Nov 23/Key player in China’s brokerage industry vanishes without a trace/Glencore falls another 2 pence to 90 pence/ Asia has its biggest commodity trader in trouble, Hong Kong bases Nobel Industries/Belgium on full alert for the 3rd straight day/Paris finds a suicide belt which heightens concerns/Both Baltic and Shanghai Container Index falls to record lows/Brazil faltering in all 3 areas: lower growth/higher inflation and higher unemployment with massive debt to GDP and climbing/ Argentina elects a new President and he faces a complete mess/Interest rate swaps continue massively into the negative which makes no sense/USA loses the big pharma company Pfizer to Ireland/Interesting the total sales of both companies is a touch shy of present Ireland GDP/USA is very angry at this/National Mfg index (Chicago) plummets/also National PMI falls badly as does existing home sales/

Gold:  $1066.80 down $9.60   (comex closing time)

Silver $14.04 down 6 cents

In the access market 5:15 pm

Gold $1069.50

Silver:  $14.13

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 200.25 tonnes for a loss of 103 tonnes over that period.

In silver, the open interest surprisingly rose by a large 2975 contracts  despite the fact that silver was down 16 cents in Friday’s trading. The total silver OI now rests at 173,524 contracts In ounces, the OI is still represented by .867 billion oz or 123% 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 was hit again as this time another 4767 contracts were liquidated as the OI fell to 418,625 contracts. Gold was down by $1.60 in Friday’s trading. It seems the modus operandi of the bandits is to try and liquefy gold/silver OI as we approach first day notice on Monday, November 30. They are succeeding in gold but not silver. The bankers get very nervous when OI is rising despite awful prices for the metals. We had 0 notices filed for nil today. As I know everybody is aware that we are now in the options expiry for the comex gold/silver contracts, our LBMA contracts and OTC contracts.

We had no changes in gold inventory at the GLD/ thus the inventory rests tonight at 660.75 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 change in silver inventory, a rather large deposit to the tune of 1.053 million oz / Inventory rests at 318.209 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 2975 contracts up to 173,524  despite the fact that silver was down by 14 cents with respect to yesterday’s trading.   The total OI for gold surprisingly fell by 4767 contracts to 418,625 contracts as gold was down by $1.60 with respect to Friday’s trading.

(report Harvey)

2  a)Gold trading overnight, Goldcore

(Mark OByrne)



 i) Last night, 9:30 pm SUNDAY night, MONDAY morning Shanghai time.  Japan Nikkei closed, Shanghai falls as does Hang Sang.  Copper, iron ore and zinc falter again putting pressure on Glencore et al. Copper falls 1%. Glencore falls to 90 pence. Last night, there is again absolute fear in China,  as now Yim Fang a key player and CEO of a public securities business in Shanghai has disappeared.
(or vaporized)
( zero hedge)
ii) Commodity prices fall causing our Chinese markets to falter despite the massive intervention by the POBC
(zero hedge)
i) Update on the Paris bombings
(zero hedge)

ii) a)  Saturday and Sunday:  Belgium on full alert as another threat is still imminent and serious.  Citizens remained at home causing huge damage to their economy.

( zero hedge)
iib) a suicide belt has been found in a trash can in Paris/heightening more fears
(zero hedge)
iii)  European PMI surprisingly rises
(zero hedge)
 iv) Looks like Glencore stock is also heading for the Morgue:  down another 2 cents to 90 pence
(courtesy LSE/Harvey)

 v) and they call Spain, the miracle recovery?


i)  At least the USA was one person “alive in the beltway”.

Listen to Tulsi Gabbard:  She has got the whole USA middle east policy perfectly correct!!
(Wolf Blitzer/CNN/zero hedge)
ii)  Now  the USA is bombing the ISIS trucks.  However they are giving the truck drivers 45 minutes to get out of their trucks or they will be obliterated with the oil.  Of course the big question is this; why have they waited 13 months in order to bomb the oil trucks.
Just in the past three weeks:  a harbinger for events to come:

” spot rates for transporting containers from Asia to Northern Europe have crashed a stunning 70% in the last 3 weeks alone. This almost unprecedented divergence from seasonality has only occurred at this scale once before… 2008! “It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.”

(courtesy zero hedge/Baltic Dry Index/Shanghai Container Freight index:)

i)Brazil’s economic indicators plummeting”

as outlined to you last week, Brazil has a trio of bad stuff happening to them:

1. Faltering GDP

2.Runaway inflation

3.Huge unemployment

a great picture of deteriorating conditions inside Brazil:

(courtesy zero hedge)

ii) Argentina elects a new leader as he inherits a mess:
(zero hedge)
iii JPMorgan sounds the alarm bell on emerging market debt
(seeking alpha)
i) The Saudis are desperate as they realize that they made a policy error:
they state that they will do everything possible to stabilize the oil market
(zero hedge)

ii) But the jawboning by the Saudis was not enough as oil re circles back into the 41 dollar column in early morning trading.

It recovered again in the afternoon finally breaking into the 42 dollar column
(courtesy zero hedge)
i) It is official/Pfizer intends to move to Europe by the reverse takeover of Allergan, where Allergan becomes the official domicile of the corporation.  The USA will lose buckets of money and we can assure you, the USA officials are not happy
(zero hedge)

ii)   the Chicago national economic activity indicator contracted for the 3rd month in a row.  And the USA says that their economy is healed?(Chicago Fed/zero hedge)

iii) National PMI (Chicago) falls again

(National PMI/zero hedge)

iii)  The big USA manufacturing PMI collapses to a 2 year low, with new orders and employment faltering:

(national USA manufacturing Index)

iv) Existing home sales falter badly with last months reading

(existing home sales/zero hedge)

v) Interest rate swaps continue into the negative spelling that the economy is broken:

a very important read and here is the highlight:

“Now, that demand is clearly falling we find ourselves with massive overcapacity of manufacturing capacity and commodity output. Inventories, both in manufactured goods and commodities are breaking record levels every day now. We are “swimming in oil” in North America, Europe and China while desperate producers keep churning out a product no one wants. The story is no different in coal, gas, iron ore, steel, cement, cars, glass, trucks, heavy-duty equipment etc. A massive inventory liquidation is underway which will lead to a new global recession in 2016.

This is the real reason why SWAP spreads are negative. The complete unwind, or even reversal, of global wholesale ?dollar? funding put extreme pressure on corporations (which overwhelm the market for hedging) as they realize they can no longer roll over debt to maintain their overcapacity.With a scramble for real dollars (note, a ?dollar? is a claim on dollars for which no dollars actually exists) the dollar exchange rate is surging; both compounding and reflecting the problem at hand.”

vi)  it seems that there are more shares shorted that outstanding.  Last man will have to pay an exorbitant price to buy back in

(zero hedge)

vii)  Now we witness  Wall Street’s darling Valeant  heading to the morgue;

(courtesy zero hedge)
ix on the criminal act of spoofing:

it is amazing that the Attorney General is attacking the criminality of foreign firms but not the USA boys

(zero hedge)
1. Koos Jansen on Chinese gold demand/false data from a reuters reporter
(Koos Jansen)
2. Our banker friends were in the gold/silver markets early in the Chinese session and continued with their blatant manipulation all day
(zero hedge)
3. Throughout the night, commodities collapse as Venezuela predicts 20 dollar oil
(zero hedge)

4. Eric Sprott is venting his venom as he discusses the blatant manipulation of silver and gold(courtesy Mac Slavo/ Sprott/keith Neumeyer)

5. Chinese savers are turning to gold for a store of value


6. Bill Holter..

We have pointed out to you on Friday night, the fact that the Fed this morning is having a special meeting. Bill Holter states correctly that the Fed is never proactive but always reactive.  So what happened to cause this meeting?  I extremely doubt every much if they have having a meeting on reducing interest paid on excessive deposits.  That would show that the economy is not doing well and exactly opposite to the belief that the markets are healed and that the Fed can raise rates.


( Bill Holter/Holter-Sinclair collaboration)

7. David Stockman talks with Eric King on the failed USA policies and why the crooks are manipulating gold southbound.

(David Stockman/Kingworldnews)

8 Late this afternoon we learn that Asia’s largest commodity trading company Nobel is basically junk.  As we pointed out to you earlier you can think of Nobel as Asia’s Glencore and it is quite conceivable that some of the trades may have the other as counterparty:

( zero hedge)
9 Mike Maloney/Peak Prosperity.
the big reset is upon us!!
(Mike Maloney)

Let us head over to the comex:

The total gold comex open interest fell from 423,392 down to 418,625  for a loss of 4767 contracts as  gold was down by $1.60 with Friday’s trading.   For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest:  1) total gold comex collapse in OI as we enter an active delivery month, and 2) a continual drop in the amount of gold standing in an active month. We certainly are witnessing the former in spades today. The November contract lost 0 contracts staying at 210 contracts. We had 0 notices filed yesterday, so we lost 0 gold contracts or an additional nil oz will stand for delivery in this non active delivery month of November. The big December contract saw it’s OI fall by a monstrous 27,109 contracts from 160,269 down to 133,160 as our crooked bankers made things very uncomfortable for anybody in the gold arena wishing to take physical delivery. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 238,432 which is good. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was good at 218,945 contracts.

Today we had 0 notices filed for nil oz.
And now for the wild silver comex results. Silver OI rose by 2975 contracts from 170,549 up to173,524 despite the fact that the price of silver was down 14 cents with respect to Friday’s trading. The bankers continue to pull their hair out trying to extricate themselves  from their silver mess (the continued high silver OI with it’s extremely low price, combined with the banker’s massive physical shortfall) as the world senses something is brewing in the silver arena. The huge rise in silver OI necessitates  massive raids by the bankers as they had to cover their rather large shortfall.  We now enter the non active delivery month of November. The OI fell by 8 contracts down to 25. We had 8 notices filed yesterday so we neither gained nor lost any silver contract that will stand for delivery in this non active month of November.  The big December contract month saw its OI fall by only 5,508 contracts down to 55,544. The volume on the comex today (just comex) came in at 73,933 , which is huge. The confirmed volume yesterday (comex + globex) was excellent at 66,696. First day notice for both gold and silver is Monday Nov 30. After today,  we have exactly 4 trading days left.
We had 0 notices filed for nil oz.

November contract month:

INITIAL standings for November

Nov 23/2015

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 100.00 oz ???


Deposits to the Dealer Inventory in oz
Deposits to the Customer Inventory, in oz   1268.25 oz


No of oz served (contracts) today 0 contracts
No of oz to be served (notices) 210 contracts


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 267,503.2 oz
 Today, we had 0 dealer transactions
Total dealer withdrawals:  nil oz
total dealer deposit:  nil oz
We had 1 customer withdrawals:
 i)Out of Delaware:  100.000 oz  ???? exactly/???
total customer withdrawal 100.00  oz
We had 2 customer deposits:
 i) Into Manfra:  803.75 oz
ii) Into Scotia:  964.50 oz

Total customer deposits  1,268.25  oz

we had 0  adjustments:

 JPMorgan has a total of 10,777.279 oz or.3352 tonnes in its dealer or registered account.
***JPMorgan now has 337,121.339 oz or 10.48 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.( 210 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 (210) minus the number of  notices served upon today (0) x 100 oz which equals 21,700 oz standing in this non delivery month of November (.6749 TONNES)
we neither lost nor gained any gold contracts that will stand for delivery  in this non active delivery month of November.
We thus have 0.6749 tonnes of gold standing and only 4.708 tonnes of registered gold for sale, waiting to serve upon those standing
Total dealer inventory 151,482.729.079 oz or 4.711 tonnes
Total gold inventory (dealer and customer) =6,438,071.059   or 200.25 tonnes)
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 200.25 tonnes for a loss of 103 tonnes over that period.
the comex today is still bleeding gold tonight but by only a tiny amount. 
JPmorgan has only 10.5 tonnes of gold total (both dealer and customer)
And now for silver

November initial standings/First day notice

Nov 23/2015:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 187,873.413 oz

(Scotia, CNT)

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 489,500.383


No of oz served (contracts) 0 contracts  nil oz)
No of oz to be served (notices) 25 contracts 

150,000 oz)

Total monthly oz silver served (contracts) 56 contracts (280,000 oz)
Total accumulative withdrawal of silver from the Dealers inventory this month nil oz
Total accumulative withdrawal  of silver from the Customer inventory this month 8,046,105.7 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit; nil oz

we had no dealer withdrawals:

total dealer withdrawals:  nil

we had 3 customer deposits:

i) Into CNT;  977.420 oz

ii) Into Delaware:  6999.783 oz

iii) Into Scotia; 482,523.200

total customer deposits: 490,500.383 oz

We had 2 customer withdrawals:
i)Out of Scotia: 2010.013 oz
ii) Out of CNT: 185,863.400 oz

total withdrawals from customer account: 187,873.413   oz

we had 0 adjustments
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 (56) x 5,000 oz  = 280,000 oz to which we add the difference between the open interest for the front month of November (25) 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:
56 (notices served so far)x 5000 oz +(25) { OI for front month of November ) -number of notices served upon today (0} x 5000 oz ,=405,000 of silver standing for the Nov. contract month.
we neither gained nor lost any silver contracts that will stand for delivery in this non active delivery month of November.
Total number of dealer silver:  43.545 million oz
Total number of dealer and customer silver:  up to 160.581 million oz


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 23 no changes in gold inventory at the GLD/Inventory rests at 660.75 tonnes
Nov 20/a huge withdrawal of 1.19 tonnes of gold at the GLD/Inventory rests at 660.75 tonnes
Nov 19.2015/no change in gold inventory at the GLD/Inventory rest at 661.94 tonnes
Nov 18/no change in gold inventory at the GLD/Inventory rests at 661.94 tonnes
Nov 17/no change in gold inventory at the GLD/Inventory rests at 661.94 tonnes
Nov change in gold inventory at the GLD/Inventory rests at 661.94 tonnes
Nov 13/no change in gold inventory at the GLD/Inventory rests at 661.94 tonnes/
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.23.  inventory 660.75 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.
Nov 23/we had another addition (deposit) of 1.053 million oz of silver into the SLV tonight/Inventory rests at 318.209 million oz
Nov 20/no change in silver inventory at the SLV/rests tonight at 317.156 million oz.
Nov 19/no change in inventory rests tonight at 317.256 million oz/
Nov 18.2015: no change in inventory/rests tonight at 317.256 million oz
Nov change in inventory/rests tonight at 317.256 million oz/

Nov 16.And now SLV/another huge addition of 2.145 million oz into the silver inventory of SLV/rests tonight at 317.256 million oz

Nov 15/no change in silver inventory at the SLV/inventory 315.111 million oz/

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 23/2015:  tonight inventory rests at 318.209 million oz***
(I would guess that the addition of silver tonight was paper silver as opposed to real silver entering the vaults)
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.
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 11.4 percent to NAV usa funds and Negative 11.3% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 62.2%
Percentage of fund in silver:37.5%
cash .1%( Nov 23/2015).
2. Sprott silver fund (PSLV): Premium to NAV falls to-0.08%!!!! NAV (Nov 23/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV falls to – .84% to NAV Nov 23/2015)
Note: Sprott silver trust back  into negative territory at -0.08% Sprott physical gold trust is back into negative territory at -.84%Central fund of Canada’s is still in jail.

