Nov 3/Another 2.98 tonnes leaves the GLD/In the past 3 days 8.04 tonnes have left/Comex dealer (registered) gold down to only 4.7 tonnes/ Gold open interest does not fall much with the raid yesterday/silver OI also does not fall much/ In China the big Apple Corp supplier halts hiring due to lack of demand/Another big story: interest rate swaps turn negative again indicating either turmoil or lack of collateral or both/Russian airplane disaster seems to indicate an explosion in mid air. Do not know yet how this occurred/USA factory orders miss for the 11th month in a row/S and P puts all the Too Big to Fail banks on negative watch/

Gold:  $1114.20 down $21.60   (comex closing time)

Silver $15.24  down 27 cents

In the access market 5:15 pm

Gold $1117.80

Silver:  $15.28

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

At the gold comex today,  we had a very poor delivery day, registering 0 notices for nil 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 208.32 tonnes for a loss of 95 tonnes over that period.

In silver, the open interest fell by only 1202 contracts despite silver being down 16 cents in Friday’s trading.  The total silver OI now rests at 167,743 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 notices served upon for nil oz.

In gold, the total comex gold OI fell by a rather small 533 to 450,584 contracts as gold was down $5.70 yesterday.  We had 0 notices filed for nil oz today.

We had another huge withdrawal in gold inventory at the GLD to the tune of 2.98 tonnes (same amount of withdrawal yesterday) / thus the inventory rests tonight at 686.30 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,no change in silver inventory   / Inventory rests at 313.817 million oz.

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

1. Today, we had the open interest in silver fell by 1202 contracts down to 167,743  despite the fact that silver was down 16 cents with respect to yesterday’s trading.   The total OI for gold fell by only 533 contracts to 450,584 contracts as gold was down $5.70 yesterday.

The fact that OI continues to remain high necessitates the bankers to continue raiding hoping to shake the leaves from the gold and silver trees.  Remember that December is generally a big delivery month for both gold and silver

(report Harvey)

2.Gold trading overnight, Goldcore

(/Mark OByrne)



 i) Last night, 9:30 pm MONDAY night, TUESDAY morning Shanghai time.  Japan Nikkei plummets, Shanghai falls as well.
Japan surprises with no QE.  USA/Yen cross rises.  Big arrest as the President of China’s 3rd largest bank is being investigated for graft with a huge Motor company.  Another big injection of money to stop the fall in Chinese stocks.
(zero hedge)
 ii) USA to send ships twice a year around the Chinese man made islands
(zero hedge)
iii) a big story…Apple supplier in Taiwan/Shanghai halts hiring due to lack of demand for the new Apple 6 S
(zero hedge)
 In a speech today, Draghi continues with his dovish lyrics and as such the Euro/USA drops.
(zero hedge)
 Interest rate swaps turn negative again!!
around the world we are witnessing again USA + other exotic swap rates turning negative.   Last month I reported this to you as this happened before only during the crisis of 2008 and 2009.
An interest rate swap is a swap between counterparties where there is an exchange of fixed rates for variable rates.  Negative interest rate swaps are extremely rare and this indicates one of three things possible that may be happening:
i)i) Counterparty risk is less than sovereign  (cannot happen)
ii) lack of collateral, forces one party to pay more just to receive the collateral.
iii) turmoil inside the interest rate arena
you can bet ii) and iii)
 i ) Infrared satellite images catch a heat flash exactly when Russian airplane goes off radar
(zero hedge)
 ii)  Victim body parts suggest huge explosion
(zero hedge)
iii) strong evidence that the plane blew up in mid air
(zero hedge)

iv) Negotiations  are to set between the current head of Syria, Assad,   and Syrian opposition.  The opposition is weak and will have no influence on the negotiations.  Remember that  Russia has its huge naval port at Tartus and its airport strength in Latakia.

(courtesy zero hedge)
 i)  TransCanada Pipelines  just killed the keystone XL pipeline deal as they comment that with low prices in oil, it is just not
(zero hedge)

 ii) Panic buying in oil for no reason;

(zero hedge)
 iii) Oil breaks 48 dollars on WTI

iv) After the markets closed:

two important points on oil inventories
i) API reports larger than expected crude inventory
ii) Cushing inventories down!

9 USA stories/Trading of equities NY

i) USA factory orders miss for the 11th month in a row

(zero hedge)

ii) James Quinn of the Burning Platform does a great job in describing what the USA has done to cause

today’s huge turbulence in global affairs

(James Quinn/Burning Platform)

iii NY ISM mfg provides a massive spike upwards in a sigma 7 move.  A complete joke

(ISM NY/zero hedge)

iv)  Beware!! San Francisco fed warns that even though data on all fronts are bad, expect a rate hike in December

(zero hedge/San Francisco Fed)

v) The truth arrives:  JPMorgan slams ZIRP as actually hurting growth not helping

(JPMorgan/zero hedge)

vi)  last night, S and P puts all big USA banks (i.e. Too Big to Fail banks) on negative watch

(S and P/zero hedge)

vii  the markets are finally taking the rate hike in December seriously.  The rise in yield generally means an error in Fed policy is contemplated

(zero hedge)

viii) Do you remember the sub prime home liar loans?  Well they are back but this time, in the auto loan sector
(courtesy zero hedge)

ix)  Tesla today:  A good example of why the market is rising:

poorer revenues than expected, huge losses and a huge burning of cash and yet the stock is up 7% in after hours.
we are in a crazy market.
x) David Stockman on the lunacy of the markets:
(David Stockman/ContraCorner)

10.  Physical stories

i) What else is new.  ECB meet bankers prior to announcements of ECB decisions.

(GATA/London’s Financial times)

ii) Bill Murphy of GATA interviewed by Rory Hall  (Dave Kranzler IRD)


iii) Many firms vying to build Texas’ gold facility


(GATA/Texas Tribune/Austin Texas)

iv Jonathan Kosares on algorithmic trading which is manipulating gold lower

(Jonathan Kosares/GATA)

 v  Bill Holter’s commentary tonight is entitled:  “Ocean front property …in Arizona?”

Let us head over to the comex:

The total gold comex open interest fell from 451,117 down to 450,584 for a loss of only 533 contracts as gold was down $5.70 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. We now witness both of these events despite the fact that November is a non active delivery month. The November contract went down by 11 contracts down to 282.  We had 0 notices filed yesterday, so we lost 11 contracts or  1100 0z that will not stand for delivery. The big December contract saw it’s OI fall by 6,140 contracts from  287,124 down to 280,984. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 120,487 which is poor. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 118,121 contracts.
Today we had 0 notices filed for 600 oz.
And now for the wild silver comex results. Silver OI fell by 1202 contracts from 168,945 down to 167,743 as the price of silver was down 16 cents with respect to yesterday’s trading. 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. The huge rise in silver OI necessitates  massive raids by the bankers as they had to cover their rather large shortfall.  We now enter the non active delivery month of November. The OI fell by 0 contracts down to 11. We had 0 notices filed yesterday so we neither lost nor gained any silver contracts standing in this non active delivery month of November.  The huge (and active) delivery month of December saw it’s OI fall by 2419 contracts down to 104,119. The estimated volume for today (regular hours Comex) came in at a poor at 25,847.  The confirmed volume yesterday (comex + globex) was an very good at 46,169..
We had 0 notices filed for nil oz.

October contract month:

INITIAL standings for November/First day notice

Nov 3/2015

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  3215.000 oz


Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  nil
No of oz served (contracts) today 0 contracts

nil oz 

No of oz to be served (notices) 282 contracts

(28,200 oz)

Total monthly oz gold served (contracts) so far this month 6 contracts

600 oz

Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 3215.000 oz


 Today, we had 0 dealer transactions
Total dealer withdrawals:  nil oz
we had 0 dealer deposits
total dealer deposit:  zero
We had 1 customer withdrawal:
 i ) Strangely the 32150.00 oz of deposit on Oct 14.2015 now leaves!!
Out of Scotia:  32150.00 oz  (1000 kilobars)
total customer withdrawal 32150.00  oz
We had 0 customer deposits:

Total customer deposits nil  oz

we had 2 huge adjustments:

 i) Out of HSBC:
1210.68 oz of gold leaves the customer and lands into the dealer account of HSBC
ii) and this is a dilly!!
76,911.630 oz leaves the customer account of Scotia and landed into the customer account of Scotia
 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 0 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 (6) x 100 oz  or 600 oz , to which we  add the difference between the open interest for the front month of Nov.( 282 contracts) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals the number of ounces standing.
Thus the initial standings for gold for the Nov. contract month:
No of notices served so far (6) x 100 oz  or ounces + {OI for the front month (282)– the number of  notices served upon today (0 x 100 oz which equals 29,900 oz  standing  in this month of Nov (0.8958 tonnes of gold).
We thus have 0.8958 tonnes of gold standing and only 4.708 tonnes of registered gold (for sale gold/dealer gold) waiting to serve upon those standing.
Total dealer inventory 151,384.629 oz or 4.708 tonnes
Total gold inventory (dealer and customer) =6,697,500.06   or 208.32 tonnes)
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 208.32 tonnes for a loss of 95 tonnes over that period.
The liquidation of gold at the comex continues today in the customer account and the dealer account also liquefies with only 4.7 tonnes remaining.
And now for silver

November initial standings/First day notice

Nov 3/2015:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 430,960.510 oz 

(Brinks, CNT,Scotia)

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 1,188,893.300 oz


No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 11 contracts 

55,000 oz)

Total monthly oz silver served (contracts) 3 contracts (15,000 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 855,606.1 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 1 customer deposit:
 i) Into CNT:  1,188,893.300 oz

total customer deposits: 1,188,893.300 oz

We had 3 customer withdrawal:
i) Out of Brinks: 189,567.110
ii) Out of CNT:  150,999.700
iii) 90,393.700 oz

total withdrawals from customer: 430,960.510   oz

we had 0 adjustments
Total dealer inventory: 43.045 million oz
Total of all silver inventory (dealer and customer) 163/571 million oz
The total number of notices filed today for the November contract month is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in Nov., we take the total number of notices filed for the month so far at (3) x 5,000 oz  = 15,000 oz to which we add the difference between the open interest for the front month of November (11) 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 Nov. contract month:
3 (notices served so far)x 5000 oz +(11) { OI for front month of November ) -number of notices served upon today (0} x 5000 oz ,=70,000 oz of silver standing for the Nov. contract month.
we neither lost nor gained any silver ounces standing for delivery in this non active delivery month of November.


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:
Nov 3/another huge withdrawal of 2.98 tonnes at the GLD/Inventory rests at 686.30 tonnes. (in 3 days:  total withdrawal 8.04 tonnes)
Nov 2..2015: another huge withdrawal of 2.98 tonnes at the GLD/Inventory rests at 689.28 tonnes
oct 30/a huge withdrawal in gold inventory of 2.08 tonnes at the GLD/Inventory rests at 692.26 tonnes
Oct 29/no change in gold inventory at the GLD.Inventory rests at 694.34 tonnes
Oct 28.2015: a huge withdrawal of 1.2 tonnes in gold inventory/rests tonight at 694.34
Oct 27/no change in gold inventory/rests tonight at 695.54 tonnes
Oct change in gold inventory/rests tonight at 695.54 tonnes
Oct 23/ a huge withdrawal of 1.78 tonnes of gold at the GLD/Inventory rests at 695.54 tonnes
Oct 22./no change in gold inventory at the GLD/Inventory rests at 697.32 tonnes
Oct 21./we had no change in gold inventory at the GLD./Inventory rests at 697.32 tonnes.
Oct 20./no change in gold inventory at the GLD/Inventory rests at 693.75 tonnes/
Oct 19.2015: A huge increase of 3.57 tonnes into the GLD/Inventory rests at 697.32 tonnes.  Highly unusual to have 3 consecutive deposits and withdrawals in a row!!
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
Nov 3/2015 GLD :686.30 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. I sure looks like there is stress inside the GLD!!

And now SLV

Nov 3.2015; no change in silver inventory/rests tonight at 313.817 million oz/

Nov 2/a withdrawal of 716,000 oz from the SLV/Inventory rests tonight at 313.817 million oz

Oct change in silver inventory at the SLV/Inventory rests at 314.532 million oz

Oct 29/a big withdrawal of 1.001 million oz from the SLV/Inventory rests at 314.532 million oz

Oct 28.2015: no change in silver inventory at the SLV//inventory rests at 315.533 million oz.

Oct 27/no change in silver inventory at the SLV/Inventory rests at 315.533 million oz/

Oct 26/no change in silver inventory at the SLV/Inventory rests at 315.533 million oz/

Oct 23./no change in silver inventory at the SLV/Inventory rests at 315.533 million oz

Oct 22./no change in silver inventory at the SLV/Inventory rests at 315.533 million oz

Oct 21:a we had a small addition in silver ETF inventory of 381,000 oz/inventory rests tonight at 315.533 million oz

Oct 20.2015/ no change in silver ETF/Inventory rests at 315.152 million oz

Oct 19.2016: no change in silver ETF/Inventory rests at 315.152 million oz

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

Nov 3/2015:  tonight inventory rests at 313.817 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 10.3 percent to NAV usa funds and Negative 10.6% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 61.6%
Percentage of fund in silver:38.3%
cash .1%( Nov 3/2015).
2. Sprott silver fund (PSLV): Premium to NAV rises to+0.52%!!!! NAV (Nov 3/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV falls to – .41% to NAV Nov 3/2015)
Note: Sprott silver trust back  into positive territory at +0.52% Sprott physical gold trust is back into negative territory at -.41%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

And now your overnight trading in gold and also physical stories that may interest you:
Trading in gold and silver overnight in Asia and Europe
(courtesy goldcore/Mark O’Byrne/Steve Flood)

Apocalypse Now: Has Next Giant Financial Crash Already Begun?

Paul Mason, writing in The Guardian, describes how we are already at the beginning of a financial Apocalyse.  “A predicted global meltdown passed without event. But there are enough warning signs to suggest we are sleepwalking into another disaster”.

GoldCore: Expansion, Boom, Recession and Depression.

He suggests all the signs are present to indicate that the financial apocalyse has begun:

“Let’s assemble the evidence. First, the unsustainable debt. Since 2007, the pile of debt in the world has grown by $57tn (£37tn). That’s a compound annual growth rate of 5.3%, significantly beating GDP. Debts have doubled in the so-called emerging markets, while rising by just over a third in the developed world”.

“John Maynard Keynes once wrote that money is a “link to the future” – meaning that what we do with money is a signal of what we think is going to happen in the future. What we’ve done with credit since the global crisis of 2008 is expand it faster than the economy – which can only be done rationally if we think the future is going to be much richer than the present”.

