yesterday recorded a 0.81% gain, halting a four-day slide.
Earnings certainly helped support the better tone yesterday. Ford, Pfizer, Merck and UPS were some of the headliners to report earnings beats with share prices rising between 1% and 5%, while an after the close report from Gilead Sciences also saw shares surge in aftermarket trading. Interestingly, despite growth in North American and Europe, Ford’s CFO highlighted the difficulty in China, trimming its full-year forecasts for sales in the country. With the latest round of reports taking the number of S&P 500 reporters now to 236, earnings beats have remained steady at 76% while the beat/miss ratio at the sales level is now evenly matched at 50/50 (beats having stood at 51% yesterday). Over in Europe meanwhile, with 131 Stoxx 600 companies having reported both earnings and sales beats have remained relatively steady at 65% each.
Data flow in the US yesterday was highlighted by a notably weaker than expected Conference Board consumer confidence print (90.9 vs. 100.0) for July. The reading declined 8.9pts from a downwardly revised June print, the biggest decline in four years and in turn taking the reading down to the lowest level since September last year. The details were just as weak with a gauge of consumer expectations for the next six months falling 12.9pts to 79.9 in the month and measures of jobs and business conditions outlooks also weakening. Elsewhere, the S&P/Case Shiller house price index for May was also weak having fallen 0.18% mom during the month (vs. +0.30% expected). On the other hand we saw a slight improvement in the flash July services PMI to 55.2 (vs. 55.0 expected), an increase of 0.4pts which helped to lift the composite up 0.6pts to 55.2. There was also some decent improvement in the July Richmond Fed manufacturing activity index which rose 6pts to 13 – a nine month high. All told there was little change in the Treasury market with the benchmark 10y closing 3.2bps higher in yield at 2.251%, barely budging following the data. The Dollar did pare gains however following the data, but still closed +0.28% on the day.
European data flow was centered on the UK yesterday where we saw Q2 GDP print in line with consensus at +0.7% qoq helping to put the annualized rate at +2.6% yoy. DB’s George Buckley believes that this combined with recent data flow suggests the recovery is sustainable but that the major concern in this respect is the reliance on growth from the consumer segment as opposed to other spending components. Sterling caught a bid on the back of the print, closing +0.35% against the Dollar while 10y Gilts finished more or less unchanged at 0.973% (+0.2bps). It was a quiet day all round for European sovereign bonds in fact with 10y Bunds a very modest 0.2bps lower in yield at 0.688% and the peripherals around 2bps lower.
Before we move onto today’s calendar, one thing to keep an eye on is the potential re-opening of the Greece equity market soon. Yesterday we heard the ECB approve proposals for trading rules to end the now four-week closure according to the Athens Stock Exchange. Any timing and trade restrictions are to be decided by a finance ministry decree. In the time that the exchange has been closed, according to Bloomberg a US listed ETF which has served as a proxy for the exchange is down 18%.
Turning over to the day ahead now, German and French consumer confidence readings along with UK consumer credit and mortgage approvals data are the key releases this morning. This afternoon we get June pending home sales data in the US before the FOMC statement this evening (due 7pm BST). On the earnings front Facebook, Goodyear and Metlife are the notable reporters.
end
Chinese stocks surge last night, especially in the last hour after the government injects 100 billion into the rescue fund. This will become a huge disaster
(courtesy zero hedge)
Chinese Stocks Rise After Government Injects $100bn Into Sovereign (Rescue) Fund; Sell-off ‘Blame’ Shifts To Hong Kong
Despite the reassurances from western media and talking heads that China is unimportant (both its stock market and economy), Asian economies continue to show signs of contagion from China’s slowdown as Thai exports weaken and Hong Kong trade tumbles. But it is the blame game that is top of mind tonight as Chinese regulators switch attention to Hong Kong brokers in their “investigation into malicious sellers.” As SCMP’s George Chen notes, first they blame a “foreign force,” and now they blame Hong Kong, always careful not to blame themselves. After 3 down days, Chinese stocks look are opening slightly higher as there is little follow-through from yesterday’s PPT rescue or today’s panic-buying in US markets especilaly in light of an additional $100bn injection into the sovereign (rescue) fund.
Just throw another 100bn at it…
As a reminder, China closed on the weaker side overnight…
But it appears the PPT save overnight and extension through the US session is not helping China at the open…
- *CHINA’S CSI 300 STOCK-INDEX FUTURES LITTLE CHANGED AT 3,683
Update: Buying pressure arrived shortly after the open ..
- *CHINA’S CSI 300 INDEX SET TO OPEN UP 0.8% TO 3,839.96
- *CHINA SHANGHAI COMPOSITE SET TO OPEN UP 0.7% TO 3,689.82
Not exactly the follow-through they would have hoped for…
But here is the chart everyone is looking at…
* * *
As SCMP’s George Chen explains, blame continues to project outward…
Though as we saw yesterday,. any strength is being used by locals to sell (not short) into government strength as one farmer exclaimed – fighting back tears, “I have have ruined my entire family… I will nevere touch stocks again.”
* * *
Furthermore, while Western media continues to stress how unimportant Chinese stocks (and the Chinese economy now apparently) is to US stocks and the US economy… it is, as Gavekal Capital explains, crucially important and more evidence is building of a slowing Chinese economy permeating the rest of Asia…
Today’s edition of our diary of weak Asian economic stats focuses on the recently released trade and industrial production numbers out of Thailand and the trade numbers from Hong Kong. The Thai economy is feeling the pain of the Chinese slowdown acutely even in the most high level economic statistics.
Meanwhile the Hong Kong trade figures, which we view more as a proxy for Chinese trade given its intermediary port position connecting China with the rest of the world…
…paint the picture of the weakest trade by volume since 2013.
* * *
But apart from that – everything is awesome judging by US equities.
end
A real problem for China has pork prices are rising. This is accompanying a fast exodus of hot money. Normally China would raise rates to stop the flow out of China, but they cannot due to higher prices on staple pork and also a stagnant economy.
