nov 12/World Gold Council: “huge gold demand surfaced this quarter”/Open interest on gold comex drops big time (8442 contracts) but not silver as it rose by 3553 contracts/Glencore falls below 100 pence which will no doubt trigger many derivative problems for them/Deutsche bank is Glencore’s biggest creditor/World’s largest engine maker Rolls Royce plummets on poor sales and outlook/Oil breaks into the 41 dollar column/Huge flotilla of oil tankers heading for the USA/Huge contango for offshore oil vs onshore oil will cause on shore oil to plummet/Surprising export of gold from England of 280 tonnes so far this year (all of last yr 114 tonnes) and yet England produces no gold/

Gold:  $1080.90 down $3.90   (comex closing time)

Silver $14.22  down 4 cents

In the access market 5:15 pm

Gold $1084.50

Silver:  $14.30

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 notice 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 209.72 tonnes for a loss of 93 tonnes over that period.

In silver, the open interest surprisingly rose by a considerable 3,553 contracts despite silver being down by  6 cents in yesterday’s trading.  The total silver OI now rests at 165,988 contracts In ounces, the OI is still represented by .829 billion oz or 119% 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 huge 8442 contracts to 427,984 contracts as gold was  down by $0.30 yesterday. It seems the modus operandi of the bandits is to liquefy gold/silver OI as be approach first day notice on Monday, November 30. They succeeded in gold but not silver. We had 0 notices filed for nil today.

We had a huge withdrawal in gold inventory at the GLD to the tune of 1.49 tonnes / thus the inventory rests tonight at 661.94 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. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. 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, after they deplete the GLD will be the FRBNY and the comex.   In silver, we had a huge addition  in silver inventory to the tune of 1.43 milllion oz   / Inventory rests at 315.111 million oz.

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

1. Today, we had the open interest in silver rise by a considerable 3,553 contracts up to 165,988  despite the fact that silver was down by  6 cents with respect to yesterday’s trading.   The total OI for gold fell by a considerable 8442 contracts to 427,984 contracts with gold down only 30 cents yesterday.

The bankers are succeeding in lowering the OI as the upcoming big December delivery month approaches.  They did not have any luck in silver.  First day notice is Monday, Nov 30.

(report Harvey)

2.Gold trading overnight, Goldcore

(/Mark OByrne)

3. ASIAN AFFAIRS
 i) Last night, 9:30 pm MONDAY night, TUESDAY morning Shanghai time.  Japan Nikkei rises slightly, Shanghai falls although rescued at the end of the day.
Base metals fall badly putting more pressure on Glencore et al. Glencore falls below 100 pence.
(zero hedge)

 ii)  China reports today on very weak lending as their debt levels and non performing loans are just too high for the Chinese to take on more debt.  This should signal for QE for China:

( zero hedge)
 iii)  Toy manufacturer in Shenzen, disappears owing 600 workers their wages and severance
(zero hedge)
4.  EUROPEAN AFFAIRS

 i)  A 24 hour national strike was called for today.  Massive street protests brought the Greek economy to a fresh halt.

(zero hedge)
ii  The world’s largest makers of engines for jets and planes plunges on a huge profit warning.  The company states that the dividend will be reviewed.  As zero hedge states:  they face a near death experience as its credit default swaps rise:
(zero hedge)

iii)  The situation inside Catalonia is getting quite interesting.  The government is threatening to arrest Mas and also Catalonia’s parliament refuse to elect Mas.

a very muddy situation..
(courtesy zero hedge)
5. GLOBAL AFFAIRS
i)Graham Summers correctly states that if the economy is strong then coal and oil will be higher in price and greater in demand:
(Graham Summers/Phoneix Capital Research)

ii  Here is one media that does not believe its nation’s report on “a stellar jobs report”(courtesy zero hedge)

6. RUSSIAN AND MIDDLE EASTERN AFFAIRS
The temperature between Russia and the USA just rose a few notches with the following:

(courtesy the Saker)

7.  OIL RELATED STORIES
i)   Huge oil inventory levels:  highest in a decade!!
(zero hedge)
ii)  The globe is witnessing flotillas of super tankers circling the globe as capacity on shore falters to zero.  This is causing oil at sea prices to rise as the oil is occupied in those ships.  This is causing a huge contango for offshore oil vs onshore oil.  As offshore oil rises, in order to make it profitable to store the oil, it necessitates further price reduction on onshore oil
 (zero hedge)

iii)  Crude breaks into the 41 dollar column on again huge inventory gains especially in Cushing OK.

(courtesy zero hedge)
8.  EMERGING MARKETS
 President of Venezuela, Madur0, had 2 of his nephews arrested in New York for smuggling cocaine
(zero hedge)

9 USA stories/Trading of equities:

i)  James Bullard:  we may stay at zero interest rates for quite some time

(James Bullard/zero hedge)

ii) USA comfort data just released:

two significant findings:

a) Blacks are further from comfort

b) the 25 -34 age group in the uSA also are further from comfort

remember that the consumer is 70% of GDP

iii)  Janet Yellen’s favourite report the JOLTS report shows job openings rising off but hirings leveling off.

Why?  find out in today’s important commentary

(zero hedge)

10.  Physical stories

i)  Attacks on gold are becoming for intense every day.  Something is smoking behind the scenes

(John Embry/Kingworldnews)

ii) a)  The big news of the day:  the generally sanguine World Gold Council announces huge gold coin sales and it is at its highest levels since 2008:

very important for you to read..

(courtesy World Gold Council/zero hedge)

ii b) Reuters Jan Harvey reports on the same data from the WGC

(Jan Harvey/Reuters)

iii) N.Y Sun reports on the debate that Cruz wants to do two important things;

i) audit the Fed
ii) bring back the gold standard

 

a very welcome change to the debate

 

(New York Sun/GATA

 

 

iv) Sentiment on gold is commented upon by GATA members and others..

(Chris Powell/GATA)

 

v) a) Copper at 6 year lows.  Glencore falls below 100 pence putting tremendous pressure on this huge derivative player

 

(zero hedge)

b) With copper prices retreating, Glencore and all of its derivative trading may bring down Germany, Deutsche bank and maybe set off a huge financial collapse everywhere

(Dave Kranzler/IRD)

 

vi  Demand for silver far outstripping supply

 

a must read commentary tonight from Steve St Angelo

(SRSRocco report)

vii) Bill Holter’s important piece entitled:  “Popular delusions …even if “popular” are still delusional.”

viii) Lawrence Williams of Lawrieongold/Sharp Pixley believes that the smuggled gold may amount up to 25% of their supply:

 

(Lawrie on gold)

ix) record gold exports from England to China.

(Koos Jansen)

Let us head over to the comex:

The total gold comex open interest fell from 436,426 down to 427,984 for a loss of 8,442 contracts as gold was down $0.30 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. It looks like the latter has stopped. The November contract remained constant at 214 contracts. We had 0 notices filed yesterday, so we neither gained nor lost any gold  that will stand for delivery in this non active delivery month of November. The big December contract saw it’s OI fall by a gigantic 23,009 contracts from 226,262 down to 203,253. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 192,973 which is  good. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was very good at 243,050 contracts.

Today we had 0 notices filed for nil oz.
And now for the wild silver comex results. Silver OI rose by a considerable 3,553 contracts from 162,435 up to 165,988 despite the fact that the price of silver was down 6 cents with 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 rose by 9 contracts up to 15. We had 0 notices filed yesterday so we gained 9 silver contract or an additional 45,000 oz will stand for delivery in this non active delivery month of November.  The huge (and active) delivery month of December saw it’s OI fall by 5,002 contracts down to 78,844. The estimated volume for today (regular hours Comex) came in at a humongous 72,162 contracts.  The confirmed volume yesterday (comex + globex) was also humongous at 72,328..
(for the past two days:  total volume of 154.6 contracts or 773 million oz which equates to 110% of global silver production ex China ex Russia.)
It sure looks like someone or some entity is going after supplies of silver at the comex as continual raids do not cause our silver leaves to fall off the tree.
We had 0 notices filed for nil oz.

November contract month:

INITIAL standings for November

Nov 12/2015

Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  160.76 oz

manfra

Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  32,150.000 oz

 

1000 kilobars

Scotia

No of oz served (contracts) today 0 contracts
No of oz to be served (notices) 214 contracts

(21,400 oz)

Total monthly oz gold served (contracts) so far this month 7 contracts

700 oz

Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 89,520.1 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) Out of Manfra:
160.76 oz
total customer withdrawal 160.76  oz
We had 1 customer deposit:
 i) Into Scotia;  32150.000 oz  (very suspicious/3rd such transaction in a month)

Total customer deposits  32,150.00  oz

we had 1  adjustments:

 i) out of Brinks:
96.45 oz was adjusted out of the dealer and this landed into the customer account of Brinks
 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 (7) x 100 oz  or 600 oz , to which we  add the difference between the open interest for the front month of Nov.( 214 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 (7) x 100 oz  or ounces + {OI for the front month (214)– the number of  notices served upon today (0 x 100 oz which equals 22,100 oz  standing  in this month of Nov (0.6874 tonnes of gold).
 we neither gained nor lost any gold ounces standing for delivery in this non active delivery month of November.
We thus have 0.6874 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 151,384.629.079 oz or 4.708 tonnes
Total gold inventory (dealer and customer) =6,742,525.884   or 209.72 tonnes)
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 209.72 tonnes for a loss of 94 tonnes over that period.
 
end
And now for silver

November initial standings/First day notice

Nov 12/2015:

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 325,802.190 oz

Brinks

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 10,834.03 oz

Delaware

No of oz served (contracts) 0 contracts  (nil oz)
No of oz to be served (notices) 15 contracts 

75,000 oz)

Total monthly oz silver served (contracts) 5 contracts (25,000 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 4,996,842.3 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 Delaware;  10,834.03 oz

total customer deposits: 10,834.03 oz

We had 1 customer withdrawals:
i)Brinks: 325,802.190 oz

total withdrawals from customer account: 325,802.190   oz

we had 0 adjustments
Total dealer inventory: 43.340 million oz
Total of all silver inventory (dealer and customer) 162.044 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 (5) x 5,000 oz  = 25,000 oz to which we add the difference between the open interest for the front month of November (15) 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:
5 (notices served so far)x 5000 oz +(15) { OI for front month of November ) -number of notices served upon today (0} x 5000 oz ,=100,000 oz of silver standing for the Nov. contract month.
we  gained 9 contracts an additional 45,000 silver ounces will stand for silver in this non active delivery month of November.
 
end

 

The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:i) demand from paper gold shareholders ii) demand from the bankers who then redeem for gold to send this gold onto China
And now the Gold inventory at the GLD:
Nov 12/another huge withdrawal of 1.49 tonnes of gold inventory/rests tonight at 661.94 tonnes/GLD is bleeding gold and the blood flow is heading east.
Nov 11/a huge withdrawal of 3.00 tonnes of gold inventory/rests tonight at 663.43 tonnes
Nov 10/a small deposit of .32 tonnes of gold in gold inventory/rests tonight at 666.43 tonnes
nov 9/another 2.98 tonnes of gold leaves the GLD/Inventory rests at 666.11
Nov 6/another huge 2.68 tonnes of gold leaves the GLD/Inventory rests at 669.09 tonnes
Nov 5/a huge withdrawal of 14.53 tonnes of gold from the GLD/rests tonight 671.77 tonnes
nov 4/ no change in gold inventory at the GLD/Inventory rests at 686.30 tonnes
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 26.no change in gold inventory/rests tonight at 695.54 tonnes
Nov. 12/2015 GLD :661.94 tonnes*
*this is the lowest level in quite some time.  It looks like physical gold acquired in the past few months have now left the GLD vaults heading for China.
end

And now SLV

nov 12/surprisingly we had a huge addition of 1.43 million oz of silver into the SLV/Inventory rests at 315.111 million oz/(my bet:  it is paper silver not real silver entering the vaults)

Nov 11/no change in silver inventory at the SLV/rests tonight at 313.681 million oz/

Nov 10/no change in silver inventory at the SLV/rests tonight at 313.681 million oz/

Nov 9/no change in silver inventory/rests tonight at 313.681

Nov 6/ we had a very tiny withdrawal of 136,000 oz (probably to pay for fees)/Inventory rests tonight at 313.681 oz

Nov 5/strange no change in silver inventory/rests tonight at 313.817 million oz/

Nov 4/2015: no change in silver inventory/rests tonight at 313.817 million oz/

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 30.no 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

 

Nov 12/2015:  tonight inventory rests at 315.111 million oz***
Note the difference between the GLD and SLV.  GLD sees liquidation of metal but not SLV. Why?  because the SLV has no real silver behind it only paper silver.
end
 
And now for our premiums to NAV for the funds I follow:
Sprott and Central Fund of Canada.(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 10.7 percent to NAV usa funds and Negative 10.8% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 62.3%
Percentage of fund in silver:37.6%
cash .1%( Nov 12/2015).
2. Sprott silver fund (PSLV): Premium to NAV falls to+0.33%!!!! NAV (Nov 12-/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV falls to – .86% to NAV Nov 12/2015)
Note: Sprott silver trust back  into positive territory at +0.33% Sprott physical gold trust is back into negative territory at -.86%Central fund of Canada’s is still in jail.
end
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)

Gold Bullion Demand Surges 27% In Q3 – New Chinese “Buying Spree”

Gold Demand Trends Q3 2015 was released by the World Gold Council today. The quarterly publication is the leading industry resource for data and opinion on global gold demand and examines demand trends by sector as well as geography.

The key findings from the report are as follows:

[Graphic source: World Gold Council]

GoldCore: Gold Demand Trends

Overall demand increased by 8% year-on-year to 1,121t as selling of futures contracts and ETFs contributed to a price dip, 6% in July, which buoyed gold demand around the world.

Total consumer demand – made up of jewellery demand – totalled 928t, up 14%.

Global investment demand saw a significant rise of 27% to 230t, up from 181t in Q3 2014.

This was led by the US which saw a surge in bar and coin demand – ittripled and was up 207% to 33t from 11t on the same period last year, with massive demand from China, up 70% to 52t and Europe up 35% to 61t.

China’s sharp devaluation of the yuan this summer sparked another gold bar and coin “buying spree” in China according to the World Gold Council, as canny store of wealth buyers sought to shelter themselves from further market volatility and sharp falls in stock markets.

Much of this European demand came from Germany and Austria where demand remains very high due to heightened German concerns about the euro, the European and global economy.

Global jewellery demand for Q3 2015 was up 6% year-on-year to 632t compared to 594t in Q3 2014. In India, demand was up 15% to 211t and China was up 4% to 188t. The US and the Middle East also saw gains, up 2% to 26t and 8% to 56t respectively.

Central bank demand reached 175t, the 19th consecutive quarter of net purchases. Russia continued to “lead the pack” in terms of central bank purchases.

– Demand in the technology sector declined 4% to 84t as the sector continued to endure pressure, with the industry choosing to shift towards alternative, cheaper materials in technological applications.

– Total supply was 1,100t in Q3, up 1% year-on-year. Total mine supply (mine production + net producer hedging) remained relatively flat up 3% year-on-year to 848t compared to 814t in the same period last year. Year-on-year quarterly mine production shrank by 1% to 828t in Q3 2015 against 836t in Q3 2014. Recycling

Must-read guide to international bullion storage:

GoldCore: Essential Guide to Storing Gold In Singapore

Download Essential Guide to Gold Storage in Singapore

Essential-Guide-To-Storing-Gold-In-Switzerland

Download Essential Guide To Storing Gold In Switzerland


DAILY PRICES
Today’s Gold Prices: USD 1087.60,  EUR 1014.03 and GBP 716.21 per ounce.
Yesterday’s Gold Prices: USD 1088.60,  EUR 1013.17 and GBP 718.36 per ounce.
(LBMA AM)

GoldCore: Gold COMEX

 

COMEX Gold in USD – 1 Year

Gold closed down $2.70 yesterday to finish the day at $1088.70.  Silver closed at $14.42, down $0.14. Platinum lost $12 to $898.