Press Release

Sprott Announces Clear Path and Timeline to Complete Offers for Central GoldTrust and Silver Bullion Trust

Only Through the Sprott Offers can Unitholders Receive Real and Certain Value

Sprott Encourages all Unitholders to Follow the Majority That Have Already Tendered

TORONTO, Nov. 23, 2015 (GLOBE NEWSWIRE) — Sprott Asset Management LP (“Sprott” or “Sprott Asset Management”), together with Sprott Physical Gold Trust (NYSE:PHYS) (TSX:PHY.U) and Sprott Physical Silver Trust (NYSE:PSLV) (TSX:PHS.U), today announced that it is now positioned to take action to expedite its offers for Central GoldTrust (“GTU”) (TSX:GTU.UN) (TSX:GTU.U) (NYSEMKT:GTU) and Silver Bullion Trust (“SBT”) (TSX:SBT.UN) (TSX:SBT.U) and bring these matters to a successful conclusion.

Pursuant to the recently announced decision of the Ontario Securities Commission, Sprott has provided additional disclosure and extended its offers to 5:00 p.m. (Toronto time) on December 7, 2015 to allow unitholders to review such updated disclosure. Upon the expiration of this 15 day “waiting period”, Sprott will be entitled to remove the GTU and SBT trustees in order to expedite a special meeting of unitholders to vote on the transactions, assuming more than 50.1% of units have been tendered to the applicable Sprott offer.

A majority of GTU, and a significant number of SBT, unitholders have already tendered into the Sprott offers. With majority unitholder support on December 7, 2015, Sprott will have a clear path to completion by being able to affect the necessary changes at the Trustee level of both Trusts on this date. Sprott will then immediately take actions to convene special meetings where unitholders may finally take action to complete the Sprott offers.

John Wilson, CEO of Sprott Asset Management, said, “We have consistently defeated the transparent attempts of the Spicers and the conflicted GTU and SBT Trustees to block our offers and we are now finally positioned to bring this process to a timely and successful conclusion. We encourage unitholders to not be swayed by the proposal to convert their bullion trust into an open-ended ETF or the Spicers’ hollow arguments to support this extreme and self-serving measure. Sprott encourages any unitholders who haven’t already done so to tender their units to the Sprott offer today to receive real and certain value from your bullion investment.”

Sprott urges GTU and SBT unitholders to remember the reasons to tender to the Sprott offers:

  • The Sprott offers provide an immediate premium on an NAV to NAV basis plus an additional premium payable in Sprott Physical Gold Trust and Sprott Physical Silver Trust units, respectively.
  • Sprott initiated these offers after GTU and SBT unitholders were punished by consistent trading discounts to NAV.
  • The Sprott offers are an opportunity to enter into a security that is fully-backed by bullion and properly tracks the price of such underlying bullion. Unitholders have chosen to invest in gold or silver, and the Sprott offers provide an opportunity for unitholders to enter into a security that properly reflects the value of that commodity.
  • Sprott is now positioned to provide GTU and SBT unitholders witha clear and timely path to completion.

Additionally, the Sprott offers provide:

  • A regulated entity that is committed to unitholders’ best interests and is managed by experienced, professional investors with a superior investment platform. GTU and SBT are run by entrenched and conflicted Trustees who have only sought to maintain the status quo and enrich themselves at unitholders’ expense.
  • A safe and secure investment stored at the Royal Canadian Mint, which is backed by the Canadian federal government, rather than the ordinary commercial vault that is used by GTU and SBT.
  • Investor friendly redemption features that allow unitholders to decide how and when to sell their investment. GTU and SBT offer no option to redeem for physical bullion and effectively charge a 10% fee to redeem for cash.

Mr. Wilson continued, “The desperation of the Spicers and their Trustees is reflected by their 11th hour announcement of a highly conditional and hastily made proposal to convert GTU and SBT into ETFs. This transaction would betray the very purpose of unitholders initial investments, and even if approved, could take many months to complete and carry substantial costs and risks to unitholders. We encourage unitholders to tender into the real, immediate Sprott offers before them which provide a premium on a NAV to NAV basis.”

As of 5:00 p.m. (Toronto time) on November 20, 2015, there were 9,714,610GTU units (50.34% of all outstanding GTU units) and 2,294,529 SBT units (41.97% of all outstanding SBT units) tendered to the respective Sprott offers.

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

For more information, unitholders can

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)

Mine Production Stagnates As Silver Coin Demand Hits Record High

Thomson Reuters has released their interim Silver Market Review including provisional supply and demand forecasts for 2015.

Highlights from that report include:

– Total silver supply is forecast to fall to 1,014.4 Moz* in 2015, down 3%
– Silver bullion coin sales at record high, up 95% year-on-year
– Coin demand should account for 12% of physical demand this year
– Silver market is expected to be in an annual physical deficit of 42.7 Moz* in 2015
– Silver prices this year are 18.3% lower than in the same period in 2014
*Millions of Oz

GoldCore: Silver bars
A one thousand oz silver bar

According to a recent review by silver analyst Steve St. Angelo, “The world has experienced consecutive silver deficits for the past 12 years”.  Recently published data shows  “three of the top five silver producing countries are showing large declines in production compared to the same period last year”.  He also highlights the most important statement in the Interim Silver Market Review: “While such deficits do not necessarily influence prices in the near term, multiple years of annual deficits can begin to apply upward pressure to prices in subsequent periods”.

Other observations from the review include a predicted increased demand from industrial silver consumers – the photovoltaics industry, Solar and ethylene oxide producers – however, the total industrial demand for silver is forecast to fall by 4% to 570.7 Moz, and to account for 54% of physical demand in 2015. Total physical demand is also forecast to contract by 2.5% in 2015, to 1,057.1 Moz, primarily driven by a drop in demand from the electronics sector, a downward trend which begin in 2011.

The global ‘supply squeeze’ in silver coins, has forced some mints to ration sales and sending US-based buyers to seek coins from overseas.  The Perth Mint have stated demand for silver coins is unprecedented (see Silver coin demand is absolutely through the roof” – Perth Mint”).

Read the full Thomson Reuters Releases Interim Silver Market Review

Additional sources: ‘World Silver Deficits –12 Years Running’
“Biggest Silver Supply Losers For 2015″


Today’s Gold Prices: USD 1085.15 , EUR 1014.80 and GBP 709.26 per ounce.
Yesterday’s Gold Prices: USD 1073.10, EUR 1004.18 and GBP 703.05 per ounce.

GoldCore: SIlver in USD - 1 Month

Silver in USD – 1 Month

Gold had decent gains yesterday- $11.90 throughout the day – closing at $1082.00. Silver also finished up slightly – by $0.10 – to close at $14.27. Platinum gained $7 to $853.

Download Essential Guide to Storing Gold Offshore

Essential Guide To Storing Gold Offshore

Mark O’Byrne
At the opening, our banker friends were trying to assert their authority by throwing 1500 contracts at the instant China opened:
(courtesy zero hedge)

Gold Mini Flash-Crashes At Asian Open

Someone decided that the exact opening of Gold futures trading on a Sunday night – ahead of a holiday week in the US – was the perfect time to liquidate over $161 million notional of ‘paper’ precious metals contracts…Currencies were unmoved, stocks are leaking higher and bonds lower.


Admittedly the flush was modest in size (around a 0.5% drop and pop) but we are sure whoever this gold-seller’s fiduciary duty is owed to will not mind at all...

1500 or so contracts liquidated instantly… makes perfect sense.




And now other commodities were hit last night

(courtesy zero hedge)


Commodites Plunge To New 16 Year Low; Oil Slides On Venezuela Warning, Soaring Dollar

As reported last night, ongoing concerns that China’s economy is doing far worse than reported when the PBOC lowered its Yuan fixing below expected to the lowest level since August 31, pushed copper futures to a new low not seen since May 2009 while nickel dropped to the lowest level since 2003.


A big catalyst for the ongoing collapse in the Bloomberg commodity index which just hit a fresh 16 year low, is the relentless surge in the dollar, with the DXY rising as high as 99.98 the highest since April, as a result of rising prospects for a December U.S. rake hike (odds are now at 70%, up from 36% a month ago) boosting currency differentials and flows into the USD, making commodities more expensive for buyers in other currencies.

As Bloomberg also notes, a London Metal Exchange Index of six industrial metals has fallen for six weeks. Gold has dropped for five straight weeks, crude oil is on a three-week losing run. The Bloomberg Commodity Index is set for its worst year since the financial crisis, plunging 23 percent.

The result is that global miners continue to suffer and basic resource stocks are taking their lead from the slide in commodities. All 17 members of the Stoxx 600 Basic Resources Index are falling today, with Glencore and ArcelorMittal dropping as much as 5 percent. The gauge is this year’s worst performing industry group on the Stoxx Europe 600 Index, falling 26 percent. Along with utilities it’s the only one to have fallen out of nineteen. Glencore’s 2015 decline is 70 percent. Anglo American’s is 65 percent. ArcelorMittal has sunk 50 percent.


It’s not just the metals though: crude also started the session off on the wrong foot, following this weekend’s comments from Venezuela that oil prices may drop to as low as the mid-$20s a barrel unless OPEC takes action to stabilize the market, Venezuelan Oil Minister Eulogio Del Pino said.

This confirms what Goldman warned last week when it predicted oil dropping as low as $25/barrel if warm weather continues over the winter.

According to Bloomberg, Venezuela is urging the Organization of Petroleum Exporting Countries to adopt an “equilibrium price” that covers the cost of new investment in production capacity, Del Pino told reporters Sunday in Tehran. Saudi Arabia and Qatar are considering his country’s proposal for an equilibrium price at $88 a barrel, he said.

Sure, every producer would like a higher price, only problem is nobody wants to be the first to cut production, and so the race to the bottom will accelerate.

OPEC ministers plan to meet on Dec. 4 to assess the producer group’s output policy amid a global supply glut that has pushed down crude prices by 45 percent in the last 12 months. OPEC supplies about 40 percent of the world’s production and has exceeded its official output ceiling of 30 million barrels a day for 17 months as it defends its share of the market.

“We cannot allow that the market continue controlling the price,” Del Pino said. “The principles of OPEC were to act on the price of the crude oil, and we need to go back to the principles of OPEC.”

Also not helping the oil story was news overnight that Chinese oil imports declined even as Saudi Arabia reclaimed its position from Russia as the largest crude supplier to China as OPEC members extended their global fight for market share.

The world’s biggest oil exporter sold 3.99 million metric tons to China in October, 0.8 percent more than in September, data from the Beijing-based General Administration of Customs showed on Monday. Angola, another member of the Organization of Petroleum Exporting Countries, also surpassed Russia in shipping crude to the Asian nation. Russia supplied 3.41 million tons to its neighbor in October, a 16 percent drop from a record in September. Angola’s shipments climbed 27 percent from the previous month to 3.64 million tons, the data showed.

But it’s not just the usual suspects who continue to overproduce. Moments ago we got the following Bloomberg headline:


Which means that oil has a lot more downside before a new equilibrium price is established as producers remain reluctant to stop pumping in a deflationary environment where their only hope is to offset sliding prices with soaring volume.

As a result the rolled over WTI January contract was down 3% at last check, down $1.24, and also en route to test the $30-handle which its now expired December contract would be solidly inside.

Late this afternoon we learn that Asia’s largest commodity trading company Nobel is basically junk.  As we pointed out to you earlier you can think of Nobel as Asia’s Glencore and it is quite conceivable that some of the trades may have the other as counterparty:
(courtesy zero hedge)

S&P Just Warned Asia’s Largest Commodity Trader It May Be Junked

The name Noble Group should be familiar to frequent readers from our August 18 report on the company, but to those who are unfamiliar here is the quick summary: because it is Asia’s largest commodity trader, Noble can be better thought of as Asia’s Glencore.

As a further reminder, on August 18 we said that we expect a big announcement of S&P on Noble Group later this week” as a result of the ongoing deterioration in the company’s fundamentals as well as various market-traded securities, notably its stocks and default swaps.

As usual, S&P was late, but just over three months later, the rating agency finally came out with the catalyst we have been expecting when moments ago it said that it had “placed its ‘BBB-‘ long-term corporate credit rating on Hong Kong-based supply-chain management service provider Noble Group Ltd. and the  ‘BBB-‘ issue rating on the company’s senior unsecured notes on CreditWatch  with negative implications.”

In other words, Asia’s Glencore is about to be junked. Here’s why, from S&P:

The CreditWatch action reflects our view that Noble’s liquidity and financial leverage have weakened and breached levels that we consider appropriate for the current rating. However, management’s commitment to raise new capital could support the company’s credit profile.