“This summer, the Bank for International Settlements (BIS) pointed out that certain major economies were seeing a sharp rise in debt-to-GDP ratios, which were well outside historic norms. In China, the rest of Asia and Brazil, private-sector borrowing has risen so quickly that BIS’s dashboard of risk is flashing red. In two thirds of all cases, red warnings such as this are followed by a major banking crisis within three years.”

“The underlying cause of this debt glut is the $12tn of free or cheap money created by central banks since 2009, combined with near-zero interest rates. When the real price of money is close to zero, people borrow and worry about the consequences later.”

“So, the biggest risk to the world, despite its growing seriousness, is not the deflation of a bubble. It is the risk of that becoming intertwined with geopolitics. Any politician who minimises or ignores this risk is doing what the purblind economists did in the run up to 2008″.

Read the full article “Apocalypse now: has the next giant financial crash already begun?


Paul Mason2Paul Mason is a respected journalist and broadcaster.  He is a former economics editor of BBC’s Newsnight and currently he is economics editor of Channel 4 News.

He can be followed on@paulmasonnews.



Today’s Gold Prices: USD 1130.90, EURO 1029.82 and GBP 733.95 per ounce.
Friday’s Gold Prices: USD 1135.80 , EURO 1030.86 and GBP 733.86 per ounce.

live spot gold

Gold was down again yesterday closing at $1134.30, a loss of  $7.20 on the day.  Silver lost $0.09 to close at $15.4. Platinum lost $8 to $974.


Download Essential Guide To Storing Gold Offshore

Download Essential Guide To Storing Gold In Switzerland

Mark O’Byrne


Interesting…for manipulation??

(courtesy Claire Jones/London’s financial times)

ECB officials met bankers just before key policy decisions


By Claire Jones
Financial Times, London
Monday, November 2, 2015

FRANKFURT, Germany — Some of the European Central Bank’s top decision-makers met banks and asset managers days before major policy decisions, and on one occasion just hours before, copies of their diaries reveal.

The diaries, which cover meetings of the six members of the ECB’s executive board between August 2014 and August 2015, were given to the Financial Times under freedom-of-information rules and reveal engagements with the private sector, officials, and the media.

The disclosure of the meetings comes at a time of heightened scrutiny of the contacts between central bankers and the financial services industry. Earlier this year, the ECB launched its own review of the issue, setting out new principles for how its officials should interact with the private sector.

The meetings offer a sharp contrast with the Bank of England, which prohibits members of its rate-setting committee from talking to media and “other outside interests” on monetary policy matters in the week before a policy decision. …

… For the remainder of the report:


GATA Chairman Bill Murphy interviewed by Rory Hall for The Daily Coin


8:07a ET Tuesday, November 3, 2015

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy was interviewed last week at the New Orleans Investment Conference by Rory Hall for The Daily Coin, discussing the huge impact of the central bank gold price suppression scheme. The interview is 18 minutes long and can be heard at The Daily Coin here:

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


Firms vying to help Texas build gold depository


By Aman Batheja
The Texas Tribune, Austin
Friday, October 30, 2015…

Major international players in the precious metals industry — and some local upstarts — are hoping to get a piece of Texas’ plan to launch an official state gold bullion depository, and the wide range of pitches they’re making suggests even basic details of the project remain up in the air.

More than a dozen companies responded to a recent request from Comptroller Glenn Hegar for input on the first-of-its-kind project. Gov. Greg Abbott signed House Bill 483 in June, directing Hegar to set up the country’s only state-run bullion depository. State Rep. Giovanni Capriglione, R-Southlake, began pushing the idea in 2013 but was only able to draw enough support from other lawmakers by requiring that the private sector run the depository and charge fees to cover its costs.”With the passage of this bill, the Texas Bullion Depository will become the first state-level facility of its kind in the nation, increasing the security and stability of our gold reserves and keeping taxpayer funds from leaving Texas to pay for fees to store gold in facilities outside our state,” Abbott said when he signed the bill.

The depository won’t just store state gold and other precious metals. The law requires that individual customers, and even school districts, be allowed to open accounts. Capriglione has described it as a bank that doesn’t do any lending.

With few firm details in place, the project is drawing a wildly eclectic range of proposals, some more ambitious than others.

“We would build a 46,000+ square foot independent depository; a monument of the state of Texas,” wrote Texas Precious Metals, which runs a private bullion depository in Shiner, Texas. The company offered to construct a facility with 12-inch-thick reinforced concrete walls and a roof designed to “withstand the weight of a Boeing 767.”

Yet some larger corporations, including armored car giant Brink’s, argued that the state doesn’t need to build anything to launch its depository. “Brink’s has several secure branch locations in the State of Texas so we would look to utilize existing facilities to provide the vault storage services,” the company wrote in its response to Hegar.

Las Vegas-based Anthem Vault proposed “multiple vaulting locations throughout Texas to enable all Texans access to their bullion within a reasonable distance from their homes.” The company also offered to set up a network of “coin shops and retail storefronts” to accept deposits on behalf of the state depository.

Some supporters of the Texas depository have framed it as a challenge to the U.S. Federal Reserve’s control of the U.S. dollar, a view with a long history among the state’s grassroots Republicans. Former Texas Congressman Ron Paul is often viewed as the leader of a national campaign to have the United States return to the days when the dollar was pegged to the gold standard. At Wednesday’s Republican presidential debate, U.S. Sen. Ted Cruz made a similar suggestion.

“I think the Fed should get out of the business of trying to juice our economy, and simply be focused on sound money and monetary stability, ideally tied to gold,” Cruz said.

Several of the submissions to Hegar’s office suggest that some companies are infusing their visions of the Texas Bullion Depository with unique political views.

“We here are in full support of Texas and their efforts to restore and defend our Constitution of this Republic to these United States of America,” wrote PMB&V of Spokane, Washington, which markets a Precious Metals Access Debit Card.

Texas Precious Metals predicted the depository could serve as “a unique alternative to the federal monetary system” in the event of a banking crisis.

Toronto-based GoldMoney, which quoted Paul in its submission, went so far as to argue in its proposal that Texas “develop a legal strategy to defend its constitutional monetary rights and obligations.”

“Any attempt by the federal government to tax gold bullion within the Texas Bullion Depository would, as is the case with confiscation, effectively nullify Texas’s constitutional monetary obligations,” GoldMoney wrote.

Hegar’s office is still evaluating the responses, according to spokeswoman Lauren Willis. Eventually, the agency is expected to issue a formal solicitation for bids on the project, detailing more fully what the state envisions.

Along with ideas on the depository’s design, Hegar requested thoughts on whether the state should vie for membership in the Chicago Mercantile Exchange’s COMEX platform, where gold futures contracts are traded. The question is crucial to whether Texas will be able to achieve a widely reported declaration by Abbott’s office in June that Texas would “repatriate $1 billion of gold bullion from the Federal Reserve in New York to Texas.”

The gold bullion at issue is actually worth only $647 million and is owned by the University of Texas Investment Management Company, which oversees the assets of both the University of Texas and Texas A&M systems. UTIMCO currently pays about $647,000 a year to store the gold at the HSBC Bank headquarters in New York City, according to UT System spokeswoman Jenny LaCoste-Caputo.

The new law does not require UTIMCO to move its gold to the state’s depository. UTIMCO has said it will only do so under two conditions: that it cost less to store the gold in Texas than it does in New York and that the depository is a member of COMEX.

The Chicago Mercantile Exchange, also known as the CME Group, did not respond to a request for comment. Hegar’s office has not reached out to the exchange, Willis said.

Several companies told Hegar they were skeptical that the Texas depository could ever gain membership in COMEX, which currently requires that all its licensed gold depositories be located within 150 miles of New York City.

“Texas may be too far outside that mileage parameter, unless the State of Texas can make provisions for exceptions with these organizations,” a U.S. subsidiary of Switzerland-based Loomis International wrote.

Addison-based Dillon Gage, which runs private precious metal depositories in Delaware and Toronto, noted that CME membership would give the Texas depository a “certain reputational weight” and predicted that the CME would likely waive its geographic restrictions “for a state-run depository.”

Some warned that Texas taking on UTIMCO’s gold might not be a good deal for UTIMCO.

“The State of Texas should carefully consider the consequences of moving the gold bullion to Texas,” Delaware Depository, a precious metals dealer, wrote. “The cost of relocation, internal cost of storage, and negative impact on liquidity may greatly exceed the storage savings.”

A possible compromise solution came from a U.S. subsidiary of Hong Kong-based logistics and storage firm Malca-Amit, though Texas lawmakers aren’t likely to welcome it.

“Should the state of Texas wish to establish a COMEX gold vault, in order to expedite the process, Malca-Amit would happily operate that vault within NYC on behalf of Texas,” the company wrote.

* * *


Jonathan Kosares: Hedging HAL


1:46p ET Tuesday, November 3, 2015

Dear Friend of GATA and Gold:

Jonathan Kosares of USAGold in Centennial, Colorado, shows today how programmed, algorithmic trading is controlling gold futures prices at 8:45 a.m. ET every day, making all other trading worldwide irrelevant.

Kosares writes: “I’m becoming increasingly convinced that algorithmic trading is the single most influential force pushing markets in a ‘supportive direction’ of a ‘credible’ Fed. Would any reasonable person really be leveraging positions in long dollar, short yen, short gold, and short euro just because the Fed said they are ‘once again’ going to look at raising rates a paltry 0.25 percent in December? It doesn’t amount to anything. Yet the price action over the past week would suggest the Fed is on the cusp of a ‘lunar landing’ of monetary policy.”

The only way to escape this market rigging, Kosares writes, is to buy real metal, not paper. His commentary is headlined “Hedging HAL” and is posted at USAGold’s Internet site here:

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



And now Bill Holter

(courtesy Holter/Sinclair collaboration)

Bill H:


Ocean front property …in Arizona?

For years Martin Armstrong has denied market manipulation had any effect on markets. He has taken this stance while touting the ability of his “cycles and charts” to forecast future prices of various markets. In his latest writing he says “Throughout history, there has NEVER been a market manipulated TO ALTER its long-term trend – PERIOD.” Martin Armstrong, Oct 30,

2015 .

If you read the article he points out Bretton Woods would never have failed nor would the Swiss peg have broken. I would point out, the Bretton Woods agreement lasted in its original form for 27 years until it failed. During the 1960’s, the London Gold pool was formed to defend the dollar peg at $35 per ounce. The “pool” is officially admitted fact, it is admitted effort at “manipulation”. Maybe Mr. Armstrong does not believe 27 years is “the long term”? He went on to say “why invest in something that won’t be allowed to rise”? In the case of Bretton Woods it is obvious, the gold price was being artificially suppressed and would one day break free …which it did from $35 to over $800 in less than nine years! Wouldn’t this qualify as a reason to invest in something that would “never be allowed to go up”? Were they not trying to price gold against Mother Nature’s upward pull? I would ask, other than “severity” (the amount of zeros), is there anything different today than back in the late 1960’s?

It is already well documented markets far and wide are manipulated against the true trend of Mother Nature. The stock market in Japan for example has been supported by the Bank of Japan buying up over 50% of equity ETF’s. To this point it has worked, would Martin Armstrong counsel the purchase of Japanese equities because this “really isn’t” an instance of manipulation? Would he counsel not selling something which will never be allowed to go down? Actually, why is there such a thing as a “plunge protection team” in the U.S. in the first place? Or does this not exist either?

Another Armstrong fallacy and I quote “The amount of capital that will trade against anything that moves against its long-term trend is endless. If you really believe all this nonsense, then you better trade a different market. Why buy something that is manipulated and can never rally? It makes no sense.” Do you see the flaw here? He speaks about “endless capital”, what entity(s) theoretically have endless capital? Why the central banks of course …and who’s capital is the “most endless”? Yes, THE FED! Just one last question, “who” has the motive to keep the gold price thermometer from rising? Could it be the central bank who issues the reserve currency and who’s main competitor has ALWAYS been gold!? Yes, again THE FEDERAL RESERVE!

It is not rocket science and certainly not even speculation or conspiracy “theory” anymore, it is well documented that markets are in fact manipulated and done so in the directions central banks and sovereign treasuries wish. This is now FACT by admission of various central bankers, various sovereign treasury officials …and various admissions of guilt from financial firms who were doing the dirty work!

So Mr. Armstrong, please do not insult the intelligence of those of us who can still add 2+2 together. Tell “these people” there is no manipulation, they will believe this …or anything else for that matter. To run around and talk about the complete collapse of the Western financial world in one breath and scare people into selling their only crash insurance for protection in the next breath is dastardly indeed! I believe your opining the collapse of the Western fiat system is 100% correct, this however cannot happen without capital flooding and finding it’s way into a safe monetary haven. What “is” the safe haven?

A few years back while opining of a market/financial collapse from behind bars, Mr. Armstrong was adamant that gold would move to $5,000+ per ounce or higher as a result. He called them cause and effect at the time and gold would be the safe haven from a dysfunctional system, what has changed? This is a very important question in my opinion… what has changed and why did this change immediately take place after they sprung the prison doors open? Did sunlight give him a change of “heart” (and logic) or was the federal “company mantra” part of the key to his release? According to Martin Armstrong (and Ben Bernanke), gold is not money! As George Straight has sung many times before …I got some oceanfront property in Arizona …and if you buy that I’ll throw the Golden Gate in free! Enough said.

Standing Watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome,


Attachments area
Hillary Supporters Endorse SHARIA LAW in AMERICA!
And now your overnight TUESDAY morning trading in bourses, currencies, and interest rates from Europe and Asia:

1 Chinese yuan vs USA dollar/yuan rises , this  time at  6.3356 Shanghai bourse: in the red, hang sang:green 

2 Nikkei closed down 399.86 or 2.10%

3. Europe stocks mostly in the red   /USA dollar index up to 97.16/Euro up to 1.0978

3b Japan 10 year bond yield: rises slightly to .316% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 120.86

3c Nikkei now just above 18,000

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

3e WTI: 46.50  and Brent:   49.23

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  .554 per cent. German bunds in negative yields from 5 years out

 Greece  sees its 2 year rate fall  to 8.22%/:  still expect continual bank runs on Greek banks 

3j Greek 10 year bond yield falls to  : 8.04% (yield curve inverted)  

3k Gold at $1132.25 /silver $15.36 (8:00 am est)

3l USA vs Russian rouble; (Russian rouble up 34/100 in  roubles/dollar) 63.31

3m oil into the 45 dollar 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 .9899 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0866 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 rises to  +.554%/German 5 year rate negative%!!!

3s The ELA lowers to  82.4 billion euros,

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 2.19% early this morning. Thirty year rate below 3% at 2.95% / yield curve flatten/foreshadowing recession.