Gold prices have slid in 10 of the last 10 COMEX trading sessions (see chart below) falling back to their lowest since early August – half decade lows in dollar terms. Gold looks very oversold on a few measures and is due a bounce.

The upside potential for gold and silver far outweighs the downside risk, in time. On a 5 to 10 year time horizon, the outlook for both precious metals is very positive.

GoldCore:

 

 

 

Download Essential Guide To Storing Gold Offshore

GoldCore_Essential_Guide_to_Storing_Gold_Offshore list

end

A huge rise in silver investment demand is putting a record squeeze on supply.  Also please note that with low prices for base metals and a possible curtailment of mining, this should also cause  production to fall as most of silver production is a bi-product of base metal mining

 

(courtesy Steve St Angelo/SRSRocco Report)

 

Rising Silver Investment Demand Puts Record Squeeze On North American Supply

Filed in Mining, News, Precious Metals by on November 12, 2015 0 Comments

Rising physical silver investment demand will put a record squeeze on North American supply this year.  Since 2001, the United States and Canada have experience two opposite trends… surging official silver coins sales on the back of plummeting domestic mine supply.

For example, in 2001 U.S. and Canadian silver production totaled 96.6 million oz (Moz).  Of that total, the U.S. produced 55.9 Moz, while Canada supplied 40.7 Moz.  That year, Silver Eagle and Maple Leaf sales totaled 9.2 Moz.

U.S-&-Canadian-Silver-Production-vs-Eagles-Maple-Sales

Note:  the red and blue bars represent Canadian and U.S. silver mine supply, while the white line and boxes show the total sales of U.S. Mint Silver Eagles and the Royal Canadian Mint Silver Maples.

Even though U.S. and Canadian silver production declined significantly to 67.2 Moz by 2007, total Silver Eagle and Maple Leaf sales only increased slightly to 13.4 Moz that year.  Which means the U.S. and Canada still enjoyed a net 53.8 Moz domestic silver mine supply surplus after their official coin sales were deducted.

However, during the collapse of the U.S. Housing Market and Investment Banking System in 2008, Silver Eagle and Maple Leaf sales surged to 27.5 Moz while the combined silver production from the U.S. and Canada fell to 57.5 Moz.  This pushed the combined domestic mine supply surplus from these two countries down to only 30 Moz once consumption for official silver coins were removed.

This trend counter-trend continued (except for a brief reversal in 2012) until it hit a record net deficit of 19.8 Moz in 2014.  This supply deficit is a result of record sales of Silver Eagles and Maples of 73.2 Moz compared to 53.4 Moz combined silver production.

While it’s true the U.S. and Canada imports silver for industrial fabrication, jewelry, silverware and investment demand, this amount has increased significantly due to falling domestic mine supply.  Let’s compare the net change since 2001:

U.S-Canaidan-Silver-Production-Minus-Ealge-Maple-Sales

If we look at the chart above, we can see that the surplus of U.S. and Canadian silver mine supply minus consumption of their official silver coin sales was 87.4 Moz.  However, this is estimated to be a net deficit of 26.2 Moz in 2015 as total Silver Eagle and Maple Leaf sales reach a record 75 Moz versus combined mine supply of 48.8 Moz.

The significance here is that the United States and Canada could use 87.4 Moz of their domestic mine supply (minus official coin consumption) for industrial, jewelry and silver ware fabrication, whereas now they have to import silver just to cover the consumption for their official coin production.

That being said, there continues to be this rumor that the U.S. Mint must use domestic silver mine supply for the production of its Silver Eagles.  This used to be true when Congress authorized the U.S. Mint to use up the silver in its Strategic Stockpiles.  However, after these inventories were depleted, Congress authorized the U.S. Mint to purchase silver on the open market for the production of its Silver Eagles.

Furthermore, commonsense tells us that at the estimated 37 Moz of U.S. domestic mine supply could not meet the total demand of 45 Moz of Silver Eagles this year.

Regardless, the charts in this article show just how much the surge of Silver Eagle and Maple Leaf sales have totally overwhelmed domestic silver mine supply from these two countries.  While silver is still relatively cheap and abundant, there will come a time where silver producing countries such as Mexico and Peru will hold onto more of their mine supply for their own citizens.

Precious metal investors and especially the ignorant public have no clue just how little silver there is to go around when its true STORE OF WEALTH properties are realized.

Lastly, the first chart in this article was an updated chart found in my THE SILVER CHART REPORT.  I am currently working on THE SILVER MARKET REPORT that will focus on the silver market going all the way back until the 1950’s.

One more thing.  I have had requests from readers to add a DONATE button to the site.  Some are not interested in the Paid Reports, but enjoy reading the public articles.  So, after many requests, I have finally decided to add this DONATE feature to the site.

SRSrocco Donate Button

If you want to donate to the site, you can find the DONATE button at the bottom of each article or at the top right hand portion of the site.  I plan on putting out more articles in the future on how best to protect one’s assets as U.S. and Global Oil production collapses.  This is one of the most misunderstood concepts by the majority of analysts in both the precious metal community and Main Stream Media.

————–

end

 

The total amount of gold shipped from England to China this year is an astronomical 280 tonnes.  (Last yr only 114 tonnes was exported).

What is fascinating here is that England does not produce any gold from any gold mines

 

As Koos reports, the onslaught of gold leaving the west to the east is in full swing.

Posted on 12 Nov 2015 by

Record UK Gold Export To China In September, Chinese Gold Import Reaches 156t

According to the most recent data from Eurostat the UK has net exported 37.6 tonnes of gold to China in September, an all-time record. This figure is up 25 % m/m and up 280 % y/y.

The UK started exporting gold directly to China in April 2014 when it shipped 5 tonnes to the mainland while for the first time bypassing Switzerland and Hong Kong. In total the UK net exported 114 tonnes to China in 2014. Year to date the UK has already net exported 210 tonnes of gold to China, annualized a whopping 280 tonnes, which would be 146 % more than last year. The exodus of gold from the West to the East is still in full swing.

UK - CN Gold Trade 2012 - september 2015

Net export from the UK to Switzerland in September accounted for 44 tonnes, which is 45 % less than in August. Year to date the UK has net exported 417 tonnes of gold to Switzerland, down 0.3 % from 2014 and down 62 % from 2013 – all due to direct gold export to China instead of transshipping it through Switzerland for refining.

Overall the UK was a net exporter in September at 47 tonnes, which is 64 tonnes less than in August. Year to date the UK has net exported 334 tonnes in total – it has also imported gold, explaining total net export can be lower than what was net exported to China and Switzerland.

UK Gold Trade 2012 - September 2015
UK net gold export and SGE withdrawals are correlated.

One of the greatest gold hoards on earth is located in London. The capitol of the UK has been the epicenter of the global wholesale gold market for centuries, hence many bullion banks and central banks have their physical gold stored within the M25 London ring way. It was estimated by a team of gold researchers (Ronan Manly & Nick Laird) that in early June 2015 approximately 6,256 tonnes of gold were stored in London. The composition of these holdings at the time was:

  • 5,134 tonnes stored in the vaults at the Bank Of England (BOE), of which at least 3,779 tonnes were owned by central banks, the 1,355 tonnes residual were unknown holdings.
  • 1,122 tonnes were stored in vaults outside the BOE, of which 1,116 tonnes in ETFs with a 6 tonnes residual in unknown holdings.  
LondonGold11
Courtesy Jesse’s Café American.

Because central banks are not likely to sell their gold (in significant quantities), what was potentially available for sale is the residual at the BOE (1,355 tonnes), the ETF gold (1,116 tonnes) and the residual outside the BOE and the ETFs (6 tonnes). Totalling at 2,477 tonnes, of which 1,116 tonnes in ETFs and 1,361 tonnes in unknown holdings.

By tracking gold export from the UK we can grasp what is happening to these stocks of gold in London. From 1 June until 30 September 2015 the UK net exported 181 tonnes in total, and GLD (the largest ETF in London) lost 27 tonnes over this period. Consequently, total ETF stocks must have declined to roughly 1,089 on 30 September, and unknown holdings in London down to 1,207 tonnes. 

Here at BullionStar we have been writing withdrawals from the vaults of the Shanghai Gold Exchange (SGE), which equal Chinese wholesale gold demand, have been explosive in recent months. After the Chinese stock market plunged in June SGE withdrawals made an exceptional run up for the time of year. But, as SGE withdrawals skyrocketed we had to wait for foreign trade statistics to learn what the ratio was between recycled gold and import supplying the SGE (domestic mining supply being fairly constant), to get the best overall view on Chinese gold demand. High exports from the UK to China confirm Chinese demand has indeed been very strong this year. Although, it can still be there is more recycled gold flowing through the SGE relative to withdrawals than in previous years, because withdrawals are so exceptionally high this year.

Please read The Mechanics Of The Chinese Domestic Gold Market for a comprehensive explanation of the relationship between SGE withdrawals and Chinese wholesale gold demand.

Remember when in 2013 the gold price went down sharply and Chinese gold demand exploded? Back then Hong Kong net gold exports to China were dominating the headlines as these were thought to be the main indicator for gold going into China mainland. At the time China was importing large amounts of gold through this route, sometimes above 130 tonnes a month. More than a year later the Swiss customs department opened its gold cross-border trade book by deciding to publish gold trade statistics country specific. When we added these numbers to Hong Kong trade statistics we learned Chinese gold import had been (occasionally) more than 160 tonnes a month in 2013. Currently, we’re back at those levels. Aggregated net gold export from Hong Kong, Switzerland and the UK to China was 156 tonnes in September, which excludes gold export from Australia. The most recent data from Australia is from July and shows they have net exported 13 tonnes of gold directly to China (a record). SGE withdrawals were strong in July, but they were strong in August and September as well. I would not be surprised if Australia has exported over 10 tonnes of gold directly to China in August and September. If that appears to be true in the coming months China is importing at a tune of 166 tonnes a month. Let’s have a look at some charts.

China gold import

In the chart above Australia’s gold export to China is not included for August and September, yet total Chinese gold import (derived from the countries of which I have access to the export data) has already reached 156 tonnes in September 2015.

In the chart below we can see strong SGE withdrawals from June until September have depleted the SGE vaults, which are being replenished by gold imports.

China gold import + SGE

Currently, China is on track to import more than 1,400 tonnes this year, added by domestic gold mining output (476 tonnes) makes 1,876 tonnes.

Yes, it’s safe to say Chinese gold demand is very strong in 2015. We will compare these numbers with Chinese consumer gold demand as disclosed by the World Gold Council in a forthcoming post.

Koos Jansen
E-mail Koos Jansen on: koos.jansen@bullionstar.com

 

(courtesy John Embry/Kingworldnews)

Central banking’s attack on metals is more intense than ever, Embry tells KWN

Section:

6:53p ET Wednesday, November 11, 2015

Dear Friend of GATA and Gold:

Sprott Asset Management’s John Embry tells King World News today that central banking’s attack on the monetary metals has never been as intense as it is now. An excerpt from the interview is posted at the KWN blog here:

http://kingworldnews.com/the-best-antidote-to-the-chaos-that-is-happenin…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

end

Cruz ups the ante by stating two important things:

i) audit the fed

ii) they must go back to the gold standard.

(courtesy New York Sun)

New York Sun: Silent Cal speaks

Section:

From the New York Sun
Wednesday, November 11, 2015

Call him Calvin Coolidge Cruz. Suddenly Senator Cruz, citing the president who delivered the full-employment economic boom known as the Roaring Twenties, is emerging as a man to watch in the Republican race. Two debates in a row, the senator from Texas declared for the gold standard and sound money, which are associated with high economic growth and low unemployment. He got in ahead of Rand Paul and any of the rest of the pack.

Two debates don’t make a campaign, of course, but the monetary issue is potentially the most transformative question in the race. It’s not just Mr. Cruz, either. Senator Paul, Governors Christie and Huckabee, and Senator Santorum all emerged on this issue last night, each adding enough savvy and subtlety to the question that it is clear the issue is starting to percolate on the hustings. No doubt this is in part because of what happened at the debate in Boulder, when CNBC’s Rick Santelli turned to the Texan and asked him to “focus on our central bank, the Federal Reserve.” …

… For the remainder of the commentary:

http://www.nysun.com/editorials/silent-cal-speaks/89345/

 

end
Chris Powell writes on the sentiment on gold and the market for gold
(courtesy Chris Powell/GATA)

Sentiment means nothing in the gold ‘market,’ but GATA’s is to press on

Section:

11:15p ET Wednesday, November 11, 2015

Dear Friend of GATA and Gold:

Sentiment couldn’t be worse in the monetary metals sector right now. The good news and the bad news are that sentiment doesn’t matter.

Of course Mark Hulbert at MarketWatch thinks it matters, as he makes a business out of gauging the sentiment of financial letter writers, and he even calculates that sentiment for gold is good among those writers and constitutes a contrarian indicator, signifying that the metals will continue to fall, though of course those writers themselves are trying to be contrarian to market sentiment:

http://www.marketwatch.com/story/gold-investors-foolishly-think-the-yell…

And an anonymous blogger who says he attended GATA’s presentation at the New Orleans Investment conference last month writes that GATA Chairman Bill Murphy and your secretary/treasurer “both came across to me as defeated” and “have mentally lost the righteous battle they have been fighting for 15-plus years,” which he construes as another “bottom indicator” for gold:

http://news.goldseek.com/GoldSeek/1447166425.php

The guy is entitled to his impressions, and Murphy and your secretary/treasurer didargue in New Orleans that central banks are rigging markets, including the monetary metals markets, more ferociously and obviously than ever. After all, just a few days earlier an Austrian central banker had said as much himself —

http://www.gata.org/node/15878

— and Sprott Asset Management’s John Embry expressed the same thought tonight:

http://www.gata.org/node/15929

But “defeated”? Murphy and your secretary/treasurer would not have bothered going to New Orleans if we thought that. We still have enough to eat and drink at home. Nor would your secretary/treasurer, considering GATA defeated, be tapping this out on the keyboard so late at night when he could be watching old episodes of “Hill Street Blues” on TV.

* * *

GATA’s friend J.S. sounds close to defeated tonight anyway. He writes:

“Is there a point where even the noble gentlemen at GATA surrender to the inevitable and just capitulate, or can you ride out your principles to absolute ruin?

“Believe me, I’m on your side in all this, but there hasn’t been any single event — aside from the anomalous exchange-traded fund paper chase of 2010-11 — where we’ve seen any of the analysis from our side come to fruition. Ironically I would contend that the monetary metals are the worst investment precisely because they are the best investment. By this I mean they remain too much of a threat to the real beneficiaries of this country ever to be allowed to flourish.

“I think it’s apparent to all at this point that we live in a command-and-control economy and the people who are so heavily invested in the current paradigm will not hesitate to undertake the most nefarious and draconian measures to ensure that King Dollar is never dethroned. Besides, if the dollar was ever dethroned, I think we would have greater problems to contend with than the fair-market value of the monetary metals. It seems that the better the news for gold, the lower it goes.

“So here we are after another five years with nothing to show for our efforts. Market manipulation has been explained to me a thousand ways but what good is analysis based on economic fundamentals if it never yields a positive outcome? I keep joking with friends and colleagues that when I’m finally ruined by holding out to the inevitable climax for the metals I will become the most erudite homeless person in the world.

“Our blind faith in gold and silver has reached such proportions that it would make even the most zealous evangelical preacher envious, as the ‘gold rapture’ never seems to arrive. Like many others I was extremely confident about why gold and silver were the right choices, but now we are finding ourselves in for a rude awakening as we begin wondering how we will survive.

“I have nothing but praise for GATA’s efforts to bring the truth to light. But in the current political environment of warrantless wiretaps, too big to fail, undeclared wars, falsified economic statistics, whistle blowers treated like villains, and candidates who will never sincerely address the country’s real problems, we must ask: How did we manage to kid ourselves into thinking that doing the economically sound thing would ever succeed?