(courtesy zero hedge)
The Fate Of China’s Monetary Policy Is In The Hoofs Of Pigs
It seems China’s efforts to stabilize their economy stock market knows no bounds – nowhere better exemplified than the 5% spike in an hour last night after injecting $100bn into the sovereign (rescue) fund – and western observers applaud the efforts as if they are costlessly saving the world. However, there are costs to all this leveraged asset bubble creation (and maintenance) and, as China People’s Daily reports, nowhere is that more evident than the surging price of pork (on if China’s main CPI components). As Deutsche Bank warns, in the past 15 years, the PBoC has never cut interest rates when inflation was picking up (whether driven by food or more broad-based); so the fate of an ‘easy money’ inspired stock market bubble remains in the hands hoofs of pigs as the policy stance will be forced to turn from loosening to neutral in Q4 as inflation rises.
Just keep pumping money in right?
Well there are consequences… (via China People’s Daily)
The price of pork in China has been rising for a couple of months now, with a new uplift record in 3 years. According to the National Bureau of Statistics (NBS), starting in March, the price of pork has been rising for 4 months with a total of a 5.7 yuan rise. In China, the price on pork is closely related to the CPI (Consumer Price Index). Experts interpret that the price of pork will keep on rising and drive the rise of CPI at the same time. Consequently, the CPI of the latter half of the year is expected to be a little higher than the first half of the year, but there is no strong sign of inflation.
Statistics of NBS show that from March 18 to July 20, the price of pork has risen almost 50 percent. The current price on pork ranks the highest since the year of 2012. Based on previous experience, the price on pork usually would have an “outburst” every 2 to 3 years. The last “pork cycle” happened during June 2010 to June 2011. It seems like a new round of the “pork cycle” is around the corner. Because of being under the oversupply for a long period of time, many small and medium-sized farmers’ quit their jobs- a major driver of appreciation.
In China, the price of pork is one of the main components of the CPI. In 2010, the rise in the price of pork and vegetables was taken as the dominant factor that caused the rise of CPI in the fourth quarter.
And, as Deutsche’s Jim Reid notes, there are actions after those consequences…
Yesterday our economics team in China highlighted the recent surge in pork prices for the country in recent weeks. They noted that having stayed negative for 14 consecutive months since the beginning of 2014 (averaging -4.2% in the time), the yoy growth of pork prices turned positive in March (+2%) and averaged nearly 7% in Q2 (8.3% in April, 5.3% in May and 7.0% in June). Pork prices have typically been the driving force for CPI in past cycles and they expect prices to remain on the rise for the next 6 to 12 months, reinforcing their view that CPI will be on an upward trend in H2.
Our colleagues also point that in the past 15 years, the PBoC has never cut interest rates when inflation was picking up (whether driven by food or more broad-based) and so believe that this could constrain the room for further easing beyond one cut (and one further RRR cut) in Q3 this year.
They then expect the policy stance to turn from loosening to neutral in Q4 as inflation rises and growth picks up slightly.
Furthermore, considering all factors, we believe recent development raises the probability for the government to cut growth target for 2016 to 6.5% from 7%.
* * *
So, simply put, the fate of China’s economy, stock market, and monetary policy is in the hands of pigs (the porcine type, not the humane type)… just as it forced PBoC’s hand in 2011… so be careful what you wish for.
A Syriza rebellion threatens to derail the bailout:
(courtesy zero hedge)
Tsipras Threatens Snap Elections As Syriza Rebellion Threatens To Derail Bailout
On Tuesday we documented the rapid collapse of the Greek economy. According to data presented at an extraordinary meeting of the Hellenic Confederation of Commerce and Entrepreneurship, retail sales have fallen 70%, while the The Athens Medical Association recently warned that 7,500 doctors have left Greece since 2010.
To be sure, assigning blame for the economic malaise is difficult as it’s still largely unclear whether internal structural problems or externally imposed belt tightening deserve the lion’s share of the blame, but there certainly does seem to be a growing consensus among impartial observers that creditors’ insistence on the implementation of still more austerity in the middle of what amounts to a depression may be a fool’s errand – especially with capital controls serving to constrain economic activity.
It is against this backdrop that Greek PM Alexis Tsipras will attempt to pass a third set of prior actions through parliament – this will be the first such vote to take place with representatives of the “Quadriga” on the ground in Athens. As we noted on Tuesday, “if creditors aren’t satisfied with the progress by August 18 (i.e. if for any reason Tsipras doesn’t manage to get the third set of bailout prerequisites by lawmakers), then paying the ECB on August 20 won’t be possible and then it’s either tap the remainder of the funds in the EFSM (which would require still more discussions with the UK and other decidedly unwilling non-euro states) or risk losing ELA which would trigger the complete collapse of not only the economy but the banking sector and then, in short order, the government. And through it all, the PM is attempting to beat back a Syriza rebellion (which will only be exacerbated by the upcoming vote on the third set of measures) while convincing the opposition that he’s not secretly backing the very same Syriza rebels in their attempts to forcibly take the country back to the drachma.”
On Wednesday, Tsipras spoke out about the new bailout “deal”, debt re-profiling, the referendum, and party politics in an interview with Sto Kokkino radio station.
As Bloomberg reports, the Prime Minister “says that his mandate was to stop destruction of Greece [and that] things have changed” for the country and for Syriza. “The Greek people voted ‘no’ to a bad deal, they did not vote for an exit from the euro. Now some people are trying to manipulate the results,” he continued.
Tsipras went on to accuse creditors of not negotiating in good faith, noting that the “quartet” of institutions wasn’t independent. As for the referendum call, Tsipras says he “had no other choice” and that the plebiscite was “high risk.” As for abandoning the Greek “no” vote, Tsipras appears to have laid the blame at the foot of EU officials, saying it was “creditors [who] decided to shut down Greek banks” (the implication being that it was the bank closure and attendant economic pain which forced his hand in Brussels). Finally, the PM insists on playing up debt relief as something that was extracted from creditors during bailout talks (as opposed to something that was agreed to later once even Germany realized that without some manner of re-profiling, Greece’s situation was utterly hopeless). “We got a commitment for debt relief, which will take place after the first review of the program, in November,” the PM said.