Noble’s liquidity deteriorated in the third quarter of 2015 following a 27% decline in the company’s net available readily marketable inventory to US$1.48 billion as of September 2015 from US$2.0 billion in June 2015. The deterioration was largely related to the fall in commodities prices. The company’s available and undrawn committed credit lines fell almost 50% during the period to about US$1 billion.The company’s cash sources are less than 1.5x cash uses as of September 2015, below the threshold for a “strong” liquidity assessment.

Worse, S&P has given Noble a deadline of three months in which to raise a lot of capital, or else be downgraded to junk, a rating which could effectively end its trading business, and ultimately could lead to a liquidation of the entire company.

The rest of the note:

Noble’s financial leverage is also weak for the rating. The company’s ratio of funds from operations (FFO) to debt is 19.8% as of September 2015 on a rolling 12-month basis. This is a similar level to that in June 2015, but down from 24% in March 2015. In our view, the company’s cash flow and earnings visibility are poor amid a challenging market. We expect that the company will commit to its stated strategy of focusing on profitability, and having prudent working capital management and cost controls to help offset market  volatilities.


We believe the Noble management’s commitment to raise at least US$500 million in new capital could help restore the company’s liquidity position and financial leverage, which will be key to maintaining the current rating. In our opinion, if Noble were able to raise at least US$500 million in capital to offset its outstanding debt, the ratio of FFO to debt could improve to about 22%. The company has a good track record of raising capital through recycling assets and attracting new investors, in our opinion.


We aim to resolve the CreditWatch placement in three months. We will review Noble’s liquidity trends and financial leverage to see if the company’s capital-raising and cost-cutting measures are adequate to weather the heightened volatility in the global commodities market.


We may lower the rating by one notch if: (1) Noble’s liquidity does not improve, such that its cash sources are unable to cover uses by at least 1.5x. This could happen if the company is unable to raise sufficient capital per its commitment or its cash generation and working capital controls are weaker than we expect; or (2) Noble’s financial leverage does not improve over the next three months, such that the ratio of FFO to debt remains below 25%. This could happen if the company cannot raise new capital or if its earnings and profitability deteriorate. We could lower the rating by two or more notches if both conditions above are not met within the next three months.


We could also downgrade Noble if the company’s trading risk position weakens.Possible indications of such weakness include increases in fair value relating to long-term commodity offtake contracts, concentration risk of counterparties, or lower cash realization of commodity contracts than the company expects.


We could affirm the rating if we believe the weakening of Noble’s liquidity is temporary and the company has a credible plan and shows strong execution to restore its financial strength. Noble’s ratio of cash sources to cash uses staying above 1.5x and its FFO-to-debt ratio rising above 25% on a sustained basis could indicate such improvement. At the same time, we expect the company to demonstrate continued cash realization of marked-to-market gains and prudent risk management of fair value financial assets, including offtake contracts.

Just like for Glencore, a downgrade to junk would trigger an unknown amount of collateral and margin calls, promptly sucking up the company’s liquidity.

Which probably explains why Noble’s CDS which was trading at ~700 bps when we first profiled the company more than 3 months ago, has since doubled.

August 18:


And November 23:


* * *

Finally, for those who missed it, here was the original Noble Group report courtesy of Simon Jacques

Trust is everything in commodity trading, it is also what is maintaining a constant risk premia in this market.

Noble Group is Asia’s largest commodities trader.

According to GMT research, Noble Group took what they have estimated as between $4 to $6 billions worth of fair value gains on asset valuation over the last 5 years.

Just prior their Q2 earnings release, we published the reasons outlining why we believe that the trader is an accounting hocus-pocus.

Since we are exactly one week after their Q2 results, in theory Standard and Poor’s had time to do their homework.

We expect a big announcement of S&P on Noble Group later this week.

UK insurers (who have also a foot in the cargo insurance market) have dumped Noble Group bonds overnight.

The S&P downgrade was leaked or they have just anticipated it.

Bonds maturing 2020 now trading in mid 80’s; private bank clients waking up to risks? Company no longer has access to capital markets.

6 months after repeated ­assurances from Alireza that the financial accounting inquiry’s findings would not trigger a scramble for capital,  5 yrs CDS paper quoted at 743 bps, stands at the highest level since 2009, 100bps bid-ask

Energy credit analysts wonder where Noble Group’s financing will come from going forward with the downgrades.

The trader will lose its access to their counter parties because of stricter limitations to deal with them now.

Below is an excellent interview from GMT Research founder Gillem Tulloch made on Bloomberg Television.

Over the weekend this fabulous piece was released:
(courtesy Mike Maloney/Peak Prosperity)

Mike Maloney: The Rollercoaster Crash

Submitted by Adam Taggart via,

Precious metals sank to 5-year lows during this past week. The long painful price decline that began at the end of 2011 still continues unabated. Holders of gold & silver are understandably wondering if their faith in precious metals has been misplaced.

In this week’s podcast, we invite Mike Maloney back on the podcast. Mike is the owner of one of the largest bullion dealers in the US,, and one of the top minds we know of on monetary history. In this wide-ranging interview — which announces the release of a new educational video, The Rollercoaster Crash, which kicks off Season 2 of GoldSilver’s excellent video series Hidden Secrets of Money — Mike lays out the rationale for an approaching global reset of the existing fiat currency regimes, and why asset-backed currencies are highly likely to return in our lifetime:

History shows that whenever there is a problem with the currency, whether it is big inflation, hyperinflation, or deflation, people go back to safe haven assets. And we should be going into a deflationary episode that is overreacted to that causes big inflation or hyperinflation, which causes a breakdown of the current global monetary system, the global dollar standard that is now the longest-lived of these artificial monetary systems and has developed a bunch of stress cracks and is in the process of imploding right now. There is going to be before the end of this decade, most likely, another emergency meeting of a bunch of finance ministers and economists to try and hash out another world monetary system. It is just history repeating, and it is a natural consequence of a man-made, artificial manipulation of the free market.


But if this debt-based currency system has to evolve, switchover to some sort of asset-based currency system or currency system that is a free market thing, I am fine if the free market selects Bitcoin or if it selects gold or silver again like it has for the past 2500 years — it keeps on selecting gold and silver as the optimum money. I am fine with whatever the free market picks. And I believe it will lead to greater prosperity. But we are in for some short-term pain. The good news is that for somebody that is properly positioned, it can be the best thing that ever happened to you because of this enormous wealth transfer. If currency a fails, its price measured in gold goes to infinity.


Today, there is about $200 worth of gold, investment-grade gold, per person. And there is about $40,000 worth of other liquid financial assets that compete in storing purchasing power. And so those liquid financial assets such as cash, stocks, and bonds, the problem with them is that their purchasing power can evaporate. It is something that is just based on trust. And if just 10% of those liquid financial assets come chasing gold, gold’s purchasing power has to rise 20-fold.

Click the play button below to listen to Chris’ interview with Mike Maloney (78m:22s)



Posted on 23 Nov 2015 by
Koos Jansen is the only guy to follow when you want the true demand for gold inside China
(courtesy Koos Jansen)

Reuters Spreads False Information Regarding The Chinese Gold Lease Market

A reporter from Reuters asserts there is 2,000 tonnes of gold tied up in the Chinese gold lease market. Once again, we will debunk these fictitious statements. 

Kindly be advised to have read Mechanics Of The Chinese Domestic Gold Market and Chinese Gold Trade Rules And Financing Deals Explained before you continue. (More in depth information on the Chinese gold lease market can be read in my posts: A Close Look At The Chinese Gold Lease Market, Gold Chat About The Chinese Gold Lease Market,Zooming In On The Chinese Gold Lease Market and Chinese Gold Leasing Not What It Seems.)

The most important event in the current international gold market are the thousands of tonnes being imported into China but are not measured by any Western consultancy firm as demand. The firms have tried to create al sorts of excuses to explain where this missing gold went, but nearly all have proven to be false. For the record, naturally this gold can’t be missing, in my view most of it is simply bought by individual and institutional investors directly at the Shanghai Gold Exchange.

Last month at the LBMA conference a group of ‘gold experts’ discussed how round tripping and gold leasing should explain the difference between withdrawals from the vaults of the Shanghai Gold Exchange (SGE) and Chinese consumer gold demandthe difference refers to the missing gold. However, round tripping and gold leasing can never have soaked up 2,500 tonnes of gold. To debunk this nonsense BullionStar decided to translate the official Chinese gold cross-border trade rules, covering the Chinese domestic gold market and Chinese Customs Specially Supervised Areas, to support an extensive blog post I wrote about round tripping that cannot inflate SGE withdrawals and thus has nothing to do with the missing gold. On 16 November 2015 I published another post about the difference, no I will not stop writing about this, in which I wrote:

 … Does the mainstream media ever investigate this odd discrepancy? … Please, show me how gold leasing has inflated SGE withdrawals by 2,500 tonnes …

(“this odd discrepancy” is the difference)

My prayers have been heard! Reuters published an article on 19 November 2015 titled Cracks appear in China’s gold leasing trade as jewelers suffer defaults that asserts there is 2,000 tonnes of gold tied up in the Chinese gold lease market. Note, the article is only about gold leasing, they dropped round tripping. This Reuters article, published by a mainstream news agency read by thousands of gold investors as their primary source for what’s happening in the international gold market, is truly amazing in being inaccurate. The content can be summarized as:

  • There is 2,000 tonnes of physical gold in China tied up in gold leasing,
  • currently sales of jewelry is going down and can trigger a cascade of defaults in gold leases, which will subsequently dampen Chinese gold imports and impact Chinese bank balance sheets.
  • The outlook is grim.

Needless to say, I disagree and I need to counter such articles in detail – or no one will – because the false assumptionsabout the Chinese gold market in the mainstream media keep aggregating and spiralling away from any sense of logic.

Reuters can have a habit of exaggerating microscopic events in the Asian gold market to conclude demand is declining. On 12 September 2014 they wrote the Indian population could be abandoning gold altogether as they shifted to put their savings at the bank. The headline read:

India’s love affair with gold may be over 

In the body it continued:

Kiran Laxman Salunkhe used to buy jewellery during religious festivals, but sliding gold prices have led the young farmer to break with his family’s traditional investment.

This year Salunkhe has deposited his hard-earned savings at the bank for the first time in a decade…

…”Nowadays it is risky to keep jewellery. Burglaries are rising,” he said. “With a fixed deposit there is no risk.”

In short, Reuters asserted India’s love affair with gold, that goes back thousands of years, might be over because one farmer said to have deposited a few rupees at the bank (there are 1.2 billion people living in India). Of course, a year later India’s love affair with gold is not over and demand is actually on the rise. Year to date (up until August) India has imported 666 tonnes of gold, up 69 % year on year, according to official data from India’s Directorate General of Commercial Intelligence and Statistics. In addition, India’s long awaited gold monetization scheme, pushed by the World Gold Council to dampen India’s gold import, has so far attracted only 400 grams out of the +20,000 tonnes national hoard.

Back to China. Last year, on 15 April 2014, Reuters headlined:

China may have 1,000 tonnes of gold tied in financing

This falseassumption was copied from a World Gold Council report (China’s Gold Market Progress And Prospects, April, 2014) that initiated the ‘there are thousands of tonnes of gold tied up in Chinese financing deals’ meme. The meme threats that an unwind (or default) of the financing deals will trigger a collapse in the Chinese gold market and imports would come to a halt, with all due consequences for the international gold market. In the Reuters article from 15 April last year we could read [brackets adde by me]:

“If that number [1,000 tonnes tied up in financing deals] is accurate, it is significant because an unwind of that is equivalent to a year’s worth of (Chinese) imports,”

Guess what, in 2014 China imported roughly 1,250 tonnes of gold and in 2015 China is set to import 1,400 tonnes of gold. Concluding the Chinese gold market has not collapsed, but is gathering steam. So what should Reuters write to defend the meme? There is now 2,000 tonnes tied up in financing deals and any unwind would mean an even greater collapse of the Chinese gold market! Let us analyze the Reuters article from 19 November to understand why it’s false. From Reuters:

The top four Chinese banks alone have up to 443.4 billion yuan ($69.63 billion) tied up in gold leasing, so any pull back could cut China’s imports and hit global bullion prices that are already languishing at the lowest in more than five years.

… Nearly all is likely tied up in gold financing and at current prices would amount to around 2,000 tonnes of bullion. 

First of all, the 443.4 billion yuan Reuters bring forward as what Chinese banks show on their balance sheets as ‘precious metals’ can be anything, they are not solely gold leases. This is best elucidated by the annual reports from the banks themselves. Before we read the annual reports, remember, all Chinese banks’ balance sheets merely show ‘precious metals’ assets and liabilities, not any gold, silver or specified items. Furthermore, any Chinese citizen can open an SGE account through a commercial bank, or start a gold savings program at a commercial bank. These banks have been the designated vehicles appointed by the State Council to facilitate gold buying for the citizenry and corporations. All of this gold can show up on the balance sheets.

From Agricultural Bank of China:

… Precious metals

Precious metals comprise gold, silver and other precious metals.

… As a major precious metal market maker in the PRC, the Bank provided customers with precious metal trading, investment and hedging services through leasing gold, trading of precious metal derivative to customers and trading physical precious metal in the Shanghai Gold Exchange, the Shanghai Futures Exchange and the London precious metals market.

From China Construction Bank:

In 2014, … the number of customers with the Account Precious Metals totalled 16,103,300.The Bank proactively explored Precious Metals Trading (Shanghai Gold Exchange) Agency business and the number of contracted customers of Individual Precious Metals Trading (Shanghai Gold Exchange) Agency business amounted to 2,160,700. It introduced innovative products including silver leasing for enterprises and PC client for Individual Precious Metals Trading (Shanghai Gold Exchange) Agency business.