“My thanks to GATA for your efforts. Now if you’ll excuse me I have to ramble on over to Wal-mart to see if they’re still hiring.”

* * *

Yes, our little nonprofit educational and civil rights organization may need a bit more time to overthrow all the central banks — the creators of infinite money, the wielders of infinite power in secret — and thereby establish free and transparent markets and restore limited and accountable government in the civilized world. If mere sentiment made any difference in the face of that power, we in GATA might almost write despairing farewell notes and shoot ourselves tonight so that we could become the decisive contrarian indicators and thereby assure the success of our cause.

But our liquidation would not change central banking’s interests and objectives, which would remain the destruction of markets and the oppression of humanity.

While your secretary/treasurer would be surprised if the central banks can push gold much lower — after all, the mining industry already has been destroyed — they would not have to push gold down more to expropriate it outright or to expropriate the industry that mines it or to tax capital gains on gold at 100 percent.

But one can oppose the totalitarianism of central banking without necessarily investing in any particular way. Our cause does not require the financial ruin of its participants.

For those who want to stay invested in the monetary metals, mining entrepreneur Jim Sinclair offers some encouragement tonight on the eve of his seminar in Los Angeles:

http://www.jsmineset.com/2015/11/10/los-angeles-qa-session-announced/

As for your secretary/treasurer, he will offer hope only in the most general terms.

A little dialogue from “Casablanca” may be instructive, an exchange between the cynical but still vaguely idealistic nightclub owner Rick Blaine and the heroic if rather humorless anti-Nazi resistance leader Victor Laszlo:

BLAINE: Don’t you sometimes wonder if it’s worth all this? I mean, what you’re fighting for?

LASZLO: We might as well question why we breathe. If we stop breathing, we’ll die. If we stop fighting our enemies, the world will die.

Getting more cosmic, there’s always the Old Testament, where 1st Samuel recounts an improbable victory for the hugely overmatched side —

So David prevailed over the Philistine with a sling and a stone, and smote the Philistine, and slew him. But there was no sword in the hand of David.

And of course Isaiah says “they that wait upon the Lord shall renew their strength,” which your secretary/treasurer construes to mean that those who are doing the right thing always have at least an outside chance of divine favor.

The lights are still on and the Internet connection still works, so in the hope that weare doing the right thing we’ll press on in the morning.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 

end
Copper plunges to a 6 year low after Goldman warns more problems ahead.  Glencore stock now trades below 100 pence which will no doubt cause huge problems for this major derivative player:
(courtesy zero hedge)

Copper Plunges To Fresh 6 Years Low After Goldman Warns More Pain Ahead, Glencore Slides Back Under 100p

One month ago, when Glencore announced it latest copper production cut initiatives and mine mothballing efforts, we said that aside from the brief price spike, it would have absolutely no impact on the longer-term price dynamics of the metal which has achieved “doctor” status. The main reason we offered is that while Glencore was reducing supply, others such as Rio Tinto would gladly step in to fill the supply void. To wit:

Rio Tinto, warned that it will not cut copper production, saying it would be illogical to hold back output and leave space in the market for higher-cost rivals.

 

And just like that Glencore’s assumption that others in the space will act rationally, and “cooperate” with the attempt by Glencore to impose a new game theoretical equilibrium by reducing supply, and thus boosting prices, has crashed and burned.

 

According to the FT, Jean-Sebastien Jacques, head of copper and coal at Rio, said the Anglo-Australian mining group would not reduce output even though current prices of the industrial metal did not reflect “fundamentals”.

Rio’s CEO summarized his philosophy quite simply: “Why should I make cuts?” Mr Jacques said, in an interview ahead of LME Week, the biggest annual gathering of the metals and mining industry. “If you have marginal assets and marginal projects and you have a pretty weak balance sheet I think you may be in trouble pretty soon,” he said.

One month later, and just moments ago, we got confirmation of this prediction courtesy of the following two Bloomberg headlines:

  • COPPER FALLS 1.8% TO $4,856/TON, REACHING LOWEST SINCE 2009
  • NY COPPER DROPS AS MUCH AS 1.8% TO $2.177/LB, LOWEST SINCE 2009

Visually:

 

And intraday:

 

Worse for the company that as we said in early 2014 is the best proxy for both global copper demand and the Chinese industrial economy, after dead cat bouncing back to 125p in recent weeks, moments ago troubled Glencore (which alongside Volkswagen was one of the main corporate catalysts unleashing the September swoon) traded back under the psychological level of 100p.

So besides the obvious lack of actual wholesale production cuts as beggar thy higher-cost neighborstrategies are unleashed among the copper miners, did something else cause the latest overnight breakdown in prices?

The answer is yes, and it comes from a Goldman report titled simply enough “Copper poised to move even lower.”

Here is how report author Max Layton explains, in many more words than we used a month ago, what we said in early October when previewing this latest tumble in copper prices.

Supply growth has been weak, but demand has been weaker

 

2015 has seen slow rates of copper mine supply growth on supply disruptions and price-related closures and refurbishments. Despite the lack of supply growth, copper is now trading near its year-to-date lows and more than 20% lower than at the beginning of the year. This speaks to the ongoing demand weakness and deflationary cost environment which has driven the market into surplus and reduced cost support (the latter via a stronger dollar and weaker energy prices). Ongoing price weakness, in spite of price-related output cuts, is consistent with our view that producers do not move markets into deficit by cutting supply… rather they move markets closer to balance (than they otherwise would be). A demand recovery along with further supply discipline is required to see markets such as copper move into deficit.

 

Nearer term, LME and Comex net speculative positioning has picked up in recent weeks, in our view, partly on an anticipated improvement in Chinese economic data during 4Q15 (Exhibits 1 and 3). Should the Chinese data disappoint, and positioning unwind to January levels, or even lower, to August levels, copper prices may fall further than our base case forecast, which is for $4,800/t by year end. Indeed, SHFE open interest has risen across the base metals complex over the past two weeks as prices have pulled back (Exhibit 2), potentially suggesting that participants trading on the SHFE exchange are concerned about ongoing weakness in China’s commodity intensive ‘old economy’.

 

 

Importantly, we expect mine supply growth to accelerate in 2016-17 in the face of only limited demand growth. Indeed, over the coming months and throughout 2016 and 2017 investment during the prior boom period is set to bear more substantial fruit, with 5 major mines (the “big 5”) starting up or expanding output significantly, adding c.1.4mtpa of supply capacity by end 2017, and underpinning an acceleration in mine supply growth from c.1% in 2015 to at least c.3% pa in 2016/17. The “big 5” to watch are Cerro Verde (commissioning, Peru), Las Bambas (commissioning, Peru), Buenavista expansion (ramp up, Mexico), Sentinel (Commissioning, Zambia), and Grasberg (higher grades, Indonesia). We assume far less than nameplate is achieved in our supply and demand balance, in Exhibit 5, which shows pre-disruption allowance figures that we use in our model (Exhibit 4).

 

 

Stronger mine supply growth puts pressure on demand to pick up in order to absorb it. While we assume that a modest demand recovery in China will keep the copper market surplus around c.500ktpa in 2016 in our base case (Exhibit 5), our conviction level here is not high, and as a result we continue to see the risks to our supply and demand balance and price forecasts as skewed to the downside.

 

 

Overall, we continue to see the risks towards our $4,800/t year end 2015 and $4,500/t year end 2016 price forecasts as skewed to the downside, and recommend producers hedge and investors run long dated short positions.

* * *

Finally more charts than one can wave an electricity-conducting stick at.

end

 

Dave Kranzler on the upcoming default at Glencore:

Extremely important and a must read….

(courtesy Dave Kranzler/IRD)

 

Glencore Mirrors The Entire Global Financial And Economic System

  • Collapsing fundamental economics
  • Plunging end-user demand for its products
  • Overloaded with debt
  • Hidden land-mines in the form of OTC derivatives

Who said “black swans” have to be hidden?   Glencore is in full view.  After a dead-cat bounce from a quick descent that took Glencore stock from 310 (pounds) to 68 in 5 1/2 months, the stock is rolling over again and headed lower:

Untitled

This isn’t just about the plunging price of copper, which is now back to its pre-financial system collapse price in 2008 and headed lower. Copper is responsible for generating only 36% of Glencore’s operating income.  This is about the plunging prices and demand for oil and all base metals.

It’s about a company (global financial system) that hides a lot of risk, debt, derivatives, corruption and fraud.  Point of example:  Glencore’s funded debt level is $50 billion and it has the capability to draw on credit lines that would take it up to $100 billion.  But the sleazebag snakeoil promoters cite Glencore as having $19 billion in “liquid” inventories so the debt number that gets quoted and widely accepted is $31 billion.   But it’s not.  It’s $50 billion.  And Glencore’s “liquid” inventory is the same base metals that are plunging in price from oversupply and lack of demand.

Furthermore, over 30% of Glencore’s EBIT is derived from what the Company labels as its “marketing” business.  But this is the legacy business that was originally Marc Rich’s commodities trading company.   It’s a corrupted commodities trading and brokerage business. That means it’s riddled with hidden counter-party risks and derivatives.  We don’t know the full extent of Glencore’s risk-exposure in this area because this an area that global financial regulators give financial firms a lot of breathing room with which to cover up the truth using insidious accounting schemes.  But what I do know for sure is that you can rip and toss out any of the research reports indicating the Glencore’s derivatives exposure is limited to $5.2 billion.   The real number is multiples of that.

With 50 billion (pounds) in funded debt and not including hidden off-balance sheet skeletons – Glencore’s debt to market capitalization (13 billion pounds) is nearly 4:1.  That is an extreme degree of leverage for a volatile, commodities-based business which is headed into an economic depression.

Glencore is a microcosm for the entire global economic and financial system.  Including and especially the United States.  And here’s the kicker.  Deutsche Bank is Glencore’s largest creditor.  We can also very safely assume that Deutsche and Glencore are counterparties to a vast web of derivatives contracts.   I’m sure Deutsche has also tried to off-load credit exposure thru the use of credit default swaps with hedge funds and other shadow banking participants.  But who are those counterparties and how is the risk of default on this “insurance” Deutsche has likely “purchased.?”  Glencore has the possibility of taking down Deutsche Bank, which in turn would take down the entire German system.

The rest will flow from there and there will be a lot of blood, including and especially in the United States.

Just like with Glencore, the true degree of ongoing economic collapse and financial risk exposure has been papered over with both QE and more debt issuance.  It won’t take much trigger a financial nuclear explosion.

I would suggest that this is why the Central Banks and the relateve propaganda machine have shifted into full-gear in their effort to prevent the price of gold from engaging in unfettered price discovery.  I would also suggest that this is why the U.S. conducted a highly visible Trident nuclear missile test along the west coast, in full view of Russia and China.

end

The big news of the day:  the generally sanguine World Gold Council announces huge gold coin sales and it is at its highest levels since 2008:

 

 

very important for you to read..

 

 

(courtesy World Gold Council/zero hedge)

‘Gold’ Spikes Off 2015 Lows As Gold Coin Sales Surge To Highest Since Financial Crisis

With the ‘paper’ price of gold are a somewhat unprecedented barrage of selling currently (down 9 of the last 11 days) to 4-month lows, one could be forgiven for thinking that demand for the precious metal is dropping. However, as almost every nation in the world (ex US) is devaluing their currency, The World Gold Council reports that physical gold demand has risen dramatically with US gold Eagle coin sales at the highest levels since the financial crisis.

‘Physical’ Demand is exploding…

 

As ‘Paper’ prices collapse…

 

And then spike off 2015 lows…

 

As the latest report from The World Gold Council shows, gold buyers jumped on the new low prices…

US retail investment demand jumped to 32.7 tonnes, generating growth of more than 200% year-on-year,”

 

This signaled both a level of interest in gold investment not seen since the global financial crisis, and a level of price awareness on a par with that of Indian and Chinese retail investors. Nowhere was this more clearly demonstrated than in the US, where the US Mint reported rocketing sales of gold Eagle coins.”

 

 

“Demand for was the highest for more than five years: in volume terms, sales hit 397,000 oz.,”

 

Demand for newly minted coins surged across all key product lines: sales across all denominations were many multiples of their long-term average levels. Secondary market activity was correspondingly weak as profit-taking slumped in favor of bargain hunting.”

Finally – who is buying? It’s not just those crazy retail gold bug doomers… Central Banks continue to back up the truck, taking advantage of the ‘low’ prices…Gold as a reserve  asset remains firmly on the radar

Central banks continue to build their holdings of gold, adding 175t to official reserves.

 

Purchases by central banks and other official sector institutions almost equalled the Q3 2014 record of 179.5t as gold’s diversification benefits were increasingly recognised and sought. A couple of new countries joined the ranks of repeat buyers, the most significant of those being China.

 

The People’s Bank of China (PBoC) confirmed in July that its gold reserves had expanded by over 50% since its last announcement in 2009. At 1,658t, that put China at number six in the global rankings. Subsequently, the PBoC has begun regularly to report changes to its gold holdings and has confirmed an additional 50.1t of purchases between July and September.

 

And in another small but significant step, the central bank of the United Arab Emirates (UAE) confirmed that, between April and September it added 5t of gold to its reserve asset portfolio, having held none since 2003.  The result is that the UAE makes it into the top 100 holders of gold and expands the geographical spread of central bank buyers.

Q3 saw continued buying by regular names, primarily concentrated in the CIS region. Selling was again limited and sporadic.

 

So it makes all the sense in the world that gold ‘prices’ are testing the lowest levels since October 2009…

 

Charts: Bloomberg and The World Gold Council

end
And now Reuters Jan Harvey reports on the huge global gold demand;
(courtesy Jan Harvey/Reuters)

Global Gold Demand Hits More Than Two-Year High in Third Quarter, World Gold Council Says

By Jan Harvey
Reuters
Thursday, November 12, 2015

LONDON — Global gold demand hit its highest in more than two years in the third quarter as July’s price drop boosted buying of jewellery, coins, and bars, the World Gold Council said on Thursday.

Overall demand reached 1,121 tonnes in the last quarter, up 8 percent year on year to its highest since the second quarter of 2013. The rise was tempered by increased outflows from bullion-backed exchange-traded funds, however.

Bar and coin buying more than tripled in the United States to a five-year high of 32.7 tonnes, and rose 70 percent in China and 35 percent in Europe. That followed a more than 6 percent slide in spot gold prices in July, their biggest monthly drop in two years. …

However, outflows from gold ETFs — popular investment vehicles that issue securities backed by physical metal — increased by 24 tonnes year on year to 65.9 tonnes, helping to offset the rise in demand elsewhere. …

… For the remainder of the report:

http://www.reuters.com/article/2015/11/12/us-gold-wgc-report-idUSKCN0T110B2015111

end

India’s smuggled gold could be 25% of supply

New York closed at $1,084.70 down $3.70 yesterday. In Asia it rose to $1,088.05 before London opened. The LBMA price setting fixed it at $1,087.60 down from $1,088.60 over yesterday. The dollar Index is at 99.14 up from 98.95 at today. The dollar is at $1.0715 up from $1.0740 against the euro.  In the euro the fixing was €1,014.795.63 down from €1,015.63.  Ahead of New York’s opening gold was trading in the dollar at $1,086.85 and in the euro at €1,014.14.

The silver price closed at $14.30 down 12 cents from yesterday’s close. At New York’s opening, silver was trading at $14.42.

The currency markets, the dollar and the gold price stabilized with a weaker bias, again today. Again, the dollar has not broken through the 100 level on the dollar Index. With the Eurozone contemplating negative interests rates down as far as 0.75% [like Denmark and Sweden] we believe that the Treasury and the E.C.B. have or will agree that such stimuli not be permitted to weaken the euro. That is, if the dollar Index rises above 100, convincingly. Technically the euro should be moving to par with the dollar. We continue to watch to see if this is the new way forward. If so it will have a positive impact on the gold price.