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

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

Futures Flat Despite More Weakness Among European Banks, Volkswagen; Another Apple Supplier Warning

So far today’s trading session has been a repeat of what happened overnight on Monday, when following a weak start on even more weak Chinese data, US equities soared on the first trading day of the month continuing their blistering surge since that dreadful September payrolls report, which as we showed was mostly catalyzed by a near record bout of short’s being squeezed and covering, which accelerated just as the S&P broke the 2100 level.


So will we see another centrally-planned USDJPY-driven, low volume marketwide levitation, with another VIX smash and a short squeeze as kicker today? One thing we won’t get is a boost from the RBA, which kept its benchmark interest rate unchanged at a record-low 2 percent as reported previously, despite 12 out of 29 economists predicting a rate cut.

RBA Governor Glenn Stevens talked up the prospects for an improvement in economic conditions, causing traders to push back bets on when the next cut might happen into the first quarter of 2016. The Aussie rose against all 16 of its major peers. In 2015 it’s dropped 12 percent against the U.S. dollar. What was most interesting about the RBA announcement, however, was not what happened after the announcement, but the usual HFT mockery in the AUDUSD just before as shown in the chart before. We are confident the Australian regulators will once again find nothing wrong with this attempt by HFT algos to gauge market depth and set momentum, and headfake other algos, in what is an increasingly observed phenomenon ahead of key data.


Also notable out of Asia was the news reported here first that key Apple supplier Pegatron has halted hiring on weak iPhone sales, refuting the contents of the infamous email Tim Cook sent to Jim Cramer on August 24 to halt the market crash. For now AAPL stock is clearly ignoring the China Daily news, although that may change during the day.

Elsewhere in Asia, equity markets traded higher following the strong close on Wall Street amid outperformance in energy and health care sectors, with risk sentiment further supported by encouraging PMI and construction data from the US. KOSPI (+0.5%) and ASX 200 (+1.2%) were lifted by the energy sector as it tracked the performance seen in the US, while Hang Seng (+0.9%) was supported by casino names, following reports that China may relax the visa regulation in Macau. Shanghai Comp. (-0.25%) trade was reserved as margin debt declined for the 2nd day, with the nation also continuing to the digest the recent soft Chinese PMI figures, while markets in Japan are closed due to Culture day.

European stocks are little changed as auto, real estate, financial equities declines offset by travel & leisure, insurance, oil & gas gains. 5 out of 19 Stoxx 600 sectors fall with autos, banks underperforming and travel & leisure, oil & gas outperforming. 47% of Stoxx 600 members decline, 49% gain.

Notable movers are Volkswagen, which is currently down over 3% in German trading after the EPA said yesterday that it has discovered more Volkswagen cars containing software that helped them cheat emissions tests. The most recently discovered batch of 10,000 vehicles that the EPA says are equipped with “defeat device” technology are 3-liter diesel engine cars, including several Volkswagen, Audi and Porsche 2014 to 2016 model years.

There were even bigger moves among Europe’s bank which have continued their disappointing trend of late, with Standard Chartered falling under the hammer overnight, with its shares plunging as much as 8 percentafter announcing 15,000 job cuts and a $5.1 billion rights issue. The bank reported a surprise third-quarter loss as loan impairments in India surged. Standard Chartered is aiming for savings of $2.9 billion by 2018 and will restructure or exit $100 billion of assets. New CEO Bill Winters is picking up the pieces from his predecessor’s push into emerging markets. Standard Chartered derives most of its revenue from Asia. The shares have slumped 31 percent in 2015.

Then there was the largest Swiss Bank UBS, which several weeks after #2 Swiss bank Credit Suisse announced a major business overhaul and capital raise, also postponed a profitability target sending its shares 5% lower. The plan now is to achieve 15 percent return on tangible equity by 2017.

In Forex, the re-pricing of risks surrounding the ECB meeting in December saw the 1-month EUR/USD vol surge higher, with spot also under pressure given the sizeable cluster of expiring option strikes at 1.1000, said to be equivalent to around 1.6bIn. Also of note, the RBA refrained from announcing further monetary policy easing overnight which prompted broad based AUD strength, with the pair testing the 21 DMA line in the process. Unlike yesterday’s stellar UK manufacturing PMI release, today’s construction PMI data came inline and somewhat failed to reinforce growing calls for hawkish BoE.

Whether or not it is deemed a currency is irrelevant, but bitcoin soared overnight hitting a new 2015 high of 389 before paring some gains as the market learns about Chinese capital outflows and how these are facilitated with the digital currencies.

Looking at commodities, heading into the North American open, WTI and Brent crude futures are seen broadly higher, albeit marginally, supported by reports late yesterday that some OPEC members are calling for measures to support oil prices.

Key events on the US calendar today include the ISM NY reading for October, and September factory orders data and the November IBD/TIPP economic optimism reading. Later we’ll get October vehicle sales data. Comments from the ECB President Draghi, who is due to give a speech at 6pm London time, will also be closely watched. Meanwhile earnings season continues with 28 S&P 500 companies set to report, including Kellogg and DaVita Healthcare. Over in Europe we’ve got 13 Stoxx 600 companies due to report including UBS.

In terms of trading, expect USDJPY levitation to lead to another low-volume melt up in stocks as the all time high in the S&P, now just over 1% away is retested.

More Top News:

  • TransCanada Keystone Pause Seen Giving Obama, Trudeau New Start: Co. asked Secretary of State John Kerry to suspend assessment, arguing it would allow State Dept. to await results of separate Nebraska review  (see below)
  • Activision to Buy Candy Crush’s Maker in $5.9 Billion Deal: King Digital shareholders to get $18/share in cash, 16% premium to $15.54 close on Monday.
  • AIG Posts Loss, Eliminates Jobs as Icahn Calls for Breakup: 3Q net loss $231m, or 18c/shr; co. plans to cut as many as 400 senior-level jobs.
  • JPMorgan, BofA, Citigroup Among Big U.S. Banks S&P May Cut: Along with Wells Fargo, Goldman, Morgan Stanley, Bank of New York Mellon, State Street Corp., banks had senior unsecured, nondeferrable subordinated debt ratings placed on negative credit watch at S&P. (see below)
  • UBS Reorganizes Management, Postpones Profitability Target: Bank shaking up leadership, pushing profit goals further into future after reporting 3Q profit that more than doubled
  • Downed Russian Jet Suffered Prior Damage Linked to Other Crashes: Investigators will be taking close look at 2001 repair to plane’s tail as it’s one thing known to cause type of sudden midair breakup that occurred; Plane’s Audio Data Has ‘Uncharacteristic Noises’: Interfax
  • Boeing, GE Would Be Blocked From Ex-Im Loans in Amendment: House members proposing >20 amendments to U.S. highway bill that would alter how ExIm Bank operates.
  • Gross’s Bid at Redemption Set Back as Soros Pulls $490m: Soros money pulled as Janus Global Unconstrained Bond Fund lost 2% since Gross started running it, worse than 63% of similar funds.
  • BlueMountain, Longtime Valeant Holder, Says It Exits a Drugmaker: Fund said it exited position after shares plummeted, House Democrats sought to subpoena drug co. over high drug prices.

Market Wrap:

  • S&P 500 futures down 0.1% to 2093
  • Stoxx 600 up less than 0.1% to 377
  • MSCI Asia Pacific up 0.6% to 134
  • US 10-yr yield up less than 1bp to 2.17%
  • Dollar Index up 0.19% to 97.11
  • WTI Crude futures up 0.7% to $46.46
  • Brent Futures up 0.5% to $49.03
  • Gold spot down 0.2% to $1,132
  • Silver spot down 0.5% to $15.34

Bulletin Headline Summary from RanSquawk

  • Lacklustre performance by stocks in Europe this morning, with financials underperforming following earnings by Standard Chartered
  • The re-pricing of risks surrounding the ECB meeting in December saw the 1-month EUR/USD vol surge higher, with spot also under pressure given the sizeable cluster of expiring option strikes at 1.1000
  • Going forward, market participants will get to digest the release of the latest US factory orders report, API crude oil inventories updated after the closing bell on Wall Street and also comments from SNB’s Jordan, as well as ECB’s Draghi
  • Treasuries steady, 10Y yields near highest since late September as markets wait for Yellen testimony Wednesday, nonfarm payrolls Friday
  • Yellen and her top two lieutenants, all speaking publicly Wednesday, have a chance to drive home a united message about their readiness to raise rates in December if the labor market continues to show modest improvement
  • China’s annual growth should be no less than 6.5% in the next five years, President Xi Jinping said Tuesday, according to the official Xinhua News Agency; is the first five-year plan to confront an era of sub-7% economic growth
  • China will seek to increase the yuan’s convertibility in an orderly manner by 2020 and change the way it manages currency policy, according to the Communist Party’s next five-year plan
  • Standard Chartered Plc dropped the most in more than three years after the lender said it plans to eliminate 17% of its workforce, scrap the dividend and tap investors for $5.1b as CEO Bill Winters seeks to restore profit growth
  • The slump in iron ore that has driven prices below $50 a metric ton may deepen as BHP Billiton Ltd. forecast that the raw material will probably extend its decline for years as output rises, while Vale SA reaffirmed plans to increase low-cost supply
  • In less than 18 months, Norway’s Statoil has scrapped four years worth of drilling by canceling or suspending rig contracts, according to Bloomberg calculations based on company statements
  • Germany’s BDI industry lobby sided with Merkel’s approach to tackling the refugee crisis, saying that Europe’s biggest economy can surmount the challenge if sacrifices are made
  • Sovereign 10Y bond yields mixed. Asian stocks mostly higher, European stocks gain; U.S. equity- index futures decline. Crude oil higher, gold falls, copper little changed


DB’s Jim Reid completes the overnight wrap

Today’s log sees markets having progressively improved from a weak Monday session in Asia. The Dow (+0.94%) edged back into positive territory YTD, while the S&P 500 advanced +1.19% and the Nasdaq 100 (+1.18%) clocked a fresh 15-year high – the first of the major US indices to move back to a multi-year high following the surging recovery from the August lows. Prior to this the Stoxx 600 had closed up +0.34% and is now back to 10% returns YTD. US credit had a strong day also with CDX IG a couple of basis points tighter, while another 11 deals priced in the IG primary markets yesterday amounting to nearly $8bn of issuance.

While corporate activity in the healthcare space was attributed to much of yesterday’s stronger showing, energy stocks led gains despite a weak session for the energy complex. WTI finished down -0.97% and Brent (-1.55%) closed back below $49/bbl, while Natural Gas tumbled nearly 3%.

Much of the focus yesterday however was on the latest round of manufacturing data with the final October global manufacturing PMI’s. In Europe the Euro area reading was revised up 0.3pts at the final count to 52.3 which puts it back at where it was in August. Germany’s PMI was revised up 0.5pts to 52.1, while France’s nudged down a modest 0.1pts to 50.6. The first reading out of Italy revealed a much better than expected 1.4pt rise to 54.1 (vs. 53.1 expected) while the UK posted a sharp 3.7pt rise to 55.5 (vs. 51.3 expected) which was the highest since June last year.

In the US the final October manufacturing PMI was revised up 0.1pts from the initial flash to 54.1, a full point up on last month. The latest October ISM manufacturing reading fell 0.1pts to 50.1 although a touch ahead of market expectations (50.0). The print was the joint-lowest since December 2012 with the details also interesting, with both new orders (52.9 vs. 50.1) and production (52.9 vs. 51.8) rising modestly but offset by a big drop in the employment component (47.6 vs. 50.5) which was the lowest reading for this series since August 2009. This of course comes before Friday’s important employment report.

Treasury yields did nudge higher yesterday although in reality they were little moved post the data with the benchmark 10y yield finishing +2.9bps at 2.172%. The Atlanta Fed downgraded their Q4 GDP forecast for the US to 1.9% post the data from the initial 2.5% estimate, while December Fed rate hike expectations are unmoved relative to where we finished on Friday at 50%.
It’s been a generally positive start for markets in Asia this morning, following the lead from the US last night. The Hang Seng is +1.27%, while the Kospi and ASX are +0.65% and +1.42% respectively. Gains are a bit more modest in China where the Shanghai Comp (+0.26%) are CSI 300 (+0.28%) are slightly higher. Markets in Japan are closed for a public holiday. Meanwhile the Aussie Dollar is up +0.8% after the RBA left rates on hold as expected, although the attached statement noted that the ‘outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand’.

Staying with data, the latest quarterly Fed Senior Loan Officer survey was released yesterday which on the whole was probably a touch soft. With regards to consumer lending, a ‘small net fraction of banks’ were said to have indicated that they were more willing to make consumer installment loans over the past three months, while a few large banks were said to have eased their standards for credit card loans. The survey did reveal a modest net fraction of banks reporting weaker demand across home-purchase loans. Banks reported little change in commercial and industrial lending standards, but of the modest number that had changed, tightening was more frequent. In particular, domestic respondents that tightened either standards or terms on commercial and industrial loans over the quarter were said to have cited a less favorable or more uncertain economic outlook as well as worsening of industry specific problems as reasons. Lending standards are a lead indicator for HY corporate defaults so we like to keep a careful eye on them.

Staying with HY, this morning we published our latest European HY monthly note where we take a look at the strong rebound in performance in October and note how this type of rebound has been fairly common in the face of the magnitude of sell-off we saw in September. We highlight how there seems to have been something of a flight to quality (within HY) with BBs comfortably outperforming single-Bs and CCCs in October as well as contrasting the performance of EUR HY with other risk assets. We also look at what are arguably positive developments in terms of technicals. Apart from a couple of weeks in July, issuance has been particularly muted since June and YTD index eligible redemptions have been in excess of €40bn therefore YTD net issuance (€13bn) is the lowest it has been in the past 4 years. Specifically since net issuance reached a YTD peak in April we have actually seen negative net issuance of more than €2bn. We also note that with index coupons somewhere in the region of €13bn for 2015 funds may receive about as much cash as there is issuance this year. This is very rare. When we also factor in recent inflows the technical backdrop looks to be supportive of further returns in HY as long as macro factors don’t disappoint.

Earnings wise yesterday it was relatively quiet with just 19 S&P 500 companies reporting, of which 11 (58%) beat earnings expectations and 9 (47%) beat sales expectations. That puts the overall trend now (with 360 companies reported) at 74% and 45% respectively, little changed from Friday.

Before we take a look at the day ahead and staying on the micro theme briefly, headlines are circling now that both Porsche and Audi look set to be pulled deeper into the recent VW emissions scandal. The news has come about after the US Environmental Protection Agency has, according to Reuters, said that it is now investigating 3L engines used in larger and more expensive models of VW cars, as well as those in Audi and Porsche vehicles. The investigation looks set to continue and no doubt more details will emerge in due course. Interestingly this looks set to bring my recent car purchase into the cross-hairs although I stress it wasn’t a Porsche!!