Here are a few more notable quotes from the interview:
But for many Syriza lawmakers, the time for rhetoric has long since passed and indeed, it now appears that the party will not wait until after the third bailout is formally in place to call a party conference. Here’s Kathimerini:
SYRIZA’s central committee is due to hold an emergency meeting Thursday in an attempt to find a way to settle the growing rift within the party over whether the government should agree to a third bailout or not.
The second meeting Tuesday of the political secretariat in two days resulted in a decision to call a gathering of the central committee after several SYRIZA officials belonging to the party’s radical left wing called for the government not to pursue negotiations with Greece’s lenders but to follow an “alternative” path.
Prime Minister Alexis Tsipras spoke at Monday’s meeting of the political secretariat and insisted that the government has no other viable option than to agree a new bailout with the institutions.
He proposed holding an emergency SYRIZA congress, probably in September, to allow party members to debate the issue.
However, the party’s Left Platform, led by ex-Energy Minister Panayiotis Lafazanis is pushing for the congress to be held now, before a third bailout has been agreed.
The central committee members will have to decide whether they will accept either of these options or whether there should be a ballot of SYRIZA members to decide what should be done.
Meanwhile, creditors are “pleased” with how “cooperative” Greece is being now that they have been thoroughly humiliated and subdued (which recalls what the German Economic Council said on Tuesday about “uncooperative” states). “The teams from the institutions are now already on the ground in Athens since Monday and the talks have now been ongoing for the last couple of days,” an EU Commission spokesperson said on Wednesday, adding that Brussels is “satisfied with the smooth and constructive cooperation with the Greek authorities and that should allow us to progress as swiftly as possible.”
But as should be abundantly clear from the above, and as we and others have pointed out on quite a few occasions since Alexis Tsipras left Brussels on July 13, there’s something very odd about leaving the implementation of an unpopular bailout program to the political party from which the staunchest opposition emanates.
The alleged plot to seize the country’s currency reserves hatched in secrecy by Lafazanis only serves to reinforce the suspicions not only of creditors, but of the very same opposition lawmakers who helped Tsipras secure the necessary votes to pass the first two sets of prior actions.
Put simply, there seems to be a very real possibility that the Syriza rebellion will gather enough steam in the coming weeks to materially derail discussions. This is then a race – Tsipras needs to formalize the new program before Lafazanis (and perhaps Varoufakis) foment enough discontent to make a meaningful push to head off implementation.
And with that, we’ll close with the following sound bites from Kathimerini which sum up the situation quite nicely.
Greek Bonds Plunge As Tsipras Threatens Snap Election
10 year Greek bond yields are spiking this morning (and prices therefore plunging) as trading actvity picks up in the dormant peripheral capital markets. The 2025s are downover 5pts from their last traded price back in late June with yields spiking back up toward 12.5%. This derisking comes after, as we detailed earlier, not only is the Greek economy collapsing but while Brussels is “satisfied with the smooth and constructive cooperation with the Greek authorities and that should allow us to progress as swiftly as possible,” Greek PM Tsipras is threatening snap election as rebellion within ‘his’ party grows.
Volume and actvity picks up in GGBs and the price plunges…
* * *
Put simply, there seems to be a very real possibility that the Syriza rebellion will gather enough steam in the coming weeks to materially derail discussions. This is then a race – Tsipras needs to formalize the new program before Lafazanis (and perhaps Varoufakis) foment enough discontent to make a meaningful push to head off implementation.
If Varoufakis Is Charged With Treason, Then Dijsselbloem Should Be As Well
In the aftermath of this weekend’s infamous leak of Yanis Varoufakis audio recording with members of OMFIF in which the former finmin admitted to asset managers that in his tenure as a finmin he had engaged in preparations for a return to the Drachma, Greece has been gripped by a media frenzy debating whether Varoufakis will be charged with treason for daring to even contemplate how an exit from the EMU would take place.
To be sure, Varoufakis may have poured the initial gasoline on the fire when he admitted to Ambrose Evans-Pritchard shortly after the recording surfaced that “the context of all this is that they want to present me as a rogue finance minister, and have me indicted for treason. It is all part of an attempt to annul the first five months of this government and put it in the dustbin of history.”
His concerns were certainly justified: yesterdayKathimerini reported that Greek Supreme Court prosecutor Efterpi Koutzamani on Tuesday took two initiatives in the wake of revelations by former Finance Minister Yanis Varoufakis that he had planned a parallel banking system: she forwarded to Parliament two suits filed against the former minister last week by private citizens and she appointed a colleague to determine whether any non-political figures should face criminal charges in connection with the affair.
The legal suits were filed last week by Apostolos Gletsos, the mayor of Stylida in central Greece and head of the Teleia party, and Panayiotis Giannopoulos, a lawyer. Giannopoulos is suing Varoufakis for treason over his handling of talks with Greece’s creditors. Gletsos, for his part, accuses Varoufakis of exposing the Greek state to the risk of reprisals.
As there is a law protecting ministers, the judiciary cannot move directly against Varoufakis. It is up to Parliament to decide whether his immunity should be lifted so he can stand trial. The first step would be to set up an investigative committee.
A third suit was expected to go to Parliament after a group of five lawyers said they were seeking an investigation into whether any non-political figures should face criminal charges in connection with the Varoufakis affair. The charges would involve violation of privacy data, breach of duty, violation of currency laws and belonging to a criminal organization. It was the lawyers’ move that prompted Koutzamani to order an investigation.
As a further reminder, during the telephone call Varoufakis detailed his plan for a parallel banking system, which would involve a childhood friend, a professor at Columbia University, to hack into the ministry’s online tax system.
Varoufakis did not name the head of the General Secretariat for Information Systems, Michalis Hatzitheodorou, but the description of his role at the ministry and his background suggested he was referring to him.
