Oct 16

Good evening Ladies and Gentlemen:

Here are the following closes for gold and silver today:

Gold:  $1183.60 down $4.30   (comex closing time)

Silver $16.10  down 5 cents.

In the access market 5:15 pm

Gold $1176.84

Silver:  $16.04

First, here is an outline of what will be discussed tonight:

At the gold comex today,  we had a very poor delivery day, registering 50 notices for 5000 ounces  Silver saw 0 notices for nil oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 208.52 tonnes for a loss of 95 tonnes over that period.

In silver, the open interest rose by a HUGE 2325  contracts as silver was up by only 5 cents yesterday. I guess in silver nobody of importance wants to leave the arena.  The total silver OI now rests at 167,615 contracts In ounces, the OI is still represented by .838 billion oz or 120% of annual global silver production (ex Russia ex China).

In silver we had 0 notice served upon for nil oz.

In gold, the total comex gold OI rose to 458,400 for a gain of 6698 contracts.  We had 50 notices filed for 5000 oz today.

We had a huge decrease  in tonnage  at the GLD to the tune of 6.25 tonnes /   thus the inventory rests tonight at 700.00 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. It sure looks like 670 tonnes will be the rock bottom inventory in GLD gold. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold will be the FRBNY and the comex.   In silver, we had no changes in silver inventory at the SLV  / Inventory rests at 315.152 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 a considerable 2325 contracts up to 167,615 as silver was up 5 cents with respect to yesterday’s trading.   The total OI for gold rose by a whopping 6698 contracts to 458,400 contracts,as gold was up $7.80 yesterday.

No wonder the raid today as the OI has been rising too fast for our criminal bankers.

(report Harvey)

2.Gold trading overnight, Goldcore

(/Mark OByrne)

3.  COT report\



Asian , European and Russian/Middle eastern affairs

8 USA stories/Trading of equities NY

9.  Physical stories

Let us head over to the comex:

The total gold comex open interest rose from 451,702 up to 458,400  for a  of gain of 6698 contracts as  gold was up $7.80 with respect to yesterday’s trading.   For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest:  1) total gold comex collapse in OI as we enter an active delivery month, and 2) a continual drop in the amount of gold standing in an active month, and today the latter of these developments continued but a slower pace.  The new active delivery month we enter is October and here the OI fell by 82 contracts down to 934. We had 0 notices filed yesterday so we lost 82 contracts or 8200 additional oz will not stand for delivery.  The November contract went down by 41 contracts down to 232. The big December contract saw it’s OI rise by 5,100 contracts from 308,396  up to 313,496. The estimated volume on today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was  06,604 which is poor. The confirmed volume on yesterday (which includes the volume during regular business hours + access market sales the previous day was fair at 200,152 contracts.
Today we had 50 notices filed for 5000 oz.
And now for the wild silver comex results. Silver OI rose by a considerable 2325  contracts from 165,290 up to 167,615 as the price of silver was up only 5 cents yesterday.  Since October is not an active month, we will not see a huge contraction in the OI standing for delivery. The bankers continue to pull their hair out trying to extricate themselves  from their silver mess (the continued high silver OI with it’s extremely low price, combined with the banker’s massive physical shortfall) as the world senses something is brewing in the silver arena. We enter the October contract month which saw it’s OI fall by 1 contracts down to 12. We had 0 contracts filed yesterday so we neither gained nor lost any silver contracts standing in this non active delivery month of October.  The November contract month saw it’s OI remain constant at 37.
The big December contract saw its OI rise by 826 contracts up to 112,847. The estimated volume today as to number of contracts sold is 34,501 contracts (regular business hours, 8 20 am to 1:30 pm) is excellent as the bankers through everything but the kitchen sink at silver trying to contain the price around 16.00.  The confirmed volume yesterday (regular plus access market) came in at 52,352 contracts which is excellent in volume.
We had 0 notices filed for 5,000 oz.

October contract month:

Initial standings

Oct 162015

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  nil
Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  nil
No of oz served (contracts) today 50 contracts

5000 oz 

No of oz to be served (notices) 884 contracts

88,400  oz

Total monthly oz gold served (contracts) so far this month 240 contracts

(24,000 oz)

Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 184,991.8  oz
 Today, we had 0 dealer transactions
Total dealer withdrawals:  nil oz
we had 0 dealer deposits
total dealer deposit:  zero
We had 0 customer withdrawals:  
total customer withdrawal nil  oz
We had 0 customer deposit:

Total customer deposit nil  oz

we had one adjustment:


 from the Scotia vault:
10,076.714 oz was transferred to the dealer vault from the customer side.
 JPMorgan has a total of 10,777.279 oz or.3352 tonnes in its dealer or registered account.
***JPMorgan now has 580,809.509 oz or 18.06 tonnes in its customer account.
Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 44 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received) by JPMorgan customer account.
To calculate the final total number of gold ounces standing for the Oct contract month, we take the total number of notices filed so far for the month (240) x 100 oz  or 24,000 oz , to which we  add the difference between the open interest for the front month of Oct. (934 contracts) minus the number of notices served upon today (50) x 100 oz   x 100 oz per contract equals the number of ounces standing.
Thus the initial standings for gold for the Oct. contract month:
No of notices served so far (240) x 100 oz  or ounces + {OI for the front month (934)– the number of  notices served upon today (50 x 100 oz which equals 112,400 oz  standing  in this month of Oct (3.496 tonnes of gold).
We lost 82 contracts or an additional 8,200 oz will not stand for delivery.  It seems that the cash settlements resumed in earnest today.
We thus have 3.49 tonnes of gold standing and only 5.6523 tonnes of registered gold (for sale gold/dealer gold) waiting to serve upon those standing.
Total dealer inventory 181,670.082 oz or 5.6523 tonnes
Total gold inventory (dealer and customer) =6,704,069.599   or 208.52 tonnes)
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 208.52 tonnes for a loss of 95 tonnes over that period.
And now for silver

October silver Initial standings

Oct 16/2015:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 503,872.420  oz

CNT, Scotia

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory  1,027,392.08 oz


Scoita, hSBC

nilNo of oz served (contracts) 0 contract  (niloz)
No of oz to be served (notices) 12 contracts (60,000 oz)
Total monthly oz silver served (contracts) 64 contracts (320,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil oz
Total accumulative withdrawal  of silver from the Customer inventory this month 8,906,237.6 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit; nil oz

we had 0 dealer withdrawals:
total dealer withdrawal: nil  oz
We had 4 customer deposits:
i) Into Brinks: 299,390.67  oz
ii) Into Delaware:  1900.200 oz
iii) Into HSBC;  300,966.88 oz
iv) Into Scotia:  420,134.330 oz

total customer deposits: 1,027,392.08 oz

We had 2 customer withdrawals:
 i) out of CNT: 103,537.400 oz
 ii) Out of Scotia: 400,335.000 oz  ???

total withdrawals from customer: 503,872.400.    oz

we had 0 adjustments
Total dealer inventory: 42.872 million oz
Total of all silver inventory (dealer and customer) 162.998 million oz
The total number of notices filed today for the September contract month is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in Oct., we take the total number of notices filed for the month so far at (64) x 5,000 oz  = 320,000 oz to which we add the difference between the open interest for the front month of September (12) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing.
Thus the initial standings for silver for the Oct. contract month:
64 (notices served so far)x 5000 oz +(12) { OI for front month of September ) -number of notices served upon today (0} x 5000 oz ,=380,000 oz of silver standing for the Oct. contract month.
 we neither gained nor lost any silver ounces standing for metal today.
the comex resumes its liquidation of silver from the customer side and the dealer side. 
*** Ladies and Gentlemen: we are having an old fashioned bank run but instead of paper money being removed, it is silver.


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
And now the Gold inventory at the GLD:
Oct 16./we had a huge withdrawal of 6.25 tonnes/inventory 693.75 tonnes
Oct 15.2015: a huge increase of 5.06 tonnes/inventory rests at 700.00
Oct 14/a huge increase  in gold tonnage of 7.74 tonnes/inventory 694.94 tonnes
oct 13/no changes in gold inventory at the GLD/rest at  687.20 tonnes
Oct 12./2015:  no change in gold inventory at the GLD/rests at 687.20 tonnes
Oct 9.2015: no change in gold inventory at the GLD/rests at 687.20 tonnes
Oct 8.2015: no change in gold inventory at the GLD/inventory rests at 687.20 tonnes
Oct 7/ a withdrawal of 1.78 tonnes at the GLD today/Inventory rests at 687.20 tonnes
oct 6/ no change in gold inventory at the GLD/Inventory rests at 688.98 tonnes.
OCT 5/ a small withdrawal of .22 tonnes of gold inventory at the GLD/Inventory rests at 688.98
oct 2.2015: another addition of 1.78 tonnes of gold inventory at the GLD/Inventory rests at 689.20 tonnes
Oct 1.2015/ a huge addition of 3.28 tonnes of gold inventory at the GLD/Inventory rests at 687.42 tonnes
Sept 30./no change in tonnage at the GLD/Inventory rests at 684.14 tonnes
Sept 29.2015: no change in tonnage at the GLD/inventory rests at 684.14 tonnes
sept 28/another huge addition of 3.87 tonnes of gold into the GLD/Inventory rests tonight at 684.14 tonnes
Sept 25/we had a huge addition of 5.66 tonnes into the GLD/Inventory rests at 680.27 tonnes.
sept 24.2015; no change in gold inventory/inventory rests at 676.40 tonnes
Sept 23.2015: we gained a rather large 1.79 tonnes of gold into the GLD/Inventory rests tonight at 676.40
Oct 16/2015 GLD :693.75 tonnes*
* London is having a tough time sourcing gold. I believe that the last few days of additional GLD gold is a paper gold addition and not real physical.

And now SLV

Oct 16/no change in silver ETF/inventory rests tonight at 315.152 million oz

Oct 15./no change in silver ETF inventory/rests tonight at 315.152

Oct 14/no change in silver ETF/silver inventory/rests tonight at 315.152 million oz

oct 13/no change in silver ETF /silver inventory/rests tonight at 315.152 million oz

:oct 12/ no change in the silver ETF/silver inventory rests tonight at 315.152 million oz

Oct 9.2015:/no change in the silver ETF SLV inventory/rests tonight at 315.152 million oz/

Oct 8.2015/no changes in the silver ETF  SLV/Inventory rests tonight at 315.152 million oz

Oct 7/a huge withdrawal of 3.243 million oz from the SLV/Inventory rests tonight at 315.152 million oz

Oct 6/no change in silver inventory/inventory rests at 318.395 million oz

oCT 5/we had a small withdrawal of inventory at the SLV of 134,000 oz/and this is also to pay for fees/inventory rests at 318.395 million oz

Oct 2.2015: no change in silver inventory at the SLV/inventory rests at 318.529 million oz

Oct 1.2015:another addition of 1,145,000 oz of silver inventory added to the SLV inventory./inventory rests at 318.529 million oz

Sept 30/no change in silver inventory at the SLV/Inventory rests at 317.384 million oz

sept 29.2015: we had another withdrawal of 859,000 oz from the SLV/Inventory rests at 317.384 million oz

sept 28./no change in silver inventory/rests tonight at 318.243 million oz/

Sept 25./we had another 954,000 oz of silver withdrawn from the SLV/Inventory rests this weekend at 318.243 million oz

Sept 24.2015: no change in silver inventory tonight/inventory rests at 319.197 million oz

Sept 23.2015: we had a huge withdrawal of 1.718 million oz at the SLV/Inventory rests at 319.197 million oz

oct 16/2015:  tonight inventory rests at 315.152 million oz***
 ** the jury is still out if the addition of silver is real or paper silver
especially with London in silver backwardation.
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 9.1percent to NAV usa funds and Negative 9.3% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.7%
Percentage of fund in silver:38.1%
cash .2%( Oct 16.2015).
2. Sprott silver fund (PSLV): Premium to NAV falls to+0.43%!!!! NAV (Oct 16/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV falls to – .85% to NAV Oct 16/2015)
Note: Sprott silver trust back  into positive territory at +0.80% Sprott physical gold trust is back into negative territory at -.51%Central fund of Canada’s is still in jail.