Looking at the today’s calendar, there’s little to note in the European session this morning while data-wise in the US this afternoon we kick off with the ISM NY reading for October, before we then get September factory orders data and the November IBD/TIPP economic optimism reading. Later on this evening we’ll get October vehicle sales data. Comments from the ECB President Draghi, who is due to give a speech at 6pm London time, will also be closely watched. Meanwhile earnings season continues with 28 S&P 500 companies set to report, including Kellogg and DaVita Healthcare. Over in Europe we’ve got 13 Stoxx 600 companies due to report including UBS.


Let us begin….
Last night, 9:30 pm Monday night, Tuesday morning Shanghai time.  Japan Nikkei closed and Shanghai drops.  Initial fix on yuan higher. The probe on a senior banker intensifies with the arrest of the President of China’s third largest bank on graft suspicions with DongFeng motors.  Dalian Iron Ore fell to 2 month lows. The central bank of Australia sparks a commodity slide and thus more foreign exchange turbulence.
(courtesy zero hedge)

Widening Probe Snags Most Senior Chinese Banker Yet, Sends Stocks Lower; RBA Sparks Commodity Slide, FX Turbulence

It’s a busy night in AsiaPac. The ubiquitous Japanese stock buying-panic at the open quickly faded. China weakened the Yuan fix quite notably and injected another CNY10bn of liquidity but news of the arrest of the President of China’s 3rd largest bank and a graft investigation into Dongfeng Motor’s general manager sparked greater uncertainty and Chinese stocks extended the losses from yesterday. Commodities had started to creep lower, with Dalian Iron Ore pushing 2-month lows with its biggest daily drop in 3 months, were extended when the Aussie central bank kept rates steady (as expected) but sparked turmoil in FX markets with forward guidance of th epotential for more easing.


Japanese markets opened in their usual glory, then faded fast…


China opened with more liquidity injections and a sizable weakening in the Yuan fix…


Probes widened with AgBank (China’s 3rd largest bank) President arrested…


The president of China’s third-largest bank has been detained, local media reported on Monday — the most senior bank official to be swept up in President Xi Jinping’s sweeping anti-corruption campaign.


Zhang Yun, president, vice-chairman, and deputy Communist party secretary of Agricultural Bank of China had been “taken away to assist an investigation”,Sina Finance and QQ Finance reported, using a known euphemism for corruption arrests. QQ cited an AgBank employee saying that Mr Zhang had been arrested on Friday and that executives had held a meeting late into the night to discuss a response.


Mr Zhang is the most senior banker to be ensnared in China’s anti-corruption probe.


In January, then-president of midsized Minsheng Bank, Mao Xiaofeng, was arrested in an investigation linked to a top aide to former president Hu Jintao. Days later Lu Xiaofeng, a board member at Bank of Beijing, was also arrested.


More recently, police arrested the general manager and several other top executives at Citic Securities, China’s largest securities brokerage, for insider trading linked to the big fall in China’s stock market this year.


Local media also reported on Monday that a famous hedge fund manager was under arrest for insider trading.

And Dongfeng Motors general manager facing graft charges…

A general manager of China’s Dongfeng Motor Group is being investigated for suspected corruption, the country’s graft watchdog said on Monday.


Zhu Fushou was being investigated for “suspected severe violation of discipline”, the Central Commission for Discipline Inspection (CCDI) said in a statement on its website. Discipline violations generally refer to corruption.

All of which follow the weekend’s extraordinary actions around Xu Xiang and the Zexi Fund – whose holdings (below) are all under more pressure again today (amid liquidation fears)…

  • Guangdong Electric Power
  • China Gezhouba
  • Guoxuan High-Tech
  • China Sports Industry
  • Shanghai Metersbonwe Fashion
  • Eastern Gold Jade
  • Founder Technology Group
  • Shanghai Tofflon Science
  • Hareon Solar Technology
  • Fujian Rongji Software
  • Anhui Xinlong Electrical
  • Shenzhen Desay Battery
  • Anhui Xinke New Materials
  • Jiangsu Alcha Aluminum
  • Tianjin Saixiang Technology
  • Jinzi Ham
  • Guangdong Eastone Century Tech
  • Nantong Jiangshan Agrochemical
  • Guangzhou Lingnan Group
  • Hangzhou Cable
  • Xiamen Academy of Building
  • Ningbo Kangqiang Electronics
  • Fujian Haiyuan Automatic
  • Tieling Newcity Investment
  • Ningbo United
  • Elec-Tech International

All of which sparked selling pressure in Chinese stocks as recent re-leveraging was unwound for the 2nd day in a row…


China is in big trouble…


And then RBA decides, as economists expected, not to cut rates


Which extended commodity losses…


But of course fed the crowd some forward guidance hope:


This erased Aussie stock gains and sparked chaos in the FX markets – despite the “no move” being expected…running stops high and low before settling back unch…


One wonders who knew what early? Just like last time (and will the regulators get involved again)


And US equity futures are drifting lower as USDJPY rolls over and Apple fears rise on Pegatron hiring freeze...


Charts: Bloomberg

Oh oH!!  this is foretelling!!  A key apply supplier in Taiwan, Pegatron Corp, the maker of Apple’s next generation iphone 6S and ipad has halted hiring in its  Shanghai factory as sales of the iPhone 6S have been disappointing!!
(courtesy zero hedge)

Key Apple Supplier Halts Hiring Due To Poor iPhone Sales

Two months ago, Tim Cook reportedly wrote Jim Cramerthat everything was awesome with iPhone sales in China.Days later, channel checks appeared to call Cook’s statement into question. Several day ago, one of Apple’s component makers – Dialog Semi – issued cautious guidance strongly suggesting iPhone sales momentum was weakening. Apple’s earnings produced disappointment asChina sales rather notably fell (but was quickly dismissed by analysts as US sales rose) and now, perhaps most worrying of all, Taiwan’s Pegatron Corp – maker of Apple’s next-gen iPhone 6S and iPad – has halted hiring in its Shanghai factory as workers note “sales of iPhone 6S have been disappointing.”

In May 2013, Pegatron became “the new FoxConn” as then new Chief Executive Tim Cook, Apple divided its weight more equally with a relatively unknown supplier, giving the technology giant a greater supply-chain balance.

Pegatron Corp., named after the flying horse Pegasus, will be the primary assembler of a low-cost iPhone expected to be offered later this year. Foxconn’s smaller rival across town became a minor producer of iPhones in 2011 and began making iPad Mini tablet computers last year.

Back in June 2014, everything was awesome:

Two companies that assemble Apple’s iPhones and iPads are on a hiring spree, a signal that orders from the Cupertino-based group are ramping up ahead of the launch of a new device.
not so much


Taiwan’s Pegatron Corp, which employs 100,000 people, said on Monday that it isexpanding its workforce in mainland China by 30 per cent to keep up with the production of smartphones.

But now, in October 2015, the huge facility at Pegatron Technology’s factory in Shanghai sports a deserted look, as China Daily reported moments ago.

Gone are crowds waiting for job interviews or others who come to enquire about possible job openings.


The facility, which at its peak employed around 100,000 people, has temporarily suspended hiring as demand for Apple products has waned considerably.


The winding passage that leads to an interview room is all but deserted. Rather than excited faces, one can see young employees trudging out of the facility with fatigue and despair written large on their face.


Zhang Libing, a 23-year-old from Anhui province, told China Daily that he had just resigned from his job at Pegatron as he was exhausted and fatigued with the long working hours. Next to him was a huge electronic screen that kept flashing the message that the company has put on hold all fresh hiring for the time being.


“We are not surprised at that,” Zhang said. “The sales of iPhone 6S have been disappointing. I am afraid that if we do not leave now, we will be laid off soon.”



China, its biggest market outside the United States, accounted for nearly one-fourth of its total revenues in the fourth fiscal quarter because of its robust handset sales in the country. But fresh concerns have arisen over whether the company would be able to sustain the sales momentum.


Fading enthusiasm for iPhones in China has dragged down the device prices in the parallel market and hit new orders to the supply chain partners.


Pegatron was planning to hire roughly 40,000 workers for its Shanghai plants in the summer when Apple entrusted it with the iPhone 6S and iPad manufacturing.The current employee strength of the company remained unclear.

It appears things have changed dramatically in a very short period of time…

Cai Xiaoshuai left his hometown in Luoyang of Henan province and landed a job at the assembly line in Pegatron four months ago. But the 22-year-old man said he had had enough. His basic wage was 2,020 yuan ($320) per month and he had to work overtime for 2.5 hours every day to make sure that his salary would get close to 4,000 yuan.


“Some of my friends went to Kunshan in Jiangsu province to try their luck there. But it seems that the electronics industry there is in an even worse shape. So I am thinking of staying on and checking out other opportunities in Shanghai. But I will definitely not work in any electronics company. I have had enough,” said Cai.

Which leaves us asking, as we did when doubts began to surface about Cook’s letter to Cramer:

So is AAPL the next AOL, and is Tim Cook the next Thorsten Heins?


It all depends on China: if the world’s most populous nation can get its stock market, its economy and its currency under control, then this too shall pass. The problem is that if, as many increasingly suggest, China has lost control of all three. At that point anyone who thought they got a great deal when buying AAPL at $92 will have far better opportunities to dollar-cost average far, far lower.

Oh, and to anyone still holding their breath for AAPL to file a public statement which may well contain an outright lie, you may exhale now.




 OK then, let’s get on the nerves of the Chinese!!
(courtesy zero hedge)

US Will Send Warships To China Islands “Twice A Quarter”, Pentagon Says

Last week, the US did a silly thing. The Pentagon sent the USS Lassen to Subi Reef in the Spratlys just to see if Washington could sail by China’s man-made islands in the South Pacific without getting shot at.

(Subi reef)

(USS Lassen)

As ridiculous as that sounds from a kind of “let’s not start World War III” perspective, it’s an entirely accurate assessment of Obama’s “freedom of navigation” exercise. There was no reason whatsoever for the US to be there and the pass-by served no purpose at all other than to test Beijing’s patience.

To be sure, China isn’t innocent here. They’ve built 3,000 acres of sovereign territory atop reefs in disputed waters and built runways, ports, and cement factories on their new “land” which understandably makes Washington’s regional allies like The Philippines a bit nervous.

Still, it isn’t as if the PLA is about to invade Australia and it seems likely that if one could listen in at The Pentagon, US officials could probably care less about these “sandcastles.” But America’s “friends” in the region think that “this is the time for courage” (to borrow and alter a classic Gartman-ism), and so, Washington felt compelled to sail a warship by the islands just to prove it could. China didn’t fire on or surround the US-flagged guided missile destroyer, but the PLA did follow it and Beijing subsequently expressed its extreme displeasure at the “exercise.”

As we noted before and after the “incident”, most “experts” believe the US will need to keep up the patrols if they’re to be “effective.” Sure enough, The Pentagon now says destroyers will sail within 12 nautical miles of the islands twice every three months. Here’s Reuters:

The U.S. Navy plans to conduct patrols within 12 nautical miles of artificial islands in the South China Sea about twice a quarter, a U.S. defense official said on Monday.


“We’re going to come down to about twice a quarter or a little more than that,” the official said. “That’s the right amount to make it regular but not a constant poke in the eye. It meets the intent to regularly exercise our rights under international law and remind the Chinese and others about our view.”

Yes, because Washington doesn’t want to “poke anyone in the eye.”

So, as The White House attempts to put on a brave face amid mounting threats to US hegemony, The Pentagon is apprently set to antagonize Beijing for no reason at all other than to appease America’s regional allies who are effectively asking if Big Brother is still dedicated to playing world police officer.

We close with China’s warning, issued last week:

“If the United States continues with these kinds of dangerous, provocative acts, there could well be a seriously pressing situation between frontline forces from both sides on the sea and in the air, or even a minor incident that sparks war.”


In a speech today, Draghi continues with his dovish lyrics and as such the Euro/USA drops:

(courtesy zero hedge)

EURUSD Drops After Draghi Repeats Same Dovish Message Once Again

In a speech that was not supposed to discuss monetary policy, Mario Draghi appears to have been unable to control himself and repeated – once again – the same dovish message that he has for months:


And – once again – in its goldfish-memory-like manner, EURUSD legged lower, to the lows of the day as Pavlovian algos are unable to see through the same regurged jawboning.



Charts: Bloomberg


They have now spotted by infrared satellite a heat flash at the time of the Russian airplane disaster.  It can only mean an explosion.
Now the big question:  what caused the explosion?
(courtesy zero hedge)

Infrared Satellite Reveals Heat Flash At Time Of Russian Airplane Disaster

Earlier today, we highlighted commentary from Russia’s Kogalymavia (the airline operating the ill-fated Airbus A321 which crashed in the Sinai Peninsula) where officials said human and technical factors weren’t responsible for the mid-air disaster which killed 224 people.

IS Sinai took credit for “destroying” the plane but it wasn’t immediately clear what the contention was in terms of just how the group went about sabotaging the flight. Subsequently, a series of analysts and commentators opined that there was simply no way the militants could have possessed the technology or the expertise to shoot down a plane flying at 31,000 feet, but as Kogalymavia put it, “a plane cannot simply disintegrate.”

In short, it seems as though something exploded, and while we can’t know for sure whether someone detonated on board or whether, as former NTSB investigator Alan Diehl told CNN, “final destruction” of the plane was the result of “aerodynamic forces or some other type of G-forces,” the circumstances are exceptionally suspicious especially given where the plane was flying and the current rather “tense” relationship between Moscow and Sunni extremists.

Now, the US has apparently ruled out the possibility that a projectile hit the plane but satellite imagery depicts a “heat flash” at the time of the crash which indicates “some kind of explosion on the aircraft itself, either a fuel tank or a bomb.” Here’s NBC:

While many have speculated that a missile may have struck a Russian commercial airliner that went down over Egypt’s Sinai peninsula, U.S. officials are now saying satellite imagery doesn’t back up that theory.


A senior defense official told NBC News late Monday that an American infrared satellite detected a heat flash at the same time and in the same vicinity over the Sinai where the Russian passenger plane crashed.


According to the official, U.S. intelligence analysts believe it could have been some kind of explosion on the aircraft itself, either a fuel tank or a bomb, but that there’s no indication that a surface-to-air missile brought the plane down.


That same infrared satellite would have been able to track the heat trail of a missile from the ground.


“The speculation that this plane was brought down by a missile is off the table,” the official said.


A second senior U.S. defense official also confirmed the surveillance satellite detected a “flash or explosion” in the air over the Sinai at the same time.


According to the official, “the plane disintegrated at a very high altitude,” when, as the infrared satellite indicates, “there was an explosion of some kind.”