With respect to investment and financial market business, the Bank introduced innovative products such as sales of physical precious metals to corporates…

From Bank Of China:

The Group entered into various derivative financial instruments relating to … precious metals and other commodities for trading, hedging, asset and liability management and on behalf of customers.

Reuters insinuates all ‘precious metals’ in the books of the Chinese banks, worth 443.4 billion yuan, are gold leases but this is absolutely not true. Only the Chinese banks themselves know the exact composition of the ‘precious metals’ in their books. I have yet to meet an outside analyst that knows too. For sure the bank balance sheets capture gold leases, but also other precious metals like silver and a very wide variety of precious metals products for individual clients and corporations (China Construction Bank has 16,103,300 customers with the Account Precious Metals and 2,160,700 customers with the Individual SGE Precious Metals Trading Agency business). It can even be gold hold by the banks for hedging purposes stored in London. Maybe all the physical gold stored in SGE designated vaults is also shown on the commercial bank balance sheets. We simply don’t know, although we do know it’s not all gold leasing. So, there goes anotherassumption from Reuters.

Allow me to share a few more thoughts, about two very scary words used by Reuters: “tied up”. This can sound as if the gold can be untied any moment flooding the Chinese gold market. I think Reuters is mixing up separate data points from the Chinese gold market. In 2014 it was said by the World Gold Council there was 1,000 tonnes of gold tied up in financing deals based on the total lease volume in China, which was 1,070 tonnes in 2013. However, this yearly lease volume is not the gold that is leased out at any point in time, but reflects the aggregate volume disclosed on all lease contracts that are executed over one year’s time in the Chinese domestic gold market. Meaning, if 500 mining companies lease 2 tonnes of gold for 1 month in 2016, the yearly lease volume would be 1,000 tonnes, while on 31 December 2016 the total amount of gold leased out could be nil.

Screen Shot 2015-05-21 at 4.48.21 PM
Courtesy ICBC.

As the yearly lease volume has kept rising since 2013 it could have been Reuters mistakenly matched the yearly lease volume (from a slide from ICBC) to the balance sheets of commercial banks as the gold tied up in gold leasing. Though, the yearly lease volume is not the amount of gold leased out at any point in time and the precious metals in the books of the banks do not merely stand for gold leases. So, we know there is a lot less than 2,000 tonnes of gold on lease in China – say, a few hundred tonnes at max.

Reuters states the 2,000 tonnes (which in reality is a lot less) is tied up in gold leasing. These two words are highly misleading in my humble opinion. In the context of this blog post two types of lessees borrow gold: jewelry companies to manufacture jewelry and enterprises that are seeking cheap credit (mining companies or speculators). The latter will promptly sell spot any borrowed gold to use the proceeds for investment. In my view, during such a lease period there is nothing tied up in gold leasing; there is just a debt to be repaid by the lessee to the lessor when the lease comes due. At the end of the lease period the lessee has to buy gold in the market (SGE) to settle the debt. In case jewelry companies lease gold the words tied up are more appropriate, in my view, as the leased gold bars are in transit from being processed to being sold as jewelry. But, a jewelry company will always keep its gold inventory as low as possible, which makes me wonder how much gold can be tied up by jewelry companies. In any case, it can only be a share of the total amount of gold leased out in any point in time. Because we all agree most leases in China are used for financing, which requires borrowed gold to be sold spot and bought back when the lease comes due, likely there is only a small percentage of total leases tied up by jewelry companies. For a fact, Reuters doesn’t know how much gold is tied up in gold leasing.

The article by Reuters is centered on declining jewelry sales in China that will lead to defaults in the leases. A few small gold loans have already defaulted, “according to sources familiar with matter”, Reuters wrote. This might be true, but it can also be false. I haven’t heard any news from China jewelry sales are high this year, so this would imply they are low. However, the most recent numbers from the World Gold Council are hard to be trusted as they are often revised upwards after a months.

  • At first the WGC reported jewelry sales in 2013 were 669 tonnes, a few months later they revised this number to 928 tonnes, up 39 %.
  • At first the WGC reported jewelry sales in 2014 were 624 tonnes, a few months later they revised this number to 807 tonnes, up 29 %.
  • Currently the WGC reports jewelry sales Q1-Q3 2015 were 583 tonnes (annualized 778 tonnes), but I guess we have to wait a year before they make their last revision.

Pretty smart from the WGC; when Chinese gold demand numbers are first published, and the gold space is paying attention, they state Chinese demand is low, which greatly influences global sentiment. Months later, when the gold space isn’t paying attention, they revise the numbers to more realistic levels.

I shall rest here. If more Chinese jewelry companies will default in the future we shall see. In any case it will not turn sour 2,000 tonnes of gold tied up in gold leases.

Koos Jansen
E-mail Koos Jansen on:




Eric Sprott is venting his venom as he discusses the blatant manipulation of silver and gold

(courtesy Mac Slavo/ Sprott/keith Neumeyer)



“It’s All A Lie” – Eric Sprott Slams Massive Monetary Metals Manipulation

Submitted by Mac Slavo via,

If the government’s official statistics are to be believed the U.S. economy is moving full steam ahead. Consumer are spending, the job market is expanding, real estate has recovered, stocks are soaring and the U.S. dollar is stronger than it has been in a decade.

But if you have yet to realize it, it’s all a lie. So says billionaire investor Eric Sprott of Sprott Global, which manages hundreds of millions of dollars in contrarian investment funds for clients all over the world. Well known for his long-term bullishness on the resource sector, specifically precious metals, Sprott joined First Mining Finance chairman Keith Neumeyer in a must-see interview where the pair discuss everything from the state of the global economy and trade to gold market manipulation and the inevitable breakdown of highly leveraged paper trading exchanges.

Neumeyer recently sent a very public letter to the Commodity Futures Trading Commission highlighting rampant price suppression, noting that neither real producers or real consumers are being represented by the manipulative practices of a small concentration of players. Echoing those concerns Sprott suggests that for every 5 tons of real gold there are some 1500 tons worth of claims. The inevitable outcome should claimants ever want to take delivery of physical inventory will be an unprecedented explosion in price:

To be brutally honest, I mean, that’s what I dream of… I think we’re almost at that point where we might very well have a shortage of gold and silver by a product of this last raid here, so much so that we’ll take those 5 tons from the COMEX because we have lots of people buying silver and gold.

The manipulation of precious metals, coupled with the supply and demand fundamentals which Sprott says will lead to shortages over the next few years as mining companies reduce output or close up shop, will leave many investors who think their gold holdings are easily convertible to physical assets with nothing more than depreciating Yellen Bucks at exactly the moment they’ll need precious metals in their possession.

Everything says to me that the demand for gold is in excess of the supply. And, of course, you wonder why the price would go down, but people look at the COMEX which stays manipulated, which is so obvious to me what’s going on. We have 5 tons of physical gold. We have something like 1500 tons of claims against that 5 tons. So to be quite direct about your question, yes, I kind of wonder any day, is somebody going to snatch those 5 tons of gold, and we end up with some kind of cash settlement. But then you have to think, if we would have a cash settlement, having taken gold from 1900 down to 1100, all under the threat of a rate increase for the last 5 years, which has never happened and may not ever happen, and then all of a sudden they’re like “well, really there is no gold here, we’ll just cash settle it at $1,100.” Meanwhile, we’ve lost $800 on a false claim. And perhaps maybe people in the know know about this, they keep the price of precious metals suppressed because they are the canary in the coal mines.

A canary in the coal mine, indeed:

There’s no way we should have a strong dollar here. We haven’t even begun to deal with the issues that are facing the U.S. public, i.e., Social Security, Medicare, everything so far is a lie.


I mean, I can’t believe inflation’s 2% when pretty well every individual in the U.S. just on their healthcare policy, just on that policy alone, their cost went up 2% a year. On everything. Just on healthcare, because it’s probably 20% in healthcare, you get a 10% increase, that’s a 2% increase. So whether or not anything else goes up, there’s a 2% increase. And they don’t throw in grants and education and all those other things that are going up. Inflation numbers are massively understated, everything’s a lie.


I don’t believe the jobs report from last Friday, the ADP number, it’s all a lie. And I sort of ask why do they have to lie about everything? Well, you know why they have to lie about everything… Because we don’t have an economic recovery happening, and they’ve got to pretend there is one. And so when you get these funny numbers that come out that suggest we have strength when deep down you know there’s no strength. Look at the truckloads, the rail car load increase, the cost of chartering a ship, the Baltic rate, they’re all going to new lows here.

Knowing full well that we’re dealing with a lie so big that its eventual consequence will lead to bewilderment and widespread panic among the general global public once it becomes common knowledge, one should be asking: what do I do now?

Keith Neumeyer, whose company has been rapidly acquiring distressed assets in the precious metals mining space, provides an insightful and actionable answer given what we know about what’s coming:

As Eric said, the valuations now are quite laughable. As well as many people know, I’ve been in this market for a while. I’m not sure if Eric has seen these valuations before but in my 32 years of being in it, I don’t recall ever being able to buy a drilled ounce of gold in the ground for less than $10 an ounce.



Not one of these transactions could have occurred in a normal market — the costs would have been just much, much higher and just unaffordable.


And then on a personal note, as I’ve said a couple of times to some good friends, I’ve just recently sold my last piece real estate and I’m putting all that money into this sector. I’m going all-in, I think this is “back up the truck” time, this is a once-in-a-decade opportunity, and I’m putting my money where my mouth is.

Though the market price has yet to reflect it, Eric Sprott and Keith Neumeyer are being joined by scores of billionaires and investment funds that are positioning themselves in the gold and silver markets.

They know what’s coming. Unfortunately for the majority of the populace, it’ll be too late by the time they realize it too.


(courtesy Bloomber/GATA)

Chinese savers turn to gold as rest of the world exits holdings


From Bloomberg News
Wednesday, November 18, 2015

Even as investors shed gold holdings almost everywhere else in the world, Chinese savers like Hu Jingjing are buying.

Stung by a $5 trillion stock-market collapse, an overbuilt property market, and a devaluation of the yuan, Chinese investors are adding to bullion holdings that have already made them the world’s largest consumers of the metal. A third straight annual decline in prices has failed to deter purchases, partly because there are few attractive alternatives for preserving assets.

“It’s been a very tough year for investment because shares are so volatile and bank deposits are threatened by a weakening yuan,” Hu, a 36-year-old manager at a clothing retailer, said after buying a 30-gram bullion bar for 7,865 yuan ($1,232) at a jewelry store in Beijing on Nov. 4. “I don’t think gold is going to drop any more and I can sell it back to them if the price goes up.”

China imported the most gold in 19 months from Hong Kong in September, following the surprise devaluation of the yuan in August and a rout in domestic shares that was the biggest since the global financial crisis. Even the central bank has been accumulating the metal, announcing in July that reserves were up 57 percent since 2009 and adding to holdings each month since then. While the stock market has recouped some of its losses, investors continue to withdraw gold from the bullion exchange in a sign they are still worried about the economic outlook. …

… For the remainder of the report:




And now David Stockman enters the gold debate.  He correct asserts that central banks hate gold as this ancient metal is a barometer for ailing markets:
(courtesy David Stockman/Kingworldnews/GATA)

Central banks hate gold for rebuking their destruction of markets, Stockman says


9:55a ET Saturday, November 21, 2016

Dear Friend of GATA and Gold:

Former U.S. budget director David Stockman tells King World News that central banks are “hostile toward gold because gold is the ultimate rebuke to central bank money printing and manipulation and destruction of honest price discovery and honest financial markets.” An excerpt from the interview is posted at the KWN blog here:…

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



As I pointed out to you on Friday might, the Fed this morning is having a special meeting. Bill Holter states correctly that the Fed is never proactive but always reactive.  So what happened to cause this meeting.  I extremely doubt every much if they have having a meeting on reducing interest paid on excessive deposits.  What would show that the economy is not doing well and exactly opposite to the belief that the markets are healed and that the Fed can raise rates.

I will let you decide..


here is Bill Holter


(courtesy Holter-Sinclair collaboration)



Very Strange Indeed!


The Fed made an announcement Friday they will be holding an “expedited, closed meeting” on Monday.  This is very strange indeed.  First, aren’t all meetings “closed”?  And how often do they hold “expedited” meetings.  When I first heard this my mind started to turn toward “why”?  Why would they have the need to do this?  And on such short notice?

  My first thoughts were either something may have broken in the derivatives markets or maybe it had something to do with the upcoming IMF vote to decide whether or not to let China into the SDR?  These two thoughts made the most sense as markets have moved in large percentages both up and down.  The stock and sovereign bonds markets have been firm and still pressed up against their highs so it can only be a short in trouble.  Commodities have been eviscerated so maybe a long (Glencore or others?) could be in trouble?
 As for the possibility they are meeting prior to the IMF vote, the dollar has been firm so there is no current dollar crisis for them to manage.  Please understand, the Fed NEVER gets out in front of anything.  I find it unlikely the Fed is meeting to strategize how they will handle the inclusion of the yuan into the SDR …and thus a lower slice of the pie for the dollar. 
  Alternatively, is it possible the Fed has been informed there will be a veto to the Chinese entrance and are preparing for the blowback from such an action?  In my opinion if this were to really occur, it would be the very worst of all worlds.  The Chinese may not immediately react to the lost of face but understand this, they WILL REACT.  Maybe they wouldn’t just pull the plug out of the wall but the “power” will be disconnected!
  If we take their statement at face value, it sounds like they are considering changing what they pay banks for the massive pile of deposits that have piled up at the Fed.  Could it be the Fed wants these balances to be lowered and will decide to lessen the incentive to banks to park money and rather entice them to lend?  This thought process would be supported by the collapse in the velocity of money but the question remains, will the banks begin to lend.
  To finish let me say the following: the Fed has NEVER in my career since 1983 ever been “proactive”, they have always been “reactive”.  I have asked many contacts if they know what this meeting is all about or why it is “expedited”?  No one has anything more than theory as to what’s going on.  I have explored some of the possibilities here yet there are many more.  I do not believe whatever is going on is “benign”.  I say this because of the way this meeting has been announced.  Something very strange is going on behind the scenes …we will have to wait to find out what exactly it is.