Press Release OCT 6.2015

Sprott Increases Offer for Central GoldTrust and Silver Bullion Trust

Offering an Additional Premium of US$0.10 per GTU Unit payable in Sprott Physical Gold Trust Units
and US$0.025 per SBT Unit payable in Sprott Physical Silver Trust Units

When Announced on April 23, 2015, Offers Represented a Premium of US$3.06 per GTU Unit and US$0.91 per SBT Unit for Unitholders Based on Trading Value and the NAV to NAV Exchange Ratio

Premiums as of October 5, 2015 (including the Increased Consideration) are US$1.14 per GTU Unit and US$0.61 per SBT Unit

Notice of Extension and Variation to be Filed Shortly

Offers Will Now Expire on October 30, 2015 –Unitholders Urged to Tender Now

TORONTO, Oct. 6, 2015 (GLOBE NEWSWIRE) — Sprott Asset Management LP (“Sprott” or “Sprott Asset Management”), together with Sprott Physical Gold Trust (NYSE:PHYS) (TSX:PHY.U) and Sprott Physical Silver Trust (NYSE:PSLV) (TSX:PHS.U) (together the “Sprott Physical Trusts”), today announced that it has increased the consideration payable to unitholders in connection with its offers to acquire all of the outstanding units of Central GoldTrust (“GTU”) (TSX:GTU.UN) (TSX:GTU.U) (NYSEMKT:GTU) and Silver Bullion Trust (“SBT”) (TSX:SBT.UN) (TSX:SBT.U) (the “Sprott offers”).

Unitholders will now receive an additional premium of US$0.10 per GTU unit payable in Sprott Physical Gold Trust units and US$0.025 per SBT unit payable in Sprott Physical Silver Trust units (the “Premium Consideration”), in addition to the units of Sprott Physical Gold Trust and units of Sprott Physical Silver Trust, respectively, being offered on a net asset value (NAV) to NAV exchange basis. Based on trading values and the NAV to NAV Exchange Ratio (as such term is defined in the Sprott offers) at the time Sprott announced its intention to make the Sprott offers on April 23, 2015, the offers reflected a premium of US$3.06 per GTU unit and US$0.91 per SBT unit. The premium as of October 5, 2015, based on trading values, the NAV to NAV Exchange Ratio and the Premium Consideration, represents US$1.14 per GTU unit and US$0.61 per SBT unit, respectively. In connection with this increase in consideration, the expiry time for each Sprott offer is extended to 5:00 p.m. (Toronto time) on October 30, 2015.

“Central GoldTrust and Silver Bullion Trust unitholders have been burdened for too long by a group of trustees committed to protecting the interests of the Spicer family. It is only through the public spotlight that the variety of undisclosed fees paid to supposedly independent trustees has forced public disclosures and hollow justifications. Sprott’s offers to unitholders are compelling and momentum is building as we continue to show the clear advantages of the offers. The response of the GTU and SBT trustees has been to penalize unitholders with the burden of paying for costly lawsuits and expensive advisors to protect the Spicer family and the fees they receive. We are accordingly increasing our offer to compensate unitholders for this abuse of trust, and encourage them to take advantage of this opportunity to exchange their units for an immediate premium, and trade a management committed to entrenchment to one committed to their best interests,” said John Wilson, Chief Executive Officer of Sprott Asset Management.

Added Wilson, “We have provided extensions to the offers so that no unitholders are left without this opportunity to exit an underperforming investment and enter into a high quality security that functions as intended, reflecting the value of the bullion held in the trust. Sprott appreciates the support of GTU and SBT unitholders to date and currently anticipates these extensions will be the final extensions to the Sprott offers.”

As of 5:00 p.m. (Toronto time) on October 5, 2015, there were 8,194,265 GTU units (42.46% of all outstanding GTU units) and 2,055,574 SBT units (37.60% of all outstanding SBT units) tendered into the respective Sprott offers. Total units tendered as of October 5, 2015, do not include pending units which are typically received on the date of expiration.

GTU and SBT unitholders who have questions regarding the Sprott offers, are encouraged to contact Sprott Unitholders’ Service Agent, Kingsdale Shareholder Services, at 1-888-518-6805 (toll free in North America) or at 1-416-867-2272 (outside of North America) or by e-mail at contactus@kingsdaleshareholder.com.

At 3:30 pm we receive the COT report which tells position levels of our major players.  Last week showed huge increases in OI short
 positions for our bankers.  Let us see if it increased:
Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
203,299 86,140 53,042 144,242 262,736 400,583 401,918
Change from Prior Reporting Period
12,299 -18,041 -4,253 -4,182 25,843 3,864 3,549
147 101 87 45 57 233 214
  Small Speculators      
  Long Short Open Interest    
  35,345 34,010 435,928    
  1,836 2,151 5,700    
  non reportable positions Change from the previous reporting period  
COT Gold Report – Positions as of Tuesday, October 13, 2015

Our large specs;

Our large specs who have been long in gold added 12,299 contracts to their long side.

Those large specs who have been short in gold covered a monstrous 18,041 contracts from their short side

Our criminal commercials:

Those commercials who have been long in gold pitched a huge 4182 contracts from their long side.

Those commercials who have been short in gold added a monstrous 25,843 contracts to their short side

Our small specs:

Those small specs who have been long in gold added 1836 contracts to their long side

Those small specs who have been short in gold added 2151 contracts.


and now for silver



Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
74,575 22,865 20,210 45,022 103,648
5,737 -5,187 3,250 -3,922 5,202
95 41 40 37 43
Small Speculators Open Interest Total
Long Short 161,346 Long Short
21,539 14,623 139,807 146,723
55 1,855 5,120 5,065 3,265
non reportable positions Positions as of: 146 117
  Tuesday, October 13, 2015   © SilverSeek.com


our large specs:
Those large specs that have been long in silver added 5737 contracts to their long side
Those large specs that have been short in silver covered 5187 contracts from their short side
Our commmercials:
Those commercials that have been long in silver pitched 3922 contracts from their long side/
Those commercials that have been short in silver added a huge 5,202 contracts to their short side
Our small specs:
Those small specs who had been long in silver added 55 contracts to their long side
Those small specs who have been short in silver added 1855 contracts to their short side.\
Conclusions for silver and gold:
Overnight gold/silver trading from Asia and Europe overnight:
courtesy Goldcore/Blog/Mark O’Byrne/Stephen Flood

Gold’s Inflection Point and Asset Allocation with John Butler

– Gold’s Outlook For Year End 2015 and In 2016

– Gold’s Performance in the Coming Years: 2016-2020

– Coming Global Currency Reset

– Asset Allocation – How Much Gold?

– Owning Gold – How and Where?

GoldCore: John Butler Interview

We had the great pleasure of interviewing John Butler of Amphora Capital yesterday and announced that John is now working as a consultant with GoldCore and helping us advise HNW clients and institutions on strategies with regard to allocating to gold.

There were some very interesting insights and we believe high net worth and institutional investors and indeed all listeners will get useful information with which to protect and grow their wealth.

We will be conducting a Webinar next Thursday, October 22nd at 1600 (BST/ London/ UK time) in which we will open up the floor to attendees in our ever popularQuestion and Answer session.

Register Now and have your question answered by John Butler.

GoldCore: Register now for Webinar

John will be giving a keynote speech at the Precious Metals Symposium in Sydney, Australia on October 26th and 27th and we are scheduling meetings with HNW clients for him while he is in Sydney.

Contact us at sales@goldcore.com if you wish to meet John in Sydney to discuss optimal strategies to access and allocate funds to the gold market today. 

Stephen Flood and Mark O’Byrne will be attending and live tweeting from the LBMA in Vienna from Sunday to Tuesday (October 18-20) and are available to meet clients and attendees in Vienna — info@goldcore.com.

Today’s Gold Prices:   USD 1176.35, EUR 1035.34 and GBP 761.39 per ounce.
Yesterday’s Gold Prices:  USD 1183.35, EUR 1034.08 and GBP 764.17 per ounce.

GoldCore: Gold in USD - 1 month


Gold in USD – 1 Month

Gold was marginally higher yesterday and finished $5.10 higher, closing at $1162.40. Silver closed at $15.85, up $0.1 for the day.  Euro gold rose to €1023 per ounce, platinum gained $16 to $993 per ounce.

Gold is set for its second week of gains and is up 1.7%. If it close 2-percent higher for the week, it will be its best week in four.

Gold is down 0.4% at $1,178.20 after logging five consecutive days of gains and remaining near  a 3-1/2-month high hit on yesterday. Gold remains above the key 200-day moving average of $1,177 and a weekly close above this level today will be bullish for gold.

Gold’s 14-day relative strength index (RSI) is quite high but remains a long way from overbought territory which is indicated by a reading above 70, suggesting further gains are possible.

Silver is headed for a third straight weekly gain, while platinum is heading for a second weekly jump. Palladium, however, is set to snap a five-week winning streak, with a 1-percent drop.


Download Essential Guide To Storing Gold In Singapore


Mark O’Byrne
(courtesy Mike Kosares/GATA)

Mike Kosares: ‘Third wave’ of crisis, Shanghai gold’s ascent, and ‘helicopter money’


3:37p ET Thursday, October 15, 2015

Dear Friend of GATA and Gold:

Mike Kosares’ latest News & Views letter has been posted at USAGold’s Internet site, addressing what is supposed to be the “third wave” of the world financial crisis, the growing influence of the Chinese gold market in Shanghai, and speculation about “helicopter money.” The letter is posted at USAGold’s Internet site here:


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




(courtesy Alasdair Macleod)

Gold is money, admittedly not often circulating as such today. Fiat currencies issued by governments have driven gold out of circulation. But where does this leave silver?

Money-substitutes, bank notes and bank deposits, were originally backed by physical silver, and were switched in favour of gold-backed money-substitutes over the last two centuries. It was a process that happened first in England, starting with Isaac Newton’s declaration in 1717 that silver would be exchanged at the Royal Mint in the ratio of fifteen and a half ounces to one of gold. While Newton was a towering genius in physical science, he didn’t understand markets, and that an inflexible bimetallic standard not adjusting for the subjectivity of prices would be problematic.

Market preferences in subsequent years deemed gold preferable to silver at Newton’s exchange ratio, because British merchants tended to pay for imports from the Continent with silver while hoarding gold. This might have been due to the convenience of gold for merchants’ dealings, or it could equally have been due to price arbitrage. For whatever reason, Britain moved towards gold and finally adopted it as the government’s preferred money when the first sovereigns were issued in 1821.

In was not a market vote against silver: it was the result of an attempt at bimetallism that failed, and a government that decided to switch from its centuries-old sterling silver standard. Other countries followed later falling into line with Britain, with Germany and the United States eventually accepting gold as the leading metallic money in the 1870s. And as Von Mises records in his Theory of Money and Credit, “The sharp decline in the price of silver since 1873 is recognised as largely due to the demonetisation of this metal in most countries.”1

This is an important point, obvious perhaps on reflection. The move from Newton’s gold-to-silver ratio of 15.5:1 to today’s 70:1 can be put down largely to silver’s demonetisation. Today, the price of silver measured in the world’s reserve currency, by which it trades, is heavily influenced by a cartel of industrial users and their banks through the financial markets.