In a statement on Tuesday, Hatzitheodorou rebuffed as “absolutely false” reports regarding any type of intervention in the ministry’s information systems. The GSIS, and the current general secratary, have not planned much less attempted any type of intervention in its systems, the statement said. It added that the GSIS has enacted procedures with strict specifications which guarantee the security of personal data and make such interventions by anyone impossible.
What makes matters confusing, is that the core allegation made by Varoufakis, namely that the Troika controls Greece tax revenues and had to be sabotaged, was strictly denied: European Commission spokeswoman Mina Andreeva on Tuesday described as “false and unfounded” Varoufakis’s claims that Greece’s General Secretariat for Public Revenues is controlled by the country’s creditors.
In other words, if Andreeva is right, then Varoufakis’ transgression of threatening to hijack the Greek tax system was merely hot air, and the former finmin is guilty of nothing more than self-aggrandizement.
On the other hand, if Greece does find it has a legal basis to criminally charge Varoufakis with treason merely for preparing for a Plan B, then it brings up an interesting question: if Varoufakis was a criminal merely for preparing for existing the Euro, then comparable treason charges should also be lobbed against none other than Varoufakis’ nemesis – Eurogroup president and Dutch finance minister Jeroen Dijsselbloem.
Recall from the November 28 post that “Netherlands, Germany Have Euro Disaster Plan – Possible Return to Guilder and Mark“, to wit:
The Dutch finance ministry prepared for a scenario in which the Netherlands could return to its former currency – the guilder. They hosted meetings with a team of legal, economic and foreign affairs experts to discuss the possibility of returning to the Dutch guilder in early 2012.
At the time the Euro was in crisis, Greece was on the verge of leaving or being pushed out of the Euro and the debt crisis was hitting Spain and Italy hard. The Greek prime minister Georgios Papandreou and his Italian counterpart Silvio Berlusconi had resigned and there were concerns that the eurozone debt crisis was spinning out of control – leading to contagion and the risk of a systemic collapse.
A TV documentary broke the story last Tuesday. The rumours were confirmed on Thursday by the current Dutch minister of finance, Jeroen Dijsselbloem, and the current President of the Eurogroup of finance ministers in a television interview which was covered by EU Observer and Bloomberg.
“It is true that [the ministry of] finance and the then government had also prepared themselves for the worst scenario”, said Dijsselbloem.
This is precisely what Varoufakis was doing too.
“Government leaders, including the Dutch government, have always said: we want to keep that eurozone together. But [the Dutch government] also looked at: what if that fails. And it prepared for that.”
While Dijsselbloem said there was no need to be “secretive” about the plans now, such discussions were shrouded in secrecy at the time to avoid spreading panic on the financial markets.
Again, precisely like in the Greek scenario.
In fact, if throwing people in jail, may round up Wolfi Schauble as well:
Jan Kees de Jager, finance minister from February 2010 to November 2012,acknowledged that a team of legal experts, economists and foreign affairs specialists often met at his ministry on Fridays to discuss possible scenarios.
“The fact that in Europe multiple scenarios were discussed was something some countries found rather scary. They did not do that at all, strikingly enough”, said De Jager in the TV documentary. “We were one of the few countries, together with Germany. We even had a team together that discussed scenarios, Germany-Netherlands.”
When the EU Observer requested confirmation from Germany, the German ministry of finance did not officially deny that it had drawn up similar plans, stating simply: “We and our partners in the euro zone, including the Netherlands, were and still are determined to do everything possible to prevent a breakup of the eurozone.”
* * *
This is quite a revelation. At that time the German finance minister Wolfgang Schauble had said that the Euro could survive without Greece. Whether it could survive without the Dutch is another matter entirely.
Fast forward 3 years when Greece, too, was making preparations for “preventing the breakup of the eurozone” in doing precisely what Schauble wanted as recently as three weeks ago: implementing a parallel currency which would enable Greece to take its “temporary” sabbatical from the Eurozone.
So one wonders: where are the legal suits accusing Dijsselbloem and Schauble of the same “treason” that Varoufakis may have to vigorously defend himself in a kangaroo court designed to be nothing but a spectacle showing what happens to anyone in Europe who dares to give Germany the finger, either literally or metaphorically.
The answer: nowhere, and they will never appear, because if Varoufakis is indeed sued it will not be because he did something that other much more “serious” Eurocrats haven’t considered or done before, but simply to crucify the Greek and make him into a dramatic example for any other “peripheral” (or even core, ahem “Madame Frexit”) European who would even consider taking a comparable action on their own and pushing Europe’s artificial, and now expiring, monetary union to the edge of collapse.
Then again, considering just how badly Europe misjudged the third season of the Greek bailout tragicomedy, it may want to be careful: the last thing it wants is to create a martyr against what increasingly more are calling a fascist oligarchy operating, conveniently enough, out of Belgium, Frankfurt and Berlin, one whose next item on the agenda is taking advantage of the Greek crisis and finally doing away with European state sovereignty altogether handing over control of Europe to a “parliament”, one which if the ECB is any indication, will also be run by a few Goldman bankers.
Is the $100 Trillion Bond Bubble About to Burst?
The situation in Greece has very little to do with politics or economics. Instead it is entirely focused on just one thing.
That issue is collateral.
What is collateral?
Collateral is an underlying asset that is pledged when a party enters into a financial arrangement. It is essentially a promise that should things go awry, you have some “thing” that is of value, which the other party can get access to in order to compensate them for their losses.
For large European banks, EU nation soveregin debt (such as Greece) is the collateral backstopping hundreds of trillions of Euros worth of derivative trades.
This story has been completely ignored in the media. But if you read between the lines, you will begin to understand what really happened during the Greek bailouts.
Remember:
1) Before the second Greek bailout, the ECB swapped out all of its Greek sovereign bonds for new bonds that would not take a haircut.
2) Some 80% of the bailout money went to EU banks that were Greek bondholders, not the Greek economy.