  Standing watch,

  Bill Holter
  Holter-Sinclair collaboration
  Comments welcome

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

1 Chinese yuan vs USA dollar/yuan falls in value , this  time at  6.3890/ Shanghai bourse: in the red , hang sang: red

2 Nikkei closed  

3. Europe stocks all in the red  /USA dollar index up to 99.85/Euro down to 1.0619

3b Japan 10 year bond yield: rises to .324%   !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.12

3c Nikkei now just above 18,000

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

3e WTI: 41.21  and Brent:   44.57

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 rises to  .490 per cent. German bunds in negative yields from 6 years out

 Greece  sees its 2 year rate rise to 6.90%/:  still expect continual bank runs on Greek banks 

3j Greek 10 year bond yield rises to  : 7.08%  (yield curve close to inversion)

3k Gold at $1072.85/silver $14.04 (7:45 am est)

3l USA vs Russian rouble; (Russian rouble down 32/100 in  roubles/dollar) 65.06

3m oil into the 41 dollar handle for WTI and 44 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 1.0216 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0849 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/arrests 10 traders for Euribor manipulation

3r the 6 year German bund now  in negative territory with the 10 year rises to  +.490%/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 2.29% early this morning. Thirty year rate above 3% at 3.04% /

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


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

Global Stocks Fall For First Time In Six Days As Commodity Rout Spills Over Into Stocks

While the key geopolitical event of the last three days days continues with Brussels which remains on lockdown over terrorism fears, the main event in overnight markets was the latest tumble in commodities, which dropped to the lowest level since 1999, facilitated by the soaring dollar. Oil likewise continued its downward trend following a warning by Venezuela prices may drop to the mid-$20s while Chinese storage capacity appears to be topping out, leading to a slowdown in oil imports as noted earlier.

As a result, global stocks have fallen for the first time in six days as the sell-off in commodities continued, dragging both US equity futures and European stocks lower. However, putting this in context, last week the MSCI All Country World Index posted its biggest weekly gain in six weeks: alas, without a coincident rebound in commodity prices, it will be merely the latest dead cat bounce.

The reason for the latest surge in the US Dollar (overnight the DXY has risen to the highest level since April, almost touching the 100 level) is that over the weekend San Francisco Fed President John Williams said there is a “strong case” for a U.S. rate increase in December, assuming economic data continue to be encouraging. The odds of a move have risen to 70 percent from 36 percent a month ago, according to Bloomberg data.

Top news stories include Pfizer/Allergan merger; UAW’s new contracts with Ford, GM; possible pilot union deal for UAL; CVC/Canadian Pension deal for Petco, Diebold’s deal for Wincor Nixdorf, and Argentine presidential election.

Market Wrap:

  • S&P 500 futures down 0.2% to 2085
  • Stoxx 600 down 0.5% to 380
  • MSCI Asia Pacific down 0.4% to 134
  • FTSE 100 down 0.6% to 6297
  • DAX down 0.3% to 11088
  • US 10-yr yield up 2bps to 2.28%
  • Dollar Index up 0.31% to 99.87
  • WTI Crude futures down 3.1% to $40.61
  • Brent Futures down 2.1% to $43.73
  • Gold spot down 0.8% to $1,069
  • Silver spot down 1.5% to $13.97
  • German 10Yr yield up 4bps to 0.52%
  • Italian 10Yr yield up 3bps to 1.53%
  • Spanish 10Yr yield up 3bps to 1.67%
  • S&P GSCI Index down 1.6% to 332.2

Looking at global markets, Asian stocks traded higher following last week’s firm US gains which saw the S&P 500 post its best week YTD, although a slump in commodities capped further gains in the region. ASX 200 (+0.4%) led the region higher amid gains in consumer staples following reports of interest in retail giant Woolworth’s Big W unit. Shanghai Comp. (-0.6%) initially traded higher as margin debt approached 3-month highs before paring gains heading into the European open, while the Hang Seng (-0.4%) was weighed on by energy as crude tests the USD 41/bbl level and mild weakness in the financial sector amid reports that banks are set to keep deposit rates high. Markets in Japan are closed due to Labour Thanksgiving holiday. PBoC set the CNY mid-point at 6.3867 vs. last close. 6.3850 (Prey. mid-point 6.3780); which was the weakest setting since August 31st.


  • Guotai Junan International Plunges as Chairman Out of Reach: Yim Fung hasn’t been in contact since Nov. 18.
  • PetroChina, CNPC Said to Consider Pipeline, Refinery Sales: Would be first major divestment since pipelines sale in 2013.
  • Fitch Doubts Modi Budget as $15 Billion Salary Boost Hurts Bonds: Moody’s says fiscal challenges constrain India’s credit rating.
  • Tokyo Authorities Investigate After Fire in Toilet at War Shrine: Sound of an explosion reported.
  • China Pulled Further Into Syria Crisis Amid Terrorism Threat: Execution of Chinese national shows Islamic State’s reach.
  • Alibaba’s Ma Said to Be in Discussions to Buy SCMP Stake: Ma in talks to buy a stake in publisher of Hong Kong’s South China Morning Post.

Stocks in Europe are seen lower across the board, however have come off lows in recent trade (Euro Stoxx: -0.50%) amid generally upbeat preliminary readings of manufacturing and services PMIs out of Europe.

European shares decline for first day in 3, with Swiss, French, Norwegian bourses underperforming. Energy names leads the way lower amid ongoing pressure on commodity prices, with WTI down over USD 1.00 and gold down by around USD 9.00 in early trade. Elsewhere, Silver (USD -0.18) has since recovered from worst levels having hit 6 year lows overnight, as the stronger USD (USD Index +0.10%) continues to weigh on precious metals.

At the same time, despite the weakness in equities and the month-end supportive flow for fixed income products, Bunds remain in the red and have grinded lower throughout the European session. The weakness is in part driven by the upcoming supply this week, with Belgian debt agency auctioning off EUR 2bIn in 2025 and 2028 bonds. USTs also trade lower, as expectations of Fed rate hike continue to pressure prices. Elsewhere, Gilts also reside firmly in the red, while it is worth noting that December coupon-paying Gilts are going ex-dividend on 26th November. Also of note, Moody’s said that Britain may not face a credit rating downgrade if it votes to leave the European Union in a membership referendum due by the end of 2017.

European Top News:

  • European Business Index Points to Strongest Economy Since 2011: Composite index of services & manufacturing rose to 54.4 from 53.9 in Oct., to highest reading since May 2011.
  • Euro Area’s Negative-Yielding Debt >$2 Trillion on Draghi: Investor expectations of further monetary easing from ECB President Mario Draghi have pushed yields on more than $2t of euro-area govt debt below zero.
  • Deutsche Bank Said Planning 1k London Job Cuts: Sunday Times: Bank plans to shrink its workforce by 9,000 people by 2018, according to report citing people familiar.
  • Carney to Assess Economy as Official Muddies BOE Rate Outlook: Mark Carney will give his latest assessment of U.K. economy tomorrow in testimony.
  • Riksbank ‘Rapped Over Knuckles’ on Covered Bond Downgrade: Debt office, financial watchdog lashed out against central bank for failing to check with them before proposing tougher collateral rules on covered bonds.
  • Amazon Strikes Won’t Prevent Record German Sales: Reuters: Cites Amazon Germany head Ralf Kleber.

European Eco Data:

  • Markit Eurozone composite Nov. preliminary PMI 54.4 vs survey 54
  • Markit Germany composite Nov. preliminary PMI output 54.9 vs survey 54
  • Markit France composite Nov. preliminary PMI 51.3 vs survey 52.5


  • Pfizer, Allergan Said to Be Close to $150b Combination: Cos. may announce merger as soon as today, creating a drugmaking behemoth with products from Viagra to Botox, with low-cost tax base
  • Brussels Stays on Lockdown Amid Hunt for Terror Suspects: Lockdown continued for thrid day on Monday, with schools, shops and entire metro system shut
  • Auto Workers Approve Ford, GM Contracts With Raises for All: New contracts with Ford, GM wrapped up one of most lucrative rounds of negotiations for UAM after it offered concessions to help Big Three
  • CVC, Canadian Pension Said to Agree $4.7 Billion Petco Deal: 2 firms beat joint offer from KKR, Hellman & Friedman, as well as Apollo Global bid
  • Diebold Agrees to Buy Wincor Nixdorf for About $1.9b: Takeover to create biggest maker of cash machines, security systems with >$5b in sales
  • Oil Slides as Venezuela Sees Mid-$20 Crude If OPEC Doesn’t Act: Oil has slumped ~46% in past year as OPEC continues to pump above its collective quota
  • Copper Slumps Below $4,500; Nickel Falls 5% as Metals Slide: At lowest since May 2009 as investors fear China’s shift to consumer-driven economy from investment-led expansion will slow demand
  • United Airlines Reaches Proposed Two-Year Labor Deal With Pilots: The Air Line Pilots Association on Friday told its members it has reached an “agreement in principle” with co.
  • Argentina Elects Pro-Business President; Big Change Expected: Center-right opposition leader Mauricio Macri to be president in decisive end to 12 years of leftist populism.
  • Masters of Universe Scared of China Risks See Yuan Devaluation: Hedge fund managers warn that China hard landing may spark global recession.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • Stocks in Europe are seen lower across the board, however have come off lows in recent trade amid generally upbeat preliminary readings of manufacturing and services PMIs out of Europe.
  • Bunds remain in the red and continue to edge lower, with the weakness in part driven by the upcoming supply this week.
  • Looking ahead today sees the release of US manufacturing PMI, existing home sales and comments from ECB’s Weidmann, Coeure and Lautenschlager.
  • Treasuries decline despite weakness in stocks and commodities and before week’s auctions begin with $26b 2Y notes, WI 0.97%, highest since April 2010.
  • As some economists warn the Fed will err if it raises interest rates in December, Paul Mortimer-Lee of BNP Paribas SA is taking a different tack as he argues the central bank may have already blundered by not hiking sooner
  • Economic activity in the euro area hit a 4-1/2 year high, according to Markit’s composite PMI; however, the report also showed output prices falling for a ninth month
  • Growth in France’s services sector slowed this month, with hotels and restaurants reporting that the Nov. 13 terrorist attacks in Paris had a negative impact on business.
  • The search for a key suspect in the Paris terror attacks kept Brussels in an unprecedented lockdown that brought business to a standstill as European leaders vowed to tackle the crisis at its roots in Syria
  • OPEC ministers are likely to keep its output quota steady at a meeting on Dec. 4 in Vienna, according to analysts; supply may swell further next year if Iran resumes sales that were halted by sanctions
  • Oil prices may drop to as low as the mid-$20s a barrel unless OPEC takes action to stabilize the market, Venezuelan Oil Minister Eulogio Del Pino said
  • $32.8b IG priced last week, $4.63b HY. BofAML Corporate Master Index OAS holds at +162, YTD range 180/129. High Yield Master II OAS widens 4bp to +632, YTD range 683/438
  • Sovereign 10Y bond yields higher. Asian stocks mixed, European stocks lower, U.S. equity-index futures decline. Crude oil, gold and copper decline


DB’s Jim Reid completes the overnight wrap


In a week marred by the aftermath of the tragic events in Paris, markets proved their resilience last week and closed out Friday mostly on a positive note on a light news-flow day. Sentiment was boosted by more dovish comments from Draghi. In Europe the Stoxx 600 finished +0.22% and the Dax closed +0.31%, while across the pond and despite weakening through lateafternoon, the S&P 500 (+0.38%), Nasdaq (+0.62%) and Dow (+0.51%) all finished in the green to cap a strong week – the latter in particular now back to exactly flat for the year. It continues to be a different story in the commodity market however where volatility remains a big feature. Oil markets (WTI +0.43%, Brent +1.09%) actually nudged a bit higher on Friday to close the week broadly flat, but Copper was down another 1% and creeping close to $4500 along with across-the-board losses for much of the metals space, while natural gas was down nearly 6% and at a fresh low for the year.

Meanwhile, in the bond space US 2y yields (+2.5bps) closed at 0.917% and above 0.90% for the first time this year as the Fed commentary on Friday all hinted towards a December liftoff bias. In stark contrast, 2y Bund yields were down another basis point on Friday and extending their move deeper into negative territory at -0.396%. That spread between the two now has gone above 130bps which is the most 2y Treasuries have traded above similar maturity Bunds this year and in fact the most since August 2006. With regards to ECB President Draghi’s speech on Friday, markets latched onto his comment that ‘if we decide that the current trajectory of our policy is not sufficient to achieve our objective, we will do what we must to raise inflation as quickly as possible’, saying that this ‘is what our price-stability mandate requires of us’. Bundesbank President Weidmann, speaking at the same event, was a lot more upbeat, saying that ‘I see no reason to talk down the economic outlook and paint a gloomy picture’ and that ‘we should also not forget that the monetary policy measures already taken still need time to fully feed into the economy’.

With Thanksgiving Day on Thursday this week in the US, as you’ll see in the week ahead at the end it’s set to be a fairly front-loaded week for data, with a bumper day for releases on Wednesday in particular and the usual focus on the retail sales stats on the back of Black Friday at the end of the week. Tomorrow’s big release however is the second reading for Q3 GDP in the US. Our US economists expect growth to be revised up to 2.3% saar from the initial 1.5% saar at the first read based on stronger inventory accumulation. This is slightly more bullish than the current 2.1% consensus forecast on Bloomberg.

Ahead of this, it’s been a mixed start for Asian equity bourses this morning. In China the Shangahi Comp is up -0.06% in early trading, while the CSI 300 is -0.05% with both bourses down following the midday break. The Hang Seng is -0.25% but there are gains for the Kospi (+0.69%) and ASX (+0.39%) while markets in Japan are closed for a public holiday. Commodity markets have kick started the week on the back foot. Oil in particular has given up Friday’s gains and more, with WTI down -2.12%. Natural Gas is down another 3% also while there’s broad based losses across much of the metals space.