There were no sales from the SPDR gold ETF but sales of 0.45 of a tonne from the Gold Trust. The holdings of the SPDR gold ETF stands at 663.432 tonnes in the SPDR gold ETF and at 159.85 in the Gold Trust. These sales had no impact on the gold price

Single’s Day on Alibaba was around 50% higher than last year, confirming what we said about the burgeoning growth of the middle classes in China. It is from this quarter that the future gold demand will come. The day was certain evidence of the rising disposable income among those classes. If we are to believe the Indian GDP growth figures of 7.3% we will see the urban Indian middle classes change the shape of Indian gold demand too. Currently the demand from the agricultural community is poor this year as a low quality monsoon led to lower disposable income for gold. However, the available figures on Indian demand completely ignores smuggled gold, which has to be 25% plus, of supply to the nation.

end
And finally, Bill Holter with this important piece:
Popular delusions …even if “popular” are still delusional.
My e-mail box has been filled up this week with panicked owners of gold and “trolls”, it is sometimes hard to decipher which is which.  I say this because the logic being employed is in some cases panic driven and in others just plain flawed, but similar nonetheless.  Some who own gold assets have come to the mindset that even though they know precious metals are manipulated, they fear it will “go on forever”.  The same goes even for some of the leaders in the gold community, weak knees abound.  The bottom line is this, once the last once of deliverable gold is received, the game will end.
Let’s ask a few questions to put this in perspective.  If your local forecaster showed you the radar of a cat5 hurricane out in the gulf moving very slowly toward you, is there anyone or anything that could get you to cancel your homeowners or flood insurance?  This is the case in today’s financial and geopolitical world.  You see daily where leverage has risen to previously unseen ratios.  You have watched as interest rates around the world have been zeroed out and in many cases have gone negative.  You see reported economic numbers that make no sense and are regularly contradicted by real world experience.  
  Geopolitically you see the United States losing power at every turn to the hands of China/Russia and the rest of the world.  Power is being supplanted in trade, finance, manufacturing and production, socially and even militarily.  This loss of power is unmistakable …but, none of this matters because the stock market is up, credit markets are still stable (on the outside), the dollar is firm versus other fiat currencies and gold has been pressed down and down.  THIS is now the “new normal” and nearly everyone is extrapolating it forward “forever”.
  Sorry to break the news to you but ALL of this is unsustainable.  You need not even take Bill Holter’s word for this, just listen to the number crunchers and bean counters regarding Social Security, Medicaid, pensions, healthcare, military spending, the real economy and on and on.  In many cases, the “bean counters” are previous federal employees like David Stockman and David Walker, who better would know? 
We mathematically have the largest financial hurricane of all time coming and will be a direct hit worldwide.  All of the “rigs” will be taken down and lost.  Have you ever asked yourself what the world would look like should free markets price everything?  Do you really believe interest rates would be where they are?  Or the stock markets?  Would a McDonalds hamburger only cost $3?  Would you be able to get $2 gasoline when the rest of the world in many case $5 per gallon or more?  When the financial storm hits, do you believe your bank or broker will survive because they are “special”? 
  What comes will be ALL engulfing.  We will see what should have happened in 2008 but was postponed.  It was “postponed”, NOT cancelled because no policy changes were allowed to take place.  What comes our way is 2008 on steroids!  No central bank, no sovereign treasury nor collection of same will have the power to save, rescue or mitigate the 100 years of credit growth when the great unwinding comes.
As for gold (and silver), this will be your only insurance and the only lifeboat on our global Titanic.  I asked earlier, if you knew a category 5 hurricane was about to hit, would you cancel your insurance?  If you were told over and over again your insurance company was broke and could not pay, but then did your own due diligence and found it was not true, would you listen to the naysayers and cancel?  Currently we are headed into December, historically always the largest delivery month for COMEX.  This at a time when nearly no gold has entered the registered vaults for 50 days running.  COMEX holds less than 5 tons of gold while China’s Shanghai exchange is withdrawing 200 tons per month.  
  Do you see a problem with this?  Is this any different from the FDIC having less than a quarter penny per $100 to insure deposits?  Just because a bank run has to this point been avoided (by any and all means), do you really believe it will “never” happen given the financial leverage now embedded in the system?  Is COMEX any different?  Just because a “run” hasn’t happened does this mean it will never?  Of course the next questions should be “what if I have money in the bank and don’t own any gold when the storm hits”?  Do you really expect your bank account to survive or for you to have the ability to buy your way into a lifeboat? 
  Maybe you feel you are smart enough to know ahead of time when exactly the black swan will arrive.  If you believe this you are fooling yourself.  Anything from a derivatives blowup, a single bankruptcy of the wrong entity, a mistaken dogfight in the sky or at sea, a flash mob riot or secession somewhere or even “nothing at all” will get a cascade of defaults started that cannot be stopped.  This is the nature of credit booms …they ALL bust and this just happens to be the BIGGEST credit orgy in ALL HISTORY!  All that is “in control” now will suddenly be out of control in an instant.  All that you see as “normal” in today’s world was 20 years ago considered insanity.  Just because the vast majority believe in a grand delusion, this does not make it any less delusional.  Once the cascade begins, your insurance company will not be accepting applications or even phone calls at that point until the dust clears! 
Standing watch,
Bill Holter
Holter-Sinclair collaboration
Comments welcome bholter@hotmail.com
And now your overnight THURSDAY morning trading in bourses, currencies, and interest rates from Europe and Asia:

1 Chinese yuan vs USA dollar/yuan falls badly in value , this  time at  6.3678/ Shanghai bourse: in the red , hang sang:green 

2 Nikkei closed up 6.38 or 0.03%

3. Europe stocks all in the red  /USA dollar index up to 99.15/Euro down to 1.0719

3b Japan 10 year bond yield: falls badly to 30.8%  !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 122.99

3c Nikkei now just above 18,000

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

3e WTI: 42.66  and Brent:   45.56

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 down for WTI and down for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to  .620 per cent. German bunds in negative yields from 6 years out

 Greece  sees its 2 year rate fall  to 7.39%/:  still expect continual bank runs on Greek banks 

3j Greek 10 year bond yield falls to  : 7.53% (yield curve flat)  

3k Gold at $1084.87 /silver $14.37 (8:00 am est)

3l USA vs Russian rouble; (Russian rouble down 42/100 in  roubles/dollar) 65.85

3m oil into the 42 dollar handle for WTI and 45 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 1.0051 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0773 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 6 year German bund now  in negative territory with the 10 year falls to  +.620%/German 6 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 2.32% early this morning. Thirty year rate above 3% at 3.11% /

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

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

Euro Crushed By Draghi’s Latest “Whatever It Takes” Moment; Fed Speaker Barrage On Deck

It was a seesaw day for Chinese stocks which started off on the wrong foot despite an Australian jobs number that was so good even the Australian media and economistsaren’t buying it, perhaps aided by a Chinese new loans number that missed badly (new loans of CNY514Bn, Exp. 800Bn, aggregate financing CNY477Bn, Exp. CNY1.05Tr) and suggests the recent surge in credit creation may be tapering, however the afternoon session once again saw the arrival of the National Team with stocks recovering all losses before closing 0.48% in the red.

The intervention did not help commodities, however, as Shanghai steel futures fell more than 1% to another record low pressured by shrinking demand in top consumer China that has dented appetite for raw material iron ore. With falling prices seen forcing more Chinese steel mills to either cut output or close, demand from the biggest iron ore buyer is at risk, keeping ore prices lower for longer as top suppliers fight for more market share. Copper prices also continued their slide following a note from Goldman overnight predicting even more downside for the “Doctor” which in turn has pushed shares of Glencore back under 100p again.

But the biggest event overnight came from Europe, where Draghi managed to once again jawbone the Euro lower by over 50 pips when he told European lawmakers in a prepared testimony that downside economic risks are “clearly visible,” repeating his October press conference statement, adding that the ECB will reexamine degree of accommodation in December as “inflation dynamics have somewhat weakened.”

And the statement that crushed the Euro: “If we were to conclude that our medium-term price stability objective is at risk, we would act by using all the instruments available within our mandate to ensure that an appropriate degree of monetary accommodation is maintained.” I.e., another “whatever it takes” moment.

The immediate result:

 

Another immediate result:

  • GERMAN TWO-YEAR NOTE YIELD DROPS TO RECORD-LOW MINUS 0.372%

This means that even if Draghi cuts to -0.30%, 2 Year bonds will still be below the yield floor and thus not eligible for purchases, which will then force the ECB to cut even more sending yields even more negative and so on in a cat and mouse game of twilight zone monetarism.

What is perhaps more disturbing is that despite the aggressive jawboning by Draghi, while the Euro obediently tumbled, neither European stocks nor US futures rebounded and the latest market snapshot can be seen below:

  • S&P 500 futures down 0.1% to 2067
  • Stoxx 600 down 0.7% to 376
  • MSCI Asia Pacific up 0.4% to 134
  • US 10-yr yield down less than 1bp to 2.32%
  • Dollar Index up 0.07% to 99.08
  • WTI Crude futures up 0.2% to $43.03
  • Brent Futures up 0.2% to $45.90
  • Gold spot up less than 0.1% to $1,087
  • Silver spot up 0.5% to $14.40

One reason for the market’s lack of euphoria is that today we get another surge in Fed speakers later today, which means the risk of being caught offside to some ridiculous algo momentum ignition is very high, and why liquidity will be lower than usual. Specifically, speaking today we have Janet Yellen, No.2, Stanley Fischer, and four other Fed stooges. Look for much more December rate hike jawboning; the question is whether it will be hedged with talk focusing on the latest swoon in stocks and the resumed collapse in oil prices.

The speaker calendar:

  • 9:15am: Fed’s Bullard speaks in Washington
  • 9:30am: Fed’s Yellen speaks in Washington
  • 9:45am: Fed’s Lacker speaks in Washington
  • 10:15am: Fed’s Evans speaks in Chicago
  • 12:15pm: Fed’s Dudley speaks in New York
  • 6:00pm: Fed’s Fischer speaks in Washington

Another catalyst that may have prevented a rebound in Europe (and US) were earnings by engine making giant Rolls Royce whose shares sank the most in 15 years after a stark profit warning, which tumbled by 20%. Some £2 billion ($3 billion) of market value disappeared after the company said 2016 earnings will be hurt from declining demand for business jet engines and lucrative maintenance services on bigger turbines. This year’s profit will also be at the lower end of the forecast range. New CEO Warren East will unveil plans to reorganize the company on Nov.24. Shares have plummeted 37 percent in 2015, on track for the worst annual performance in seven years.

Back to the overnight markets, where in Asia stocks traded mixed, following the tepid lead from its US counterparts. ASX 200 (+0.5%) pared initial energy inspired losses after the strong Australian jobs report signalling an improvement in the economy, while the Nikkei 225 (-0.1%) oscillated between gains and losses. Shanghai Comp. (-0.5%) plunged the most in a week led by tech names with growing concerns that the recent 25% bounce back from the August low has been overdone amid a raft of weak data from the nation. JGBs rose 12 ticks amid light volumes, subsequently shrugging the relatively lacklustre 30-yr auction.

Notable was China’s monetary data which came decidedly mixed. As Goldman summarizes, October M2 growth was above market expectations while loan and TSF growth were well below market expectations. However, the weakness in TSF came in more volatile components. 

  • New CNY loans: Rmb 514 bn in October (RMB loans to the real economy: Rmb 557.4 bn) vs. GS forecast on loans to the real economy: Rmb 700 bn, Bloomberg consensus: Rmb 800 bn. September 2015: Rmb 1,050 bn; October 2014: Rmb 548 bn. Outstanding CNY loan growth: 15.4% yoy in October (14.3% SA ann mom, estimated by GS); September 15.4% yoy (14.6% SA ann mom).
  • Strong M2 growth was supported by two factors: (1) very supportive fiscal policy with October fiscal spending at 36.1% yoy, (2) less drag from FX flows compared with September as indicated by the FX reserve data (though we would like to see more data such as FX position data to get a better sense). Both are supportive of domestic liquidity conditions.
  • Loan supply was modestly weak but seasonally adjusted sequential growth remained firm.
  • The downside surprise of TSF data was mainly the result of a large drop in discount bills, which tend to be a very volatile category. Despite the downside surprise the month-on-month growth of the TSF stock, after adjusting for local government bond issuance, was 14.8% annualized, only slightly slower than September.
  • The mixed picture from money and credit data is broadly consistent with the lackluster activity data in October. Given activity growth is still on the soft side of officials’ comfort zone, and CPI inflation has been decelerating (it has surprised on the downside for two months in a row and is likely to remain low at least in November), policy is still likely to maintain a loosening bias. We continue to expect another cut in RRR (50 bps) and benchmark rates (25 bps) before the end of the year.

Hong Kong’s Hang Seng Index rebounded 2.4% after a five-day drop, the longest since Aug.24, becoming Asia’s best-performing stock market on Thursday. The gauge has suffered from a series of weaker-than-forecast Chinese economic data even as China’s own stocks rebounded.

The price action in the European morning session was governed by comments made by ECB’s Draghi, whereby he continued the dovish rhetoric from last month’s press conference, most notably stating that the ECB will examine monetary policy accommodation at the December meeting. As such, this leaves the door open for both an extension for the current QE program and a cut in the deposit rate.

European equities (-0.7%) also saw modest upside on the back of ECB’s Draghi’s comments, however major European indices remain in negative territory as sentiment remains downbeat after the latest soft data out of China, combined with the uncertainty with regards to the form of ECB easing in terms of whether the ECB may cut the deposit rate or expand QE . Separately for equities, multinational companies may benefit from ECB monetary easing, however may also have to contend with the possible December rate hike by the Fed, which could counter effects from the ECB action.

On a stock and sector specific basis, equities were led lower by a spate of poor earnings releases from the likes of Rolls Royce (-20%) and RWE (-8.0%), while seeing the energy sector underperform after WTI and Brent erase all their overnight gains shortly before the European cash equity open.

As a consequence, EUR is weaker across the board as market participants continue to price in further monetary easing, with significant weakness being seen this morning against both the USD and CHF; while in the more long term view and given previous rhetoric from the SNB, a sustained move lower in EUR/CHF may be a concern for the Swiss central bank.

In Asia, AUD outperformed amid positive Australian jobs data, as the headline reading topped expectations printing the highest figure since March’12 (58.6K vs. Exp. 15.0K), which also saw OIS price in as little as a 5% chance of a rate cut from the RBA in December compared with a 60% probability before the release.

In fixed income markets, Bunds also benefited from ECB’s Draghi’s comments and peripheral bond yield spreads are seen broadly tighter. However gains were capped by supply out of Italy, with the equivalent of 36k bund futures set to be issues. Front-month Euribor was also bid on the prospect of lower rates and further policy intervention.

In commodities, WTI continues to trade around 2 month lows amid the continuing supply glut, as demonstrated by Tuesday’s API crude oil inventories printing a build for the seventh straight week, which has been exacerbated by the stronger USD. Softness continues to be seen in base metals as copper continued its downward trajectory, falling for the fifth session out of six in Asia following yesterday’s weak Chinese industrial production data. Base metals continued to sell off during European trade, as a result of more weak Chinese data releases, with Chinese New Yuan Loans CNY (Y/Y 513.6B vs. Exp. 800.0B Prey. 1050.0B) and Aggregate Financing CNY (Oct 476.7B vs. Exp. 1050B Prey. 1300B, Rev. 1302B) both missing expectations. Of note, copper is now closing on the year low of USD 4,855 which it reached in August.

Today’s key events in the US this include the initial jobless claims reading, shortly followed by more employment data in the September JOLTS job openings read. Later we’ll also get the October Monthly Budget Statement. It’s a particularly busy day for Fedspeak as mentioned with Bullard (2.05pm GMT), Yellen (2.30pm GMT), Evans (3.15pm GMT), Dudley (5.10pm GMT) and Fischer (11pm GMT) all expected to speak at various points.