Regarding #1, going into the second Greek bailout, the ECB had been allowing European nations and banks to dump sovereign bonds onto its balance sheet in exchange for cash. This occurred via two schemes called LTRO 1 and LTRO 2 which happened in December 2011 and February 2012 respectively. Collectively, these moves resulted in EU financial entities and nations dumping over €1 trillion in sovereign bonds onto the ECB’s balance sheet.
Quite a bit of this was Greek debt as everyone in Europe knew that Greece was totally bankrupt.
So, when the ECB swapped out its Greek bonds for new bonds that would not take a haircut during the second Greek bailout, the ECB was making sure that the Greek bonds on its balance sheet remained untouchable and as a result could still stand as high grade collateral for the banks that had lent them to the ECB.
So the ECB effectively allowed those banks that had dumped Greek sovereign bonds onto its balance sheet to avoid taking a loss… and not have to put up new collateral on their trade portfolios.
———————————————————————–
Which brings us to the other issue surrounding the second Greek bailout: the fact that 80% of the money went to EU banks that were Greek bondholders instead of the Greek economy.
Here again, the issue was about giving money to the banks that were using Greek bonds as collateral, to insure that they had enough capital on hand.
Piecing this together, it’s clear that the Greek situation actually had nothing to do with helping Greece. Forget about Greece’s debt issues, or protests, or even the political decisions… the real story was that the bailouts were all about insuring that the EU banks that were using Greek bonds as collateral were kept whole by any means possible.
So here we are today and Greece is back in the headlines. Once again the country is out of money and the ECB and IMF are trying to punish it without hurting the larger EU banks.
Why are they making such a big deal about Greece… a country whose GDP is just 2% of the EU?
Because whatever happens in Greece will be used as a template for much larger problems AKA Spain and Italy.
Spain and Italy, by comparison, have €1.78 trillion and €1.87 trillion in external debt respectively.
That is a heck of a lot of collateral that would be in BIG trouble in the event of a bond crash for either country.
And both countries have bond yields that are spiking…
Here’s Italy:
Smart investors should take note of this now. It is a MAJOR red flag to be watched closely.
end
Bill Gross describes the global economy and its price of assets as nothing but a shell game:
(courtesy Bill Gross/CNBC)
“There is no doubt that the price of assets right now is a question mark… and ultimately when Central Banks stop manipulating markets where that price goes is up for grabs… and probably points down“
As Gross tweeted…
This clip carries a public wealth warning…
(courtesy zero hedge)
The Rise Of The Yuan Continues: LME To Accept Renminbi As Collateral
As far-fetched as the notion may be to those who are wedded – by choice, by misguided beliefs, or by virtue of being completely beholden to the perpetuation of the status quo – to idea that the dollar will forever retain its status as the world’s reserve currency, the yuan is set to play a critical role in global finance, investment, and trade going forward.
We’ve long argued that the BRICS bank, the AIIB, and to an even greater extent, the Silk Road Fund, will help to usher in a new era of yuan hegemony in international investment and trade. A number of recent developments support this, including Beijing’s push for the renminbi to play an outsized role in loans doled out through the AIIB, the denomination of loans from the BRICS bank in yuan, and China’s aggressive investment in Pakistan and Brazil via the Silk Road initiative (here and here).
As for financial markets, China recently confirmed theimpending launch of a yuan denominated gold fix which conveniently dovetailed with the LBMA’s acceptance of the first Chinese banks to participate in the twice-daily auction that determines London gold prices.
Now, in the latest sign of yuan proliferation and penetration, the renminbi will be accepted as collateral by the LME along with the dollar, the euro, the pound, and the yen.
Here’s WSJ with more:
China’s domestic stock market may be in turmoil but the country’s currency, known as the yuan or renminbi, is making a seemingly relentless push deeper into the global financial system.
The latest step: the London Metal Exchange, the world’s largest venue for trading metals where $15 trillion of metals was traded last year, is set to accept yuan as collateral for banks and brokers that trade on its platform.
The Chinese currency joins the U.S. dollar, the euro, the British pound and Japan’s yen, which are all currently permissible as collateral on the LME’s platform.
“In the commodities area, it makes absolute sense to start providing renminbi-denominated services,” said Trevor Spanner, chief executive of the LME’s clearing house business. “The renminbi is on its way to becoming one of the world’s most widely used currencies” he said.
While largely a technical change, the LME move marks another milestone for China’s currency.
The yuan is now the fifth most used currency for international payments, ranking number seven a year ago, according to data from the Society for Worldwide Interbank Financial Telecommunication, a provider of payments services.
A Bank of England survey on Monday showed that trading in yuan rose 25% in London in the six months to April this year, even as trading volumes in other currencies fell by 8% on average over the same period.
The takeaway: irrespective of any damage China’s recent interventions into its domestic equity markets may have on the country’s SDR push, and regardless of whether the PBoC cash injection into CSF spooks the market and serves to accelerate short-term capital outflows, the internationalization of the yuan isn’t likely to be meaningfully derailed.
We’ll leave you with the following quote from Dan Marcus, CEO of London-based currency trading platform ParFX whospoke to WSJ:
“The rise of China’s currency on global markets is arguably the most significant development in currency trading since the introduction of the euro in 1999.”
Meanwhile In Venezuela… The Socialist Paradise Has Arrived
As we recently warned, the hyperinflationary collapse in Venezuala is reaching its terminal phase. With inflation soaring at least 65%, murder rates the 2nd highest in the world, and chronic food (and toilet paper shortages), the following disturbing clip shows what is rapidly becoming major social unrest in the Maduro’s socialist paradise… and perhaps more importantly, Venezuela shows us what the end game for every fiat money system looks like (and perhaps Janet and her colleagues should remember that).
As we previously concluded, and seemingly confirmed by the above video,
Venezuela’s hyperinflation is reaching its final stages. It is probably already far too late for the government to stop the complete collapse of its currency. The bolivar is in the process of transforming from a medium of exchange to tinder for wood-stoves.Venezuelans who had the presence of mind to convert their savings into gold or foreign currency in good time are likely to survive the conflagration intact.