History tells us that silver, and not gold, was coinage for the masses, continuing in this role until relatively recently, before silver coins were completely debased. The question now to be considered is whether or not silver will ever be remonetised. If so, we can expect the ratio to fall towards Newton’s formula, implying the silver price will rise significantly relative to that of gold.

The base case for gold returning into circulation for transactions is that it becomes superior again to fiat currencies as money. Clearly, this is most likely to happen in the event of a serious dislocation of the current monetary system, and the failure by governments to come up with a convincing alternative. We can all have our views on this matter, but assuming for a moment that this is a possibility, it is worth understanding the differences between gold and silver as monetary metals today.

As a rule of thumb the silver price is twice as volatile as that of gold and the underlying price dynamics are different. Nearly all the gold mined throughout history has accumulated as above-ground stock, and current mine production is adding to it at a rate of less than two per cent annually, approximately matching global population growth. However with silver, according to The Silver Institute, roughly sixty per cent of consumption is industrial, the balance of forty per cent going into silverware, coins and bars, and jewellery.

This means about 400 million ounces (12,400 tonnes) is accumulating annually in public hands. During the last twenty years the US Geological Survey estimates over 400,000 tonnes of silver have been mined worldwide, so it is likely that approximately 160,000 tonnes of this total is publicly owned, based on a 60/40 split, in addition to stocks previously accumulated. We have no credible estimates for gold accumulation over the same period, beyond mine output of about 50,000 tonnes, much of which has disappeared into secret, wealthy and relatively concentrated ownership. By way of contrast, most households around the world possess some silver in one form or another.

The advantage silver offers the masses as money is partly psychological: you can acquire a lot more of it for less government currency. This obvious fact has led commentators to deride it as poor man’s gold. Both metals of course are infinitely divisible; but what matters more for ordinary people is that gold today costs $1170 per ounce, while silver costs only $16. Even if the silver price rises, the disparity will never close for the common man.

If gold does return to its historic status as transaction money, it is therefore certain that silver will as well. Given both metals have a long-run history of acceptability as money, it is hard to imagine otherwise. But silver has a further advantage: the US Government set a precedent by confiscating and banning ownership of gold in 1933, while silver, the people’s money circulating in coins, was left alone.

The thought that the US Government might at a future date implement such a policy is, frankly, daft. It would be ironic that having denied gold has any role as money, banning its use in this role and confiscating it would amount to an acceptance that it is, after all, money. But governments do daft things when their backs are against the wall. You only have to recall the price and wage controls that were introduced in a number of jurisdictions during the 1970s, including America, in a forlorn attempt to cap price inflation. Under pressure, a future US Government, in conjunction with other like-minded states, would almost certainly consider restricting their citizens’ rights to gold ownership, with or without confiscation. It may be politically expedient to clobber the rich who own gold, but it would be difficult to extend these restrictions to silver, because of its industrial applications and the widespread public outcry that would surely follow.

However, the likelihood of a catastrophic failure of fiat currencies, with or without attempts to outlaw possession of gold or silver, is currently beyond the consideration of all but a small fringe of economists and financial commentators. This is now changing, due to the failure of monetary and economic policies in the advanced economies. As concerns over increasing economic and financial instability mount, and with them the risk to confidence in government currencies being maintained, attention should move towards the potential for gold to mitigate these risks. What is not generally appreciated, even among many sound money advocates, is that silver historically fulfilled the role as the people’s money ever since coins were invented, with gold being preferred only for larger transactions.

No doubt the principal focus will always be on gold as the ultimate metallic money, but the temptation to overlook silver’s monetary credentials is a mistake. Arguably, it could even have a greater claim than gold to be the people’s money, because for all of commercial history it has been more widely circulating for that mundane purpose.


(courtesy Eric Sprott)

Central banks pushed gold down to facilitate zero rates, Sprott says


4:25p ET Thursday, October 15, 2015

Dear Friend of GATA and Gold:

Sprott Asset Management Chairman Eric Sprott, interviewed by Mark Thorburn for SmallCapPower.com, says the gold price was manipulated down by central banks to make zero interest rates seem normal but that the central banks involved in the scheme likely are running out of metal to keep it going much longer. Sprott also identifies a few mining companies in which he has invested. The interview is 10 minutes long and can be viewed at SmallCapPower.com here:


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



(courtesy Chris Powell/GATA)

There are no markets anymore, just interventions — in 20,000 words


8:20p ET Thursday, October 15, 2015

Dear Friend of GATA and Gold:

Perth Mint research director Bron Suchecki today calls attention to an erudite but exceedingly long analysis of modern markets by Christopher R. Cole of Artemis Capital Management in Austin, Texas, whose central point seems to be that for years now central banks have undertaken pre-emptive market manipulation, purchasing a substantial portion of their own nations’ bond and equity markets and effectively placing a put under them.

Cole writes: “As markets now fully price the expectation of central bank control, we are now only one voltage switch away from the razor’s edge of risk” — the “voltage switch” being a reference to the mechanism that barely prevented the explosion of a nuclear bomb in the crash of a B-52 bomber in North Carolina in 1961.

Suchecki writes of Cole’s analysis: “One point that caught my eye and that I think goes a long way to explaining gold’s bear market is his identification of a shift from the central bank put, ‘policy action employed in response to, but not prior to, the onset of a crisis,’ to pre-emptive central banking, which is ‘monetary action in anticipation of future financial stress to avert a market crash before it starts.'”
To your secretary/treasurer Cole’s analysis sounds like an enormously long-winded elaboration on a high school graduate’s remark at GATA’s conference in Washington seven years ago: “There are no markets anymore, just interventions”:


And while Cole sees the markets as being “only one voltage switch away from the razor’s edge of risk,” that high school graduate wonders why, if central banks and governments have already purchased a substantial share of their bond and equity markets, and if they have already started surreptitiously trading all futures markets, including the commodity markets —



— they can’t just purchase the remainder of the markets and thereby end markets — and risk — altogether and forever. Indeed, that high school graduate suspects that the best that advocates of free markets and democracy can hope for in the near future is simply to drag this comprehensive “financial repression” into the open enough so that even mainstream financial news organizations are forced to acknowledge it and so the discussion about returning to a market economy and democracy can begin.

Suchecki’s report is headlined “The Gold Warrior,” contains a link to Cole’s analysis, and is posted at the Perth Mint’s Internet site here:


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





(courtesy Chris Powell/GATA/AP)

There IS gold in Fort Knox — 10 DOUBLE EAGLES 1933 Saint-Gaudens


Court Again Considers Fate of Seized Gold Coins Worth $80 Million

From The Associated Press
via Yahoo News
Wednesday, October 14, 2015


PHILADELPHIA — A federal appeals court is again weighing the fate of 10 rare gold coins possibly worth $80 million or more that the government says were illegally taken from a Philadelphia mint and wound up in a jeweler’s hands.

A lawyer for jeweler Israel Switt’s heirs told the 3rd U.S. Circuit Court of Appeals on Wednesday that authorities gave up any right to the coins when they failed to respond to the family’s seized-property claim within 90 days.

The Treasury Department insists the $20 Double Eagles were stolen from the U.S. Mint in Philadelphia before the 1933 series was melted down when the country went off the gold standard.

They argued the heirs, Joan Langbord and her sons, cannot lawfully own the coins, which she said she found in a family bank deposit box in 2003. The government regained possession of the coins when the family brought them to the Secret Service to be authenticated.

So far in the decade-long battle, both sides have been declared winners.

In 2009, a judge ruled that the government improperly seized the coins and denied the family due process when officials at the U.S. Mint in Philadelphia decided to keep them after the family asked that they be authenticated. Two years later, a jury found the seizure had been legal because the coins hadn’t been circulated and must therefore have been stolen.

A three-judge appellate court flipped the result again in April, ruling 2-1 in favor of Switt’s family.

Federal prosecutors then asked for another shot before the full appeals court, leading to Wednesday’s hearing. No timetable for a ruling was given.

The coins are being held at Fort Knox, Kentucky, for safekeeping.

The Mint struck nearly a half-million of the Double Eagles in Philadelphia in 1933 but never released them. They were melted into gold bars after President Franklin D. Roosevelt abandoned the gold standard.

Sculptor Augustus Saint-Gaudens designed the Double Eagle with a flying eagle on one side and a figure representing liberty on the other.

One Double Eagle, once owned by King Farouk of Egypt, sold in 2002 for $7.6 million, then a record for a coin. Its later owner, a London coin dealer once jailed by the U.S. over it, split the proceeds with the U.S. Langbord lawyer Barry Berke brokered that deal.

The Langbords offered the government a similar split but were rebuffed.

* * *



China adds another 14.9 tonnes of official gold to its arsenal.  Official reserves now are 1708.5 tonnes

(courtesy Reuters/GATA)

China boosted gold reserves in September by nearly 1%


By A. Ananthalakshmi
Friday, October 16, 2015

China increased its gold holdings by nearly 1 percent in September even as total foreign exchange reserves dipped, central bank data showed today.

Gold reserves rose by 480,000 fine troy ounces, or 14.9 tonnes, to 54.93 million ounces, or 1,708.5 tonnes at the end of September, the People’s Bank of China said.

The central bank added 16.2 tonnes in August and nearly 19 tonnes in July.

“Their buying has been pretty consistent,” said Victor Thianpiriya, commodity strategist at ANZ. “It’s clear that they consider gold to be an important part of their holdings. So it won’t surprise me if they continue to add to reserves.”…

… For the remainder of the report:



And now your overnight FRIDAY morning trading in bourses, currencies, and interest rates from Europe and Asia:

1 Chinese yuan vs USA dollar/yuan falls quite a bit in value, this  time at  6.3522 Shanghai bourse: up, hang sang:green 

2 Nikkei closed  up 194.90 points or 1.08%

3. Europe stocks all  in the green   /USA dollar index up to 94.59/Euro up to 1.1368

3b Japan 10 year bond yield: falls slightly to .32% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.26

3c Nikkei now just above 18,000

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

3e WTI: 46.82  and Brent:   49.97

3f Gold down  /Yen down

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to .551 per cent. German bunds in negative yields from 5 years out

 Greece  sees its 2 year rate rises to 9.80%/:  still expect continual bank runs on Greek banks 

3j Greek 10 year bond yield rises to  : 7.86%  

3k Gold at $1180.80 /silver $16.11 (10 am est)

3l USA vs Russian rouble; (Russian rouble up 49/100 in  roubles/dollar) 61.50

3m oil into the 46dollar handle for WTI and 49 handle for Brent/ China purchases huge supplies from Saudi Arabia

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar.

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9519 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0820 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 on criminal charges/

3r the 5 year German bund now  in negative territory with the 10 year moving further from negativity to +.551%/German 5 year rate negative%!!!

3s The ELA lowers to  87.9 billion euros, a reduction of 1.0 billion euros for Greece.  The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 2.01% early this morning. Thirty year rate below 3% at 2.86% / yield curve flatten/foreshadowing recession.

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

(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)

Buying Panic Fizzles As Option Expiration Looms

In the absence of any key economic developments in the Asian trading session, Asian stocks traded mostly under the influence of the late, pre-opex US ramp momentum courtesy of another day of ugly economic data in the US (bad econ news is good news for liquidity addicts), closing solidly in the green across the board, led by China (+1.6%) and Japan (+1.1%) thanks in no small part to the latest tumble in the Yen carry trade, which mirrored a bout of USD overnight weakness.

And since a major part of the risk on move yesterday was due to ECB member Ewald Nowotny’s comments welcoming more QE, news from Eurostat that the final Eurozone CPI print in September was -0.1%, which confirmed Europe’s deflation continues, should only be greeted with even more buying as it assures further easing by the ECB – even if like Sweden the ECB has virtually no net supply left to monetize – is inevitable.