Top news:

  • Draghi Says Inflation Weakening as December Policy Choice Nears: Likelihood of inflation returning to the ECB’s desired level has declined and economic risks are rising, Mario Draghi said at hearing in the European Parliament on Thursday
  • China Credit Growth Falls as Tepid Economy Dents Loan Demand: Aggregate financing slumped to 476.7 billion yuan ($75 billion), lower than all 25 economists’ projections
  • Global Banks Agree Contract Updates to Stave Off Another Lehman: Agreed to rewrite trillions of dollars of financial contracts as the industry seeks to persuade regulators that they can fail without bringing down the global economy
  • Rolls-Royce Plunges as 2016 Profit to Suffer Near $1 Billion Hit: Will drop as demand for business-jet engines and lucrative maintenance services on bigger turbines declines
  • Siemens Raises Dividend and Plans $3.2 Billion Share Buyback: Will buy back as much as EU3b of shares over the next 3 years
  • Lenovo Loss Slimmer Than Expected Amid Shift Away From China: 2Q net loss of $714m vs $803m avg expected by analysts; sales climbed 16%, also beat ests.
  • Salini Buys Lane Industries for $406 Million to Expand in U.S.: Has been looking for an acquisition in North America for more than a year as CEO seeks business in fast-growing mkts for infrastructure investments
  • Russia Sees Syria War Endgame Stretch to 2017 as Talks Renew: Will propose a political transition in Syria lasting as long as 18 months at the next round of talks starting Saturday in Vienna
  • Major Oil Companies Have Half-Trillion Dollars to Fund Takeovers: Exxon tops the list with total of $320 billion for potential acquisitions, followed by Chevron with $65 billion in cash and its own shares, then BP with $53 billion
  • Apache’s Snub of Anadarko Approach Puts Both Explorers in Play: For Anadarko, an acquisition of the $20 billion company would have served as a defense from any potential suitors

Overnight Summary from RanSquawk and Bloomberg

  • Dovish comments from ECB’s Draghi sees weakness in EUR but failed to pull equities out of negative territory
  • Bunds also benefited from ECB’s Draghi’s comments and peripheral bond yield spreads are seen broadly tighter, however gains were capped by supply out of Italy
  • Looking ahead, today sees US weekly jobs data, JOLTS and DoE inventories as well as a host of Fed and ECB speakers
  • Treasuries gain amid as stocks decline on weak earnings, slowing credit growth in China; quarterly refunding ends today with $16b 30Y bonds, WI 3.110% (highest since June) vs 2.914% in October.
  • Mario Draghi signaled that the ECB is ready to boost its stimulus programs next month as economic prospects worsen and “signs of a sustained turnaround in core inflation have somewhat weakened”. Draghi says QE “is actually working,” had “powerful effects” on banking, markets
  • Industrial production in the euro area fell more than forecast in September, declining 0.3% vs -0.,1% est
  • Goldman expects ECB to cut deposit rate by 10bp to -30bp in Dec., leave main refi rate unchanged at 5bp, extend QE through end of 3Q 2017
  • China’s broadest measure of new credit slumped to the lowest in 15 months in October, adding to evidence six central bank interest-rate cuts in a year have yet to spur a sustained pick up in borrowing
  • Hermes International SCA and Burberry Group Plc reported sputtering sales growth in America, adding to the woes of luxury-goods makers already reeling from an Asian slump
  • Sweden has imposed temporary border controls to stem a record inflow of refugees as the Nordic nation pleads with the rest of Europe to help deal with the biggest migration wave seen in the region since World War II
  • Russia will propose a political transition in Syria lasting as long as 18 months at the next round of talks starting Saturday in Vienna, where diplomats will resume the search for a settlement to the country’s civil war.
  • $7b IG priced Tuesday, $200m HY. BofAML Corporate Master Index OAS holds at +161, YTD range 180/129. High Yield Master II OAS widens 8bp to +602, YTD range 683/438
  • Sovereign 10Y bond yields lower. Asian stocks mixed, European stocks and U.S. equity-index futures decline. Crude oil and copper fall, gold gains

 

 

DB’s Jim Reid completes the overnight recap

It was fairly quiet in markets again yesterday, which was unsurprising with the US Treasury market closed for Veterans Day. As you’ll see in the day ahead at the end of the report it’s a very busy day for Fedspeak today with five officials due to comment including Fed Chair Yellen shortly after lunchtime, so expect news-flow to pick up. Yesterday US equity markets were open and traded with a bit of a softer tone for much of the session. The S&P 500, Dow and Nasdaq all finished the session -0.32%. In fact, this was an incredibly rare event. Running the numbers since the commencement of the Nasdaq in 1971, we calculate that this has only ever happened on one other day which was 15th August 1978 (assuming returns are calculated to 2dp’s). Meanwhile, prior to this European markets had actually moved higher with the Stoxx 600 +0.65% while European sovereign bond yields edged down a couple of basis points as another dovish ECB story out of Reuters made the rounds which we’ll touch on shortly.

The commodity complex was again the centre of some of the sharper moves. Metals were weak reflecting the softer than expected Chinese IP data yesterday with Silver (-0.73%), Platinum (-2.07%), Zinc (-2.25%), Copper (-0.78%) and Lead (-1.51%) all under pressure. Oil markets also tumbled which sent energy stocks sharply lower yesterday. WTI finished the session -2.90% to close back below $43/bbl for the first time since August 24th. Brent was weak too, finishing down over 3% and back below $46/bbl. It feels like most days at the moment we see fresh negative headlines suggesting the glut in prices is set to be prolonged and yesterday saw the latest American Petroleum Institute numbers show inventories increased by 6.3m barrels last week which was far higher than analyst expectations of 1.1m according to the WSJ, sparking the sell-off. On top of this, news that Iraq has loaded 10 tankers to supply US crude to American ports also weighed on sentiment, as did the EIA raising its forecast for US crude production for the remainder of the year.

Back to that Reuters story yesterday on the ECB. The article suggests that the Bank is considering the possibility of buying debt of cities and municipalities as part of its asset purchasing programme, possibly as soon as March next year. Reuters suggests that almost $500bn of bonds issued by cities and muni’s are in circulation currently, with the article suggesting that options are being studied. There was little mention of the possibility of buying corporate debt other than it being ‘much sought after and therefore difficult to buy’ according to the article. In any case, it’s another clear dovish hint from the ECB that some sort of further stimulus is likely. While the expansion into cities and muni’s for Q3 wouldn’t materially raise the overall universe, it does potentially increase the time horizon for countries seeing a shortage of assets.

Staying with the ECB, late last night we also heard from board member Coeure who, while noting that the decision is yet to have been made, confirmed that ‘the debate is open’ with regards to possible further easing. Coeure added that Euro area growth is accelerating ‘but it remains weak, while inflation expectations have stopped improving and underlying inflation has hit a ceiling’.

Turning to the latest in Asia this morning markets are somewhat mixed. The Hang Seng (+1.0%) is up for the first time in 6 days largely led by Tech and Consumer names. The Nikkei is flat but the Shanghai Composite is down just around 1% as we type partly driven by Financials and Energy stocks. Asia credit is trading reasonably firm with high quality corporates around 2-3bps tighter. Staying in China, there has been a few updates over the last 24 hours but one of the interesting macro stories was a Bloomberg article which reported that the central Government may increase the municipal debt-swap program quota up by 25% to CNY3.8-4.0trillion this year. Chinese rates are slightly higher on the back of potentially more long dated bond supply. Recall the plan was first established earlier this year to ease financing conditions at the local government level in the hope of supporting infrastructure spending.

Overall easier policy is perhaps starting to show and we got more signs of that from yesterday’s Chinese data. Indeed in a note yesterday our China Chief Economist, Zhiwei Zhang, noted that some of these indicators stabilized in October. Some of the positives that Zhiwei touches upon in particular were leading indicators for FAI. He points out that funds available for FAI rose by 7.3% yoy last month, compared to 6.8% in September having been driven by improving funds from state budget. On top of this, planned investment for new projects grew along with ongoing project investment, suggesting fiscal policy easing is working. In addition land sales as reported by the NBS improved sharply in October, jumping to -9.1% from -42.8% in September. This is consistent with other recent lands sales data and again reinforces the view that fiscal revenue will improve in Q4 and Q1. On the negative side, new housing starts failed to maintain the strong momentum of September, casting uncertainty on the property sector outlook. Overall Zhiwei maintains his growth forecast of 7.2% yoy in Q4 and 6.7% in 2016. As a baseline case he expects no more IR or RRR cuts for the rest of the year, but notes that the chance of one more IR cut is rising post the soft CPI data.

Switching tracks a little and back to markets, one of the most interesting themes we’ve been discussing with credit clients over the last few days has been the latest data from the NY Fed showing US corporate debt inventories turning negative for the first time on record. Rather like the fact that swap spreads are now deeply negative in the US, this again shows the relationships and ideas we knew from the past are changing in this heavily regulated market and financially repressed world. In both markets year-end pressures are exacerbating the issue. We still believe that when this credit cycle ends the lack of liquidity will be a major issue but for now other factors are still more dominant for the direction of spreads and we don’t think there has been an increase in the liquidity premium in recent times. In fact with inventories run down so uickly, and with the in ows we ve s een in recent weeks, had it not been for still huge US supply, credit could have gapped tighter. At the moment supply is offsetting positive inflows and remains a big issue for US credit. However in some ways it does reflect that there is still demand for the asset class. The worst periods in credit markets are when you can’t give new deals away. At the moment record supply is being taken down which is causing spread indigestion rather than anything more serious at the moment.

Trying to gauge the volume of supply in US that we’ve seen and post Tuesday’s c.$7bn of issuance, we’re standing now at nearly $57bn alone for the month of November so far and $1.4tn YTD. Putting it into perspective, that’s currently running about 17% higher YoY.

Just wrapping up yesterday and specifically the data, the only release of note was out of the UK where there some mixed signals from the latest employment rate. On the positive side the ILO unemployment rate fell in September, declining one-tenth to 5.3% (vs. 5.4%). However wages data were softer than expected. Ex-bonus earnings fell three-tenths to 2.5% yoy which was lower than expected (vs. 2.6% expected).

Looking at the day ahead now, this morning there’ll be close attention on the final October German CPI reading while we’ll also get last month’s French CPI data. The September Euro area industrial production print is also expected shortly after these. In the US this afternoon we’ll get last week’s initial jobless claims reading, shortly followed by more employment data in the September JOLTS job openings read. Although the data is released with a one-month lag, the data nonetheless is important given it’s closely followed by Fed Chair Yellen. Later this evening we’ll also get the October Monthly Budget Statement. It’s a particularly busy day for Fedspeak as mentioned with Bullard (2.05pm GMT), Yellen (2.30pm GMT), Evans (3.15pm GMT), Dudley (5.10pm GMT) and Fischer (11pm GMT) all expected to speak at various points. On top of this the ECB’s Draghi is set to speak to lawmakers in EU parliament this morning at 8.30am, while later on we are due to hear from BoE Chief Economist Haldane.

end

ASIAN AFFAIRS
 
Let us begin….
Last night, 9:30 pm WEDNESDAY night, THURSDAY morning Shanghai time.  Japan Nikkei closed up and Shanghai rises.  Initial fix on yuan lower. However the big news is again commodities fall for the 6th straight day as well as the Freight index which basically collapsed last night:
(courtesy zero hedge)

 

“Currency War By 1000 Cuts” Continues – PBOC Weakens Yuan For Longest Streak Since Lehman

Amid warnings from Daiwa Capital Markets that policy-makers “will sacrifice Yuan stability” in order to manage the deterioration in the economy (trade and industrial production data confirming the weakness), The PBOC weakened the Yuan fix for the 8th straight day. This is the longest streak of weakness since August 2008.

 

As Bloomberg notes,

Chinese policy makers will sacrifice yuan stability as it is clear that growth is being impeded by currency being stronger than it needs to be, according to Daiwa Capital Markets.

 

PBOC will allow currency to weaken to 7.5000 per dollar by end of next year, representing a 15% drop from yesterday’s closing level of 6.3665

 

“The authorities need to stop intervening in the currency market for the purpose of making the currency stable, as a strong currency is offsetting the policy easing so far,” Kevin Lai, HK-based Chief Asia ex-Japan economist, says in interview

 

Still, any currency weakness wouldn’t be without challenges: it would increase debt burden of companies that have borrowed in foreign currency.

And sure enough…

 

  • *CHINA WEAKENS YUAN FIXING FOR 8TH DAY, LONGEST RUN SINCE 2008

 

Charts: bloomberg

end

 China reports today on very weak lending as their debt levels and non performing loans are just too high for the Chinese to take on more debt.  This should signal for QE for China:
(courtesy zero hedge)

China Panics: Sends Fiscal Spending Through The Roof As Credit Creation Tumbles

arlier this week, MNI suggested that according to discussions with bank personnel in China, data on lending for October was likely to come in exceptionally weak. That would mark a reversal from September when the credit impulse looked particularly strong and the numbers topped estimates handily.

“One source familiar with the data said new loans by the Big Four state-owned commercial banks in October plunged to a level that hasn’t been seen for many years,” MNI reported.

Given that, and given what we know about rising NPLs and a lack of demand for credit as the country copes with a troubling excess capacity problem, none of the above should come as a surprise.

Well, the numbers are out and sure enough, they disappointed to the downside. RMB new loans came at just CNY514bn in October – consensus was far higher at CNY800bn. That was down 6.3% Y/Y. Total social financing fell 29% Y/Y to CNY447 billion, down sharply from September’s CNY1.3 trillion print. Here’s Barclays with the breakdown:

And here’s TSF:

As noted above, this is likely attributable to three factors.

First, banks’ NPLs are far higher than the official numbers, as Beijing’s insistence on forcing banks to roll souring debt and the suspicion that nearly 40% of credit is either carried off the books or classified in such a way that it doesn’t make it into the headline print. Underscoring this is the rising number of defaultsChina has seen this year. Obviously, you’re going to be reluctant to lend if you know that under the hood, things are going south in a hurry. Here’s Credit Suisse’s Tao Dong, who spoke to Bloomberg: “Banks are still unwilling to lend. This is quite weak, even stripping out the seasonality. The rebound in bank lending, boosted by the PBOC’s injection to the policy banks, has been short lived.”

Second, it’s not clear that demand for loans will be particularly robust for the foreseeable future. The country has an overcapacity problem. In short, companies don’t need to invest and they’re already straining under mountainous debt loads they can’t service.

Here’s Alicia Garcia Herrero, chief Asia Pacific economist at Natixis: “The reason is simple: too much leverage.”

With those two things in mind, consider thirdly that this comes against the backdrop of lackluster economic growth. As Goldman points out, “China is likely to continue to slow credit growth over the medium to long term given credit growth is still running at roughly double the rate of GDP growth.” In short, it’s not clear why anyone should expect these numbers to rebound. Back to Bloomberg:

The “big miss for China’s credit growth in October rings alarm bells about the strength of the economy and significantly increases the chances of continued aggressive easing,” Bloomberg Intelligence economist Tom Orlik wrote in a note. “It lends support to the idea that a combination of falling profits, the high cost of servicing existing borrowing and uncertainty about the outlook has significantly reduced firms’ incentives to borrow and invest. That’s similar to the problem that afflicted Japan during its lost decades.”

So if these kind of numbers continue to emanate from China, expect the calls for fiscal stimulus to get much louder. Indeed consider that fiscal spending soared 36% on the month (via Bloomberg again):

China’s government spending surged four times the pace of revenue growth in October, highlighting policy makers’ determination to meet this years’ growth target as a manufacturing and property investment slowdown weigh on the economy.

 

Fiscal spending jumped 36.1 percent from a year earlier to 1.35 trillion yuan ($210 billion), while fiscal revenue rose 8.7 percent to 1.44 trillion yuan, the Finance Ministry said Thursday. In the first ten months of the year, spending advanced 18.1 percent and revenue increased 7.7 percent.