That official also stressed “there is no evidence a missile of any kind brought down the plane.”

We’d be remiss if we didn’t note that the video released by ISIS which purports to depict the plane exploding in mid-air doesn’t appear to show any kind of missile, but rather seems to suggest that someone on the ground knew the exact time when the aircraft was set to explode.

To be clear, there’s always the possibility that this is a coincidence and that the explosion which brought down the plane wasn’t terror related, but given the circumstances, you certainly can’t blame anyone for suspecting the worst and as we noted earlier, the Sinai Peninsula is well within the range of Russia’s warplanes flying from Latakia:

Victim body parts scattered over 8 kilometers is consistent with an explosion:
(courtesy zero hedge)

Victim Body Parts Suggest “Powerful Explosion” Most Likely Cause Of Russian Airplane Crash

On Monday evening, we brought you the latest from what will almost undoubtedly end up being one of the year’s biggest stories.

According to US officials, an infrared satellite detected a “heat flash” concurrent to the mid-air disaster that caused a Russian passenger jet to crash in the Sinai Peninsula killing all 224 people on board. This, the defense official contended, takes the missile theory off the table but does suggest that there could have been an explosion on the plane, either a fuel tank or a bomb. 

Although it’s impossible to say whether a video released by ISIS in the hours after the crash is authentic, the assessment detailed above would be broadly consistent with what the footage appears to show.

Not everyone is convinced. A competing theory revolves around whether an incident that saw the plane scrape its tail on a runway in 2001 might have contributed to the catastrophe.

Now, Russian media says that according to an Egyptian forensic expert, victims’ injuries seem to point to a mid-air explosion. Here’s Sputnik:

According to an Egyptian forensic expert, an analysis of injuries sustained by victims of the Russian airliner crash on Saturday in Egypt shows that a mid-air explosion might have occured aboard the Airbus A321 passenger jet, RIA Novosti reported.


On October 31, an Airbus A321 operated by the Russian airline Kogalymavia crashed in the Sinai Peninsula en route to St. Petersburg from the Egyptian resort city of Sharm El-Sheikh. The tragedy has become the largest civilian aircraft disaster in Russian and Soviet history.


“A large number of body parts may indicate that a powerful explosion took place aboard the plane before it hit the ground,” said an Egyptian forensic expert who took part in the examination of the bodies of the A321 crash victims.


According to the expert, a DNA analysis would be needed to identify the victims of the Russian airliner crash in Egypt.

In no uncertain terms: the fact that there were body parts scattered in an 8 kilometer radius is all you need to know about what caused the plane to crash.

Still, Egypt’s civil aviation ministry says there’s as yet no “proof” to support Moscow’s claims that the plane broke apart. Here’s Reuters:

Spokesman Mohamed Rahmi said there was no proof yet that the plane had broken up in flight. “This could be a long process and we can’t talk about the results as we go along,” he said.

Well, sure you can, and a lot of people are. Despite Rahmi’s contention that no evidence exists that the plane exploded (you know, other than the video from the terrorists which shows it exploding and the testimony of a forensic expert), he did confirm that no distress call was received from the pilot:

“No communication from the pilot was recorded at the navigation centers requesting anything,” he told Reuters.

We’ll close with the following from Bloomberg and leave it to readers to draw their own conclusions given everything noted above:

More than a decade before it burst into pieces mid-air, the Russian jetliner that crashed in Egypt on Saturday scraped its tail on a runway during landing and needed to be repaired.


Investigators poring over wreckage of the Metrojet Airbus Group SE A321 in Egypt’s Sinai peninsula will be taking a close look at a 2001 repair to the plane’s tail because it is one of the few things known to cause the type of sudden midair breakup that occurred Saturday, said John Goglia, a former airline mechanic who served on the U.S. National Transportation Safety Board.


“If the engineering is done right, it’s not an issue. If the repair follows the engineering data, it’s not an issue,” said Goglia, who isn’t involved in the Metrojet investigation. “But a breakdown in any one of those can and has resulted in catastrophic failures.”


While it may take years for a repair to eventually crack enough to fail, that can lead to a violent explosion damaging an aircraft, according to accident reports.


Such a failure occurred in 2002 when China Airlines Flight 611 flying from Taiwan to Hong Kong broke apart at the spot where the Boeing Co. 747’s tail was repaired 22 years earlier.


Japan Airlines Flight 123 hit a mountain in 1985 after a similar repair came apart, claiming 520 lives. When the repair let loose, it blew off the vertical fin rising out of the tail. Without that fin, the plane couldn’t be controlled.

again, strong evidence that there was an explosion in mid air

(courtesy zero hedge)

Metrojet Latest: Doomed Russian Plane Plunged At 300 Miles Per Hour

Earlier today, we got the latest conflicting reports from the bevy of officials, “experts”, and investigators weighing in on the Russian passenger jet that fell out of the sky above the Sinai Peninsula.

According to Russian media, an Egyptian “forensic expert” has come to the conclusion that an explosion was likely the cause of the crash. 

You needn’t be an “expert” to understand his logic. Essentially, he suggested that because body parts were scattered across such a wide radius, it seems likely that something on the plane blew up.

That doesn’t necessarily mean there was a bomb on board and indeed, if the plane’s tail wasn’t properly repaired after it struck a runway in 2001, it’s possible that a catastrophic failure resulting in a “violent explosion” could occur years later. Still, the fact that ISIS released a video purporting to show the plane exploding and the fact that the pilot did not contact anyone on the ground to indicate that anything had gone wrong, seems to suggest that something happened very quickly which resulted in the complete destruction of the aircraft. 

Now, we get the latest on the ill-fated flight from Bloomberg and FlightRadar24, with the latter reporting that the plane essentially slowed down abruptly before falling out of the sky at 300 miles per hour. Here’s more:

The Russian plane that crashed Saturday in Egypt slowed suddenly and then plunged to the Earth at 300 miles (483 kilometers) per hour, according to revised data of its final moments captured by flight-tracking website FlightRadar24.


The Metrojet Airbus Group SE A321 carrying 224 people fell from 31,000 feet to 26,000 feet in the final 26 seconds, according to the final transmission from its radio transponder reporting information to the ground.


The new data is consistent with reports from Egyptian and Russian officials, who said that the plane came apart as it was flying at cruising altitude from Sharm el-Sheikh to St. Petersburg. It also indicates that the plane’s direction of travel was wobbling from side to side, which would occur if it was coming apart.  


It dropped gradually at first and then more rapidly as the plane’s forward speed slowed, according to the new data. By the last transmission, it was moving forward at only 54 miles (87 kilometers) an hour, far below a normal flying speed.


Raw data from the plane reported initially by FlightRadar24 suggested the aircraft was bucking up and down in its final seconds. The flight tracking firm now believes that altitude information was erroneous.


The newer information released Tuesday is based on global-positioning satellite data that the plane also transmitted, which the firm believes is more accurate, according to a posting on its website.

All of the above contradicts statements made earlier today by Egypt’s civil aviation ministry whose spokesman Mohamed Rahmi claims there’s no proof that the plane came apart in the air. 

In any event, this looks like further evidence that the plane did in fact explode, which means that either a tail strike that occurred in 2001 ultimately caused the plane to fall out of the sky 14 years later, or else someone detonated something on board. 

The takeaway from the above is that this must have been an absolutely horrifying event – the plane explodes, the pieces basically stall at 31,000 feet before plummeting to the ground at 300 miles per hour. Once again, if there’s any shred of evidence to corroborate claims that ISIS is responsible for this, you can expect the Russian Defense Ministry to begin airing daily videos depicting strikes on IS Sinai in short order.


Negotiations  are to set between the current head of Syria, Assad,   and Syrian opposition.  The opposition is weak and will have no influence on the negotiations.  Remember that  Russia has its huge naval port at Tartus and its airport strength in Latakia.
(courtesy zero hedge)

Russia Set To Host “Negotiations” Between Assad, Syrian Opposition As Iran Hardens Stance

When we began to document the ongoing battle for Syria’s second-largest city Aleppo, one of the things we were keen to point out is that the fight amounts to the final push to effectively restore the Assad regime.

That’s not to say there won’t still be a dizzying array of rebel groups and Sunni extremists operating in the countryside, it’s just to note that once the country’s major cities in the west are under government control, it will then simply be a matter of Russia and Hezbollah conducting search and destroy missions in order to eradicate whatever remains of the opposition. That will invariably entail an assault on Raqqa, which should be particularly interesting given that by that time, the US will have troops in the vicinity. 

In any event, the point is that once the government retakes Aleppo, you can expect Moscow to begin angling for elections or some manner of political settlement.

The US and its regional allies will be negotiating from an impossibly weak position. With their proxy armies driven back and with no desire to commit to full-fledged military operations to counter the Russians and Iranians, Sergei Lavrov will essentially be able to dictate terms to Washington, Riyadh, Ankara, and Doha and you can bet those terms will involve the restoration of the Assad government in one form or another.

Well sure enough, Interfax is now reporting that Assad is prepared to “negotiate” with some opposition groups in Moscow. Here’s Reuters with more:

Syrian government officials and members of the country’s splintered opposition could meet in Moscow next week as Russia pushes to broker a political solution to the crisis, a senior official said on Tuesday.


“Next week, we will invite opposition representatives to a consultation in Moscow,”Interfax news agency quoted Russian Deputy Foreign Minister Mikhail Bogdanov as saying.


“The meeting … will possibly be with the participation of government representatives,” Bogdanov said. He did not say which opposition members could attend.


After initially dismissing Syrian opposition groups fighting its regional ally President Bashar al-Assad, Moscow has shown increasing flexibility as it steps up diplomatic efforts to resolve the conflict that has killed some 250,000 and displaced millions.


Russian Foreign Minister Sergei Lavrov will meet U.N. Syria envoy Staffan de Mistura in Moscow on Wednesday to discuss attempts to start a dialogue between Damascus and the Syrian opposition, Moscow’s foreign ministry said.


The list included mostly former and current members of the National Coalition for Syrian Revolutionary and Opposition Forces (SNC), Syria’s Western-backed political opposition block, Kommersant newspaper reported on Tuesday.


Among those named were former SNC head Moaz al-Khatib and incumbent president Khaled Khoja, the daily reported, as well as representatives from a diverse range of political, religious and ethnic groups including the Muslim Brotherhood and a Christian pro-democracy movement.

Of course as Reuters also notes, the SNC isn’t even relevant at this juncture:

The SNC has been accused of slipping into virtual irrelevance on the battlefield in Syria as Islamist and Kurdish groups have grown stronger.

So in other words, Assad is going to “negotiate” with one of the weaker players here, which underscores our contention that there’s little chance of any actual power sharing. As always, that’s not necessarily an attempt to disparage the government in Damascus, it’s just to say that anyone who believes this is going to end in a Russia-brokered, fair and open election where Bashar al-Assad has some chance of losing probably needs a reality check.

Meanwhile, The Kremlin’s Western foreign policy critic extraordinarie Maria Zakharova is out on Tuesday denying that Moscow has insisted on Assad’s restoration. Here’s AP:

In an apparent effort to set the stage for transition talks, a Russian foreign ministry spokeswoman said on Tuesday that Moscow does not consider it a matter of principle that Syrian President Bashar Assad should stay in power.


Asked whether it was crucial for Moscow that Assad stays, Maria Zakharova said on the Ekho Moskvy radio station: “Absolutely not, we’ve never said that.”


“What we did say is a regime change in Syria could become a local or even regional catastrophe,” she said, adding that “only the Syrian people can decide the president’s fate.”

Right. So Russia isn’t saying Assad’s ouster is necessary, they’re just saying it would lead directly to a “regional catastrophe” and that Syria needs to hold elections. Got it.

But again, it doesn’t seem likely that Assad would lose an election for any number of reasons. Here’s whatwe said last month:

We’ve always said that the West has a vested interest in demonizing the regime in Damascus, but at the same time, we’ve also noted that Bashar al-Assad is hardly the most benevolent leader in the history of statecraft. He is not someone most citizens will want to vote against now that Russia and Iran have put the SAA (or what’s left of it) on the path to victory. Between the likelihood that the regime will be restored, and the fact that any civilians left in Syria would far prefer Assad than the bloody anarchy that reigns across the country currently, there’s little doubt the President will prevail. That, in turn, will alow Russia to effectively close the book. That is, Moscow will be able to say “see, we held an election and Assad won. He is the legitimate leader and any further attempts to destabilize his legitimate government will be egregious examples of illegitimate meddling in the affairs of a sovereign country.”

So we shall see what comes of next week’s “negotiations” in Moscow, but no one should hold their breath for Russia and Iran to agree to a political future for Syria that doesn’t include Assad or at least the vestiges of his government. The country is just too critical for Tehran. “Russia may not care if Assad stays in power as we do”, Reuters quotes the head of Iran’s Revolutionary Guard Corps, Major General Mohammad Ali Jafari, as saying on Monday. But he added: “We don’t know any better person to replace him.” 

We contend that Russia does care – and quite a lot. Remember, Syria is now home to both a Russian naval and air base.

Finally, note that once the government is restored, one shouldn’t expect Damascus to tolerate US boots on Syrian soil for very long.

 around the world we are witnessing again USA swap rates turning negative.   Last month I reported this to you as it happened before only during the crisis of 2008 and 2009.

An interest rate swap is a swap between counterparties where there is an exchange of fixed rates for variable rates.  Negative interest rate swaps are extremely rare and this indicates one of three things possible that may be happening: 1) Counterparty risk less than sovereign (cannot happen) ii) i) Counterparty risk is less than sovereign  (cannot happen)

iii) turmoil inside the interest rate arena
you can bet ii) and iii)
(courtesy zero hedge)

Wholesale Money Markets Are “Perverted” – US Swap Spreads Hit Record Lows

At the height of the financial crisis, the unprecedented decline in swap rates below Treasury yields was seen as an anomaly. The phenomenon is now widespread, as Bloomberg notes, what Fabozzi’s bible of swap-pricing calls a “perversion” is now the rule all the way from 30Y to 2Y maturities. As one analyst notes, historical interpretations of this have been destroyed and if the flip to negative spreads persists, it would signal that its roots are in a combination of regulators’ efforts to head off another financial crisis, massive corporate issuance (which we are seeing), China selling pressure (and its impact on repo markets) and “broken” wholesale money-markets.



As we detailed previously, there appears to be 5 main reasons being cited for this “perversion”(as Bloomberg explains)

1. Central Bank un-cooperation…

“There is a rebalancing of holdings by central banks and there is still a massive supply of Treasuries that has no end in sight,” said Ralph Axel, an analyst in New York at Bank of America Corp. “We see recent signs that China is selling and overall all central banks, including the Fed, are no longer the big supporters of Treasuries as they had been in recent years. This is narrowing spreads as it cheapens Treasuries.”