That said, what happens on Opex day, stays on Opex day, which is what today is with a number of October option expiries including FTSE 100, CAC, DAX, SMI, Eurostoxx, Eurodollars as well as S&P, Nasdaq and DJIA. And as shown before, there is a distinct pattern involving US option expiration, namely one where 8 out of 8 times there has been a rally ahead of OpEx…


… followed by prompt profit taking in the sessions thereafter. Will this time be different?

For now US equity futures are virtually unchanged. One can be certain that they won’t close there, especially not after algos get the latest Gartman flip-flop.

A quick look at regional markets starting with Asia shows equities traded mostly higher with financials outperforming following the strength seen in the sector during US trade on better than expected earnings from Citigroup , with firm lending data from China also supporting sentiment. Financials led the gains in the Nikkei 225 (+1.0%) and ASX 200 (+0.7%), while the Shanghai Comp. (+1.6%) was supported at the open after aggregate lending and new yuan loans beat expectations. Furthermore, there were reports margin lending rose and China’s NDRC approved USD 15bIn worth of investments in infrastructure projects. Finally, 10yr JGBs traded mildly higher despite the mostly positive risk tone in Asia.

Despite being disappointed by less than impressive corporate earnings from both sides of the pond, stocks continued to edge higher (Euro Stoxx: 0.8%), underpinned by the growing expectation of further policy easing by the ECB and the Fed refraining from hiking rates just yet. As a result, Euribor curve continued to flatten and in turn supported the upside by Bunds, in tandem with stocks.

Consumer staples and discretionary names underperformed on the sector breakdown , after the heavyweights Nestle (-2.0%) and Hugo Boss (-10.4%) cut forecast. On the other hand, Syria related war premium, together with the decrease in US crude output as indicated by the EIA yesterday, continued to support oil price which in turn ensured the outperformance by energy related names.
Today’s notable US earnings include GE and Honeywell, while also of note today sees a number of October option expiries including for FTSE 100, CAC, DAX, SMI, Eurostoxx, Eurodollars as well as S&P, Nasdaq and DJIA .

In FX markets, CAD failed to benefit from recent commodity strength, with the USD index residing in positive territory and weighing on commodity currencies, with AUD/USD testing the 0.7300 level to the downside, while NZD/USD approached its highest level in 31/2-months after New Zealand CPI beat expectations (Y/Y 0.4% vs. Exp. 0.3%), before the pair retreated on profit taking. Of note, heading into the CPI release, 9/14 analysts had expected the RBNZ to cut rates at their Oct 29th meeting, however, 10/16 analysts now expect the RBNZ to keep rates on hold at 2.75%. Elsewhere, the final reading of Eurozone CPI all printed in line with expectations (Y/Y -0.1%), seeing no reaction in EUR.

Looking at commodities shows WTI and Brent trading with modest gains heading into the NYMEX pit open with Brent residing above the USD 50 handle after a massive build in US crude inventories. Yes, it makes no sense. So what?

Elsewhere, the modest strength in USD has weighed on gold, with the yellow metal moving away from its multi month high amid light newsflow.

Looking at today’s US calendar, highlights include industrial and manufacturing production out of the US, as well as JOLTS job openings and the preliminary reading of University of Michigan sentiment and comments from ECB’s Jazbec and Coure and BoE’s Forbes.

Bulletin headline summary from Bloomberg and RanSquawk

  • European and Asian stocks continue to edge higher, underpinned by the growing expectation of further policy easing by the ECB and the Fed refraining from hiking rates just yet
  • USD has seen strength during the European morning to weigh on major pairs
  • Highlights include US industrial and manufacturing production, JOLTS job openings and the prelim reading of University of Michigan sentiment, as well as comments from ECB’s Coeure and Nowotny and BoE’s Forbes
  • Treasuries steady, heading for gain on the week after weak retail sales and global growth concern pushed Fed liftoff expectations to 2016.
  • Debt and money markets are readying for a cut to the ECB’s deposit rate, regardless of what its policy makers say in public
  • Fed data show commercial lenders boosted UST holdings to a record $2.15t at the end of last month, signaling expectations for the central bank to postpone raising rates
  • EU leaders failed to reach a final agreement on recruiting Turkey to help stem the flow of refugees from the Middle East, with some eastern countries dragging their heels over how much aid to grant their neighbor
  • Turkish military says it shot down an aircraft at the Syria border today; the aircraft, whose nationality is unknown, was warned 3 times after being spotted inside Turkey’s airspace, military said
  • Volkswagen AG failed to keep pace with European competitors as the German carmaker’s market share slipped last month in the wake of the diesel-emissions test scandal
  • Hillary Clinton’s campaign is collecting more cash from employees of the six biggest U.S. banks than any other presidential candidate
  • Traders of bonds, currencies and commodities are facing a shrinking year-end bonus pool after their revenue in the first nine months slumped 11% to $32b at the four biggest U.S. investment banks
  • $3.1b IG priced yesterday, no high yield. BofAML Corporate Master Index OAS narrows 1bp to +173, YTD range 180/129. High Yield Master II OAS narrows 5bp to +626, YTD range 683/438
  • Sovereign 10Y bond yields mostly lower. Asian and European stocks gain, U.S. equity-index futures little changed. Crude oil higher, copper anad gold fall


DB’s Jim Reid conlcudes the overnight news

There is little sign of the fundamentals forcing gravity to kick in market wise at the moment as the rally that started with the weak payroll number two weeks ago today got a fresh breath of life over the last 24 hours as markets have slowly come to terms with the fact that the ‘great’ global central bank liquidity story of ‘2008-20XX’ is far from over. Indeed maybe I should have X-ed out the ’20’ end part of the range too. Last night the S&P 500 closed at its highest level in 8 weeks after advancing +1.49%. The Dow (+1.28%) moved higher too, while European equities closed up +1% to +1.5% despite VW tumbling lower after the Federal Motor Transport Authority (better known as the KBA) announced the official recall of 2.4m vehicles from the automaker.

Elsewhere, 10y Treasury yields nudged higher yesterday and back above 2% to close at 2.018% (+4.6bps) while the Dollar index firmed up nearly half a percent. Oil markets closed largely unchanged after paring back an intraday decline of some 3% as headlines on Bloomberg suggested that Russia is prepared to discuss production cuts which helped offset the latest inventory data showing US crude stockpiles ticked up again last week.

Earnings played a big part in shaping the better tone in markets yesterday. Financials in particular led yesterday’s move higher across the pond with Citigroup a standout following their latest quarterly report. Despite revenues sliding a tad more than analyst expectations, a decent fall in expenses helped support a beat at the profile line, sending the shares up over 4%. Goldman Sachs also closed higher yesterday following its earnings release. Despite falling short of market expectations at both the top line and profit line (the first miss in four years) after fixed income trading revenues plummeted during the quarter, investors were seemingly buoyed by messages of patience stressed in the conference call that followed. Meanwhile, reporting after the closing bell Schlumberger painted a fairly bleak picture for the outlook in the oil and gas industry. Schlumberger’s CEO was noted as saying that the market is ‘increasingly challenging’ and that ‘activity is expected to be reduced further’. The CEO also noted that a ‘lack of available cash flow exhausts capital spending for a number of our customers’ which is set to lead them to taking on a more conservative view for spending next year.

Also in the spotlight yesterday was a mixed batch of data out of US. Of particular focus was the September CPI print. Headline inflation was as expected at -0.2% mom, which dragged the YoY rate down two-tenths to 0.0%. Supported by an increase in rents and medical costs, core CPI was ahead of consensus (+0.2% mom vs. +0.1% mom) which was enough to lift the YoY one-tenth to +1.9%. It was noted however that core inflation excluding shelter costs was up a tenth, but still low at just +1.0% yoy, evidence of the general lack of inflationary pressure outside housing. Elsewhere, initial jobless claims marked a new 42-year low after declining 7k to 255k (vs. 270k). The latest manufacturing readings made for less good news however. The NY Fed’s empire manufacturing print for October improved less than expected, up 3.3pts to -11.4 (vs. -8.0 expected) while the Philly Fed manufacturing index rose 1.5pts and below market to -4.5 (vs. -2.0 expected). Finally, during September the US Treasury recorded a $91.1bn budget surplus, slightly below expectations of $95bn.

Moving on, markets in Asia this morning are largely following the lead from the US last night and closing out the week on a high note. The Nikkei (+1.08%) is leading the gains, while the Shanghai Comp (+0.31%), CSI 300 (+0.34%), Hang Seng (+0.57%) and ASX (+0.86%) are also up. The Shanghai Comp is in fact on course to close at its highest level since August 21st, while a Bloomberg story this morning is suggesting that the Chinese government is considering forming a new company aimed at bringing together all aerospace assets under one entity, thought to be part of the government’s restructuring of SOE’s.

Staying in China, our Chief China Economist Zhiwei Zhang published a note yesterday looking ahead to the upcoming 5th Plenary Session of the 18th Central Committee of the Communist Party of China, due to be held from October 26th-29th. Zhiwei expects, from an economic perspective, that the most important topic will be the new Five-Year Plan which is the blueprint for social and economic development over the period. The finalized version of this plan should reveal the growth target for the relevant period. Zhiwei believes that while there are still uncertainties on the growth target, he believes that the likelihood of keeping the 7% target is slightly higher than cutting it to 6.5%. He notes that the two possible targets will have very different implications on policy outlook. For example if the target is set at 7%, then he believes the government will have to maintain its loose policy stance and do more easing and as a result the leverage of the economy will rise. While on the other hand if the target is set at 6.5%, it means the government will tolerate slower growth to allow more space for structural adjustments, and so in this case he expects that there will be less stimulus efforts by the government. Zhiwei also noted that he does not expect a stimulus announcement for 2015 at the Plenum given the strategic nature of issues to be discussed. An important upcoming event to keep an eye on.

Early yesterday we got more Fedspeak in the form of NY Fed President Dudley. The Fed official reiterated that the Fed should liftoff this year, but made mention that this is a forecast and not a commitment. While Dudley downplayed some of the recent soft data, he did note that ‘the recent economic news suggests the economy is slowing’ and that some of the concerns emanating from China and emerging markets could still hold back the US economy. Meanwhile, Cleveland Fed President Mester continued to push her view that in her mind she believes that the US economy can handle an increase in the fed funds rate and that delaying the start of liftoff for too long risks having to move rates up more aggressively later on.

Prior to this, there were some decidedly more dovish comments from ECB Governing Council member Nowotny yesterday. Fueling chatter for more ECB stimulus, Nowotny warned that ‘we’re clearly missing our target’ for inflation, not only at the headline but also at the core. The official went on to say that the ECB is using the monetary policy instruments available, but in his view ‘it is quite obvious that in the current economic situation additional sets of instruments are necessary’. The comments saw the Euro fall 0.77% yesterday and should add some fuel to the fire ahead of next Thursday’s ECB meeting.

Looking at the day ahead now, this morning’s focus in Europe will likely be on the final September CPI reading for the Euro area, while we’ll also get trade data for the region. Over in the US this afternoon, the latest industrial and manufacturing production prints for September are due up along with capacity utilization, while we’ll also get the August JOLTS job openings data and the preliminary University of Michigan consumer sentiment reading. There’s no Fedspeak expected but the ECB’s Coeure and BoE’s Forbes are due to speak at various stages. The highlight on the earnings front is General Electric, due to report before the US open. We’ll review the earnings season as it stands so far on Monday morning.