Over the weekend there’s also been more Fedspeak to highlight. San Francisco Fed President Williams played up the recent labour market data in the US and said that ‘assuming that we continue to get good data on the economy, continue to get signs that we are moving closer to achieving our goals and gaining confidence getting back to 2% inflation’ then if that ‘continues to happen there’s a strong case to be made in December to raise rates’. Like his colleagues, Williams stressed the importance of the slope of rate rises being the most important thing to communicate.

These comments followed Friday’s Fedspeak. In particular, NY Fed President Dudley said that he hoped that relatively soon he will be confident of hitting the 2% inflation target which will allow policy makers to ‘start thinking about raising the short-term interest rates’, again also stressing the importance of this being data dependent. Meanwhile, St Louis Fed President Bullard said that he would welcome the return of an era where there is a bit more uncertainty about what the FOMC will do meeting-to-meeting, noting that this is ‘normal monetary policy’.





Let us begin

 i) Last night, 9:30 pm SUNDAY night, MONDAY morning Shanghai time.  Japan Nikkei closed, Shanghai falls.  Copper, iron ore and zinc falter again putting pressure on Glencore et al. Copper was down another 1% today. Glencore falls to 91 pence.
(courtesy zero hedge)

Copper Futures Crash Close To ‘1’ Handle Amid Record 14th Daily Drop In A Row

Front-month (Dec) copper futures are trading near $200 ($200.15) for the first time since March 2009 as the collapse in the global economic indicator extends to anunprecedented 14th day in a row. The ongoing collapse appears to have finally impacted Chinese equities which have given up the morning’s gains and are drifting rapidly lower. Overall, as Goldman warns, the metals market appears to be increasingly pricing concurrent and/or future weakness in China’s old economy.

This is the longest losing streak on record (based on Bloomberg data) and is the worst 14-day loss (down 13.8%) since October 2011…


With a break of $200 being heavily defended for now…


However, as Goldman Sachs details, rising SHFE open interest may flag China demand deterioration

Metals prices have declined by 12%-17% since late October. Over this period, China’s economic data for October has disappointed, the US dollar has strengthened on a trade weighted basis, and the broader commodity complex has moved lower, including most notably, energy prices. 


What has also occurred since late October has been an eye catching rise in Shanghai Futures Exchange open interest across the metals complex – for copper, it has been the largest increase in Shanghai open interest in 12 months – since the 1Q15 collapse in Chinese metals demand.



In our view, this development raises a red flag regarding ongoing and near term activity in China’s ‘old economy’ and metals demand growth, as measured by our GS China Metals Consumption Index (see chart below).  Indeed, over the past five years, periods of rising SHFE open interest and falling metals prices have been associated with concurrent or imminent weakening in China’s commodity intensive ‘old economy’. 


Meanwhile, though LME and Comex net speculative positioning has also declined over the period, it remains well above its August 2015 lows.


Overall, the metals market appears to be increasingly pricing concurrent and/or future weakness in China’s old economy, and related metals demand. To the extent that the metals market positioning predicts ongoing and potential future China growth weakness – since mid-2011 SHFE open interest has given a correct bearish signal on four out of five occasions – the latest metal market developments have bearish implications for China’s upcoming activity data releases and asset classes dependent on this data.

*  *  *

It appears Chinese stocks have started to recognize this is a problem…


Charts: Bloomberg

Another high profile CEO of a big brokerage firm, Yim  Fung, ofGuotai Financial.  Now doubt he has been vaporized:
(courtesy zero hedge)

On Sunday evening, George Chen delivered what, for those who follow financial markets, surely was a candidate for Tweet of the day:

Yes, “company said can’t find him,” and given China’s recent “crackdown” on anyone suspected of engaging in activities that might send stocks lower, you know what that means:

As we outlined in September, Beijing’s “kill the chicken to scare the monkey” campaign has brokers, hedgies, and even securities regulators so terrified, that one money manager said the following to his friend after being “summoned” by Chinese authorities: “If I don’t come back, look after my wife.”

Earlier this month, WSJ took a look at China’s case against Xu Xiang, who runs Shanghai-based Zexi Investment. Xu is accused of insider trading and stock manipulation and not only did Beijing detain him, they also froze his parents’ accounts. “After Xu Xiang was arrested, many people got nervous,” one fund manager told The Journal. “I don’t want to get arrested,” said another.

Around the same time the media picked up on the Xu story, another CSRC official was arrested in China. Yao Gang, vice chairman of the securities regulator, is now under investigation for graft, Reuters reported a little over a week ago, noting that Yao is the second official from the capital markets watchdog to come under scrutiny.

This is the backdrop against which Guotai’s Chairman and CEO Yim Fung went “missing” on November 18. 

Guotai was forced to find temporary replacements for Yim as “the executive currently cannot discharge his duties.” Calls to Yim’s cell went to his voicemail box.

Guotai Junan International Holdings Ltd. shares fell double digits in Hong Kong to close at HK$2.85 on Monday. It was the steepest slide in three months. 

As Bloomberg reports, “Hong Kong-based, Yim has a high profile in the local securities industry, including through his comments to the media and as chairman and then honorary chairman of the Chinese Securities Association of Hong Kong. In China, Yim is known as Yan Feng.”

Well as it turns out, Yim and Yan and any other aliases were “taken away” in connection with the investigation into the above mentioned Yao Gang.

So apparently, China is going to assert that corrupt officials at the securities watchdog may have been working with Guotai’s CEO to manipulate stocks. Or at least that’s the way this looks.

For now, Yim has been replaced by deputy CEO Wong Tung Ching, which would be fine we suppose were it not for that that last December, Hong Kong anti-corruption officials stormed his home in connection with an ICAC investigation. In other words, we wouldn’t be surprised if Guotai soon finds its deputy CEO “missing” as well.

“High Profile” CEO Of China Brokerage “Disappears”: “Company Says Can’t Find Him”



At least the USA was one person “alive in the beltway”.
Listen to her:  She has got the whole USA middle east policy perfectly correct!!

US Congresswoman Introduces Bill To Stop “Illegal” War On Assad; Says CIA Ops Must Stop

Last month, US Congresswoman Tulsi Gabbard went on CNN and laid bare Washington’s Syria strategy.

In a remarkably candid interview with Wolf Blitzer,Gabbard calls Washington’s effort to oust Assad “counterproductive” and “illegal” before taking it a step further and accusing the CIA of arming the very same terrorists who The White House insists are “sworn enemies.” 

In short, Gabbard all but tells the American public that the government is lying to them and may end up inadvertently starting “World War III.”

For those who missed it, here’s the clip:

That was before Paris.

Well, in the wake of the attacks, Gabbard has apparently had just about enough of Washington vacilating in the fight against terror just so the US can ensure that ISIS continues to destabilize Assad and now, with bi-partisan support, the brazen Hawaii Democrat has introduced legislation to end the “illegal war” to overthrow Assad. 

Gabbard, who fought in Iraq – twice – has partnered with Republican Adam Scott on the bill. Here’s AP:

In an unusual alliance, a House Democrat and Republican have teamed up to urge the Obama administration to stop trying to overthrow Syrian President Bashar Assad and focus all its efforts on destroying Islamic State militants.


Reps. Tulsi Gabbard, a Democrat, and Austin Scott, a Republican, introduced legislation on Friday to end what they called an “illegal war” to overthrow Assad, the leader of Syria accused of killing tens of thousands of Syrian citizens in a more than four-year-old civil war entangled in a battle against IS extremists, also known as ISIS.


“The U.S. is waging two wars in Syria,” Gabbard said. “The first is the war against ISIS and other Islamic extremists, which Congress authorized after the terrorist attack on 9/11. The second war is the illegal war to overthrow the Syrian government of Assad.”


Scott said, “Working to remove Assad at this stage is counter-productive to what I believe our primary mission should be.”


Since 2013, the CIA has trained an estimated 10,000 fighters, although the number still fighting with so-called moderate forces is unclear. CIA-backed rebels in Syria, who had begun to put serious pressure on Assad’s forces, are now under Russian bombardment with little prospect of rescue by their American patrons, U.S. officials say.


For years, the CIA effort had foundered — so much so that over the summer, some in Congress proposed cutting its budget. Some CIA-supported rebels had been captured; others had defected to extremist groups.


Gabbard complained that Congress has never authorized the CIA effort, though covert programs do not require congressional approval, and the program has been briefed to the intelligence committees as required by law, according to congressional aides who are not authorized to be quoted discussing the matter.


Gabbard contends the effort to overthrow Assad is counter-productive because it is helping IS topple the Syrian leader and take control of all of Syria. If IS were able to seize the Syrian military’s weaponry, infrastructure and hardware, the group would become even more dangerous than it is now and exacerbate the refugee crisis.

And make no mistake, Tulsi’s understanding of Washington’s absurd Mid-East policy goes far beyond Syria. That is, Gabbard fully grasps the big picture as well. Here’s what she has to say about the idea that the US should everywhere and always attempt to overthrow regimes when human rights groups claim there’s evidence of oppression:

“People said the very same thing about Saddam (Hussein), the very same thing about (Moammar) Gadhafi, the results of those two failed efforts of regime change and the following nation-building have been absolute, not only have they been failures, but they’ve actually worked to strengthen our enemy.”

Somebody get Langley on the phone, this woman must be stopped.

Here’s Gabbard speaking to CNN this week about Assad:

So there’s hope for the US public after all.

Perhaps if the clueless masses won’t listen to “lunatic” fringe blogs or Sergei Lavrov, they’ll listen to a US Congresswoman who served two tours of duty in Iraq and who is now telling Americans that The White House, The Pentagon, and most especially the CIA are together engaged in an “illegal” effort to overthrow the government of a sovereign country and in the process are arming the very same extremists that are attacking civilians in places like Paris.

Good luck Tulsi, and thanks for proving that there’s at least one person inside that Beltway that isn’t either dishonest or naive.

*  *  *

From Gabbard

“Here are 10 reasons the U.S. must end its war to overthrow the Syrian government of Assad:

  1. Because if we succeed in overthrowing the Syrian government of Assad, it will open the door for ISIS, al-Qaeda, and other Islamic extremists to take over all of Syria.  There will be genocide and suffering on a scale beyond our imagination.  These Islamic extremists will take over all the weaponry, infrastructure, and military hardware of the Syrian army and be more dangerous than ever before.
  2. We should not be allying ourselves with these Islamic extremists by helping them achieve their goal because it is against the security interests of the United States and all of civilization.
  3. Because the money and weapons the CIA is providing to overthrow the Syrian government of Assad are going directly or indirectly into the hands of the Islamic extremist groups, including al-Qaeda affiliates, al-Nusra, Ahrar al-Sham, and others who are the actual enemies of the United States.  These groups make up close to 90 percent of the so-called opposition forces, and are the most dominant fighters on the ground.
  4. Because our efforts to overthrow Assad has increased and will continue to increase the strength of ISIS and other Islamic extremists, thus making them a bigger regional and global threat.
  5. Because this war has exacerbated the chaos and carnage in Syria and, along with the terror inflicted by ISIS and other Islamic extremist groups fighting to take over Syria, continues to increase the number of Syrians forced to flee their country.
  6. Because we should learn from our past mistakes in Iraq and Libya that U.S. wars to overthrow secular dictators (Saddam Hussein and Muammar Gaddafi) cause even more chaos and human suffering and open the door for Islamic extremists to take over in those countries.
  7. Because the U.S. has no credible government or government leader ready to bring order, security, and freedom to the people of Syria.
  8. Because even the ‘best case’ scenario—that the U.S. successfully overthrows the Syrian government of Assad—would obligate the United States to spend trillions of dollars and the lives of American service members in the futile effort to create a new Syria.  This is what we have been trying to do in Iraq for twelve years, and we still have not succeeded.  The situation in Syria will be much more difficult than in Iraq.
  9. Because our war against the Syrian government of Assad is interfering with our being one-pointedly focused on the war to defeat ISIS, Al-Qaeda, and the other Islamic extremists who are our actual enemy.
  10. Because our war to overthrow the Assad government puts us in direct conflict with Russia and increases the likelihood of war between the United States and Russia and the possibility of another world war.”

*  *  *

Oh, and if you needed another reason to like Tulsi, here’s a bonus 40 second clip for your amusement…

Now  the USA is bombing the ISIS trucks.  However they are giving the truck drivers 45 minutes to get out of their trucks or they will be obliterated with the oil.  Of course the big question is this; why have they waited 13 months in order to bomb the oil trucks.
(courtesy zero hedge.

Get Out Of Your Trucks And Run Away”: US Gives ISIS 45 Minute Warning On Oil Tanker Strikes

Last week, in the wake of Russian and US airstrikes on ISIS oil convoys, we asked three important questions:

  1. Who are the commodity trading firms that have been so generously buying millions of smuggled oil barrels procured by the Islamic State at massive discounts to market, and then reselling them to other interested parties? In other words, who are the middlemen?
  2. Can it possibly be true, as officials now claim, that the Obama administration refrained from bombingIslamic State oil trucks because Washington thought the group was “only” making $100 million per year instead of $400 million?
  3. Is it likely, considering how cavalier the US is about collateral damage from drone strikes, that The Pentagon refused to take out Islamic State’s revenue stream because the military was afraid of killing a few “innocent” truck drivers who by definition knew they were transporting illegal crude for a terrorist organization?

The first question is, for now anyway, unanswerable. As to the second and third, here’s what we said:

Perhaps the US overestimated the effect its airstrikes were having on Islamic State’s oil production capabilities and perhaps The Pentagon was concerned with killing innocent truck drivers, but it could also be that, as Sergei Lavrov suggested earlier this month,the US has until now intentionally avoided hitting ISIS where it hurts in order to keep them in the game and ensure they can still be effective at destabilizing Assad. If you cut off the oil trade, they lose the ability to battle the regime.