Some strategists are pegging the narrowing of the two-year swap spread in recent weeks to selling of Treasuries by China as that nation’s central bank moves to stabilize its currency following the surprise yuan devaluation in August.


As speculation has swirled that China is selling shorter-maturity Treasuries while other investors dumped the securities before this month’s Federal Reserve meeting, dealer holdings of U.S. government debt climbed.



That drives repo rates higher because dealers need more cash to finance those positions.

2. Unintended Consequences from Regulatory Actions (fixing the last crisis)…

Regulatory moves such as higher capital requirements have led banks to curtail market-making, crimping liquidity and driving repurchase agreement rates above bank funding benchmarks. Repo rates factor into Treasuries pricing because they’re considered the cost of financing positions in government debt.

3. Companies are piling into the debt market to lock in low borrowing costs. They frequently swap the issuance from fixed to floating payments, which causes swap spreads to tighten.

4. Wrong-footed bets have also exacerbated the slide in spreads.

Most people on the hedge-fund side had been long swaps spreads,” said David Keeble, New York-based head of fixed-income strategy at Credit Agricole SA.


“But the rising repo rates and heavy corporate issuance really convinced a lot of people to capitulate and kill off the long-swap spread trades.”

and Finally 5. Wholesale Funding markets are broken…(as Alhambra’s Jeffrey Snyder explains)…

First, some relevant history. The interest rate swap rate is quoted as the counterparty paying fixed to receive some floating (usually tied to LIBOR, which is why eurodollar futures are entangled). Since there is credit risk involved in counterparties, it had always been assumed that the swap rate would have to trade above the relevant UST rate since the US government is assumed to be without it. That all changed during panic in 2008:

October 23, 2008, was an unusual day in credit markets even within a vast sea of unusual days. Credit and “exotics” desks at banks were left scrambling to figure out how it was possible that the 30-year swap rate could trade less than the 30-year treasury. It was thought one of those immutable laws of finance that no such might occur, to the point there were stories (apocryphal or not, the tale is about the scale of disbelief) that some trading machines were never programmed to accept a negative swap spread input. The surface tension about such things was decoded under the typical generalities that stand for analysis; if the 30-year swap spread was negative that might suggest the “market” thinking about a bankrupt US government.

A negative swap spread on its surface seems to indicate that the “market” views counterparty risk as less than risk of investing in the same maturity UST. That was never the case, however, as bank balance sheet capacity was simply collapsing leading to all sorts of irregularities; thus the problem of mainstream interpretations that stay close to the surface rather than recognize the wholesale origin (chaos and disorder) beneath. On the basis a comprehensive view of the 30-year swap spread, the sea of illiquidity is brightly and fully illuminated as once more “dollar waves” crashing the global financial system – the second much more devastating than the first.

ABOOK Sept 2015 Swaps Illiquidity 30s 08 Panic

Worse, as you can see plainly above, there was a third “dollar” wave that started in early to mid-January 2009 well after TARP, ZIRP and even QE1 (once more dispelling any heroics on the part of economists at the Fed who still had no idea what to do), accounting for the final crash to the March lows.

So you can begin to fill out the broad picture as October 2008 wore on, even though the worst of the broader market panic seemed to have been left behind. The demand for fixed side hedging was only increasing as the money dealers were both withdrawing and being unwritten in their assumed steadiness (not just ratings downgrades but very visible capital deficiencies and worse in terms of extrapolations at that moment). It was in every sense a rerun of the credit default swap reversal that had nearly brought it all down in March 2008 and then again with Lehman, Wachovia and, of course, AIG that September. In short, the “buy side” was in desperation for more hedging lest their portfolios and leverage employments tend too far uncovered while the dealers were in no position to supply it; desperate demand and no supply means prices adjust quite severely, which in this case pushed the swap rate, the quoted fixed part, below the UST rate for the first time ever (not that the swap rate history was all that long by then).

One main point of emphasis for that column was that every time this occurred thereafter there was a mainstream attempt to dismiss it while simply assuming some benign explanation dutifully quoting the usual “fixed income trader.” When swap spreads turned negative again in early 2010, for example, media stories of corporate fixed income volume filled the space to assure that all was still quite well; obviously it wasn’t given what happened not long after. Loyally replaying that very same tendency, earlier this year we received the same bland message, “ignore the turn in swaps because it’s just fixed income being more normal.”

Any actual catalog of swap spreads, especially since the “dollar” began “rising”, shows that to be utterly false.

ABOOK Sept 2015 Swaps Illiquidity 30s

There is nothing at all benign about negative spreads, especially now, after August 24, where they are stillsinking in every maturity.

*  *  *

As Jeffrey concludes, ignore swap spreads at your own peril.



Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/TUESDAY morning  7:30 am

Euro/USA 1.0978 down .0036

USA/JAPAN YEN 120.86 up .065

GBP/USA 1.5384 down .0037

USA/CAN 1.3112 up .0015

Early this morning in Europe, the Euro fell  by 36 basis points, trading now just below the 1.10 level falling to 1.0978; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore,and now Nysmark and the Ukraine, along with rising peripheral bond yields, and the unsuccessful ramping of the USA/yen cross to just above the 120 dollar/yen cross. Last night the Chinese yuan rose in value (onshore). The USA/CNY rate at closing last night:  6.3356 down .0014/ (yuan higher) 

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31/2014. The yen now trades in a slight southbound trajectory  as settled down again in Japan by 7 basis points and trading now just above the all important 120 level to 120.86 yen to the dollar.

The pound was down this morning by 37 basis points as it now trades just below the 1.54 level at 1.5384.

The Canadian dollar is now trading down 15 basis points to 1.3112 to the dollar.

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies 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 Tuesday morning: closed down 399.86 or 2.10% 

Trading from Europe and Asia:
1. Europe stocks mostly mostly in the red except Spain

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

Gold very early morning trading: $1132.75


Early Tuesday morning USA 10 year bond yield: 2.19% !!! up 2 in basis points from Friday night and it is trading well below resistance at 2.27-2.32%.  The 30 yr bond yield falls to  2.95 par in basis points.

USA dollar index early Tuesday morning: 97.16 cents up 25 cents from Monday’s close. (Resistance will be at a DXY of 100)

This ends early morning numbers Tuesday morning

Last night:
TransCanada just killed the keystone XL pipeline deal as they comment that with low prices in oil, it is just no
(courtesy zero hedge)

Transcanada Just Killed The Keystone XL Pipeline

In an ironic twist, just hours after we discussed the record capital outflow from Canada, resulting from the plunge in oil prices and the mothballing of Canada’s energy industry, Obama’s long-desired goal of killing the Keystone XL pipeline has finally come true.

Moments ago, the WSJ reported that Alberta-based Transcanada asked to suspend its U.S. permit application, “throwing the politically fraught project into an indefinite state of limbo, beyond the 2016 U.S. elections.”

Calgary, Alberta-based TransCanada Corp. sent a letter to the State Department, which reviews cross-border pipelines, to suspend its application while the company goes through a state review process in Nebraska it had previously resisted.

“In order to allow time for certainty regarding the Nebraska route, TransCanada requests that the State Department pause in its review of the Presidential Permit application for Keystone XL,” the company said in the suspension request reviewed by The Wall Street Journal. “This will allow a decision on the Permit to be made later based on certainty with respect to the route of the pipeline.”

The WSJ correctly notes that “the move comes in the face of an expected rejection by the Obama administration and low oil prices that are sapping business interests in Canada’s oil reserves.” Clearly the former was never an issue before, however the collapse in oil prices and the resultant plunge in CapEx spending means that the pipeline no longer made much economic sense.



This morning:


Panic buying in oil for no reason;


(courtesy zero hedge)

WTI Crude Algo Buying Panic Takes Out Yesterday’s Highs

The Keyser Soze bid is back… panic buying crude futures to run stops above yesterday’s high before being gone… just like that…

Heavy volume in the sudden burst of bids…


No obvious catalsyst justified this move though some have commented that Libya news increased uncertainty:



Charts: Bloomberg

Afternoon pricing:
(courtesy zero hedge)

WTI Crude Soars Above $48, Highest In 4 Weeks

Echoing the end of August face-ripping rally, WTI crude has soared almost 12% in the last 4 days, pushing the Dec contract above $48 for the first time since mid-September… And the reason? Well, The Fed is raising rates and they wouldn’t do that if the economy was not awesome, right?

Surge pricing…


In a similarly vicious move to the August-close ramp…


Charts: Bloomberg

After the markets closed:
two important points:
i) API reports larger than expected crude inventory
ii) Cushing inventories down!

API Reports Larger-Than-Expected Total Crude Inventory Build For 6th Consecutive Week, Cushing Draw

For the sixth week in a row, API reports a larger than expected 2.8mm inventory build (though that is lower than the last few week’s build). Cushing stocks, however, saw a 508k draw, easing some storage concerns. Crude oil prices remain confused for now having pumped and dumped to unch.

Sixth weekly build in a row…


Crude popped and dropped…


Charts: Bloomberg

And now for your closing numbers for Tuesday night: 3:00 pm
Closing Portuguese 10 year bond yield: 2.57% down 3 in basis points from Monday
Japanese 10 year bond yield: .316% !! par basis point from Monday and extremely low
Your closing Spanish 10 year government bond, Tuesday down 2 in basis points.
Spanish 10 year bond yield: 1.73%  !!!!!!
Your Tuesday closing Italian 10 year bond yield: 1.66% up 1  in basis points on the day: Tuesday/ trading 19 basis points lower than Spain.
Closing currency crosses for TUESDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
 Euro/USA: 1.0952 down .0062 (Euro down 62 basis points)
USA/Japan: 121.15 up 0.356 (Yen down 36 basis points)
Great Britain/USA: 1.5419 down .0003 (Pound down 3 basis points
USA/Canada: 1.3047 down .0045 (Canadian dollar up 45 basis points)

USA/Chinese Yuan:  6.3355 down .0015 on the day (yuan up)

This afternoon, the Euro fell by 62 basis points to trade at 1.0952.  The Yen fell to 121.15 for a loss of 36 basis points. The pound was down 3 basis points, trading at 1.5419. The Canadian dollar rose 45 basis points to 1.3047. The USA/Yuan closed at 6.3355
Your closing 10 yr USA bond yield: up 5 in basis points from Monday at 2.22%// ( trading below the resistance level of 2.27-2.32%)
USA 30 yr bond yield: 3.00 up 5  in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries
 Your closing USA dollar index: 97.25 up 35 cents on the day .
European and Dow Jones stock index closes:
London:  up 21.81 points or 0.34%
German Dax: up 0.48 points or 0.00%
Paris Cac up 19.97 points or 0.41%
Spain IBEX: up 47.00 points or 0.45 %
Italian MIB: down 22.94 points or 0.10%
The Dow:up 89.39 or 0.50%
The Nasdaq: up 17.98 or 0.35%
WTI Oil price;  47.98
Brent OIl:    50.53
USA dollar vs Russian rouble dollar index:  62.50 up 1.2 roubles per dollar
This ends the stock indices, oil price, currency crosses and interest rate closes for today.
And now for USA stories:


New York equity performances for today:



The Short-Squeeze-Driven Melt-Up Continues: Crude, Copper, Stocks, & Bond Yields Soar



Another day, another massive short-squeeze


Stocks are now up notably from The October FOMC last week…


And up massively from the end of September lows…


With stocks dramatically outperforming every other asset class since The September Fed Fold… (notice gold and oil retraced to unchanged since then)


*  *  *

But back to this week, Futures show the real moves best once again as we drifted lower overnight, only to ramp face-rippingly as US opened..


In Cash Indices, Small Caps (the dominant short squeezeds) is notably outperforming…


VIX held 14 again and bounced dragging stocks lower at the close….


We warned yesterday that VIX was decoupling…and today it decoupled even more…


And credit market professionals are aggressively protecting also…


Crude replaced USDJPY after Europe closed as the driver of stock algo correlations…


Treasury yields continue to surge higher non-stop all day… 30Y topped 3.00% and 10Y topped 2.20% to 7 week highs… But bear in mind that bond yields remain lower than at the September FOMC meeting (with 30Y -8.5bps)


The USDollar surged until Europe closed then dumped (with a small blip when Draghi spoke)… EUR back to a 1.09 handle…


Commodities were extremely active with crude and copper surging as PMs were dumped…


Crude ramped back above $48 (from below $43 last week), ran its stops and then faded…


And Copper ripped…


Lumber contionues to slide after last week’s ramp (and longer-term sends very dismal signals)…


Charts: Bloomberg

Bonus Chart: A reminder why we rallied – and why The Fed says it will raise rates – because the economy is doing so well…


the engine for most economies is its manufacturing. In the uSA, most of manufacturing has been off shored to China et al.

Today we witness USA factory orders miss again as they drop year over year for the 11th month in a row:

(courtesy zero hedge)


US Factory Orders Miss Again, Drops Year-Over-Year For 11th Month In A Row

It’s just factory orders…ignore it. For the 11th month in a row, US Factory Orders have fallen year-over-year, re-acclerating the most recent drop to -6.9%, something that has not happened outside of a recession in history. In fact, adjusting for the one-off Boeing surge in July 2014 this is biggest Y/Y drop since October 2008. Month-over-month, orders fell 1.0% (more than expected), down for the 11th month in the last 14. The good news is that inventories dropped 0.4% (for the 3rd month in a row) but that will further hurt GDP, but, unfortunately, inventories-to-shipments remain at 1.35x cycle highs.

History revised lower…


Recession much?


Finally Capital Goods (non-defense) plunged 7.4% in September (and is down 12.9% YoY).


Charts: Bloomberg


He is 100% accurate with everything he states:

(courtesy Jim Quinn/Burning Platform blog)

“Somebody Will Do Something Stupid”

Submitted by Jim Quinn via The Burning Platform blog,

Is it just me, or does it seem like we are moving inexorably towards a global confrontation?

China claims some islands in the South China Sea and we attempt to provoke a military response by sending a US warship within 12 miles of the disputed islands.


We accuse both China and Russia of cyber terrorism on regular basis, even though we released the Stuxnet virus into the Iranian nuclear facilities and have used mass surveillance against people around the world, including allied leaders.


We created ISIS as part of our grand strategy that included turning Iraq and Libya into lawless countries racked by civil war strife and religious zealotry.


We created the Syrian refugee crisis by funding militants against Assad because Saudi Arabia and Qatar want to build a natural gas pipeline through Syria to Europe.

We led the overthrow of a democratically elected, Russian friendly, government in the Ukraine, and have continuously provoked Russia in their own backyard.


We have covered up the true culprit in shooting down of the Malaysian airliner over the Ukraine.