Let us begin:  9:30 pm Thursday night/Friday morning 9:30 Shanghai time:
emerging nation currencies falling apart:
(courtesy zero hedge)

EM FX Party’s Over: Dollar Rallies In Early Asia Trading As China’s Bond Bubble Gathers Pace

After two days of relative USD carnage in and across the emerging and asian FX markets, early AsiaPac trading this evening is seeing that trend revert with the Ringgit, Rupee, and Lira sliding. After-hours gains in US equity futures have been erased, despite USDJPY’s continued BoJ-aided push higher (though it seems 119.00 is the new ceiling for now). China’s government bonds remain extraordinarily bid (outperforming TSYs by almost 60bps in the last few weeks) with yields dropping to 6-year-lows, as corporate bond bubble fears rotate modestly back to govvies. Aussie miners are under pressure with Iluka Resources getting hammered on “excess capacity” warnings.


The USDollar is rallying against Asian FX in the early going…


And USDJPY has run stops and rolled over…


Despite ongoing strength in Chinese equities (obeying the commands of The National team that “the correction is nearly over”)…


China 10Y yields have collapsed in the last few weeks (down 50bps outright and 43bps tighter than UST since 8/20 devaluation)


The China-UST spread is nearing 100bps – its lowest in 4 years…


Offshore Yuan signaled downward pressure on the fix and sure enough, PBOC weakened the Yuan…


But it remains an ugly week for Aussia miners (with Iluka Resources gettting “Glencore”‘d)…


Charts: Bloomberg

Just look at the estimated cost of Volkswagen dieselgate:  87 billion usa dollars.

As Worldwide Sales Collapse, VW’s Dieselgate Scandal Could Cost Up To $87 Billion In Total

On the day when embattled German auto giant Volkswagen admits that worldwide sales of its VW passenger cars were down 4.0% in September (and also down 4.7% in the first nine months of the year)…

Commercial vehicles collapsed…

Up to the end of September 2015, Volkswagen Commercial Vehicles delivered 321,300 urban delivery vans, Transporters and pick-ups all over the world. The brand’s deliveries therefore continue to be at the level of the previous year (January to September 2014: 324,800, -1.1 per cent).

In the West European markets deliveries fell by 0.2 per cent to 212,500 deliveries (213,000). In Germany deliveries fell by 5.6 per cent to 81,000 vehicles (85,800). There was once again a clear growth in sales in the United Kingdom with an increase of 13.1 per cent to 38,500 vehicles (34,050). In Spain, too, the brand’s sales increased by 8.5 per cent to 7,200 deliveries (6,600).

In Eastern Europe deliveries fell by 21.2 per cent as at September to 21,800 vehicles (27,600). In the Middle East 26,000 vehicles were delivered – 43.8 per cent more than the previous year (18,100). In Mexico deliveries rose by 8.9 per cent to 4,800 vehicles (4,400).

In South America Volkswagen Commercial Vehicles delivered 27,700 vehicles (30,000; -7.7 per cent). The brand’s deliveries in Brazil fell by 34.2 per cent to 9,100 vehicles (13,900). 14,500 vehicles were delivered on the Argentinian market, an increase of 13.0 per cent (12,850).

We thought it worth a look at just what VW faces…

Submitted by Gaurav Agnihotri via OilPrice.com,

The Volkswagen emission scandal (commonly known as Dieselgate) has shocked the entire world. It all began on September 18, 2015 when the German carmaker was charged for violating the Clean Air Act by the United States Environment Protection Agency (EPA).

Volkswagen’s turbodiesel models were found to be programmed with a ‘defeat device’ that would block the emission controls during the actual driving and would turn them on only during the emission testing phase itself. The amount of NOx emitted during the day-to-day driving was almost 40 times higher than the prescribed limits. With 11 million Volkswagen diesel vehicles being fitted with this ‘defeat device,’ there is little doubt that the VW Dieselgate could be one of the biggest scandals of all time.

How much could this scandal cost VW?



“The market does not appear to be discounting negative knock-on effects. The outcome for recall costs and fines is unclear and largely depends on the engine performance post repair,” said a Credit Suisse analyst in its report on the scandal. Estimates from Credit Suisse peg the costs of Dieselgate at a worst-case scenarios of $87 billion.

This would make the VW scandal almost 60 percent more costly than the BP Deepwater Horizon spill. Although the German car maker has allocated around $7.3 billion for dealing with the scandal, it could end up paying more than ten times the allocated amount.

Furthermore, the potential $87 billion in losses would be almost 7 times the German automaker’s net profit for 2014. The $87 billion figure from Credit Suisse includes costs related to owner re-imbursements, civil-criminal cases and fixing the emission problem. However, according to Credit Suisse, the biggest cost for VW would be to compensate for the ‘loss of value’ to the owners of the affected diesel cars, and this could be as high as $37 billion.

Moreover, it would be extremely difficult for VW to repair the damage that has been done to its global brand image after this incident, potentially costing the carmaker even more in the years ahead. There is little doubt that Dieselgate has the potential to completely shatter VW’s financial and brand value.

In a more modest case, Credit Suisse estimates that the damages could reach $26 billion, again more than three times what VW has set aside.

VW scandal could be even bigger than Enron Scandal and BP Deepwater Scandal combined

The Enron scandal of 2001 was one of the biggest and most expensive corporate scandals in U.S. history and it resulted in the collapse of Enron Corp., in wiping out close to $60 billion of its market value. The Enron scandal also wiped out almost $2.1 billion of retirement funds and around 5,600 jobs.

The recent BP Deepwater Horizon oil spill is yet another major scandal, one which could cost the oil giant more than $20 billion in form of fines and payments. However, with potential losses of close to $87 billion (as a worst case scenario estimate), the current VW scandal could actually be even bigger than the Enron scandal and BP scandal combined.

Can VW exploit any loopholes?

The year 2015 has witnessed the biggest out of court settlement of a single entity with the U.S. Department of Justice. Oil giant British Petroleum (BP) is compelled to pay $20.8 billion for charges imposed on it after its 2010 Deepwater Horizon oil spill in the Gulf of Mexico that claimed 11 lives. Although that appears to be a staggering sum, BP will be able to write off $15.3 billion as tax deductible, significantly limiting the losses to the British oil giant.

BP would be able to write off the payments related to restoration, natural resource damage and government re-imbursements, thereby leaving only $5.5 billion as a non-tax deductible sum (which is related to the violation of ‘Clean Water Act’).

“BP was found to be grossly negligent in the Deepwater Horizon case, and yet the vast majority of what they are paying to make up for their gross negligence is legally considered just business as usual under the tax code unless the DOJ explicitly prohibits a write-off. This not only sends the wrong message, but it also hurts taxpayers by forcing us to shoulder the burden of BP’s tax windfall in the form of higher taxes, cuts to public programs, and more national debt,” said Michelle Surka of U.S Public Research Interest Group.

Is it possible for VW to find a similar kind of tax relief?

What Volkswagen might end up paying

VW will have to pay for government penalties, the loss of value to its customers in forms of recalls, legal fees and will have to deal with the loss of future sales and eroded brand value. VW could face an $18 billion penalty from the EPA according to a report from Reuters. Even European countries like the UK (where citizens received tax incentives for buying a VW diesel car) are looking to impose similar penalties on the German automaker. Moreover, with close to 11 million VW cars being affected by Dieselgate, the cost of recalls and legal cases could run into billions of dollars.

However, the U.S. tax code allows replacement, reimbursements and monetary compensation as costs of doing business, thereby making them tax deductible (unless otherwise mentioned in the agreement). Even penalties and fines are considered tax deductible. This means that VW might not have to pay $87 billion (as estimated by Credit Suisse) after all, but it doesn’t mean that the company can easily get away with the scandal.

Although VW has announced plans to make a significant change in its diesel technology in addition to pushing the development of its Electric Vehicles, it will be extremely difficult for it to re-build its lost reputation in the auto industry. With net cash in hand of around $28 billion, the German carmaker needs to raise a lot of cash to stay afloat in the years ahead. VW shares have already collapsed by more than 35 percent since the scandal broke, and the $7.3 billion that it has kept aside for Dieselgate will not be enough given the possibility of paying almost 3-4 times the said amount (similar to the conservative estimate put across by Credit Suisse) even when we consider any possible tax deductions. The coming few months will greatly impact the future of the German car manufacturer.


(courtesy zero hedge)

Germany Faces “National Disaster” Over Refugee Crisis As Hungary Slams Shut Border With Croatia

“Border control officers are exposed to strong migratory pressures.”

That’s a quote from Georgi Kostov, the head of the interior ministry for Bulgaria where an Afghan man was shot and killed on Thursday,marking the first fatal shooting in Europe’s worsening migrant crisis. 

Bulgarian border guards claim a warning shot ricocheted and injured the man. He later died. Draw your own conclusions.

The official line from Bulgaria was this: “We are deeply shocked and regret the fatal incident. We are convinced that barriers, fences and police forces cannot solve the problems of people who are in a desperate situation.”

That’s a nice sentiment, but not everyone shares it and one person who is certainly not intent on adopting an open door policy to refugees fleeing the war-torn Middle East is Hungarian PM Viktor Orban who, as we’ve documented extensively, has gone to great lengths to close his country’s borders with razor wire fencing and protect those fences with water cannons, tear gas, and rubber bullets.

Here’s a quote from an interview Orban gave today which pretty much sums things up as far as he’s concerned:

“Spiritually, Islam was never part of Europe. It’s the rulebook of another world.” 

Make no mistake, the back and forth Balkan border battles between the states that are on the frontlines of the crisis have been raging for months, as Serbia, Croatia, and Slovenia attempt to negotiate how to cope with Hungary’s hardline approach. Orban’s move to wall-off his country’s border with Serbia triggered an influx of asylum seekers into Croatia (remember, everyone’s trying to get to Germany), but Slovenia’s unwillingness to serve as a kind of migrant superhighway steered refugees right back into Hungary and so now, Orban is closing the border with Croatia. Here’s how we put it late last month:

Once it became clear that Hungary was fully prepared to turn its border with Serbia into a warm April night in Baltimore in order to defend Europe’s “Christian heritage” (to quote Orban), refugees simply rerouted through Croatia. Serbia has facilitated this noting that it simply does not have the resources to accommodate the migrants and even if it did, they do not want to settle in Serbia in the first place. Once Slovenia said it wouldn’t be a part of a migrant “corridor” to Germany, the stage was set for migrants to zigzag from Hungary’s border with Serbia into Croatia, and then back into Hungary.

And here’s more from Bloomberg on Orban’s reaction after the EU failed to come to an agreement on closing off Greece to asylum seekers:

Hungary will seal its border with Croatia from midnight on Friday, expanding one of the European Union’s toughest set of measures to stem the influx of refugees, Foreign Minister Peter Szijjarto said in Budapest.


“This is the second-best option,” Szijjarto told reporters. “The best option, setting up an EU force to defend Greece’s external borders, was rejected in Brussels yesterday.” 


An EU summit on Thursday failed to reach a final agreement on recruiting Turkey to help control the flow of refugees as Russia’s bombing campaign in Syria threatens to push more people to seek safety. The bloc’s leaders also made little progress on how to redesign the system of distributing immigrants, forming an EU border-guard corps or on ensuring arrivals are properly processed.


Hungary has extended an existing barbed-wire fence on its border with Serbia to cover its frontier with Croatia. Prime Minister Viktor Orban warned this week that his government would complete the barrier if EU leaders fail to agree on closing the Greek border, the main entry point for Syrian and other Middle Eastern refugees into the 28-nation bloc.


Meanwhile, in Germany, Angela Merkel is beginning to feel the heat as lawmakers and party loyalists become increasingly impatient with the hundreds of thousands of migrants streaming into the country. More, from AFP:

Germany’s Angela Merkel is used to owning the room when she speaks to her party faithful, but the mood turned hostile when she defended her open-door refugee policy this week.