Whatever the case, it’s too late now, because just as Russian airstrikes and the Iranian ground presence forced the US to do something – anything – to prove to the world that America is serious about fighting terrorism, Moscow’s targeting of ISIS oil convoys has forced the US to get on board (the Russians are going to hit them anyway, so there’s no point in vacillating).

American airstrikes reportedly destroyed 116 oil tanker trucks earlier this month and another 280 today in Paris mastermind Abdelhamid Abaaoud’s former fiefdom of Deir ez-Zor.

Of course the US would hate to catch ISIS off guard risk killing innocent truck drivers, so prior to the November 16 strike, US planes dropped leaflets warning the drivers to “get out of your trucks now, and run away from them.” Here’s the leaflet (note the stick figures running for their lives):

Here’s some commentary from Colonel Steve Warren from Operation Inherent Resolve (delivered at a press conference earlier this month):

Early Sunday morning in Al-Bukamal, which is the southern blue circle number two, you see two blue circles there. They both represent Tidal Wave II operations, but we’re in the southern one — the one further towards the bottom of your screen, there.


In Al-Bukamal, we destroyed 116 tanker trucks, which we believe will reduce ISIL’s ability to transport its stolen oil products.


This is our first strike against tanker trucks, and to minimize risks to civilians, we conducted a leaflet drop prior to the strike. We did a show of force, by — we had aircraft essentially buzz the trucks at low altitude.


So, I do have copy of the leaflet, and I have got some videos, so why don’t you pull the leaflet up. Let me take a look at it so I can talk about it.


As you can see, it’s a fairly simple leaflet, it says, “Get out of your trucks now, and run away from them.” A very simple message.


And then, also, “Warning: airstrikes are coming. Oil trucks will be destroyed. Get away from your oil trucks immediately. Do not risk your life.”


And so, these are the leaflets that we dropped — about 45 minutes before the airstrikes actually began.

And here’s an amusing bit from the post-presser Q&A:

Q: On Bob’s question, too, if — if it’s so important to cut off the oil shipments, the critical revenue source for ISIS, why did it take so long to take out 116 oil tanker trucks?


COL. WARREN: No, that’s a great question, Jim. Thanks for asking it.


So, a little history on Operation Tidal Wave II. Initially, we, you know, we have been striking oil infrastructure targets since the very beginning of this operation.


What we found out was that many of our strikes were only minimally effective. We would strike pieces of the oil infrastructure that were easily repaired.


When we came to that realization, we conducted some more study — I think I talked about this last week, a little bit — we conducted some more study, and determined how to better strike the oil infrastructure itself, different pieces of the system.


During the course of that study, we also determined that part of the illicit oil system, from the oil coming out of the ground at a — at a pump head, to the end of that chain, which is the distribution network.


So, this is a decision that we had to make. We have not struck these trucks before. We assessed that these trucks, while although they are being used for operations that support ISIL, the truck drivers, themselves, probably not members of ISIL; they’re probably just civilians. So we had to figure out a way around that. We’re not in this business to kill civilians, we’re in this business to stop ISIL — to defeat ISIL.

So basically, it took the US 13 months to figure out that the best way to cripple Islamic State’s oil trade was to bomb – the oil.

To the extent that occurred to anyone previously, the idea was dismissed because the truck drivers are “probably not members of ISIL.” Well then who are they? Sure, they may not be suiting up in all black and firing RPGs at Toyota Corollas packed with “spies” for a propaganda video, but it’s not like they don’t know who they’re working for.

Also, as mentioned above, the US hasn’t exactly been shy about engaging targets even when there are women, children, and bedridden hospital patients in the vicinity so it’s hard to imagine that anyone at the Pentagon was worried about Islamic State’s truck drivers.

Whatever the case, the US is apprently set to give ISIS a 45 minute heads up when The Pentagon plans to bomb an oil convoy which we suppose makes sense.

It’s the least the CIA can do for an old friend.

European Affairs
An update on the Paris bombings and the suspects behind the multiple attacks in France and Belgium this year
(courtesy zero hedge)

France Releases Picture Of Third Stadium Suicide Bomber

In the days following the deadly attacks that left some 130 people dead in Paris, French authorities scrambled to identify the attackers and determine if other cells operating in France and Belgium were on the verge of staging similar operations.

As it turns out, not only were there more “teams” set to wreak havoc on the city (specifically on La Defense and Quatre Temps), but in fact, the “mastermind” of last Friday’s mayhem – a 27-year old, rising “star” in jihadist circles named Abdelhamid Abaaoud – was in fact hiding out just two kilometers from the site of the stadium bombings.

Now, as Belgium locks down Brussels and ransacks Molenbeek searching for Salah Abdeslam, two other “terrorists”, and an accomplice of Jihadi John known only as “CF”, France has released a picture of the third Stade de France bomber. 

So apparently, he goes here…

If you think you might have seen him somewhere (you know, like if you happen to have been rafting in the Mediterranean lately or maybe if you were recently hanging out with friends in Molenbeek and noticed someone making a suicide belt in the kitchen), you’re encouraged to contact French authorities immediately.

Saturday and Sunday:  Belgium on full alert as another threat is still imminent and serious.  Citizens remained at home causing huge damage to their economy.
(courtesy zero hedge)

Belgium PM Maintains Maximum Terror Alert, Confirms Threat Still “Imminent, Serious”; Civilians Urged To “Remain At Home”

Latest Update:


So – much like The Fed, it appears Belgian officials find themselves trapped at the lower bound of liberty and freedom and higher bound of terror and fearmongery.

As we detailed earlier,

On Saturday, police and other security personnelinstituted what amounts to a military lockdown of Brussels amid a “serious and imminent” terror threat.

The government’s crisis center advised the public to “avoid places where a lot of people come together like shopping centers, concerts, events or public transport stations wherever possible.” The metro was closed, bus drivers refused to work, and local authorities were encouraged to cancel large events. Soldiers and police carrying assault rifles patrolled the streets where military vehicles were parked and for all intents and purposes, residents were told to simply stay inside.

Belgian Interior Minister Jan Jambon told reporters he wanted a register of everyone living in Molenbeek because it was not clear at present who was there, with authorities conducting door-to-door checks of every house. “The local administration should knock on every door and ask who really lives there,” Jambon said. Here’s what Jambon had to say on Sunday: “There are several suspects, that’s why we have put in place such a concentration of resources. We are following the situation minute by minute. There’s is no point in hiding that there is a real threat, but we are doing everything we can, day and night, to counter this situation,”

Saturday came and went without incident, but apparently, Brussels isn’t out of the woods yet. The terror threat level remained at 4 – the highest – on Sunday and the warzone like conditions may extend into the work week. 

Authorities are apparently searching for “two men” who officials say pose an imminent threat to the public.“There are two terrorists in the Brussels region that could commit very dangerous acts,”Schaerbeek Mayor Bernard Clerfayt told Belgian media on Sunday. 

As The Telegraph reports, “the national security council, including top ministers, was expected to convene on Sunday afternoon to determine what measures to take or retain,” while it’s possible schools could be closed on Monday. 

Just in case the public wasn’t worried enough, “a terror suspect” linked to Jihadi John has apparently “evaded” British intelligence and escaped to Brussels where authorities fear he may have linked up with an Abdelhamid Abaaoud cell. The suspect, who authorities are calling “CF”, “was under surveillance when he slipped the security net and escaped in the back of a lorry,” The Telegraph says, adding that “he is known to have arrived in Brussels where he tried to obtain a false British passport.” CF is“seeking to harm the public on a wide and terrifying scale,” a judge says. 

Here are the latest images out of Brussels:

“Shelter in place and remain at home. If you were planning to attend an event, we strongly urge you to reconsider,” the US Embassy in Brussels advised Americans living in or visiting the city.

“Unfortunately, it’s a threat that goes beyond just that individual,” Jabon added, referring to Paris suspect Salah Abdeslam. “One big test will be whether the metro system starts running again Monday morning, when many of the capital’s more than one million inhabitants depend on public transport to get to work,” WSJ notes.

So, the terror marathon continues unabated and as you might have heard overnight, there were conflicting reports on Saturday regarding whether Anonymous (who decided last week to launch a cyber war against ISIS) had leaked a list of targets terrorists intended to strike on Sunday. The top Anonymous Twitter feed denied that the “intel” emanated from the group, but authorities took it seriously enough that the FBI weighed in.

In any event, Belgian Prime Minister Charles Michel wants you to know that despite the troops in the streets, the city-wide lockdown, and the government’s advice to remain indoors, nobody should be “panic-stricken.” Rather, Belgians should just “be alert.”

Roger that, Charles.



And late this afternoon as suicide belt has been discovered in a trashcan heightening fears

(courtesy zero hedge)

Markets Swoon On News Terrorist’s Explosive Belt Was Found In Paris Trash Can

On the off chance Parisians had started to calm down now that it’s been more than a week since 8 ISIS operatives turned the city into a warzone, killing 130 people in the process, expect the panic level to rise anew. Multiple sources are now reporting the discovery of an explosive belt in the suburbs.

Apparently, the “object” was found without a detonator in a trash can near Montrouge where, you’re reminded,Salah Abdeslam made a phone call on the night of the Paris attacks:

And the reaction from markets:

Meanwhile in Belgium, anyone who might have thought the work week would bring some relief for panicked citizens who for nearly three days now have been told that it’s best to remain indoors due to a “serious and imminent” terror threat, would come away disappointed on Monday as authorities extended the threat level 4 for Brussels while extending threat level 3 for the rest of the country. 


After a series of raids conducted on Sunday which led to the arrest and detention of 15 people, one man was indeed charged in connection with the Paris attacks. Here’s Reuters:

Belgian prosecutors on Monday said they have charged a man with participating in the Paris attacks in an ongoing investigation in Brussels, which is currently on maximum security alert.


He is being held in custody. Another 15 people who were arrested in an operation on Sunday night have been released after being questioned, the Federal Prosecutor’s Office said in a statement.


Two of five people detained earlier on Monday were also released, it said. 

“The investigating judge specialised in terrorism cases placed into custody a man arrested during the operations of last night. He is charged with participating in activities of a terrorist group and with terrorist attack (Paris),” the prosecutor’s office said in a statement.

Over the weekend, officials ransacked Molenbeek searching for Salah Abdeslam, two other “terrorists”, and an accomplice of Jihadi John known only as “CF.”

There’s no word on whether the man charged on Monday was one of the two men police were searching for and as far as we know, Salah Abdeslam is still on the loose, so lock your doors, stay away from the windows, don’t ride the metro, and watch out for this guy:


Strange data:  European PMi surges and yet the ECB is preparing more QE.  Go figure!!

(courtesy zero hedge)


Eurozone Composite PMI Surges To 54 Month High Even As ECB Prepares To Launch More QE To “Boost Economy”

With the ECB expected to announce a boost to QE and pushing rates even lower into record negative territory, perhaps Markit did not get the memo to double seasonally adjust the seasonally adjusted European manufacturing and services PMI survey data, when instead of providing cover for Draghi (“look, the economy is slowing down even more, surely you must unleash more printing”) it reported that not only the Manufacturing PMI rose to 52.8 from 52.3, a 19 month high and above the highest estimate (range was 51.5 to 52.6), not only the Service PMI rose to 54.6 from 54.1, a 54 month high and also above the highest estimate (range of 53.5-54.4), but the Composite PMI soared to the highest level recorded since May 2011, rising from 53.9 to 54.4 (which was also above the highest estimate).

Who drove the surge – mostly Germany, which also beat all three surveys across the board, making one wonder just which country the Volkswagen scandal was based in.

From the report:

Eurozone businesses reported the fastest rates of growth in business activity and employment for four-and-a-half years in November. The Markit Eurozone PMI® rose from 53.9 in October to 54.4, according to the preliminary ‘flash’ reading, indicating the fastest rate of expansion of output since May 2011. Moreover, the survey’s employment, new orders and backlogs of work indicators all signaled the strongest monthly expansions in four-and-a-half years.


The survey data also highlighted the broad-based nature of the upturn. The recovery continued to be led by the service sector, where business activity and new business rose at the fastest rates since May 2011 and employment showed the biggest monthly gain for five years. Manufacturing output growth meanwhile also gathered pace, reaching a three-month high amid the largest monthly improvement in order books since April of last year.  Factory headcounts also rose at a faster rate as firms raised capacity in line with the improved demand environment.


One area of weakness was France, where business activity rose at the slowest rate for three months, largely reflecting weaker service sector growth. Manufacturing output growth also slowed despite a slightly faster rise in new orders.


Growth meanwhile accelerated to a three-month high in Germany, fuelled by the biggest monthly improvement in new business for two years. Stronger gains in business activity and new orders in the service sector were partly offset, however, by a slowdown in manufacturing. An upturn in job creation was reported across both sectors, nevertheless, resulting in the largest jump in overall employment for nearly four years.


The strongest rate of expansion was seen outside of the eurozone’s two largest economies, where the survey recorded the second-steepest rise in output since the global financial crisis. Employment in the rest of the currency bloc meanwhile showed the joint-largest gain since July 2007.


Despite the upturn in the pace of growth and hiring, the survey showed ongoing deflationary pressures. Average prices charged for goods and services fell marginally, at a rate unchanged on October, while average input costs once again barely rose, linked primarily to falling global commodity prices.

How does one reconcile this seemingly resurgent economy with Draghi’s most recent comments that he is disappointed in Europe’s growth rate? Apparently Markit got the wrong memo on what message it was supposed to convey. Here is Chris Williamson, Chief Economist at Markit said:

“The PMI shows a welcome acceleration of eurozone growth, putting the region on course for one of its best quarterly performances over the past four-and-a-half years. The data are signalling GDP growth of 0.4% in the closing quarter of the year, with 0.5% in sight if we get even just a modest uptick in December.