We have colluded with Saudi Arabia to drive the price of oil down in an attempt to destroy the economies of Iran, Argentina and Russia. Putin has now called our bluff and entered Syria in full force, bombing the shit out of ISIS and proving the US had no intention of defeating these terrorists, because our military industrial complex depends upon having an enemy to fight. Now Obama is placing US troops in the line of fire between Russia, Syria, Turkey, Iran, and ISIS.


Europe was already bankrupt, using trillions in new debt to pay off the unpayable debt they already had.Now they are being overrun by Muslim hordes who will cause their societies to splinter and cause chaos, violence, and war.


Domestically, Obama has successfully splintered the country along the lines of race, religion, gun ownership, producers vs consumers, and wealth.

There are a multitude of fuses affixed to dozens of powderkegs and little kids with matches are on the loose.

I don’t know which of the fuses will be lit and which powderkeg will blow, but someone is bound to do something stupid, and then all hell will break loose.


It could happen at any time. One military miscue. One assassination. One violent act that stirs the world. And the dominoes will topple, setting off fireworks not seen on this planet since 1939 – 1945. I can see it all very clearly.



What a complete joke:

(courtesy zero hedge)

Miracle In Manhattan? – ISM New York Spikes By Most In 12 Years (From Lowest Since 2009)

File this under ‘WTF’despite job growth and purchase volume dropping for the 2nd consecutive month for the first time in 3 years, ISM New York reported a headline print of 65.8 in October. The jump from 44.5 (6 year lows) in September is the largest MoM jump since Nov 2003… Under the surface it was weak all around except for one thing… “outlook” – or hope – which soared from 62.8 to 74.0 (despite a plunge in expected demand 6 months out). All in all – we reiterate our initial thoughts – WTF!?

It’s a miracle…


Because demand expectations are at record lows…


Charts: Bloomberg


Beware!!! these idiots may hike rates despite what it will do to the uSA economy and for that matter the global finances:
(courtesy San Francisco Fed/zero hedge)

San Fran Fed Defends Rate Hike, Says Ignore Terrible Wage Growth Data

It is becoming increasingly clear that, come hell, high water, or dismal data, The Federal Reserve will raise rates in December whether the market likes it (which it will guarantee) or the economy doesn’t (which doesn’t matter after all).

A month ago, Stan Fischer dropped the first hint when he told Jackson Hole attendees that The Fed could ignore the inflation target because of transitory issues.

Fischer said there’s “good reason to believe that inflation will move higher as the forces holding down inflation dissipate further.” He says, for example, that some effects of a stronger dollar and a plunge in oil prices have already started to diminish.


Fischer added “The Fed should not wait until 2% inflation to begin tightening,”thus making that data item irrelevant for deciphering The Fed’s decisions.

Then, having warned of global turmoil weighing on her decision to raise rates, Yellen reversed position andbrushed off any concerns about global uncertainty.

Yellen removed the “global economic developments” part as well:


Recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.


So no matter what happens overseas, all clear given for rate hikes.

And now, with the final nail in the coffin of data-dependent lies,The San Fran Fed just dismissed ‘wage growth’ as entirely irrelevent to future growth or inflation

These results do not imply that wages and prices are unrelated. Certainly they are tied together in the long run, and wage data will surely contain some information for future price inflation. However, after incorporating information from prices and activity measures, the marginal additional benefit of using wage data appears small.   


Fundamentally, the weak forecasting power of wages for prices suggests that unexpectedly high or low inflation could occur regardless of the recent behavior of wages.


Researchers have extensively studied how wage data might help predict future price inflation. The overall conclusion of the literature is that wages generally provide less valuable insight into future prices than some other indicators.


In fact, models that do not incorporate wages often result in superior inflation forecasts

Thus enabling The Fed to justify a December rate-hike no matter how bad the data they are so dependent on turns out to be… Which explains this chart…


As Dec rate-hike odds hit series record 52%… in the face of collapsing macro and micro data.


the markets are finally taking the rate hike in December seriously.  The rise in yield generally means an error in Fed policy is contemplated:
(courtesy zero hedge)

30Y Yield Tops 3.00%, Highest Since Fed Folded In September

As we noted earlier, the market is starting – it appears – to take The Fed seriously…



Charts: Bloomberg


The truth arrives as JPMorgan slams ZIRP!!!!
(courtesy JPMorgan,Kelly/zerohedge)

The Truth Arrives: JPM Slams ZIRP – “It Has Been Impeding Rather Than Promoting Economic Recovery”

Earlier today Bill Gross joined the ever louder chorus of voices saying that “unconventional” monetary policy in its current iteration is not working to boost the economy (even if it is quite effective at boosting asset price inflation), however a far more prominent critic of the Fed’s status quo emerged last week when JPM’s economist David Kelly released a paper titled “Avoiding the Stagnation Equilibrium” in which he flat out rejects the conventional wisdom canon and says that “zero interest rate policy actually reduces demand in the economy, prompting the Federal Reserve to prescribe even further doses of a medicine that, for a long time, has been impeding rather than promoting economic recovery.”

Of course, there were no such calls by JPM in 2008 and 2009 when it was QE – a logical continuation of ZIRP whose effects were insufficient to boost asset prices and the stock of JPM – that saved not only his employer but the entire financial industry together with taxpayer-backed loans and guarantees that backstopped the western way of life as we know it.

It is also odd how such calls for a rate hikes emerge only after there has been a 200-some point rally in the S&P500, following a drop resulting precisely due to concerns of a tighter Fed.

We doubt, however, that his recent refutation of all that is Neo-Keynesian will be sufficient to brand him a tin-foil hatter: he merely admits what others such as this website have said all along: the epic build up in debt may have helped holders of assets but has dramatically hurt the overall economy and the middle class.

There is, as usual, a footnote: while traditionally rising rates would be seen as negative for stocks as the swoon that started with the release of the Fed’s August minutes showed, and culminated with the ETF flash crash of Monday August 24, Kelly thinks this time rising rates will be accepted by the market as a sign things are improving.

Here, JPM resorts to the traditional formulation: what does the Fed know about the economy (that nobody else supposedly does), if it is willing to get off the emergency lower bound? To wit:

Nothing is more important to the health of a free-enterprise economy than confidence. Confident consumers and businesses, at the margin, spend a little more, hire a little more and invest a little more. If this causes demand to exceed supply in the economy even by a small amount, it helps the economy grow. Because of this, one of the biggest drawbacks of the Fed’s aggressively easy monetary policy in recent years has been its negative impact on sentiment. On each occasion when the Fed announced a new quantitative easing strategy, hesitated to taper bond purchases or postponed a movement from zero interest rates, it undermined confidence. The typical question has been: What bad thing does the Fed know that we don’t?Conversely, when the Fed raises rates from very low levels, it generally acts to boost confidence.

The implication being that a rate hike will imply a “good” thing which only the Fed knows which the rest don’t. Like subprime being contained for example.

Whether or not the Fed will listen remains a different question, although judging by the creep higher in December fed fund futures, the probability of a rate hike in just over 1 month is increasingly entertained.

Here, for those interested, are the key points from Kelly’s argument:

At their September meeting, the Federal Reserve decided, for the 54th consecutive time, to leave short-term interest rates unchanged at a near-zero level. While only one voting member of the Federal Open Market Committee (FOMC) dissented, the Fed’s action, or rather inaction, was hotly debated.


Those advocating an immediate hike argued that the economy had progressed far beyond the emergency conditions that had led to the imposition of a zero interest rate policy in the first place and that the Fed was already dangerously “behind the curve.” Those lobbying for further delay pointed to a lack of wage inflation and signs of weakness in the global economy.


However, frustratingly, we believe this argument, like all monetary policy debates in recent years, has been waged on a false premise, namely that increasing short-term interest rates, even from these extraordinarily low levels, would hurt aggregate demand. We believe that the opposite is true. The real-world relationship between interest rates and aggregate demand is non-linear and an examination of the transmission mechanisms suggest that the first few rate hikes, far from depressing aggregate demand, would actually boost it.


The true relationship may, in fact, be as portrayed in Exhibit 1. As we outline in the pages that follow, raising short-term interest rates from very low levels could actually increase aggregate demand as positive income, wealth, expectations and confidence effects outweigh relatively innocuous negative price effects and ambiguous exchange rate effects. However, as interest rates increase further, the price effects of rate increases become more damaging while wealth, expectations and confidence effects eventually turn negative, causing rate increases to drag on economic demand. In other words, monetary tightening from super-easy levels can actually accelerate the economy beyond its potential growth rate before slowing it, ideally to a soft landing at a higher level of output and interest rates.


Raising short-term rates from near zero should boost economic demand,
although raising rates from higher levels could reduce it


There is, of course, more to the story. All of these effects have changed over the decades so that this argument might not have been as strong had a zero interest rate policy been employed, say, in the 1960s. In addition, the impact of interest rates on the economy is  asymmetric — a cut in interest rates from a normal level that had been sustained for some time might well boost demand even if an increase to that level didn’t dampen it. Finally, on the supply side, there is likely a significant long-term cost in lost economic efficiency from holding the price of money at an artificially low level. All of these issues are worth further research. However, for the Federal Reserve, the basic point is the most important one. The reason it should have raised rates in September and the reason, failing that, that it should do so in October isn’t that the economy can handle the pain but rather that it could do with the help.

A rate hike, JPM claims, would work favorably through the following 6 mechanisms:

• The income effect: Higher interest rates increase the interest income of savers while increasing the interest expenses of borrowers. In the household sector, in particular, short-term, interest-bearing assets are far larger than variable rate interest-bearing liabilities so that increasing short-term interest rates should boost income and thus aggregate demand.

• The price effect: Higher interest rates make it more rewarding to save and more expensive to borrow. In theory, raising interest rates will encourage households to save rather than consume and cause some businesses to forgo investment projects because they are unlikely to generate the cash flow to justify the higher interest cost. Higher rates could also reduce the number of families that qualify for home mortgages, thus slowing the housing market. All of these effects should reduce demand in the economy.

• The wealth effect: The value of an asset is generally  determined by the discounted value of future cash flows that that asset will produce. Higher interest rates increase the discount rate in these calculations and thus could reduce wealth and thereby consumption through a negative wealth effect.

• The exchange rate effect: Short-term capital flows are important in determining exchange rates. In theory, currency traders like to park their money in currencies with higher overnight interest rates. In this way, higher interest rates could increase the demand for dollars, thereby boosting the exchange rate and, by doing so, suppress exports and slow the economy.

• The expectations effect: When a central bank begins to raise rates and signals an intention to gradually increase them further, households and businesses may try to borrow ahead of further rate hikes, boosting both consumption and investment.

Finally, the conclusion, which warns about all those ZIRPy things we have been cautioning about since 2009. Better late than never:

There are, of course, many other problems with a zero interest rate policy. It may, over time, lead to growth in both debt and asset prices that exacerbate inequality in the short run and can end badly when rates return to more normal levels. More fundamentally, interest rates play a crucial role in the allocation of resources in the economy. Artificially low interest rates lead to credit being assigned inappropriately, whether, for example, through the application of unreasonably tough lending standards on small business loans and or unreasonably easy ones on student loans.


However, the most urgent point is simply that, right now, the economy could do with a little more demand. We believe that the positive impacts of income, wealth, confidence and expectations effects are only slightly offset by negative price effects and thus the first few rate increases would actually boost demand.


It is immensely disheartening that, in 2015, this point is not only not generally accepted but has to be argued on each occasion. Federal Reserve officials ponder the effectiveness of monetary stimulus in helping the economy but never consider that, at near-zero interest rates, the question is not one of degree but rather of direction. Politicians either assail the Fed for too much stimulus or too little, but never contemplate whether the supposed stimulant is actually a sedative. Academic economists largely avoid the messy arithmetic of positives and negatives on this crucial issue in favor of more mathematically challenging inquiries into more obscure topics. Meanwhile, most media coverage, often aimed at the lowest common denominator of financial understanding, feels little compulsion to advance beyond the assumptions of Econ 101.


But the dismal recent history of monetary stimulus demands a more thoughtful analysis. Japan has wallowed for 20 years with zero interest rates without showing the slightest evidence of “stimulated” demand. The mild U.S. recessions of 1991 and 2000 were followed by anemic economic recoveries, even though the Federal Reserve in both cases lowered rather than raised interest rates even as the economy was healing. Perhaps most damning of all has been this miserably slow expansion — the slowest of all the economic recoveries since World War II. While some will argue that this is due to extensive damage to the financial system, it isn’t. American financial institutions have been very well capitalized for years. Rather, America’s recovery may well have been hobbled by repeated bouts of monetary “stimulus” that have starved households of interest income, undermined confidence and undercut any incentive to borrow ahead of higher rates.


We do not propose a complete rejection of traditional economic assumptions. Steadily, if the Federal Reserve raised rates to normal levels and beyond, the effects of rate hikes on wealth, confidence and expectations would turn from tailwinds to headwinds and the price effects of higher rates would become more biting. Beyond a certain level, rising rates would slow demand and the economy could, with some luck, achieve a “growth” equilibrium, where the economy grows at its potential pace, facilitated by a normal level of interest rates.


However, today after almost seven full years of a zero interest rate policy, this seems like wishful thinking. Sadly, it is probably more likely that we get stuck in a “stagnation equilibrium” where a zero interest rate policy actually reduces demand in the economy, prompting the Federal Reserve to prescribe even further doses of a medicine that, for a long time, has been impeding rather than promoting economic recovery.


It is unlikely that policy-makers will recognize this but it still doesn’t mean that the situation is hopeless. In the fall of 2015, while demand is still only growing slowly in the U.S. economy, very low labor force and productivity growth are producing both further labor market tightening and some mild upward pressure on core inflation. If this continues, the Fed may feel an obligation to follow its latest guidance to raise interest rates to slow the economy. We don’t believe this would actually slow the economy, but in order for interest rates to regain their normal role as an efficient allocator of capital and a governor of aggregate demand, interest rates will have to rise through a region where they could actually help the economy grow faster.

Besides, as the economy weathers the impact of slow global growth, a high dollar and an inventory cycle, it will likely grow a little more slowly over the next few quarters anyway.

If” – and if it doesn’t, well the Fed will just do what it always does when it is out of other options, and cut right back to zero (or below) and boost QE.

Full presentation below (pdf)


This is big:  S and P puts all of the major too big to fail USA banks on negative watch

something must be burning inside!!
(courtesy zero hedge)

S&P Puts Too-Big-To-Fail US Banks On Ratings Downgrade Watch, Blames Fed

Having watched the credit markets grow more and more weary of the major US financials, it should not be total surprise that ratings agency S&P just put all the majors on watch for a rating downgrade:


Despite all the talking heads’ proclamations on higher rates and net interest margins and ‘strongest balance sheets’ ever, S&P obviously sees something more worrisome looming. S&P blames The Fed’s new resolution regime for its shift, implying “extraordinary support” no longer factored in. This comes just hours after Moody’s put Bank of Nova Scotia on review also (blaming the move on concerns over increased risk appetite).