In a heated atmosphere, some of the 1,000-odd members at the meeting warned of a “national disaster” and demanded shuttering the borders as Germany expects up to one million migrants this year.

“Stop the refugee chaos — save German culture + values — dethrone Merkel,” read a banner at the congress late Wednesday in the eastern state of Saxony, the home base for the anti-foreigner PEGIDA movement.

Managing the refugee crisis has turned into Merkel’s greatest domestic political challenge since she took power almost 10 years ago, in November 2005.

Long valued by the electorate for her level-headed leadership amid the eurozone turmoil, Merkel has scared many with her welcoming stance amid a growing sentiment that the boat is full.

“The chancellor is walking on thin ice,” judged the conservative daily Die Welt, pointing to a “growing gap” between Merkel and the base of her centre-right Christian Democrats (CDU) who demand she stem the record influx.

“The chancellor believes the nation can manage the crisis, but this belief is rapidly vanishing in the country,” said the newspaper.

On Sunday, she jets off to Turkey to discuss with President Recep Tayyip Erdogan how to slow the inflow sparked by war and upheaval across the Middle East and North Africa, with almost 600,000 people arriving in Europe so far this year.

On the home front, Merkel has bravely insisted “we can do it”, recalling US President Barack Obama’s campaign rallying cry of “Yes we can”.

But many Germans — who in the summer greeted refugees at railway stations — are losing faith as thousands keep coming daily and improvised refugee centres are bursting at the seams, including tent cities exposed to below-zero temperatures as winter approaches.

And here are two headlines which betray how desperate the situation is becoming:


In short, there is now a very real threat that a cascading series of border closures will completely block the Balkan route (not to mention destroy Schengen forever) leading directly to i) possibly violent confrontations between migrants and border police, and ii) a dramatic shift in the people flow through Libya, which would mark a kind of “out of the frying pan and into the fire” scenario for Syrian refugees.

As for those who have already made it to Germany and other EU countries where they intend to settle, we reiterate our warning that anti-migrant sentiment could end up creating a dangerous bout of scapegoating xenophobia and on that note, we close with the following excerpt from Bloomberg:

In another sign of backlash in the region, Czech President Milos Zeman said migrants from Muslim countries won’t respect local laws and will follow sharia, Novinky.cz news website reported.


“Adulterous women will be stoned; thieves will have their hands chopped off,” Zeman said while meeting employees of a butcher shop in eastern Czech Republic, Novinky said.


This is interesting:  sovereign Germany caught in FIFA bribery scandal!!!
(courtesy zero hedge)

Germany Caught In FIFA Bribery Scandal After Report 2006 World Cup Was Bought

With FIFA executive heads falling faster than Glencore stock (with Blatter and Platini most recently and today the entire Kuwait FA), it appeared we had reached some kind of peak debacle.. but no! German newspaper Der Spiegel reports that the German bidding committee created a slush fund in its effort to garner votes from Asian FIFA officials, land the rights to host the 2006 World Cup (which they did by 12 votes to 11).


As Der Spiegel reports,

In what could turn out to be the greatest crisis in German football since the Bundesliga bribery scandal of the 1970s, SPIEGEL has learned that the decision to award the 2006 World Cup to Germany was likely bought in the form of bribes. The German bidding committee set up a slush fund that was filled secretly by then-Adidas CEO Robert Louis-Dreyfus to the tune of 10.3 million Swiss francs, which at the time was worth 13 million deutsche marks.


It appears that both Franz Beckenbauer, the German football hero who headed the bidding committee, and Wolfgang Niersbach, the current head of the German Football Federation (DFB), and other high-ranking football officials were aware of the fund by 2005 at the latest.


Acting in a private capacity, Louis-Dreyfus — who was, at the time, chairman of Adidas, the sporting apparel and supplies company that equips the German national team — lent the money to the German bidding committee prior to the decision to award the World Cup to Germany on July 6, 2000. The loan never appeared in the bidding committee’s budget or later, once the tournament had been awarded to Germany, in that of the Organizing Committee (OK).


A year and a half prior to the World Cup, Louis-Dreyfus called in the loan, which by then had a value of €6.7 million. Officials at OK, of which Beckenbauer had become president and Niersbach vice president, began looking for a way in 2005 to pay back the illicit funds in an inconspicuous manner.


Internal documents show that a cover was created with the help of global football organizing body FIFA to facilitate the payment. Using the cover, the Germans made a €6.7 million contribution for a gala FIFA Opening Ceremony that had been planned at Berlin’s Olympic Stadium but was later cancelled. The money had been paid into a FIFA bank account in Geneva. From there, FIFA allegedly promptly transferred the money to a Zurich account belonging to Louis-Dreyfus.


It appears that the loan was used to secure the four votes belonging to Asian representatives on the 24-person FIFA Executive Committee. The four Asians joined European representatives on the executive committee in casting their ballots for the tournament to be awarded to Germany in the July 2000 vote. After Charles Dempsey of New Zealand unexpectedly abstained from casting his vote, Germany prevailed and landed the right to host the World Cup in a 12:11 vote.


Beckenbauer and Niersbach did not provide a response when contacted by SPIEGEL. On Thursday, DFB said that, “for reasons of timing,” it could not provide a statement within 24 hours. But then, on Friday morning, it sent a press release in which officials admitted that the World Cup 2006 Organizing Committee made a payment in April 2005 of around €6.7 million to FIFA. DFB officials stated it is possible that the payment was not used for the stated purpose (the FIFA cultural program). But officials claim the payment had no connection to the awarding of the World Cup.


Of the three Asian representatives who voted for Germany in the Executive Committee in 2000 who are still living, two did not answer requests for comment from SPIEGEL. A third, Chung Song Joon of South Korea, said only that the questions were unworthy of a response. Former Adidas head Louis-Dreyfus passed away in 2009.

*  *  *

Of course, if this is true, we strongly doubt that they are alone... wink wink Russia…and Qatar!!!


Russia, Iran Begin “Promised” Assault On Syria’s Largest City In Final Bid To Restore Assad

Earlier this week, we noted that Iran had reportedly sent “thousands” of troops to Syria in preparation for an offensive aimed at retaking the city of Aleppo.

With a population of more than 2 million, Aleppo was Syria’s largest city prior to the war and it’s now run by a hodgepodge of rebels and militants including al-Qaeda, the Free Syrian Army, and ISIS.

To get an idea of the effect the war has had on the city, have a look at the following before and after nighttime light emissions images:

The battle is also notable for the scale of Iran’s involvement. Between Hezbollah and Iranian forces, the battle for Aleppo is shaping up to be the largest ground operation orchestrated by Tehran to date.

Here’s more, via Reuters:

Syrian troops backed by Hezbollah and Iranian fighters launched an offensive south of Aleppo on Friday, expanding their counter-attack against rebels across western Syria with support from Russian air strikes.

Aleppo, a commercial and industrial hub near the border with Turkey, was Syria’s largest city before its four-year civil war, which grew out of protests against Assad’s rule.


Control of the city, still home to two million people, is divided between the government and rebels.


“This is the promised battle,” a senior government military source said of the offensive backed by hundreds of Hezbollah and Iranian forces which he said had made some gains on the ground.


It was the first time Iranian fighters had taken part on such a scale in the Syrian conflict, he said, although their numbers were modest compared to the army force. “The main core is the Syrian army,” the source said.


Hezbollah, which has supported Assad in several battles during the civil war, said the army was carrying out a “broad military operation” with support from Russian and Syrian jets. It made no mention of Hezbollah fighters in its brief statement.


Two senior regional sources told Reuters this week that Iran has sent thousands of troops to Syria to bolster an offensive underway in Hama province and ahead of the Aleppo attack.

And a bit more from AFP:

Russian air cover is backing offensives by Syria’s army and allied militias in the central provinces of Homs and Hama, as well as Aleppo in the north and Latakia along the coast.


On Friday, the Syrian army pushed south from the provincial capital Aleppo city, where control is divided between regime and rebels forces, as Russian air strikes pounded the villages of Al-Hader and Khan Tuman and nearby localities.


“The Syrian army started a new front on Friday and advanced to take control of the villages of Abteen and Kaddar” about 15 kilometres (12 miles) south of Aleppo city, said Observatory head Rami Abdel Rahman.


He said “dozens” of Russian aerial attacks in the past 24 hours had struck the area, which is controlled by a patchwork of groups including rebels, Islamist fighters and Al-Qaeda’s Syria affiliate, Al-Nusra Front.

Note also that Aleppo is near the so-called “anti-ISIS” zone that the US and Turkey humorously proposed to create a few months back, which means that Iran, supported by Russian air power, is now conducting an all-out ground assault very near territory Turkey likes to think it effectively patrols (if not controls).

But the real key here, is this (again from Reuters): “The assault means the army is now pressing insurgents on several fronts near Syria’s main cities in the west, control of which would secure President Bashar al-Assad’s hold on power even if the east of the country is still held by Islamic State.”

In other words, if Iran and Russia manage to retake Aleppo (and you know they will because remember, thanks to Hezbollah, this isn’t a team that’s going to be confused by the vagaries of urban warfare), Assad’s rule is restored.

Just like that.

From there, the situation would morph and what you would have is a kind of Wild West scenario, only in Syria “West” would mean “East” and Assad, Russia, and Iran, having secured most of the critical cities and territory, would be free to simply mount up and push east on a kind of search and destroy mission.

So apparently, the US and its regional allies in Riyadh and Doha have a couple of weeks to figure out what to do here or else this is going to be over and suddenly, Washington will find itself in the awkward position of having to negotiate for a transition away from an Assad government that has been fully restored.


A great article by Chambers as he states how Russia and Iran are moving to corner the middle east oil supply:
(courtesy Steve Chamber/AmericanThinker.com)

Russia And Iran Moving To Corner The Mideast Oil Supply

Submitted by Steve Chambers via AmericanThinker.com,

It looks like Vladimir Putin and the ayatollahs are preparing to corner the world’s oil supply – literally.

Last May I wrote on this site that Iran was in the process of surrounding the Saudi/Wahhabi oil reserves, along with those of the other Sunni Gulf petro-states.  I added that, “Iran’s strategy to strangle Saudi/Wahhabi oil production also dovetails with Putin’s interests.  As the ruler of the second largest exporter of oil, he would be delighted to see the Kingdom’s production eliminated or severely curtailed and global prices soar to unseen levels.  No wonder he is so overtly supporting Iran.”

We’ve now seen Putin take a major, menacing step in support of the Iranians by introducing combat forces into Syria.  Many analysts argue that he’s doing this both to protect his own naval base at Tartus and as some sort of favor to the Iranians.  Are those really sufficient inducement for him to spend scarce resources and risk Russian lives, or does he have bigger ambitions in mind?  Given the parlous state of Russia’s economy, thanks in very large part to the recent halving of oil prices, he must relish the opportunity now presented to him, in an axis with Iran, to drive those prices back to prior levels.

The Iranians, for their part, must welcome this opportunity as well, for two huge reasons: first, when sanctions are finally lifted, thanks to their friend in the White House, Iran’s oil production will only aggravate the current global excess oil supply, reducing their cash flow (although they will still repatriate the $150 billion released by the nuclear deal).  They and the Russians must both be desperate to find a way to prevent further oil price declines.  And second, Iran’s mortal sectarian enemies and rivals for leadership of all of Islam are the Saudi/Wahhabi clan, so the prospect of simultaneously hurting them while strengthening themselves must seem tremendously tantalizing.

To achieve this, the Russian-Iranian axis can pursue the encirclement strategy of the Arabian Peninsula that Iran has already been overtly conducting, as I described in May, and is evident by referring to the map below.