Those who bought stocks on the Caracas stock exchange seem to have successfully side-stepped the effects of the devaluation as well, but they need a plan for the post-inflation adjustment crisis, which will bankrupt a great many companies very quickly. Also, the government can simply close the market down at any time if it doesn’t like what is happening there, so there is the ever-present danger of even more government interference as well.
It is quite fascinating to see that in spite of numerous examples throughout history,governments never seem to learn. They all believe they can somehow overrule economic laws by diktat. This is not only true of Venezuela’s government, but of practically every government in today’s world. Central planning of money has been adopted everywhere. Venezuela merely shows us what the end game for every fiat money system looks like.
At some point the State is overwhelmed by the promises it has made to its citizens. When it can no longer pay by means of confiscating private wealth, the printing press is always the last resort. Recently one actually gets the impression that it is often the first, rather than the last resort.
In developed countries, people believe that the planners have everything in hand, and that their “price stabilization” rules will protect them from such outcomes. However, it should be clear that these rules will simply be abandoned in extremis. The independence of central banks exists only on paper – it will mean nothing in a perceived “emergency”. It is almost comical in this context that gold is being sold while most of the world’s major central banks are seemingly hell-bent on aping John Law’s Banque Générale Privée.
end
Oil related stories
Crude rises after a huge inventory drawdown!
(courtesy zero hedge)
Crude Surges After Surprise Inventory Draw, Biggest Production Decline Since 2013
Total US crude production slumped over 1.5% last week – the biggest decline since October 2013.
Add to that a considerable inventory draw of over 4.2mm barrels (against expectations of a build)…
and crude prices are surging.
Charts: Bloomberg
END
Your early morning currency, and interest rate moves
Euro/USA 1.1054 down .0011
USA/JAPAN YEN 123.62 up .043
GBP/USA 1.5639 up .0030
USA/CAN 1.2940 up .0011
Early this morning in Europe, the Euro fell by 11 basis points, trading now well above the 1.10 level at 1.1054; 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, an imminent default of Greece and the Ukraine, rising peripheral bond yields, and flash crashes.
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 4 basis points and trading just below the 124 level to 123.62 yen to the dollar.
The pound was up this morning by 30 basis points as it now trades just above the 1.56 level at 1.5639, 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 fell by 11 basis points at 1.2940 to the dollar.
We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;
1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies
2, the Nikkei average vs gold carry trade (still ongoing)
3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure).
These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>
The NIKKEI: this morning: down 25.98 or 0.13%
Trading from Europe and Asia:
1. Europe stocks mostly in the green (except Spain)
2/ Asian bourses mostly in the green … Chinese bourses: Hang Sang green (massive bubble forming) ,Shanghai in the green (massive bubble ready to burst), Australia in the green: /Nikkei (Japan) red/India’s Sensex in the green/
Gold very early morning trading: $1096.30
silver:$14.65
Early Wednesday morning USA 10 year bond yield: 2.27% !!! up 1 in basis points from Tuesday night and it is trading just at resistance at 2.27-2.32%
USA dollar index early Wednesday morning: 96.63 down 14 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: 2.53% up 1 in basis points from Tuesday
Closing Japanese 10 year bond yield: .41% !!! par in basis points from Tuesday/still very ominous
Your closing Spanish 10 year government bond, Wednesday, up 5 in basis points
Spanish 10 year bond yield: 1.96% !!!!!!
Your Wednesday closing Italian 10 year bond yield: 1.90% up 2 in basis points from Tuesday: (very ominous)
trading 6 basis point lower than Spain.
IMPORTANT CURRENCY CLOSES FOR TODAY
Closing currency crosses for Wednesday night/USA dollar index/USA 10 yr bond: 4 pm
Euro/USA: 1.0972 down .0092 ( Euro down 92 basis points)
USA/Japan: 123.98 up .406 ( yen down 40 basis points)
Great Britain/USA: 1.5598 down .0096 (Pound down 96 basis points)
USA/Canada: 1.2944 up .0070 (Can dollar down 16 basis points)
The euro fell today. It settled down 92 basis points against the dollar to 1.0972 as the dollar traded northbound today against most of the various major currencies. The yen was down by 40 basis points and closing just below the 124 cross at 123.58. The British pound was down by 96 basis points, closing at 1.5596. The Canadian dollar was down 16 basis points closing at 1.2949.
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: 2.28% up 3 in basis point from Tuesday// (at the resistance level of 2.27-2.32%)/ominous
Your closing USA dollar index:
97.20 up 54 cents on the day
.
European and Dow Jones stock index closes:
England FTSE up 75.72 points or 1.16%
Paris CAC up 40.12 points or 0.81%
German Dax up 37.94 points or 0.34%
Spain’s Ibex up 30.50 points or 0.27%
Italian FTSE-MIB down 79.12 or 0.34%
The Dow up 121.12 or 0.69%
Nasdaq; up 26.46 or 0.52%
OIL: WTI 48.69 !!!!!!!
Brent:53.43!!!
Closing USA/Russian rouble cross: 58.76 up 1 and 1/4 rouble per dollar on the day
end
And now for your more important USA stories.
Your closing numbers from New York
China Rescue, VIX Crash, & Fed Pump Squeeze Shorts Most In 6 Months
Summing up the talking heads opinions on China, Twitter, Yelp… and so on..
Overnight exuberance in the afternoon session in China….