In what looks like an admission that China will be forced to focus on fiscal stimulus going forward now that excess liquidity and rate cuts have proven ineffective in the overleveraged economy, China Daily reports that “an executive meeting of the State Council, presided over by Premier Li Keqiang, decided on Wednesday to issue a package of policies to shore up consumption, one of the driving engines tapped by the government to support economic growth.”

Here’s a look at the surge in October:

And on that note, we’ll close with the following from Citi’s Willem Buiter:

Fiscal policy can undoubtedly come to the rescue and prevent a recession in China. But what is needed is not another dose of the familiar post-2008 fiscal medicine: heavy-lifting capital expenditure on infrastructure with dubious financial and social returns, and capital expenditure by SOEs that are already struggling with excess capacity, all funded, as if these were commercially viable ventures, through the banking or shadow banking sectors. As regards funding the fiscal stimulus, only the central government has the deep pockets to do this on any significant scale. The first-best would be for the central government to issue bonds to fund this fiscal stimulus and for the PBOC to buy them and either hold them forever or cancel them, with the PBOC monetizing these Treasury bond purchases. Such a ‘helicopter money drop’ is fiscally, financially and macro-economically prudent in current circumstances, with inflation well below target and likely to fall further.

 end
This is becoming quite common now in China as the owner disappears leaving 600 + workers stranded and not paid in this southern city of Shenzen, China.
(courtesy zero hedge)

600 Hungry, Angry Chinese Workers “Sleep On The Street” After CEO Disappears With Their Wages

Over the past year many have been focusing on the collapse in commodity prices and speculating how this will impact China’s rapidly slowing economy (and reflexively, how much of this is driven by China’s rapidly slowing economy). They may be focusing on the wrong thing.

Because while it is now a virtual certainly that China’s commodity sector will undergo a wave on unprecedented business failures, which should (but may not) be accompanied by a default wave unlike anything China has seen before (quite literally: until last year, China had never seen an actual corporate default, as the government would always step in and bail out the debtor) a scarier prospect emerges when looking at what has been the biggest risk factor for China since day one, and the reason why China’s economy has to keep growing at 7% every year just to absorb the millions of new workers every year: an angry population, and millions of workers who suddenly see their wages plunge – or are left without a job – and turn violent on short notice.

We got a taste of this in September when we reportedthat as part of China’s coal industry collapse, a company in northern China had just engaged in the biggest mass layoff in China’s history when it fired 100,000 overnight, 40% of its entire workforce. Then, a month ago, we reported that “Thousands Of Angry Unpaid Chinese Workers Protest Shocking Bankruptcy Of Major Telecom Supplier.”

Now, thanks to Radio Free Asia, we find that as the tide goes out in China, things are going from bad to worse.

According to the Chinese website, in the latest confirmation that China’s Politburo is getting far more nervous than it will admit, hundreds of workers at a Hong Kong-owned toy factory in the southern Chinese city of Shenzhen have been protesting since last week after the owner “disappeared,” leaving their wages unpaid.

Workers at the Shanghe Jianming Toy Factory in the city’s Bao’an district first discovered that their Hong Kong boss, identified only by his surname Deng, was nowhere to be found, they told RFA.

“Some people are sleeping out on the street next to the factory gates, or in the road, and many are hungry,” a worker surnamed Shen told RFA.

Instead of tracking down the boss and finding why he “absconded” with all his employees’ unpaid wages, “The police sent a lot of people to surround the workers.”

Photos of the scene seen by RFA showed rows of people sleeping on sheets of cardboard by a factory wall, and rows of police guarding a street with barriers placed on it.

An official who answered the phone at the Bao’an district labor bureau said the local authorities had sent a team to the factory to listen to the workers’ complaints.

“The mood of the workforce has stabilized now, and they have gone back inside the factory gates,” the official said. “Our leaders and government officials are there too, dealing with the situation.”

According to Shen, many workers are owed overtime and severance pay under Chinese labor law. “Some people have been working here for more than a decade, and they should get severance, but they haven’t received it,” he said.

Alas, they won’t receive it because the money is all gone: a worker who gave only a nickname A Quan said the workers had realized something was amiss when they spotted the factory’s remaining management team selling off raw materials on the quiet.

“Somebody saw them, and grabbed them,” A Quan said. “They were selling off the raw materials so [we think] they definitely knew that the boss had already absconded.”

Workers have also marched to municipal government headquarters since their factory boss failed to appear at work on Thursday.

“We went to the Shenzhen municipal government from here in Bao’an,” Shen said. “We marched over there on foot; some people even fainted. By the time we arrived there, it was dark, and we didn’t manage to meet with anyone.”

What’s worse, there appears to have been massive fraud involved before the disappearance of the CEO who had a “full order book” before he left: “Shen said workers are highly suspicious of their boss’ motives for leaving, as the order book was full before his departure.”

“We were all doing overtime every day, and we had to work without a break,” Shen said. “[We think the overtime pay] is why the boss ran away; it had nothing to do with the health of the business.”

Sorry Shen, but it is precisely the health of the business why your boss deserted you with your unpaid wages.

Meanwhile, the government is quietly seeking to resolve this unpleasant situation doing what it does best: sweeping everything under the rug.

[Shen] said demonstrations by several hundred workers on Monday had prompted promises of a 2,000 yuan payout from the government, requiring a signature, for each worker, although many people are suspicious that this might mean renouncing any other claim on the company.

 

“They said they’d give us 2,000 yuan just so we have something to live on, but we don’t know how they will deal with the salary that is owed us,” Shen said.

 

“We had to sign for it and have our photo taken, like criminals, and they covered up the document that we were signing so we couldn’t see what it was,” he said, adding that most people had refused to sign.

According to workers, there is no sign that the factory is closing down. “The place is a mess, and the boss still has some containers parked there,” Shen said.

Of course, a boss who is about to disappear and leave his company and his workers to fend on their own will do just that: not leave a single trace that he is about to disappear.

* * *

This story reveals a troubling trend: China’s workers are becoming increasingly unhappy.

As RFA notes, “China has seen 1,723 industrial disputes since the beginning of the year, 267 of which have been clustered in the once-booming manufacturing regions of Guangdong, the Hong Kong-based China Labour Bulletin said.”

The ruling Chinese Communist Party-backed All-China Federation of Trade Unions (ACFTU) is charged with protecting workers’ rights, but independent labor groups and workers say it has a poor track record when it comes to negotiating with management and government officials.

Meanwhile, rights groups say police are increasingly employing criminal charges as a means of silencing peaceful activism on almost any topic. Because the last thing the Politburo wants is for China’s hundreds of millions of ever more unhappy workers is to realize that they are not alone, and that other are taking matters into their own hands as a result of a shift in leverage from employers to employees.

Authorities in Guangdong are currently holding independent labor activist Liu Shaming, 57, on suspicion of subversion after he campaigned for workers’ rights, his lawyer told RFA on Tuesday.

Lawyer Wu Kuiming said Liu’s detention on charges of “incitement to subvert state power” is the result of a top-down crackdown on non-government organizations (NGOs) in recent months.

It’s partly because he was active in promoting labor rights … but also because he wrote a diary of his experience of the June 4, 1989 [massacre],” Wu told RFA.

Fellow labor activist Peng Jiayong said Liu had been denied visits from friends or lawyers in the first five months of his detention, and that the charges against him are likely to be a form of political revenge.

“Liu Shaming helped the workers to negotiate with the factory management successfully, so that they were awarded compensation,” Peng said. “Maybe somebody wants revenge.

Maybe. Or maybe someone just wants to keep China’s rising worker dissent and anger quiet.

For now that may be working, however, as the following interactive map of all Chinese labor strikes since 2011 courtesy of the China Labor Bullettin shows, China’s worker anger is rapidly building: after virtually no strikes (just 121) in 2011, we have seen a surge in strike activity, which is set to double from the 1,000 in 2014 to just below 2,000 as of early November, and rising exponentially.

Average:
EUROPEAN AFFAIRS
A 24 hour national strike was called for today.  Massive street protests brought the Greek economy to a fresh halt.
(courtesy zero hedge)

“Social Explosion” Begins In Greece As Massive Street Protests Bring Economy To A Fresh Halt

One thing that became abundantly clear after Alexis Tsipras sold out the Greek referendum “no” back in the summer after a weekend of “mental waterboarding” in Brussels was that the public’s perception of the once “revolutionary” leader would never be the same. And make no mistake, that’s exactly what Berlin, Brussels, and the IMF wanted.

By turning the screws on the Greek banking sector and bringing the country to the brink of ruin, the troika indicated its willingness to “punish” recalcitrant politicians who pursue anti-austerity policies. On the one hand, countries have an obligation to pay back what they owe, but on the other, the subversion of the democratic process by using the purse string to effect political change is a rather disconcerting phenomenon and we expect we’ll see it again with regard to the Socialists in Portugal.

After a month of infighting within Syriza Tsipras did manage to consolidate the party and win a snap election but he’s not the man he was – or at least not outwardly. He’s obligated to fulfill the draconian terms of the bailout and that means he is a shadow of his former self ideologically. As we’ve said before, that doesn’t bode well for societal stability.

On Thursday, we get the first shot across the social upheaval bow as the same voters who once came out in force to champion Tsipras and Syriza are staging massive protests and walkouts. Here’s Bloomberg:

As Greek workers took to the streets in protest on Thursday, Alexis Tsipras was for the first time on the other side of the divide.

 

Unions — a key support base for the prime minister’s Syriza party — chanted in rallies held in Athens the same slogans Tsipras once used against opponents. Doctors and pharmacists joined port workers, civil servants and Athens metro staff in Greece’s first general strike since he took office in January, bringing the country to a standstill for 24 hours. 

 

Greece’s biggest unions, ADEDY and GSEE, are holding marches accusing Tsipras of bowing to creditors and imposing measures that “perpetuate the dark ages for workers,” as the country’s statistical agency released data showing that 1.18 million Greeks, or 24.6 percent of the workforce, remained unemployed in August.

 

The former firebrand opponent of bailouts was catapulted to power this year on a promise to end austerity, only to capitulate to creditors’ demands after the freezing of aid from the euro area brought the country’s financial system to the brink of collapse, forcing Tsipras to impose capital controls.

 

Even more belt-tightening will be required before Europe’s most indebted state gains access to additional emergency loans to cover its budget needs next year, and creditors agree to ease its debt burden. The GSEE union of private sector workers says those measures will bring “punitive austerity, poverty and impoverishment,” to a country where a quarter of the workforce is already without a job.

 

“There’s a risk of social explosion, as pension cuts and tax hikes loom,” said Sotiria Theodoropoulou, a senior researcher at the European Trade Union Institute in Brussels. “Last summer’s shock took a toll on many sectors, and it’s difficult to see where growth will come from.”

Amusingly, Syriza supports the strikes against its own policies (via The Telegraph):

The party’s department that deals with labor policy called for mass participation in the walk-out to protest “the neoliberal policies and the blackmail from financial and political centers within and outside Greece.”

And more from The Guardian:

Schools, hospitals, banks, museums, archaeological sites, pharmacies and public services will all be hit by the 24-hour walkout. Flights will also be disrupted, ferries stuck in ports and news broadcasts stopped as staff walk off the job. 

 

“We are expecting a huge turnout,” Petros Constantinou, a prominent member of the anti-capitalist left group Antarsya told the Guardian. “This is a government under dual pressure from creditors above and the people below and our rage will be relentless. It will know no bounds.”

 

“Syriza may now be trying to save its soul but it has gone back on all its promises,” said Kalomoiris, a life-long leftist who joined a rebel group, Popular Unity, formed by Syriza dissidents when Tsipras signed up to the bailout in July. 

 

“In this country a graduate starts off in the public sector with a salary of €775 a month, or €9,300 a year, and we are being told that wages will be frozen for the next decade and that every tax imaginable will be increased. How will people make ends meet? It has got to the point where a social explosion is inevitable and it will come sooner rather than later.”

Finally, from CBC:

Greek workers stayed at home on Thursday to protest austerity measures, in the biggest domestic challenge to Alexis Tsipras’s government since he was re-elected in September on a promise to cushion the impact of years of economic hardship.

 

Public transport was severely disrupted Thursday, with the Athens metro not running, bus and trolley routes reduced and ferries tied up in port. The strike shut down museums, schools and pharmacies, while state hospitals were functioning with emergency staff.

 

More than a dozen domestic flights were cancelled, while journalists also walked off the job, pulling news bulletins off the air except to report strike news.

Here, apparently, is what the beginning of a “social explosion” looks like:

Images: Protothema


So we suppose the lesson here for the troika is that you may be able to subvert the will of the people in the short term by forcing democratically elected officials to choose between their election mandate and financial ruin/depression, but that only serves to enrage an electorate that clearly was already fed up in the first place.

Obviously, this is decidedly untenable scenario and if there is indeed a rash of massive protests that causes public (and private) services to go dark for days at a time, something will have to change politically and that, in turn, sets the stage for yet another showdown with the troika. Case in point… here’s the Belgian finance minister’s response:

And last but not least, the latest jobs data for the country is out on Thursday. Unemployment is still exceptionally high, coming in at 24.6% in August with youth unemployment hovering near 50%:

The situation inside Catalonia is getting quite interesting.  The government is threatening to arrest Mas and also Catalonia’s parliament refuse to elect Mas.
a very muddy situation..
(courtesy zero hedge)
The temperature between Russia and the USA just rose a few notches with the following:

(courtesy the Saker)

Did Russia Just “Gently” Threaten The USA?

Authored by The Saker,

Interesting stuff today.  A major Russian TV channel just aired a report about Putin meeting with his top military commanders.  I don’t have the time to translate what Putin said word for word, but basically he said that the USA had refused every single Russian offer to negotiate about the US anti-missile system in Europe and that while the US had initially promised that the real target of this system was Iran, now that the Iranian nuclear issue had been solved, the US was still deploying the system.  Putin added that the US was clearly attempting to change the world’s military balance.  And then the Russian footage showed this:

 

Status6

 

According to the Kremlin, it was a mistakenly leaked secret document.  And just to make sure that everybody got it, RT wrote a full article in English about this in an article entitled “‘Assured unacceptable damage’: Russian TV accidentally leaks secret ‘nuclear torpedo’ design“. According to RT

The presentation slide titled “Ocean Multipurpose System: Status-6” showed some drawings of a new nuclear submarine weapons system. It is apparently designed to bypass NATO radars and any existing missile defense systems, while also causing heavy damage to “important economic facilities” along the enemy’s coastal regions. The footnote to the slide stated that Status-6 is intended to cause “assured unacceptable damage” to an adversary force. Its detonation “in the area of the enemy coast” would result in “extensive zones of radioactive contamination” that would ensure that the region would not be used for“military, economic, business or other activity” for a “long time.” According to the blurred information provided in the slide, the system represents a massive torpedo, designated as “self-propelled underwater vehicle,” with a range of up to 10 thousand kilometers and capable of operating at a depth of up to 1,000 meters.

Actually, such ideas are nothing new.  The late Andrei Sakharov had already proposed a similar idea to basically wipe out the entire US East Coast.  The Russians have also look into the possibility to detonate a nuclear device to set off the “Yellowstone Caldera” and basically destroy most of the USA in one shot.  While in the early years following WWII the Soviets did look into all sort of schemes to threaten the USA with destruction, the subsequent development of Soviet nuclear capabilities made the development of this type of “doomsday weapons” useless.  Personally, I don’t believe for one second that the Russians are now serious about developing such system as it would be literally a waste of resources.  So what is going on here?