Iran and its allies already control the border across the Saudi/Wahhabi Kingdom’s northern frontier, although the Iranian grip on the Syrian portion is tenuous – hence the Russian intervention.  Now Iran is also fighting a bitter proxy war with the Kingdom in Yemen, where Iran is backing coreligionist Shi’ites.  From Yemen, Iran can also threaten the Bab-al-Mandeb that provides access to the Red Sea, multiplying the pressure it already exerts on the Kingdom by threatening the Strait of Hormuz at the entrance to the Persian Gulf from its own territory.

Moreover, Iran is widely believed to be supporting the Shi’a who live on top of the Saudi/Wahhabi oil reserves in the Eastern Province.  The natural affinity between the Shi’a of Arabia and Iran has long worried the royal family and led them to discriminate against their Shi’ite subjects, fostering resentment among them.  Attacks on the Shi’a community early this year have increased tensions.  On top of all that, Iran is reportedly behind the recent Shi’a unrest in Bahrain, which Iran considers it lost “14th province” – much as Saddam viewed Kuwait in the late 1980s.

With this being the current state of the Mideast chessboard, consider how the game can unfold.With Russian assistance, Iran can save its Syrian puppet and reinforce its defensive enclave in the Allawite homeland in the northwest of its putative boundaries.  Then the combined forces of the axis can turn on ISIS, all the while boasting of doing the world a favor, and reduce its territorial control if not extirpate it entirely.  Of course, the Saudi/Wahhabis will probably do whatever they can to assist their vicious ideological offspring, but it would be hard to bet against the axis.

As the axis pacifies Syria, it can then begin pressure the Saudi/Wahhabis and other Sunni petro-states to curtail their oil production enough both to accommodate the increased Iranian flow and to lift prices back to acceptable levels.  $100 a barrel must sound like a nice target.

The axis’s initial pressure will probably be diplomatic, applied by both principal powers.  However, with Iran’s foothold-by-proxy in Yemen and their influence in the Eastern Province and Bahrain, it could easily foment more general violence against the Saudi/Wahhabis, even within the Kingdom itself.  Iran could likewise twist Bahrain’s arm and thereby rattle the cages of the lesser Sunni petro-states.  Then, by trading a reduction in oil for a reduction in violence, the axis could achieve its objective.

If not, the Iranians could escalate the violence further.  Perhaps ideally from the Iranian perspective, the Saudi/Wahhabis would overreact and provide Iran with an excuse to strike directly at the geographically highly concentrated Arabian oil fields and support facilities.  Iran might not be willing to risk royal retaliation by attacking on its own, but it could be emboldened with Russian backing by air and sea, and perhaps even a nuclear umbrella.  In that scenario, the proud Arabs would be forced to bow to the will of their ancient Persian foes – particularly since it is obvious that the US under its current president could not be relied upon for support.

An attack on the Kingdom’s fields would cause a severe and lengthy disruption of Mideast oil supply, which would dreadful for the rest of the world – but certainly not the worst-case scenario.  Such a disruption would precipitate another nasty global recession and could severely weaken the US, Europe, and China, all of whose economies are fragile and probably brittle.  Thus the damage inflicted could far outlast the disruption itself.  This could be yet another highly attractive incentive for Putin and his ayatollah allies.

So, Putin and the ayatollahs have powerful motives to corner the world’s oil market and therefore the US and the rest of the world are facing an enormous risk.  The horrible pity of this is that the US could easily demonstrate the futility of the Russian-Iranian axis trying to take the world hostage with Mideast oil, simply by opening up our surface deposits of oil shales in the Rockies.  As I showed in this analysis last March, these resources could make Mideast oil irrelevant.

The US’ surface oil shales are completely different from the deep shales that are accessed through directional drilling and fracking and that grab all the headlines; the deep shales are a mere side show in terms of reserves.  The surface shales hold up to 3 trillion barrels of oil versusabout 50 billion barrels of tight oil accessed by fracking.  The total global proven reserves of oil are 1.6 trillion barrels, and the Canadian tar sands have 1.6 to 2.5 trillion barrels (although they’re officially listed at 175 billion barrels, which are incorporated in the global total).  So, the US and Canada together essentially can triple the global supply of oil, and at prices in the $60-75/barrel range.  Meanwhile, Mideast reserves are about 800 billion barrels – half of Canada’s oil sands, perhaps less than a third of the US surface shales.  The world no longer needs the Muslim oil.

Unfortunately, the vast majority of the Rockies surface shales sit on Federal land, and while George W. Bush opened up those lands for development, Obama rescinded that policy.  These reserves now sit almost entirely idle.

As with any petroleum deposit, these surface shale reserves can’t be turned on with the wave of a wand.  But they can be opened for development with just a pen, and not even a phone.  For the protection of this country, and the good of the world, our current president should immediately open these reserves for development, with great fanfare.  If he will not use our military to protect our interests, he should at least use our economic weapons.

There is no time to lose.  Russia is on the march, in unison with the emboldened and enriched Iranians, thanks again to our president.  Putin and the ayatollahs know they will enjoy only another 464 days with this president and that none of his likely replacements will be so complacent and flexible, to use his own term.  We should therefore expect that they will want to make as much hay as they can while the sun reflects off of Obama’s insouciant grin.

a great indicator to give us evidence of a global collapse:  just take a look at India’s export import ratio!!
(courtesy zero hedge)

The Latest Evidence That Global Trade Has Collapsed: India’s Exports/Imports Plunge By 25%

Late last month, India surprised 51 out of 52 economists when the RBI cut rates by 50bps.

Although economists have a reputation for being terrible when it comes to making predictions (getting it wrong perpetually is almost a job requirement), it’s difficult to understand how 51 of them failed to see a cut of that magnitude in the cards.

After all, it was just a little over a month earlier when the Indian government’s chief economic advisor Arvind Subramanian told ET Now television that India may need to “respond” to China’s monetary policy stance. He also hinted at further export weakness to come.

Here’s what the REER picture and the export picture looked like going into the RBI meeting:

And here’s what Deutsche Bank had to say in August:

Currency competitiveness is an important factor in influencing exports performance, but global demand is even more important, in our view, to support exports momentum. Global demand remains soft at this stage which continues to be a key hurdle for exports momentum to gain traction.

Hence the outsized rate cut.

So that’s what the picture looked like going into Thursday’s export data and unsurprisingly, the numbers definitively show that global trade is in freefall. Here’s Reuters:

India’s exports of goods shrank by nearly a quarter in September from a year ago, falling for a 10th straight month and threatening Prime Minister Narendra Modi’s goal of boosting economic growth through manufacturing.


India’s economy, Asia’s third largest, is mostly driven by domestic demand, but the country has still felt the effects of China’s slowdown. Exports have dropped and consumer and industrial demand for imports has weakened.


Imports fell 25.42 percent in September from a year earlier to $32.32 billion. Exports stood at $21.84 billion, according to data released by the Ministry of Commerce and Industry on Thursday.


“We see no signs of revival in exports in the near future,” said Ajay Sahai, director general of the Federation of Indian Export Organisations. “We will be lucky if exports could even touch $265 billion to $270 billion for the whole year.”

So yeah, both exports and imports fell by a quarter. That’s right, by a quarter.

And so India finds itself in the same position as many other emerging economies in a world where trade is grinding to a halt: hoping that your own domestic demand for imported goods is even more abysmal than other countries’ demand for the goods you export just so the current account doesn’t collapse. Here’s Reuters again:

Policy makers were nonetheless relieved, because the trade deficit narrowed to $10.48 billion last month from $12.5 billion in August as gold and oil imports declined. For April-September, the trade deficit shrank to $85.36 billion from 497.17 billion a year earlier, the data showed.

But as Goldman notes, even this dynamic may be set to disappoint because the expected benefit on the deficit from falling commodity prices is not as large as expected due to the fact that India… exports some commodities:

Given the sharp decline in exports, we think the benefits of the commodity price decline on India’s trade balance may not be as large as widely perceived due to the significant commodity content within its exports.

The takeaway is this: if you needed further evidence that global trade is in the doldrums and seemingly getting worse by the month, simply see the above. Of course the hope will be that the RBI’s easing will boost exports and further narrow the deficit, but again, this is just a race to the bottom with the entire world attempting to out-ease one another in a desperate attempt to stay ahead of the pace at which global demand is contracting.

There’s nothing positive (let alone sustainable) about that.

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/Friday morning

Euro/USA 1.1368 up .0002

USA/JAPAN YEN 119.17 up ..094

GBP/USA 1.5454 down .0015

USA/CAN 1.2904 up .0050

Early this Friday morning in Europe, the Euro rose by 2 basis points, trading now well below the 1.14 level rising to 1.1368; 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, Glencore, and the Ukraine,along with rising peripheral bond yields, and the failure in ramping of the USA/yen cross above the 120 yen/dollar mark.  Last night the Chinese yuan fell in value.  The USA/CNY rate at closing last night:  6.3532 up .0143  (yuan lower)

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 now trades in a slight southbound trajectory  as settled  again in Japan  by 10 basis points and trading now just below the all important  120 level to 119.17 yen to the dollar.

The pound was down this morning by 15 basis points as it now trades well above the 1.54 level at 1.5454.

The Canadian dollar is now trading down  50 basis points to 1.2904 to the dollar. (Harper called an election for Oct 19)


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 and especially  with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade (blowing up)

3. Short Swiss franc/long assets (European housing/Nikkei etc. This has partly blown up (see Hypo bank failure).(blew up)

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 Friday morning: closed up 205.90  or 1.15% 

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

2/ Asian bourses all 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)green/India’s Sensex in the green/

Gold very early morning trading: $1180.25


Early Friday morning USA 10 year bond yield: 2.01% !!! up 4 in basis points from Thursday night and it is trading well below resistance at 2.27-2.32%.  The 30 yr bond yield falls to  2.86 up 1 in basis points.

USA dollar index early Friday morning: 94.59 up 16 cents from Thursday’s close. (Resistance will be at a DXY of 100)

This ends the early morning numbers, Friday morning
And now for your closing numbers for Friday night: 2 pm 
Closing Portuguese 10 year bond yield: 2.44% down 5 in basis points from Thursday
Japanese 10 year bond yield: .320% !! down slightly from Thursday but still extremely low
Your closing Spanish 10 year government bond, Friday down 4 in basis points. 
Spanish 10 year bond yield: 1.77% !!!!!!
Your Friday closing Italian 10 year bond yield: 1.60% down 5  in basis points from day: Thursday/ trading 17 basis point lower than Spain.
Closing currency crosses for FRIDAY night/USA dollar index/USA 10 yr bond:  2:00 pm
 Euro/USA: 1.1343 down .0023 (Euro down 23 basis points)
USA/Japan: 119.38 up 0.311(Yen down 31 basis points)
Great Britain/USA: 1.5431 down .0038(Pound down 38 basis points
USA/Canada: 1.2889 up .0035 (Canadian dollar down 35 basis points)

USA/Chinese Yuan:  6.3522 up .0143  (Chinese yuan down)

This afternoon, the Euro fell by 23 basis points to trade at 1.1343 The Yen fell  to 119.38 for a loss of 31 basis points. The pound was down 38 basis points, trading at 1.5431. The Canadian dollar fell 35 basis points to 1.2889. The USA/Yuan closed at 6.3522
Your closing 10 yr USA bond yield: up 1 in basis points from Thursday at 2.03%// ( trading below the resistance level of 2.27-2.32%).
USA 30 yr bond yield: 2.88 up 32in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries
The low yields means that the bond market is not buying the rallies on bourses.
 Your closing USA dollar index: 94.73 up 29 cents on the day .
European and Dow Jones stock index closes:
London:  up 39.37 points or 0.62%
German Dax:  up 39.63 points or .0.39%
Paris Cac up 29.50 points or 0.59%
Spain IBEX: up 129.80 points or 1.28 %
Italian MIB: up 119.97 points or 0.54%
The Dow: up 74.22 or 0.43%
The Nasdaq:   up 16.29 or 0.34%
WTI Oil price;  46.75
Brent OIl:  48.01
USA dollar vs Russian rouble dollar index:  61.28  up 9/100 rouble per dollar
This ends the stock indices, oil price, currency crosses and interest rate closes for today.
And now for USA stories:

First the NYSE performance today:

“In Fed We Trust” Is Back: Risk Soars On Hopes Economy Collapses

After yesterday’s epic squeeze ramp into OpEx, and today’s hanging-by-a-thread range on no volume, we couldn’t help but think of this…


And with this week’s rally, valuations for the S&P 500 push back towards highs (P/E >18x once again)…


And we warned what happens next…


As Gold, Bonds, & Stocks all rise as The Fed rate-hike disappears over the horizon… From “rate-hikes are good for stocks” to “please njo rate hikes, we are not ready”!!!