Provided the first momo pump in US stocks (but that faded back to unch ahead of the open and dismal housing data), FOMC prep sent us spiking before investors realized that while dovish it basically suggests the economy is crap…
Cash indices never looked back with a small pump’n’dump after the Fed statement…
This is Trannies best 2-day ramp since 2011…
Leaving everybody happy since Friday…
All about avoiding a red print Year-To-Date…
TWTR was clubbed like a baby seal…
VIX crushed to 11 handle briefly…The Matterhorn Pattern completed…
Which is no big surprise…
Treasury yields ended the day higher, with the curve steepening modestly… initialk kneejerk was bonds rallied after FOMC…
The US Dollar surged after FOMC – despite its dovish tone…
Silver jumped but gold was flat as copper and crude popped…
Saudi rumors on production cuts, US inventory draws, and the biggest US production drop since Oct 2013 sent crude soaring but The Fed pissed in the pool party arguing that things are not quite as awesome as they hoped…
Charts: Bloomberg
Bonus Chart: Data Dependent Fed misses window…
Bonus Bonus Chart: Remember this…
Pending homes sales plunge the most in two years:
(courtesy zero hedge)
Pending Home Sales Plunge Most Since 2013, Holdout Buyers Blamed
Following new home sales disappointment, pending home sales dropped 1.8% in June (missing expectations of a 0.9% rise) for the biggest drop sicne Dec 2013. After 5 months of gains, and with median prices at record highs, it appears affordability is crushing hopes of any sustained ‘recovery’ once again. Modest gains in the Northeast and West were offset by larger declines in the Midwest and South, but Larry Yun has an explanation, hold-out buyers are waiting for a better entry point (in other words – pent up demand is there).
Lawrence Yun, NAR chief economist, says although pending sales decreased in June, the overall trend in recent months supports a solid pace of home sales this summer.
“Competition for existing houses on the market remained stiff last month, as low inventories in many markets reduced choices and pushed prices above some buyers’ comfort level,” he said.
“The demand is there for more sales, but the determining factor will be whether or not some of these buyers decide to hold off even longer until supply improves and price growth slows.”
…
“Strong price appreciation and an improving economy is finally giving some homeowners the incentive and financial capability to sell and trade up or down,” adds Yun.
“Unfortunately, because nearly all of these sellers are likely buying another home, there isn’t a net increase in inventory. A combination of homebuilders ramping up construction and even more homeowners listing their properties on the market is needed to tame price growth and give all buyers more options.”
* * *
but it’s not the dismal reality of the underlying economy and the sudden disappearance of the manic Chinese buyer…
Fed Finishes 54th Consecutive Meeting With No Hike, Hints At Dovish Delay
With no press conference, expectations were muted going in (aside from the ubiquitous VIX-dip, equity market rip that happens at every FOMC meeting) but seemed to hint at delaying a September/December liftoff is on the cards – needing more job improvement…
- *FED SAYS LABOR MARKET CONTINUED TO IMPROVE, JOB GAINS `SOLID’
- *FED REPEATS RISKS TO ECONOMY, JOB OUTLOOKS `NEARLY BALANCED’
- *FED: RATE TO RISE AFTER `SOME FURTHER’ JOB MARKET IMPROVEMENT
And so the confusion continues… the jobs market is telling the Fed one thing, while inflation (held down by a lackluster Chinese demand which has in turn exacerbated a global deflationary supply glut) is saying something different, and remember 25bps doesn’t matter (just like subprime was “contained”). Full redline below.
Pre-Fed: S&P Futs 2096.00, 10Y 2.2880%, Gold $1095, EURUSD 1.1050, VIX 12.92
As usual VIX was crushed:
But broadly, bonds have led and stocks lagged since the June Fed meeting…
But a data dependent Fed may have a problem convincing the world that they are hiking rates for anything but total horror at the asset bubbles they have blown… because macro data has faded again…
* * *
Further headlines…
- *FOMC VOTE WAS UNANIMOUS
- *FED SAYS LABOR SLACK `HAS DIMINISHED’ SINCE EARLY THIS YEAR
- *FED REPEATS ECONOMY `EXPANDING MODERATELY’ IN RECENT MONTHS
- *FED REPEATS IT WANTS TO BE `REASONABLY CONFIDENT’ ON INFLATION
- *FED SAYS BUSINESS INVESTMENT, NET EXPORTS STAYED SOFT
- *FED REPEATS MKT-BASED INFLATION COMPENSATION GAUGES REMAIN LOW
This is the 54th straight Fed meeting with no rate hike. We now await Jon Hilsenrath (absent a press conference) to explain what The Fed means.
* * *
The Key Statement:
it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market
Which implies a delay or more dovish stance even though it contrasts with the addition of the word “solid” when describing the labor market:
The labor market continued to improve, withsolid job gains and declining unemployment.
The last notable change: “energy prices appear to have stabilized” was removed from the June statement, and for good reason.
end
And now the official mouthpiece for the Fed, Jon Hilsenrath:
(courtesy zero hedge/Jon Hilsenrath)
Fed Mouthpiece Hilsenrath Confirms Inflation Concerns May Delay “Liftoff”
Janet Yellen and the FOMC have spoken (in dovish tones) and now so has WSJ’s own Fed whisperer Jon Hilsenrath, whose pre-packaged missive (penned under the now default 20 minute pre-release embargo) rehashes essentially what we discussed earlier today.
In short, the jobs market is telling the Fed one thing (“continued improvement”, although Yellen is apparently looking for a bit more), while inflation (held down by lackluster Chinese demand which has in turn exacerbated a global deflationary supply glut) is saying something different, setting up a “cliffhanger” split decision in September and a tentative 25 bps trial balloon hike at the December meeting because after all, at some point Yellen will have to test the waters to discover if an “exit” is even possible without sending Wall Street into an all out panic.
Here’s Hilsenrath’s 593-word take via WSJ on the Fed’s 539-word statement:
The Federal Reserve on Wednesday kept interest rates near zero but cited progress in the U.S. job market, a sign it remains on course to raise interest rates in September or later this year.
At the same time, however, it flagged a nagging concern about low inflation, which is creating caution among officials and could convince them to delay the day of the first increase.
The Fed concluded its two-day policy meeting with a decision to leave its benchmark federal funds interest rate near zero, setting officials up for a potentially difficult call at the meeting to be held September 16-17.
Fed Chairwoman Janet Yellen has said officials expect to raise rates this year. The central bank has three scheduled policy meetings left to act, September being the next one. Wednesday’s policy statement didn’t send an overt signal about timing, giving the Fed an option for action by September but not a clear commitment to it.
Central to the Fed’s thinking is how it perceives its progress in achieving its “dual mandate” of maximum employment and inflation near 2%.