The ratings agency cited significant measures taken by Canada’s third-largest bank to increase its profitability over the past couple of years, which signal a “fundamental shift” in the bank’s risk appetite.


Over the past two years, Scotia has accelerated the growth in its credit card and auto finance portfolios “both of which areparticularly prone to rapid deterioration during an economic shock and exhibit higher defaults and loss severities than mortgage portfolios,” Moody’s said in a note late Monday.


While the bank’s moves are aimed at increasing profitability to counter the lowest domestic net interest margins among Canada’s six largest banks, Moody’s believes they increase the prospect of future credit losses when the credit cycle turns.

Goldman, Morgan Stanley & Citigroup rated A- with negative outlook, JPM has A rating with negative outlook, State Street rated A+ with negative outlook, according to Bloomberg data

Who could have seen that coming?


As Bloomberg noted earlier, The Fed’s new proposal for a “final firewall” requiring total loss absorbing capacity (TLAC) buffers at the largest banks may be the driver of S&P’s decision…

U.S. banks may collectively need to add $90 billion in debt by Jan. 1, 2022, to help ensure an orderly wind down in case of failure, which may add $680 million to $1.5 billion in annual costs. Eight G-SIBs would hold a minimum of long-term debt (LTD) under the Fed’s Oct. 30 TLAC proposal. LTD is meant to address “too-big-to-fail” concerns by having a known quantity of capital to help a bank transition through resolution. The Fed reasons that LTD could be used as a fresh source of capital, unlike existing equity.


Companies Impacted: Using 4Q14 figures, the Fed estimates six U.S. G-SIBs collectively face a $120 billion TLAC and LTD shortfall. LTD stand-alone shortfall is approximate $90 billion. Among the eight G-SIBs are JP Morgan, Citigroup, Bank of America, Wells Fargo, Morgan Stanley, State Street and Bank of New York.

All of which have seen risk-weighted assets surge since 2008…


Just as we suspected, S&P’s decision is based on The Fed’s new regime:


In other words right before The Fed’s rate hike decision.

Charts: Bloomberg


Remember the liar loans??  They’re back!!!!  When this bubble breaks it is going to be one huge bang:

(courtesy zero hedge)

Subprime Auto Goes Full-Retard: Lender Sells $154 Million ABS Deal Backed By Loans To Borrowers With No Credit

If you frequent these pages, you may remember Skopos Financial, the subprime auto lender that’s been busy packaging all manner of questionable auto loans and offloading credit risk to investors via some of what can only be described as the most noxious looking ABS deals in the history of securitization.

Earlier this year for instance, Skopos sold some $150 million worth of paper backed by a collateral pool wherein 20 percent of the loans were made to borrowers with a credit score ranging from 351 to 500. In other words, a fifth of the loans backing the deal are to the least creditworthy borrowers in the country. Here’s a look at the details:

This comes against a backdrop of rising US auto sales (see the numbers for October, out earlier today) and it’s not difficult to explain the gains. Just take a look at the following data from Experian on the lunatic loan terms being extended to borrowers (from Q1):

  • Average loan term for new cars is now 67 months — a record.
  • Average loan term for used cars is now 62 months — a record.
  • Loans with terms from 74 to 84 months made up 30%  of all new vehicle financing — a record.
  • Loans with terms from 74 to 84 months made up 16% of all used vehicle financing — a record.
  • The average amount financed for a new vehicle was $28,711 — a record.
  • The average payment for new vehicles was $488 — a record.
  • The percentage of all new vehicles financed accounted for by leases was 31.46% — a record.

Or, visually, here is America’s $1.1 trillion auto loan bubble:

The amusing thing about Skopos is that the management team is essentially just a collection of Santander Consumer veterans:

Who is Skopos Financial you ask? We’ll let them tell the story in their own words:

In 2011, Skopos Financial opened its doors with one goal in mind making tough, deep subprime auto loans easier to finance for dealers.


Leveraging our sophisticated, patented iLender technology and visionary management team, Skopos provides a streamlined process for franchise dealers to finance customers with low credit scores.


As an indirect auto lender, Skopos offers solutions for car buyers with no credit, low FICO scores, or a previous bankruptcy, repossession or foreclosure. And the best part is the speed. Skopos’ dealers enjoy fast underwriting, fast approvals and fast funding.

Yes, the “best part is speed.” We suppose the process is quite efficient considering there appear to be no underwriting standards whatsoever.

As for the “visionary” management team, have a look at the following profiles which seem to indicate that at least for some industry veterans, Santander Consumer isn’t quite subprime-y enough (note that there’s a Countrywide link in there as well for good measure):

Of course we all know who was named to Santander Consumer’s board earlier this year:

Well, don’t look now, but Skopos is at it again, and this time, 14% of the loans “backing” a $154 million ABS deal were made to borrowers with no credit score. Here’sBloomberg:

Skopos Financial, a deep-subprime auto finance company based in Irving, Texas, is packaging $154 million of loans made to borrowers with weak credit — and some without a credit score — into bonds rated investment grade.


More than three-quarters of the loans backing the deal are to borrowers with credit scores under 600 and another 14 percent have no credit score at all, according to a pre-sale report by Kroll Bond Rating Agency. That would place the bulk of the obligations well below what’s typically considered good credit.


The offering is the latest prepared by privately backed auto lenders that offload their risk into securities bought by institutional investors. Skopos, which is backed by Lee Equity Partners LLC, the New York-based private equity firm started by Thomas H. Lee, has only been in business since 2012.


About two-thirds of the loans being packaged into Skopos’ securitization have been taken out by borrowers who are financing used cars. With the loan maturities stretched to almost six years on average, borrowers may be at greater risk of owing more than their cars will be worth if they try to sell them later.


As a result of these risks, investors in the deal are being offered a big cushion against defaults. The securities, marketed by Citigroup Inc., are expected to be rated as high as AA, according to Kroll. Investors who buy them would be protected against the first 48 percent of losses. The “base case” cumulative net loss expectation is 21 percent to 23 percent, the rating company said.

Better still, half of the loans in the collateral pool were extended to borrowers in Texas where, you’re reminded, households are feeling the pinch from layoffs tied to slumping crude prices (the completely inexplicableSeptember state employment print notwithstanding):

Nearly half of the borrowers whose debt is being financed in this deal are from Texas. Earlier this year, Skopos issued an unrated securitization with the biggest concentration of borrowers also in Texas, but that comprised only 15 percent of the loan pool.


Despite the high number of loans to Texas borrowers, only a handful were in energy-production regions, making the exposure to the oil industry’s downturn “insignificant,” Kroll wrote in its report.

Yes, “insignificant.” So despite the fact that half of this $154 million deal is accounted for by borrowers from Texas, we should draw no parallel between desperate, uncreditworthy borrowers and the imperiled state of US oil producers. Got it.

What the above shows is that we’ve now reached a point wherein borrowers can get a 6-year loan for a used car with no credit score, meaning there’s virutally i) no chance they’re going to be able to make all of the payments, and ii) even if they do, they’ll be underwater with a couple of years, if not a couple of months.

How much risk is being embedded within the financial system as a result of this you ask? Well, that’s difficult to nail down, but auto loan-backed ABS supply is set to come in at around $125 billion this year, up 25%:

And here’s Nomura’s take on the dynamic dominating the market:

“The significantly weaker performance in the subprime auto sector is being driven by an increase in issuance from the lesser established issuers.”

Smaller, newer bond issuers fueled 37 percent of the sales of subprime bonds last year, up from 27 percent in the previous year.

We’ll close with a quote from Comptroller of the Currency Thomas Curry:

“This reminds me of what happened in mortgage-backed securities in the run-up to the crisis.”


A good example of why the market is rising:
poorer revenues than expected, huge losses and a huge burning of cash and yet the stock is up 7% in after hours.
we are in a crazy market:
(courtesy zero hedge)

Tesla Jumps Despite Missing, Burning Record Cash On Better Than Expected China, Outlook

Moments ago, the most hyped stock in the market announced Q3 results… and missed while burning a record amount of cash; however Musk’s contagious optimism once again dominated the outlook and as a result the stock is up by 7% after hours.

The quarter highlights:

  • Telsa delivered 11,603 vehicles in Q3
  • Q3 non-GAAP gross margin 25.1%, dropping from 29.4% a year ago; adding “we expect non-GAAP Automotive gross margin to decline slightly from Q3″
  • The company trimmed its own guidance for full year deliveries from 50,000-55,000 to 50,000-52,000
  • Non-GAAP Revenues of $1.24 billion came in line with estimates, although something strange emerged: while non-GAAP revenue rose from Q3 by about $50MM, its GAAP revenue actually declined by $18 million to $937MM. The difference: a surge in “revenue deferred due to lease accounting” which soared from $242MM in Q2 to $307MM in Q3.
  • Non-GAAP EPS of $(0.58) missed expectations of a ($0.56) print. GAAP EPS was a disastrous (1.78)
  • But most troubling, as usual, was the ongoing cash burn from a company which appears allergic to generating any positive cash flow. At ($595) million in free cash flow, this was the worst cash burning quarter in Tesla history, which supposedly was to be expected with the rollout of the Model X.

The results in charts:

Revenue: both GAAP and non-GAAP:


EPS: both GAAP and non-GAAP


And Free Cash Flow:


And yet, despite what were clearly disappointing historic results, the stock is up 7% after hours. Why? One simple reason: its forecast was as usual, bullish.

  • The company sees 17,000-19,000 deliveries in Q4, which was modestly higher than the consensus estimate of 16,500
  • It plans to invest $500MM in Q4 raising full year CapEx from $1.5 billion disclosed previously, to $1.7 billion now.

Some more of Musk’s infamous bullishness (and blaming production bottlenecks):

Model S production and deliveries are on track to achieve our initial Q4 plan. The primary limiting factor to higher Q4 deliveries is the near term ramp of Model X production, with the biggest constraint being the supply of components related to the second row monopost seats. To eliminate these supply constraints and achieve a better overall outcome, we have brought manufacturing of these seats in-house. In addition we, and some of our other Model X suppliers, are still ramping up and fine-tuning production. These factors add uncertainty to our build plans during Q4, but we feel emphasizing quality is the right decision for our customers.


During the next several quarters, operating leverage should improve with revenue and gross profit both growing faster than operating  expenses. Operating expenses should increase slightly in Q4, but reflect a further decline in Model X development expenses, offset by increased costs related to expanding our global sales capability and developing Model 3. We are on track to unveil Model 3 in late March 2016.

But most important was Musk’s commentary on China which for many was the biggest wildcard. This is what he said:

In China, our newest major market, Q3 Model S orders increased substantially from Q2, due in part to the opening of two new retail locations. We expect order growth in China to remain strong with more store openings and the recent policy changes in Beijing and other major cities that allow buyers of Tesla vehicles to bypass license plate restrictions.

In short, despite the miss, despite the epic cash burn (Tesla is down to $1.5 billion in Cash or less than 3 quarters in cash), the outlook was ok, and China was not a disaster, and that alone was enough to spook the shorts into a covering spree that at least for the time being has pushed the stock higher by 7%.


I will leave you with this great commentary from David Stockman on the lunacy of the markets  (this is especially for my friend Jeff M)

(courtesy David Stockman)

This Time Is The Same——And Worse!

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The current stock market melt-up hardly qualifies as limp. Even the robo-machines and hyper-ventilating day traders apparently recognize that their job is to tag the May 2015 highs and then get out of the way.

So when and as they complete their pointless mission, the question recurs as to why the posse of fools in the Eccles Building can’t see that they are inflating one hellacious financial bubble; and that when it blows it will deconstruct their entire 7-year project of make-pretend recovery.

In fact, if it weren’t for the monumental pain and suffering the next bubble collapse will bring to main street, you might even be tempted to urge them on toward the Wile E. Coyote moment just ahead. After all, if 84 straight months of ZIRP and $3.5 trillion of fraudulent debt monetization (QE) brings nothing more than another thundering financial collapse, it will be curtains time at the Fed.

And here’s why they can’t duck the blame this time with tall tales about a global “savings glut” causing lax underwriting in the mortgage market, or the lack of transparency on Wall Street balance sheets.

The fact is, stock prices are just plain nuts and the evidence is all there in plain sight. And so are the intense and manifold economic headwinds arising from all around the planet and the advanced age of the US business cycle.

At this point, 75% of S&P 500 companies have reported and earnings are coming in at $93.80/share on an LTM basis. That happens to be 7.4% below the peak $106/share reported last September, and means that the market today is valuing these shrinking profits at a spritely 22.49X PE ratio.

And, yes, there is a reason for two-digit precision. It seems that in the 4th quarter of 2007 LTM earnings came in at 22.19X the S&P 500 index price. We know what happened next!

Actually, we also know that the warning signs were then everywhere, but they were ignored by the Fed and the “goldilocks” infatuated traders alike. In fact, S&P earnings had peaked at $85 per share in the June 2007 LTM period and were already down to $66 by the fourth quarter.

Even the so-called ex-items or “operating earnings” were down by nearly 10% from their June peak of $91.50 per share. But that did not slow down the sell-side hockey sticks one bit.  By year-end 2008, earnings were supposed to be $115 per share or 25% higher.

As it happened, of course, ex-items earnings in 2008 came in at $49/share or half the Wall Street hockey stick level, while the kind of honest GAAP earnings that you don’t go to jail for filing posted at $15!

So here we go again. Notwithstanding the fact that S&P 500 earning have been falling for nearly a year, the Wall Street sell-side sees nothing by sunny skies ahead. Operating earnings for 2016 are currently riding that patented hockey stick at nearly a vertical plane of ascent, to $127 per share.

In other words, there is purportedly no reason to sweat the small stuff. Why a 16.5X PE multiple is par for the course, the Fed’s on hold and China’s Beijing bosses have stabilized the Shanghai index.

(to be continued)

Source: Citigroup

Well that is all for today

I will see you tomorrow night



  1. Harvey – Why do you have my work listed as Dave Kranzler?

    This headline is from 11/3/2015 ii) Bill Murphy of GATA interviewed by Rory Hall (Dave Kranzler IRD)

    Dave Kranzler and IRD had NOTHING to do with this work. Chris Powell has the entry at listed correctly as GATA Chairman Bill Murphy interviewed by Rory Hall for The Daily Coin . Where in that entry does it mention Dave Kranzler or Investment Research Dynamics?


  2. Comprehensive as always, Harvey. Regards.


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