A very mixed bag for stocks this week… Trannies ugly (down 2.4% – worst week in 2 months, after last week’s best week in 13 months) but Nasdqq up for the 3rd week in a row (the first 3 week gain since Feb 2015’s big squeeze)…


On the day,  futures drifted off the late spike highs overnight, spiked into the open (thanks to opex pinning), chopped around in a narrow range on dismal data before liftoff into the close sparked by crude into NYMEX Close then USDJPY lifted futures into p[anic-buying mode..


On the day the late-day ramp dragged all but small caps (and Trannies) into the green… on terrible volume.. Today’s exuberance blamed on hope for a shitty print from China on Sunday night!!


Here’s how the ramp was achieved – Crude’s ubiquituous trend reversal into NYMEX Close tehn USDJPY hyper-beta into the close…


VIX had quite a week (most notably in VXX – the VIX ETF)…


This dragged S&P 500 just into the green post-QE3…


“Most Shorted” stocks have seen another rampalicious squeeze in the last 24 hours into opex but end the week lower (after last week’s record-breaking surge)…


Valeant is a great example of today’s illiquid insanity in stocks…




Treasuries end the week lower in yield (with a notable flattening in 2s10s and 2s30s)…


2s30s dropped 3bps on the week – the biggest flattening in 10 weeks...BUT 2s10s is now the flattest since May 2013…


The USDollar continued to drift higher against the majors (extending yesterday’s gains), faded during US pm session and ended the week lower…


The USDollar also fell for the 3rd week in a row against Asian FX, almost fully retracing the China devaluation surge…


Commodities were mixed on the week with crude tumbling (though bid today) to its worst week in 2 months and gold and silver rising (with copper limping lower)…


Gold had its best week in the last 5 (and is up 4 of the last 5 weeks)… closing baove its 200-day moving average…


The biggest mover across the commodity complex was in Coffee…biggest drop in almost 8 months…


Charts: Bloomberg

Bonus Chart: Bad news is officially Good news…


Bonus Bonus Chart: Philosophical thought to end the week…

Industrial production for the oil and gas drillers drops to the lowest in this century
(courtesy zero hedge)

Industrial Production For Oil And Gas Well Drilling Drops To Lowest This Century

Industrial Production growth in The US has now slwoed for 10 straight months, rising just 0.4% YoY in September – the weakest growth since Dec 2009 – signaling the path to recession is clear. Manufacturing production YoY slowed to just 1.4% – the slowest since Feb 2014. For the 8th month of the last 9 IP fell MoM with a 0.2% drop in September as a modest revsion higher in autos was offset by aplunge in Oil and Gas Drilling to the lowest this century (down 4% after rising 1.7% last month).


Recession Looms…


As it appears Auto Assemblies are starting to roll over (which makes sense in light of the record high inventories)…


But the biggest driver was a collapse in Oil & Gas Drilling…


Charts: Bloomberg

Yellen’s favourite indicator the jolts number tumbles as the job openings drop to the lowest since 2009.  This will make it impossible for Yellen to raise rates:
(courtesy zero hedge)

Yellen’s “Favorite” Labor Indicator Tumbles: Job Openings Drop Most Since 2009

One month ago, when the JOLTS data showed the highest number of job openings in history, rising by a near record 430,000 to 5.8 million vacant positions, most speculated that this data – considered to be Janet Yellen’s favorite indicator of slack in the labor market now that the unemployment rate has become utterly unreliable due to the 94 million Americans out of the labor force – had sealed the fate of a September rate hike.

It did not, as instead the Fed decided to shift to its 4th mandate (the 3rd being the stock market), namely the “global environment” as the reason not to tighten monetary conditions.

But while the JOLTs data turned out to be useful to “confirm” a stronger economy, even if it was roundly rejected when it was expected to be the fulcrum catalyst for monetary policy change, we are confident it will be completely ignored this month when moments ago the BLS revealed that in August, the number of job openings tumbled back down by 298,000 to 5.37 million: far below expectations and the biggest monthly drop since the 301,000 slide in March of 2009.


So was this the job openings peak of the current cycle?

The answer will have to wait until next month as the JOLTS series is consistently revised and remarkably unreliable (and frequently made up: recall it was this site that caught the BLS fabricating data back in 2013), however another series that may serve as a guide is the JOLTS total hires vs the cumulative change in payrolls over the past year. Both of these series have topped out, even as the number of hires this cycle remains far below the peak from the previous cycle, plateauing just above 5 million compared to 5.4 million during the last bubble burst, while the 12 month cumulative change in payrolls recently slipped back under 3 million after peaking at 3.2 million in February, and well above the prior cycle peak.



Worse yet, looking at the JOLTS net turnover (hires less separations) and comparing it to the monthly change in Payrolls – two series which should otherwise overlap – one of two things will have to happen: either hires will be revised sharply lower (or separations higher) or payrolls in the past few months will need to be pushed well higher. Most likely, the estimated rate of hiring will end up being revised far lower, once again confirming the labor market is slowing down substantially.


Finally, looking at the separations end of the equation, what we see is that slowly but surely even the BLS is catching up to the private sector, which recently announced the highest number of terminations among energy companies since the crisis, and sure enough, a chart of the discharges in the Midwest shows that while the trendline is now pointing decidedly higher, it will go far higher before any substantial recovery in the US shale space.


Bottom line: despite being two months backward looking, today’s JOLTS report provide the latest batch of weak news coming from the US labor market, which likely explains the ongoing levitation in stocks which have officially given up on the “rate hike is good for stocks”narrative, and fallen back to what has worked for the past 7 years, namely terrible economic news being great news for risk assets.


Oh dear!!  this is big!!!

the largest health insurer on the Colorado Exchange abruptly collapses tonight

(courtesy zero hedge)

Obamacare’s Latest Casualty: Largest Health Insurer On Colorado Exchange Abruptly Collapses

This wasn’t supposed to happen.

With the mainstream media, at least the majority that is left of center, flooded with story after story touting Obamacare’s success, the news coming this morning from Denver that Colorado’s largest nonprofit health insurer and participant in that state’s insurance exchangeColorado HealthOP is abruptly shutting down, forcing 80,000 Coloradans to find a new insurer for 2016, was a slap in the face for the Obama administration’s crowning achievement.

According to AP, the health insurer announced Friday that the state Division of Insurance has de-certified it as an eligible insurance company. That’s because the cooperative relied on federal support, and federal authorities announced last month they wouldn’t be able to pay most of what they owed in a program designed to help health insurance co-ops get established.

Wait, wasn’t the whole point behind Obamacare to subsidize health insurance for everyone, and especially the poor? Or was the whole point of the “Affordable” Care Act merely to herd as many Americans into the clutches of the few for-profits, after the non-profit cooperatives finally read the fine print and realized they have no chance of being profitable under the new regime?

The plot thickens: in a statement announcing its closure Friday, Colorado HealthOP said it was “well on its way” to repaying some $72.3 million it has borrowed from the federal fund. The co-op reported a net loss of $23 million last year. In other words, the company burned through some $23 million in taxpayer funds and it didn’t even get a lousy shirt to show for it.

Ironically, on the company’s website, we read the following about the Co-Op’s business model:

if our revenues exceed our costs, the surplus will be reinvested to directly benefit members—through lower premiums, expanded benefits, or quality improvements.

Well, no risk of that ever happening now. What the insurer failed to point out is that if costs exceed its revenues, it will be promptly liquidated and massive corporations will be the sole beneficiaries.

Naturally, the CEO was furious: Colorado HealthOP CEO Julia Hutchins called the de-certification “irresponsible and premature.

She is not alone – as it turns out HealthOP was just the fifth casualty of a program which with every passing months is being exposed as nothing but a tax-backed piggy bank for the mega insurance corporations. “The Colorado announcement makes the co-op at least the fifth in the nation to collapse. Similar nonprofit insurers have already failed in Louisiana, Iowa/Nebraska, Nevada and New York. A health insurance cooperative in Tennessee announced this week that it would stop offering new policies.

Expect even more failures ahead of open enrollment for 2016 starts on November 1. The Colorado Division of Insurance must first certify insurers before they’re allowed to sell plans, so the de-certification essentially puts Colorado HealthOP out of business.

Back to the HealthOP CEO who added that “the Division has let local and national politics hurt Coloradans’ access to low-cost healthcare options and assessed Colorado taxpayers with significant avoidable costs,” Hutchins said in the statement.

Actually they became unavoidable the moment the deeply compromised and ideologically partisan Supreme Court imposed the Obamacare tax on Americans, with few if any realizing the monetary implications of the new insurance regime.

While it won’t provide much comfort to Colorado HealthOp, which is now winding down, its board of directors has requesting that the state allow a board-appointed independent consumer protection ombudsman to assist through the shut-down.

In other words, even more millions in taxpayer funds will now be spent to liquidate the health insurer.

And while the lame duck president hardly cared as his legacy achievement will soon be some other president’s problem, Republicans quickly took to gloating and pointed to the co-op’s closure as “a sad but predictable outcome.

“Taxpayers are on the hook for millions of dollars in loans given out to the CO-OP, money that will likely never be repaid,” U.S. Sen. Cory Gardner said in a statement after the announcement. “The years since Obamacare’s passage have been marked by crisis after crisis in healthcare, and it’s far past time for a new plan.

But wait, there’s more. Now that the numbers are being crunched, and hyperbole and propaganda are finally making way for math, someone figured out that Colorado HealthOP’s closure could be bad news for everyone shopping on Colorado’s health insurance exchange.

A Republican state lawmaker who serves on an oversight committee that has reviewed Colorado HealthOP’s finances, Rep. Lang Sias of Arvada, said “rates for everyone are expected to go up next year. Colorado HealthOP accounted for nearly 40 percent of the exchange’s total customers.”

“They’re all going to be paying more, on average, I would expect,” Sias said.

And as more Americans get letters in the mail such as the one below kindly informing them their health insurance premiums are rising by 60% crushing any desire to splurge modest “gas savings” on discretionary purchases…

… expect complaints about soaring health insurance prices, to hit – first in Colorado and then everywhere else.

From a long time reader of my site:
On the plight of Illinois!!


11:21 AM (8 hours ago)

to me
Illinois the Land of Lincoln.   Hmmm
Now populated by some of the dumbest of the human species
The Illinois lottery offers IOUs to anyone winning more than $600.
 Lotteries, state sponsored theft from people bad at math
 Now the dopes are being asked to trust the state to pay their ‘winnings’
Here is a business opportunity.
 A viatical company offers the lottery winners 20 cents on the dollar for their tickets.
 I’d take that bet.  IMO the state will never pay up.
They’ll file Chapter 9 and lottery winners will be an unsecured creditor, much like the average depositor at a bank.


Well that about does it for tonight
I will resume on Monday with my normal commentaries
all the best

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