The Fed has said it will raise rates when it has seen improvement in the job market and becomes “reasonably confident” inflation is on course to return to 2%.
The jobless rate has declined from 10% in 2009 to 5.3% in July, but the Fed’s preferred measures of inflation have remained below 2% for more than three straight years. While progress on the jobs front makes officials inclined to act, while the persistent failure to reach the inflation goal makes them hesitate.
Officials in their policy statement cited “solid job gains” and declining unemployment. The characterization of hiring gains was an upgrade from the Fed’s June policy statement, which noted job gains had picked up. The Fed also slightly tweaked its assessment of slack in the job market, saying underutilization of labor market resources had diminished, striking an earlier qualification that slack had diminished “somewhat.”
The new statement included another small hint that officials see themselves getting closer to the full employment goal. For months they have said they wanted to see “additional improvement in the labor market” before being convinced it is time to rais rates. In Wednesday’s statement they said they wanted to see “some” additional inmprovement, suggesting they see themselves nearing their threhsold on the jobs front for action.
As before, the Fed said the economy has been expanding moderately, and cited gains consumer spending and housing investment.
At the same time, however, they said inflation continued to run below the Fed’s 2% objective and said they were continuing to monitor inflation developments closely, a sign of some trepidation about its low level.
The benchmark federal funds rate has been near zero since December 2008, or 2,417 straight days.
The low rate is meant to spur economic activity by encouraging households and businesses to borrow, spend and invest. A worry for the Fed is that it might also spur another bubble like the one in housing that crippled the economy during the 2007-2009 recession.
International economic developments also weigh on officials as they plot a course for the remainder of the year. Slowing growth in China and other emerging markets is putting downward pressure on the price of commodities and manufactured goods imported into the U.S.
Fed officials have described these developments as transitory. In their June policy statement, they noted that energy prices had stabilized, a sign they believed this source of downward inflation pressure had diminished. In Wednesday’s statement they struck the reference stable energy prices, nodding to a renewed drop in oil prices that materialized in recent weeks.
The Fed voted 10-0 on the action, the fifth straight meeting with a unanimous outcome.
So as we tipped earlier, “nothing today, almost certainly nothing in September, and a small rate hike in December just to show it’s possible. The question then is will this send the dollar surging even more, and lead to an even more acute crash in corporate profitability, one which not even buybacks and non-GAAP addbacks can save.”
By Greg Hunter On July 29, 2015
Former Assistant Treasury Secretary Dr. Paul Craig Roberts contends all talk of the Fed raising interest rates this fall is totally wrong. Roberts explains, “They most certainly are not going to raise them because they’ve spent seven years keeping them at zero. In fact, inflation aside, there are already negative interest rates. . . . So, they are most certainly not going to raise interest rates because if they raise the rates, they will destroy all their efforts to keep the big banks afloat. They also would destroy the stock market. What we have seen all these years is every time the market needs to correct, the Plunge Protection Team steps in and buys the Standard and Poor’s futures and drives the market back up. So, what would cause the Plunge Protection Team and the Federal Reserve to all of a sudden jettison the policies they have been following all these years to save the big banks, to save the stock market and to keep the aura of success alive in America?”
Dr. Roberts says all the market manipulations have another big benefit. Dr. Roberts contends, “This supports the dollar as well. Now, if they were to raise interest rates, then you would see bond prices collapse, stock prices collapse and, most likely, a movement out of the dollar. The dollar is the main source of Washington’s power. So, if the dollar . . . starts going down, this is a disaster for Washington. They may lose the reserve currency status. They would lose the ability to put sanctions on other countries. They would lose the ability to pay their bills by printing dollars. So, the last thing the government wants, and certainly the Fed is part of it, is to see all of this rigged super structure come crashing down because everything would go with it.”
Dr. Roberts goes on to say, “So, why does the Fed keep talking about raising interest rates, and they have been doing this for years? Why do they keep saying that, at some point in the future we are going to raise interest rates? That’s to reassure the currency market that there is not just going to be an endless outflow of dollars and Federal Reserve purchases of bonds to keep interest rates negative, this is just to reassure the currency market that they are going to put a halt to this next September or next June. It is part of keeping the show on the road. It’s part of keeping this rigged system believable. . . . It’s all part of the propaganda campaign.”
On the recent sell off of the market in China, Dr. Roberts says, “Clearly, if the Chinese market is going down, it does suggest the situation in the United States is not that good because so much of the output of China is the off-shore production of American firms for the global market. So, if China’s economy is falling, it implies that the American economy is not doing well either because they can’t buy all the stuff that the American firms are making in China.”
Dr. Roberts has repeatedly called the global economy a “house of cards.” Currently, demand for physical gold and silver is spiking even though prices are falling. What does this mean? Dr. Roberts says, “Some people clearly understand it, and that’s why the demand of gold and silver is so high that it often cannot be met. Right now, for example, the U.S. Mint has suspended all sales of Silver Eagles simply because they cannot get enough silver to manufacture the coins to meet the demand. We see that the gold trusts are being depleted. We see extraordinary amounts of withdrawals from the Shanghai Gold Exchange. So, we know the demand for gold and silver is very, very high.Some people know that, but the financial press operates to disguise what’s going on. The financial press says the reason the demand for coins is so high is the price is falling. What made the price fall? Only two things can cause the price of gold to fall. One has to be a great increase in supplies . . . but that’s not what’s happening, it’s the opposite. . . . The only other thing that could cause the price to fall is a massive decrease in demand. We are seeing a massive increase in demand. The paper market is driving down the price and it’s fraudulent. All these stories are coming out in the press that gold is not money. It’s a pet rock. . . .”
Join Greg Hunter as he goes One-on-One with former top Treasury Department insider Dr. Paul Craig Roberts.
(There is much, much more in the hour long in-depth interview.)
Video Link
http://usawatchdog.com/fed-most-certainly-will-not-raise-interest-rates-paul-craig-roberts
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No further reports, Harvey? Are you taking some time off? Hope all is well for you.
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