This so-called “leak” of “secret documents” is, of course, no leak at all.  This is a completely deliberate action.  To imagine that a Russian journalist could, just by mistake, film a secret document (helpfully held up for him by a general) and then just walk away, get it passed his editor and air it is laughable.  Any footage taken in a meeting of the President with his senior generals would be checked many times over.  No, this was a deliberate way to remind the USA that if they really are hell-bent on spending billions of dollars in a futile quest to create some kind of anti-missile system Russia could easily develop a cheap weapon system to still threaten the USA with total annihilation.  Because, make no mistake, the kind of long range torpedo being suggested here would be rather cheap to build using only already existing technologies.  I would even add that rather than setting such a weapon off the US coast the system could also be designed to fire off a secondary missile (ballistic or cruise) which could then fly to any inland target.  Again, such technologies already exist in the Russian military and have even been deployed on a smaller scale. See for yourself:

 

Coming back to the real world, I don’t believe for one second that any type of anti-missile system could be deployed in Europe to shield NATO the EU or the US from a Russian retaliatory strike should the Empire ever decide to attack Russia.  All the East Europeans are doing is painting a cross-hair on themselves as these will be the very first targets to be destroyed in case of a crisis.  How? By use of special forces first and, if needed, by Iskander missile strikes if all else fails.  But the most likely scenario is that key components of the anti-missile system will suddenly experience “inexplicable failures” which will render the entire system useless.  The Russians know that and so do the Americans.  But just to make sure that everybody got the message the Russians have now shown that even a fully functional and survivable US anti-missile system will not protect anybody from a Russian retaliation.

The sad thing is that US analysts all fully understand that but they have no say in a fantastically corrupt Pentagon.  The real purpose of the US program is not to protect anybody against a non-existing Russian threat, but to dole out billions of dollars to US corporations and their shareholders. And if in the process the US destabilizes the entire planet and threatens the Russians – then “to hell with ‘em Russikes!  We are the indispensable nation and f**k the rest of the planet!”  Right?

Wrong.

What happened today is a gentle reminder of that.

end


EMERGING MARKETS
Two of Maduro’s nephews were arrested in New York today trying to smuggle 800 kilos of cocaine.
We wonder how many of the government key officials are involved?
(courtesy zero hedge)

Maduro Nephews Arrested After Attempting To Smuggle 800 Kilos Of Cocaine Into The US

For those unaware, Venezuela is one of the quintessential examples of what we like to call a Socialist paradise and to be sure, we’ve had our fair share at the country’s expense.

From toilet paper shortages, to images of empty shelves, to hapless President Nicolas Maduro being pelted in the head with a mango by an angry Venezuelan woman, the country never disappoints when it comes to producing absurd outcomes. Years of incompetence have led to inflation on a massive scale, with the black market bolivar exchange rate now so low that a hundred bolivar note will buy you just 14 cents. Needless to say, slumping crude prices haven’t done the country any favors either and as we outlined a few days back, the country has now resorted to selling its gold to make bond payments.

What’s amusing to note is that even as everyday Venezuelans watch in horror as their purchasing power evaporates virtually by the day, Venezuelan government officials have been variously accused in the past of drug smuggling, a side job that can be quite lucrative especially when you share a border with Colombia.As Reuters notes, “The U.S. State Department said in a report in March corruption in Venezuela facilitates drug smuggling, and it implicated high-ranking Venezuelan government officials in the trade. The U.S. Treasury has placed nine Venezuelan officials on a ‘kingpin’ list, which bars those suspected of involvement in large-scale drug trafficking from the U.S. financial system.”

With that in mind, consider that on Tuesday, two of Maduro’s nephews were arrested in Port-au-Prince, Haiti, after they allegedly contacted a DEA informant requesting assistance in their effort to smuggle some 800 kilos of cocaine to the US where it was apparently bound for New York. Here are the details via WSJ:

[They] also sent pilots to talk to an airport official at Roatán about the drug trafficking scheme, according to a U.S. document. “It looked like amateur stuff,” said a person with knowledge of the matter.

 

In subsequent meetings in Venezuela, this person said, the two Venezuelans brought a kilogram of cocaine to a confidential informant to show the quality of the promised shipment, which was to be sold in New York. Agents filmed and taped the meetings with the Venezuelans, this person added.

The two men, Efraín Antonio Campo Flores and Francisco Flores de Freitas, are nephews of Cilia Flores, Maduro’s influential wife.

As WSJ goes on to note, The First Lady – or, as she’s called in Venezuela, “The First Combatant” – has put many of her relatives in important government positions,including another nephew, Carlos Erick Malpica Flores, who is the chief financial officer of state oil company Petróleos de Venezuela and the country’s treasurer.” More, from Reuters:

She worked on the legal team of late socialist leader Hugo Chavez, working to secure his 1994 release from prison after a failed coup attempt.

 

In 2006, she became the first woman elected to lead the legislature, taking over that role from Maduro, and is registered as a candidate in the Dec. 6 legislative elections.

The arrest came as the US attempts to crack down on what Washington alleges is rampant drug activity among Venezuelan politicians and officials including Diosdado Cabello, president of the country’s National Assembly.

Needless to say Maduro isn’t happy:

That’s, “The fatherland will follow its course. Neither attacks nor imperialist ambushes can harm the people of the liberators.”

Right, whatever that means.

Fortunately for Maduro, he may be able to use the incident to his political advantage at a key time. From The Telegraph:

The case is a major embarrassment for Mr Maduro, three weeks before the ruling Socialist Party heads towards parliamentary elections. For the first time in 16 years polls suggest the Socialists could lose control of the 167-seat national assembly.

 

Some analysts said that the arrests could play into Mr Maduro’s hands, because he frequently styles himself as defending Venezuela against outside interference.

 

“The timing is hardly ideal,” said Michael Shifter, president of the Washington-based Inter-American Dialogue think tank.

 

“The arrests could give Mr Maduro the excuse he was hoping for to declare a state of emergency and postpone the elections.

 

“He will blame the arrests on US imperialism and see them as an attempt to undermine his government.”

That possibility is itself hilarious as Maduro is scheduled to speak today at The United Nations Human Rights Council in Geneva regarding Venezuela’s reputation for sitfling dissent. Demonstrators reportedly organized a protest outside the UN gates.

In any event, this will certainly be an amusing case to follow. Maduro’s nephews were due to appear before a New York judge today. If Venezuelan officials are heavily involved in the trafficking of cocaine to the US, maybe they can do their patriotic duty and use of the proceeds to offset the FX reserve burn before the country defaults.

Average:
GLOBAL AFFAIRS
Graham Summers correctly states that if the economy is strong then coal and oil will be higher in price and greater in demand:
(courtesy Graham Summers/Phoneix Capital Research)

If the Economy is Strong, Why Are These Assets In Full Blown Bear Markets?

Phoenix Capital Research's picture

We are often told that the global economy is strong… that fears of a contraction are overblown… that China is still an engine for economic growth… and that the US has detached from the turbulence in the Emerging Market space.

 

If the above claims are true, then economically sensitive assets should be rallying as global demand propels them to higher prices.

 

But they’re not.

 

In fact, they ENDED their bull markets and have erased several DECADES’ worth of gains.

 

Consider Coal.

 

In the US, Coal has become a political hot button. Consequently it is very easy to forget just how important the commodity is to global energy demand. Coal accounts for 40% of global electrical generation. It might be the single most economically sensitive commodity on the planet.

 

With that in mind, consider that Coal ENDED a multi-decade bull market back in 2012. In fact, not only did the bull market endbut Coal has erased ALL of the bull market’s gains (the green line represents the pre-bull market low) and fallen BELOW its pre-bull market lows.

 

 

Those who believe that the global is in an economic expansion will shrug this off as the result if the US’s shift away from Coal as an energy source. The US accounts for only 15% of global Coal demand. The collapse in Coal prices goes well beyond US changes in energy policy.

 

What’s happening in Coal is nothing short of “price discovery” as the commodity moves to align itself with economic reality. In short, the era of “growth” pronounced by Governments and Central Banks around the world ended. The “growth” or “recovery” that followed was nothing but illusion created by fraudulent economic data points.

 

We get confirmation of this from Oil.

 

For most of the “so called” recovery, Oil gradually moved higher, creating the illusion that the world was returning to economic growth (demand was rising, hence higher prices).

 

 

That blue line could very well represent the “false floor” for the recovery I mentioned earlier. Provided Oil remained above this trendline, the illusion of growth via higher energy demand was firmly in place.

 

And then Oil fell nearly 60% from top to bottom in less than six months.

 

 

As was the case for Coal, Oil’s drop was nothing short of a bubble bursting. From 2009 until 2014 Oil’s price was disconnected from economic realities. Then price discovery hit resulting in a massive collapse.

 

Moreover, the damage to Oil was extreme. Not only did it collapse 60% in a matter of months. It actually TOOK out the trendline going back to the beginning of the bull market in 1999.

 

 

This is a classic “ending” pattern. Breaking a critical trendline (particularly one that has been in place for several decades) is one thing. Breaking it and then failing to reclaim it during the following bounce isindicative of BEAR MARKET.

 

In short, the era the phony recovery narrative has come unhinged.  We have no entered a cycle of actual price discovery in which financial assets fall to more accurate values. This will eventually result in a stock market crash, very likely within the next 12 months.

 

If you’ve yet to take action to prepare for the second round of the financial crisis, we offer a FREE investment report Financial Crisis “Round Two” Survival Guide that outlines easy, simple to follow strategies you can use to not only protect your portfolio from a market downturn, but actually produce profits.

 

You can pick up a FREE copy at:

https://www.phoenixcapitalmarketing.com/roundtwo-ZH.html

 

Phoenix Capital Research

end

 

Here is one media that does not believe its nation’s report on “a stellar jobs report:

(courtesy zero hedge)

Australian Media Throws Up All Over ‘Stellar’ Jobs Report: “Don’t Believe The Jobs Figures!”

Last week, when the Bureau of Labor Statistics reported a blow out number (which as we showed extensively left much to be desired for anyone who dug even briefly below the surface), the US media, like an obedient dog, lapped it all up without as much as a peep questioning the credibility of this number.

Fast forward to last night, when in the second “stellar” jobs report in one week, we learned that instead of creating a mere 15,000 jobs as consensus expected, Australia added a whopping 58,600 jobs in October – the biggest monthly jump since 2012 – the vast majority of which were full-time.

 

Considering the implosion in the Chinese commodity sector, we were rather skeptical of this report: after all where is this economic demand for labor coming from if Australia’s biggest trading partner is hunkering down at a pace last seen during the financial crisis.

We thought that just like in the case of US payrolls, our skepticism of Australia’s “stellar” jobs report would not be echoed anywhere else.

How wrong we were, because overnight we were stunned to learn that unlike the US, Australia actually still has a fourth estate that not only reports data, but also dares to question it.

Here is what Australia’s original media outlet, ABC, said in a report titled simply “don’t believe the jobs figure for October”:

A fall in the unemployment rate from 6.2 per cent to 5.9 per cent in the space of one month?

 

Be sceptical. Treat with extreme caution.

 

Nearly 60,000 jobs created in Australia last month?  A fall in the jobless rate in Victoria of 0.7 percentage points? Predictably, the numbers moved markets.

 

Yet the seasonally adjusted labour force estimates from the Australian Bureau of Statistics for October sound incredible and they should be treated as just that: not credible.

 

The Western Australian’s economics editor Shane Wright captured the tone nicely when he tweeted: “The ABS chocolate wheel has landed on 5.9 from 6.2.”

 

Don’t believe politicians as they gloat and claim credit. Don’t believe the wire services when they report the estimates as fact.

 

There were 44,640 minutes in October and, if you accept the estimate, 58,600 jobs were created.

 

As the Age’s economics editor Peter Martin points out, count only normal business hours, and that equates to 5.5 workers being hired each minute of the working day.

 

Even the economist known as “Mr Sunshine”, Craig James of Commsec, is not buying it.

 

“It’s hard to believe that almost 60,000 jobs were created in one month with 40,000 of these jobs in full-time positions,” was his response.

The slamming of the economic propaganda continues:

The ABS is itself cautions against placing too much credence on the monthly figures, which are based on a changing sample, particularly the seasonally adjusted data. The statistician encourages people to focus on the trend estimate (which had the unemployment rate unchanged).

 

And, after a series of stuff ups, revisions and methodological changes over the past year,there is even more room for caution.

 

Last year, the ABS was forced to abandon seasonally adjusted labour force numbers for a period after conceding they were unreliable. The former chief statistician recently said the data was not worth the paper it was written on.

Wait, what: confidence boosting data is unreliable? Surely you jest.

And here is the ABC’s conclusion confirming at least one “developed” country still have a thinking media: “don’t be surprised if the October labour market data is revised.”

If only we could say the same about propaganda rags in the United States…

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

Euro/USA 1.0719 down .0044

USA/JAPAN YEN 122.99 up .244

GBP/USA 1.5184 down .0037

USA/CAN 1.3298 up .0043

Early this morning in Europe, the Euro fell by 44 basis points, trading now just above the 1.07 level falling to 1.0719; 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 yield. Last night the Chinese yuan down in value (onshore). The USA/CNY up in rate at closing last night:  6.3666  / (yuan down) 

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  southbound trajectory  as settled down again in Japan by 24 basis points and trading now well above the all important 120 level to 122.99 yen to the dollar.

The pound was down this morning by 37 basis points as it now trades well above the 1.51 level at 1.5184.

The Canadian dollar is now trading down 44 basis points to 1.3298 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 THURSDAY morning:closed up 6.38 or 0.03% 

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

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

Gold very early morning trading: $1085.80

silver:$14.40

Early Thursday morning USA 10 year bond yield: 2.32% !!! down 1 in basis points from Tuesday night and it is trading well below resistance at 2.27-2.32%.  The 30 yr bond yield falls to  3.11 down 1 in basis point.

USA dollar index early Thursday morning: 99.15 cents up 29 cents from Wednesday’s close. (Resistance will be at a DXY of 100)

This ends early morning numbers Thursday morning

OIL RELATED STORIES
Huge inventory levels:  highest in a decade!!
(courtesy zero hedge)
The globe is witnessing flotillas of super tankers circling the globe as capacity on shore falters to zero.  This is causing oil at sea prices to rise as the oil is occupied in those ships.  This is causing a huge contango for offshore oil vs onshore oil.  As offshore oil rises, in order to make it profitable to store the oil, it necessitates further price reduction on onshore oil
(courtesy zero hedge)

Something Very Strange Is Taking Place Off The Coast Of Galveston, TX

Having exposed the world yesterday to the 2-mile long line of tankers-full’o’crude heading from Iraq to the US, several weeks after reporting that China has run out of oil storage space we can now confirm that the global crude “in transit” glut is becoming gargantuan and is starting to have adverse consequences on the price of oil.

While the crude oil tanker backlog in Houston reaches an almost unprecedented 39 (with combined capacity of 28.4 million barrels), as The FT reports that from China to the Gulf of Mexico, the growing flotilla of stationary supertankers is evidence that the oil price crash may still have further to run, as more than 100m barrels of crude oil and heavy fuels are being held on ships at sea (as the year-long supply glut fills up available storage on land). The storage problems are so severe in fact, that traders asking ships to go slow, and that is where we see something very strange occurring off the coast near Galveston, TX.

FT reports that “the amount of oil at sea is at least double the levels of earlier this year and is equivalent to more than a day of global oil supply. The numbers of vessels has been compiled by the Financial Times from satellite tracking data and industry sources.”
The storage glut is unprecedented:
Off Indonesia, Malaysia and Singapore, Asia’s main oil hub, around 35m barrels of crude and shipping fuel are being stored on 14 VLCCs.
“A lot of the storage off Singapore is fuel oil as the contango is stronger,” said Petromatrix analyst Olivier Jakob. Fuel oil is mainly used in shipping and power generation.
Off China, which is on course to overtake the US as the world’s largest crude importer, five heavily laden VLCCs — each capable of carrying more than 2m barrels of oil — are parked near the ports of Qingdao, Dalian and Tianjin.
In Europe, a number of smaller tankers are facing short-term delays at Rotterdam and in the North Sea, where output is near a two-year high. In the Mediterranean a VLCC has been parked off Malta since September.
On the US Gulf Coast, tankers carrying around 20m barrels of oil are waiting to unload, Reuters reported. Crude inventories on the US Gulf Coast are at record levels.
A further 8m barrels of oil are being held off the UAE, while Iran — awaiting the end of sanctions to ramp up exports — has almost 40m barrels of fuel on its fleet of supertankers near the Strait of Hormuz. Much of this is believed to be condensate, a type of ultralight oil.
And unlike the last oil price collapse during the financial crisis only half of the oil held on the water has been put there specifically by traders looking to cash in by storing the fuel until prices recover. Instead, sky-high supertanker rates have prevented them from putting more oil into so-called floating storage, shutting off one of the safety valves that could prevent oil prices from falling further.
A widening oil market structure known as contango — where future prices are higher than spot prices — could make floating storage possible.
The difference between Brent for delivery in six months’ time and now rose to $4.50 last week, up from $1.50 in May. Traders estimate it may need to reach $6 to make sea storage viable.
JBC Energy, a consultancy, said in many regions onshore oil storage is approaching capacity, arguing oil prices may have to fall to allow more to be stored profitably at sea.
“Onshore storage is not quite full but it is at historically high levels globally,” said David Wech, managing director of JBC Energy.
“As we move closer to capacity that is creating more infrastructure hiccups and delays in the oil market, leading to more oil being backed out on to the water.”
Patrick Rodgers, the chief executive of Euronav, one of the world’s biggest listed tanker companies, said oil glut was so severe traders were asking ships to go slow to help them manage storage levels.
“We are being kept at relatively low speeds. The owners of the oil are not in a hurry to get their cargoes. They are managing their storage capacity by keeping ships at a certain speed.”
However, as AP reports, there is something very unusual going on off the coast in Galveston…
More than 39 crude tankers w/ combined cargo capacity of 28.4 million bbls wait near Galveston (Galveston is area where tankers can anchor before taking cargoes to refineries at Houston and other nearby plants), vessel tracking data compiled by Bloomberg show, which compares w/ 30 vessels, 21 million bbls of capacity in May. Vessels wait avg of 5 days, compared w/ 3 days May
A traffic jam of oil tankers is the latest sign of an unyielding global supply glut.
More than 50 commercial vessels were anchored outside ports in the Houston area at the end of last week, of which 41 were tankers, according to Houston Pilots, an organization that assists in navigation of larger vessels. Normally, there are 30 to 40 vessels, of which two-thirds are tankers, according to the group.
Although the channel has been shut intermittently in recent weeks because of fog or flooding, oil traders pointed to everything from capacity constraints to a lack of buyers.
“It appears that the glut of supply in the global market is only getting worse,” said Matt Smith, director of commodity research at ClipperData. Several traders said some ships might have arrived without a buyer, which can be hard to find as ample supply and end-of-year taxes push refiners to draw down inventories.
And here, courtesy of MarineTraffic is the interactive snapshot (readers can recreate it here):

All of which explains why this is happening:

end
Crude breaks into the 41 dollar column on again huge inventory gains especially in Cushing OK.
(courtesy zero hedge)

Crude Turmoils After DOE Confirms Surprise Inventory Build & Production Increase

With the crude market on tenterhooks since API reported a huge surge in inventories (especially at Cushing), DOE reported a considerable 4.2mm barrel build (less than API’s 6.3mm) but way above analyst expectations of a modest draw (7th week in a row). Cushing saw a very significant 2.24mm barrel build (API 2.5mm). Crude Production also rose near 3mo highs, putting firther pressure on crude prices which are whipsawing wildly on this data…

The imports breakdown:

  • U.S. imports of Canadian crude 3.02m b/d for wk ending Nov. 6 vs 2.77m b/d previous wk, according to preliminary EIA data.
  • Saudi Arabia 1.11m vs 865k
  • Venezuela 944k vs 595k
  • Mexico 637k vs 688k
  • Iraq 401k vs 521k
  • Colombia 264k vs 176k
  • Ecuador 133k vs 263k
  • Angola 79k vs 209k
  • Nigeria 47k vs 18k
  • Total U.S. imports of crude at 7.38m vs 6.94m
  • PADD 3 imports at 2.92m vs 2.54m
  • PADD 1 imports at 526k vs 654k
  • PADD 2 imports at 2.31m vs 2.17m

Inventories rose for the 7th week in a row

 

And soared at Cushing…

 

Production rose for the 3rd week in a row to 2mo highs..

 

The reaction in crude is turmoil…

 

But the trend is clear..

 

 

Charts: Bloomberg

Average:
And now for your closing numbers for Thursday night: 3:00 pm
Closing Portuguese 10 year bond yield: 2.78% up 4 in basis points from Wednesday
Japanese 10 year bond yield: .301% !! down 2 in basis points from Wednesday and extremely low
Your closing Spanish 10 year government bond, Thursday up 1  in basis points.
Spanish 10 year bond yield: 1.84%  !!!!!!
Your Thursday closing Italian 10 year bond yield: 1.61% down 2  in basis points on the day: Thursday/ trading 23 basis points lower than Spain.
IMPORTANT CURRENCY CLOSES FOR THURSDAY
Closing currency crosses for THURSDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
 Euro/USA: 1.0779 up .0016 (Euro up 16 basis points)
USA/Japan: 122.65 down .065 (Yen up 7 basis points)
Great Britain/USA: 1.5219  down .0003 (Pound down 3 basis points
USA/Canada: 1.3285 up .0029 (Canadian dollar down 29 basis points)

USA/Chinese Yuan:  6.3690 up .0028 on the day (yuan down)

This afternoon, the Euro rose by 16 basis points to trade at 1.0779.  The Yen rose to 122.68 for a gain of 7 basis points. The pound was down 3 basis points, trading at 1.5219. The Canadian dollar fell by 29 basis points to 1.3285. The USA/Yuan closed at 6.3690
Your closing 10 yr USA bond yield: down 1 in basis points from Wednesday at 2.32%// ( trading above the resistance level of 2.27-2.32%)
USA 30 yr bond yield: 3.10 down 2  in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries
At 4:30 closes:
the bigger changes from 2:30 pm: Euro/USA  1.0816  up .0054 on the day
and USA/Japan Yen: 122.56  down .180 on the day.
both of these changes  had a huge effect on the Nasdaq and Dow
 Your closing USA dollar index: 98.72 down 13 cents on the day  at 2:30 pm  and then bang:  98.46 down  39 cents on the day.
European and Dow Jones stock index closes:
London:  down 118.52 points or 1.88%
German Dax: down 125.24 points or 1.15%
Paris Cac down 95.86 points or 1.94%
Spain IBEX: down 233.20 points or 2.25 %
Italian MIB: down 525.82 points or 2.35%
The Dow: down 254.15 or 1.44
The Nasdaq: down 61.94 or 1.22%
WTI Oil price;  41.77
Brent OIl:    44.06
USA dollar vs Russian rouble dollar index:  66.57 down 1 and 14/100 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:

“Sell Mortimer”: Stocks Tumble Most In 6 Weeks, Back To Red For 2015

Given this…

 

The Dow is down over 500 points from last week’s highs…

 

We suspect the message to Fed Speakers from “the bulls” is…

Or this…

 

The biggest issues today were the collapse in credit, crude, and copper; but stock weakness dragged the S&P 500 into negative territory for the year…

 

On the day, Fed speak dragged us lower along with carnage in copper, crude and credit but towards the close USDJPY snapped and EURUSD broke 1.08 and seemed to extend the losses in stocks…

 

Biotechs broke below the 50DMA…

 

VRX closed at the lows of the day…

 

VXX surged…

 

And erased all the gains post-Payrolls (so good news is bad news after all)… with the S&P leading the way…

 

And Bonds are now outperforming post-payrolls…

 

 

Crude’s carnage is starting to wake up Dow Transports traders (again!!!)…

 

Today saw HY Credit spreads widen over 15bps – the biggest jump (for a non-roll day) since Dec 2014…

 

And stocks are catching down to credit…

 

Bonds & Stocks appear to be recoupling…

 

FX markets were noisy but the main message wqas dumping dollars…

 

And notice EURUSD tested up to 1.08 twice and broke 3rd time…

 

Commodities were big news today…

 

First gold crashed to 2010 lows, before spiking back higher…

 

Then crude crumbled to the late-August lows…

 

And Copper continues to get clubbed…7th down day in a row…having tagged perfectly the 50DMA before plunging

 

 

Charts: Bloomberg

Bonus Chart: What Happens Next?

Average:

5

The following Bullard statement propelled gold northbound today:

And the punchline: “Realistic” possibility that G-7 monetary policy will spend more time at or near zero rates in coming years”

In “Permazero”, Fed’s Bullard Admits US May Be Entering Permanent Period Of Lower Inflation And Interest Rates

n the first of 6 Fed speaker scheduled today, St. Louis Fed’s Bullard did what Fed presidents usually do: issued the usual tripe of contradictory statements.

On one hand he said that:

  • US ECONOMY NOW QUITE CLOSE TO NORMAL

And on the other:

  • WANTS TO RETURN TO ’84-’07 MACROECONOMIC EQUILIBRIUM; NO REASON TO CONT EXPERIMENTING W/EXTREME POL SETTING

Adding that the Fed “may need to alter some fundamental assumptions about how Fed policy works if U.S. stays in persistent state of low nominal rates, low inflation.” Like what – hiking rates? Or cutting rates to negative?

So “close to normal”if one excludes the 7 years of ZIRP and the $2.6 trillion in excess reserves. And all it would take to return to 3.5% GDP growth is unwinding $13 trillion in artificial central bank supports of a global economy that would otherwise be in a depression.

Good luck.

But the most important thing Bullard said in his speech titled “Permazero” is that the the US may be entering a permanent period of lower inflation and interest rates. Wait, wasn’t ZIRP and QE supposed to push the US economy, boost inflation and hike rates?

Good to know 7 years later that the biggest monetary experiment in history did precisely the opposite of what it was supposed to achieve.

Other highlights courtesy of Bloomberg:

  • he reiterated his support for liftoff, sees interest rate peg developing, mentions prospect that U.S. may be permanently stuck at near zero rates.
  • tge U.S. economy is “quite close to normal today,” Bullard said Thursday in text of speech in Washington, titled “Permazero”
  • 5% unemployment rate is “statistically indistinguishable” from FOMC’s view of equilibrium long-run jobless rate; inflation, based on Dallas Fed’s trimmed mean rate, is at 1.7% or just below Fed’s 2% target
  • “Simple and prudent approach” to current policy settings is to move closer to normal levels; “no reason to continue to experiment with extreme policy settings”
  • May be situation in which policy rate, inflation rate remain low either because liftoff doesn’t occur or future negative shocks force a return to zero rates
  • Stable interest rate peg is a “realistic theoretical possibility”
  • May need to alter some fundamental assumptions about how Fed policy works if U.S. stays in “persistent” state of low nominal rates, low inflation
  • Post-crisis U.S. monetary policy can be interpreted as an interest rate peg since rate has stayed near zero for almost 7 yrs
  • Almost 7 yrs at zero lower bound is “well beyond” ordinary business cycle time
  • Low nominal rate peg, far from being harbinger of runaway inflation, would dictate medium- and longer-run low inflation outcomes
  • FOMC is already committed to very low nominal rate over next 2-3 yrs

And the punchline: “Realistic” possibility that G-7 monetary policy will spend more time at or near zero rates in coming years

 end
Two big areas showing a big drop in comfort:
i) Blacks
ii) USA citizens between 35 and 42
remember that the consumer is 70% of GDP:
(courtesy zero hedge)

Black Comfort Matters

Despite a modest bounce in the headline Consumer Comfort index, the under-currents are ugly. The “state of the economy” and  “personal finances” surveys tumbled to 2 month lows. But the biggest crashes in comfort were among two interesting cohorts – black Americans’ comfort plunged to its most uncomfortable relative to white Americans in 2 months…

 

and 35-44 year olds saw comfort crash the most in 13 months to 3-month lows.

 

So it appears, if The Fed is to reinvigorate animal spirits, it needs to focus on black Americans between 35 and 44 years old…

 

Charts: Bloomberg

end

Janet’s favourite stat is causing problems for her:
“However, as JOLTs also adds, “over the past year, this relationship has changed as job  openings have outnumbered hires for several months.”
(courtesy zero hedge)
The Fed speakers are not having much fun today:
(courtesy zero hedge)

Just Stop Talking! – All 5 Fed Speakers Send Stocks Lower

When FedSpeak Fails…

 

 

The only one who can save stocks now is Stan Fischer at 1800ET…

 end
First it was Macy’s.  Now Nordstrom plummets after awful earings and they also slashed guidance for the coming year:
Is Retail the next Biotech????
(courtesy Nordstrom/zero hedge)

Nordstrom Plummets After Abysmal Results, Slashing Guidance

If there were any questions if the US consumer was merely “strong” or “quite strong”, after the abysmal results from Macy’s first, and moments ago, Nordstrom, they should all be safely swept away now.

Any time a company starts its press release with a blatant mea culpa… run. Like in the case of Nordstrom: The Company’s third quarter performance was below Company expectations, reflecting softer sales trends that were generally consistent across channels and merchandise categories.”

What happened was ugly: the company reported revenue of $3.24 billion, a miss to the $3.38 billion expected, and EPS of $0.42, nearly 50% below the expected $0.72. Q3 EBIT likewise crashed from $262 million to $151 Y/Y, as comp store sales of 0.9% were massively below the 3.6% expected.

Amusingly the retailers are unable to keep their lies straight – on one hand you have Macy’s blame the warm weather for plunging sales, and here you have JWN saying costs were among its best sellers: “Nordstrom comparable sales, which consist of full-line stores and Nordstrom.com, increased 0.3 percent. The top-performing merchandise category was Cosmetics. In addition, coats, younger customer-focused departments and dresses continued to reflect strength in Women’s Apparel.”

Considering we already mocked the “it’s the weather” bullshit, there is little we can add.

Where things get really bad though, is when looking at the acceleration in markdowns and the surge in inventory:

Gross profit of $1.1 billion, or 33.9 percent of net sales, decreased 163 basis points compared with the same period in fiscal 2014, primarily due to higher markdowns in addition to the planned impact of higher occupancy costs related to store growth and the increased mix of Nordstrom Rack. Ending inventory increase of 8.0 percent...

But wait, there’s more because just before the abysmal earnings report the Company paid a special cash dividend of $900 million, or $4.85 per share of outstanding common stock on October 27. Better to do that when the stock is higher rather then lower, eh?

It gets better: “the Company expects to initiate share repurchase for the remaining net proceeds beginning in the fourth quarter…. . For fiscal 2016, the Company estimates the net financial impact, including the share repurchase impact, to be approximately neutral to earnings per diluted share.”

And the punchline:

On October 1, 2015, Nordstrom’s board of directors authorized an additional $1.0 billion share repurchase program. During the third quarter, the Company repurchased 3.5 million shares of its common stock for $250 million. A total of $1,486 million remains available under its existing share repurchase board authorizations. The actual number, price, manner and timing of future share repurchases, if any, will be subject to market and economic conditions and applicable Securities and Exchange Commission

And to think it could have waited just a few weeks and gotten 15% more for its money consiering the absolutely collapse in JWN stock after hours.

 

Finally, and not unexpectedly, JWN slashed its outlook across the board confirming just how “strong” the US economy really is.

 

Three weeks ago we asked a simple question.

https://twitter.com/zerohedge/status/658427632284008448?lang=en

We now have the answer.

end

Well that about does it for tonight

I will see you tomorrow night

h

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4 comments

  1. There are ~100 million barrels of oil afloat in the world. If they were all going to USA they would supply the country with oil for ~5 days [19 million barrels per day]. They would supply the world for ~1 day. Prudent, I think, considering the geopolitical situations involving oil-exporting countries. Just-in-time delivery saves cost under perfect conditions. However, redundancy is required during times of turbulence. It’s what it should be.

    Like

  2. Mark Stehle · · Reply

    Great work Harvey Please keep it up I don’t know what i’d do without my daily roundup!!
    Mark

    Like

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