“The improved performance in terms of economic growth and job creation seen in November are all the more impressive given last weekend’s tragic events in Paris, which subdued economic activity in France – especially in the service sector.


“However, with recent comments from ECB chief Mario Draghi highlighting how the central bank remains disappointed with the strength of the upturn at this stage of the recovery,November’s slightly improved PMI reading will no doubt do little to dissuade policymakers that more needs to be done at their December meeting to ensure stronger and more sustainable growth.”

In other words Europe’s central bank, like the Fed, may be data driven, but not by good data when it has already made up its mind to boost stimulus. Expect a dramatic slowdown in PMIs over the coming months to provide much needed cover for continued European currency debasement.



What Recovery? Spanish Wages Tumble To Weakest Since 2007

Amid all the singing and dancing over Spain’s miraculous recovery and Europe’s renaissance on the back of Draghi’s money-printing machine, it appears – just like in America – that below the glossy veneer of engineered equity and bond prices, all is not well. As Xinhua reports, the average wage in Spain has fallen to its lowest level since 2007, according to figures released by the Spanish Ministry of Finance, and after peaking at 19.3 million in 2009, the number of workers is also collapsing.


According to data which is based on the tax returns of nearly 16,900,000 workers in Spain in 2014, the average annual wage now stands at 18,420 euros (around 20,000 US dollars).

The highest salaries are found in the capital city of Madrid, where the average worker takes home 24,576 euros. The lowest salaries are recorded in the rural region of Extremadura, where people’s annual income is as low as 13,559 euros.

The report shows that salaries showed little fluctuations from 2008 to 2011, and began to fall after the implementation of labor reform in 2012.


The ministry says the fall was not so much due to salaries being lowered for people at work, but that newly created jobs now offer much lower pay than before the crisis.

However, the crisis has no effect on Spain’s biggest earners as those who earn 10 times the minimum wage saw their salaries continue to grow. The 127,706 people fell in this category earn an average of 148,824 euros in 2014.

There is also clear gender discrimination in earnings in the highly-paid sector. Women account for just 18 percent of those earning 10 times the minimum wage.

*  *  *

So yet another ‘recovery’ based on the lowering of job quality and collapse in participation rates… as long as the mainstream media plays along with the headlines (and The ECB keeps buying) everything is awesome.


*  *  *

It appears Catalan is right to want out…

Charts: Bloomberg


Glencore closes down 2 cents to 90 pence putting extreme pressure on derivatives underwritten by them.  Their counterparty is Deutsche bank:
(courtesy LSE)


Price (GBX) 90.42 Var % (+/-) -2.07% (Down -1.91)
High 93.83 Low 86.11
Volume 66,640,226 Last close 90.42 on 23-Nov-2015
Bid 90.61 Offer 90.68
Trading status End of Post Close Special conditions NONE
As at 23-Nov-2015 17:33:32 –  All data delayed by at least 15 minutes.
Just in the past three weeks:  a harbinger for events to come!!

” spot rates for transporting containers from Asia to Northern Europe have crashed a stunning 70% in the last 3 weeks alone. This almost unprecedented divergence from seasonality has only occurred at this scale once before… 2008! “It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.”

(courtesy zero hedge/Baltic Dry Index/Shanghai Container Freight index:)

Global Trade Just Snapped: Container Freight Rates Plummet 70% In 3 Weeks

This market is looking like a disaster and the rates are a reflection of that,” warns one of the world’s largest shipbrokers, but while The Baltic Dry Freight Index gets all the headlines –having collapsed to all-time record lows this week – it is the specifics below that headline that are truly terrifying. At a time of typical seasonal strength for freight and thus global trade around the world, Reuters reports that spot rates for transporting containers from Asia to Northern Europe have crashed a stunning 70% in the last 3 weeks alone. This almost unprecedented divergence from seasonality has only occurred at this scale once before… 2008! “It is looking scary for the market and it doesn’t look like there is going to be any life in the market in the near term.”

Baltic Dry at record lows…


And Shanghai Containerized Freight collapsing…


As Reuters reports,

Shipping freight rates for transporting containers from ports in Asia to Northern Europe plunged by 27.9 percent to $295 per 20-foot container (TEU) in the week ending on Friday, one source with access to data from the Shanghai Containerized Freight Index told Reuters.


The drop came after spot freight rates on the world’s busiest route dropped 39.3 percent last week, and the current rates are widely seen as loss-making levels for container shipping companies.


The spot freight rates for transporting containers, carrying anything from flat-screen TVs to sportswear from Asia to Northern Europe, has fallen 70 percent in three weeks.


In the week to Friday, container freight rates fell 22.5 percent from Asia to ports in the Mediterranean, dropped 8.6 percent to ports on the U.S. West Coast and were down 8.0 percent to ports on the U.S. East Coast.

But even more concerning is this collapse is occurring just as the containerized freight industry enters its golden seasonal period…


Now where have we seen this massive unprecedented decoupling before?


Of course the clarion calls of the status quo, everything is awesome, optimists is that this has nothing to with demand but is merely due to over-supply of ships…

Supply has indeed surged…

Source: @M_McDonough

But only thanks to totally manipulated and decoupled-from-reality signals from ‘markets’ that caused firms to massively mal-invest in building ships for the renaissance of global trade… which never happened…


In fact, as the chart above shows, growth in global trade has been slowing down for some time, as Acting-Man’s Pater Tenebrarum notes,

But somewhere between collapsing oil prices, dollar strength, and consumer lethargy the economy’s narrative has drifted off plot.  The theme has transitioned from one of renewed growth and recovery to one of recurring sickness and stagnation.  Mass malinvestments in U.S. shale oil, Brazilian mines, and Chinese factories and real estate must be reckoned with.


Price adjustments, bankruptcies, and debt restructuring must be painfully worked through like a strawberry picker hunkered over a seemingly endless furrow row of over ripening fruits.  Sore backs, burnt necks, and tender fingers are what the over-all economy has in front of it.  The U.S. economy is not immune to the global disorder after all.

More evidence is revealed each week that the unexpected is happening.  Instead of economic strength and robust growth, economic fundamentals are breaking down.  Manufacturing is slowing.  Consumer spending is soft.  For additional edification, just look at copper, iron ore, or aluminum…

Charts: Bloomberg





as outlined to you last week, Brazil has a trio of bad stuff happening to them:

1. Faltering GDP

2.Runaway inflation

3.Huge unemployment

a great picture of deteriorating conditions inside Brazil:

(courtesy zero hedge)

Brazil’s Disastrous Debt Dynamics Could “Create Contagion” For Emerging Markets, Barclays Warns

Last week, we got the latest round of abysmal economic data out of Brazil. To summarize: GDP is in “free fall mode” (to quote Barclays), inflation hit double digits for the first time in over a decade, and unemployment soared to 7.9% in August, up sharply from just 4.3% a year earlier.

Put simply: it’s a full on economic meltdown.

The situation is made immeasurably worse by the country’s seemingly intractable political quagmire. The standoff between President Dilma Rousseff (who has been accused of cooking the fiscal books) and House Speaker Eduardo Cunha (who has been implicated in a kickback scheme tied to Petrobras) has led to a veritable stalemate that’s made it exceedingly difficult for Rousseff and her embattled finance minister Joaquim Levy to push through badly needed austerity measures.

Rousseff scored a victory on the austerity front on Wednesday when lawmakers approved her veto of a bill that would have raised retirement payments alongside the minimum wage, but this is an uphill battle and while incremental wins may be enough to give the beleaguered BRL some temporary respite, the medium- to long-term outlook is abysmal.

As Brazil continues to muddle through what has become a stagflationary nightmare, Barclays is out with a fresh look at the country’s debt dynamics and unsurprisingly, the picture isn’t pretty.

The road ahead depends on fiscal policy, Barclays begins, and that, given the current dynamic, is not a good thing. “Even if politics were uncomplicated and policy unconstrained, Brazil would still face enormous challenges adjusting to far less supportive local and global conditions,” the bank notes, referencing the now familiar laundry list of EM problems including slumping commodity prices, lackluster demand from China, the yuan deval (bye, bye trade competitiveness), and the incipient threat of a Fed hike and thus an even stronger USD.

“Investors are also grappling with the prospect of a prolonged, unsustainable fiscal policy framework,” Barclays adds.

And here’s Antonio Pascual doing his best Alberto Ramos impression by rattling off a comically long list of problems:

“Brazil is confronting a toxic combination of a primary budget deficit, high public debt (relative to EM countries), very high real interest rates (the Selic stands at 14.25%), sluggish trend growth, a negative commodity price shock and potential contingent liabilities for the sovereign, which together spell trouble for public debt dynamics.”
Yes they sure do “spell trouble for debt dynamics” and if the prospect of further imperiling the economy wasn’t enough to tie Copom’s hands, the relationship between public debt and rates leaves the central bank virtually paralyzed:

The combination of high debt/GDP and high interest rates means that Brazil suffers from ‘fiscal dominance’, a situation where monetary policy is driven by sovereign solvency concerns. Given the sensitivity of public debt to high interest rates in Brazil, the central bank is unlikely to tighten policy despite high inflation.

And even as Brazil doesn’t necessarily have an “original sin” problem (at least when it comes to public debt), the outlook is still rather dire:

How much time does Brazil have before markets push sovereign yields higher, accelerating the unsustainable debt dynamics? There are some important risk mitigants. Brazil’s debt is predominantly payable in local currency, and what is payable in foreign currency is covered many times over by its international reserves. The problem is that, by our estimates, public debt in Q4 2015 will be more than 71% of GDP with average funding costs at more than 12%, with no prospects for a turn-around towards a sustainable primary surplus or stronger growth prospects.
Going forward, “the prospects of success are bleak”:

The challenges of fiscal consolidation in Brazil are only beginning, and without policy changes, prospects of success are bleak.

In a stressed scenario, in which there is a lack of full Congress support and an unsuccessful asset sales program, we see the fiscal adjustment for 2016 amounting to only 1.0% of GDP.

This scenario is consistent with increased market pressure for the remainder of 2015 and 2016 (Figure 9). Market stress could increase, for example, due to a potential impeachment of the President, a loss of confidence in the fiscal outlook, and/or a significant increase in contingent liabilities. Our projection assumes that the primary balance worsens relative to our base case, reaching -2.3% of GDP in 2016. The deficit falls gradually thereafter but a deficit persists until 2019 (-0.5 percent).

The recession lasts for longer than in the base case, but inflation rises further because further BRL depreciation pushes actual inflation and inflation expectations higher. Inflation rises to 9% in 2015 and remains high (but gradually falls) thereafter. Interest rates rise 2pp more than in the base case in 2015 and 2016, as higher risk premia push up the cost of debt.
The end result, Barclays warns is that “in the stress scenario, debt/GDP rises to over 100% of GDP by 2020 and does not stabilise.” And while the bank admits that “there are various negative developments compounding this scenario, including higher average interest rates and weaker growth,” Barclays cautions that it “does not view [the] assumptions as unrealistic” given that for instance, the projection only assumes interest rates rising 200bp relative to the base case which “is half the increase in the cost of debt seen during the global financial crisis of 2008, and considerably less than the pressure seen in 2002 when the Selic rate rose by 800bp in less than six months.”

What happens if the cost of debt rises in line with what we witnessed in 2008, you ask? This:

The chart depicts 40 paths for debt/GDP associated with increasingly higher interest rates in steps of 10bp, starting from the baseline path for debt/GDP to the last path corresponding to the baseline scenario for interest rates plus a 400bp shock. The shock is applied to the interest rate in the transition years, not to the steady state interest rate (set at 8%). The key takeaway is that as the cost of debt rises in the baseline scenario, public debt/GDP increases rapidly and stabilizes later relative to the base case. In the extreme case of a +400bp increase in the average cost of debt, the public debt/GDP ratio peaks at a whopping 114% in 2021.

So what’s the takeaway besides the fact that Brazil is, for lack of a better word, screwed (because we already knew that)? Well remember, Brazil is representative of the problems facing EM as a whole. Slumping commodity prices, currency carnage, FX pass through inflation, sensitivity to decelerating Chinese demand and to Beijing’s yuan deval, Brazil has it all – they even have a seemingly intractable political crisis, and as we never tire of pointing out, idiosyncratic political risk factors have become an important part of the EM calculus (see Turkey and Malaysia for instance). In short, the country is a proxy for EM as a whole. With that in mind we close with what Barclays says are the wider implications of Brazil’s deteriorating fiscal picture and challenging debt dynamics:

“The prospect of such deterioration is likely to lead to a further sell-off in Brazilian assets and could create contagion – especially to vulnerable EMs – given Brazil’s systemic importance.”



Business tycoon Macri wins the Argentinian election and faces major problems:

  1. A fiscal deficit of 7% of GDP
  2. Huge inflation bordering on hyperinflation:  24% increase in CPI in September
  3. low reserves
  4. capital controls
  5. defaulting debt

(courtesy zero hedge)


Argentina Throws Out The Peronists In “Historic” Presidential Election

“Today is a historic day. It’s the changing of an era.”

That’s what Mauricio Macri, the son of Italian-born construction tycoon Francesco Macri, told thousands of supporters on Sunday after winning the Presidency in a landmark election in Argentina. As Reuters notes, Macri, a conservative who served two terms as mayor of Buenos Aires, will become only the third non-Peronist President since the end of military rule more than three decades ago. 

(“Yes. Just… yes.”)

The defeat of ruling party candidate Daniel Scioli is “seen as a rejection of departing leader Cristina Kirchner’s interventionist economic policies and a turn to the right after 12 years of leftist rule,” WSJ said on Monday. “There has never been a period in government with such tangible economic progress,” Kirchner lamented, adding that “it would be painful to see these achievements being eroded.”

(“Wait, what?”)

But voters apparently did not agree. High inflation, falling FX reserves, and a legacy of defaults cast a long shadow and in a testament to just how ready the market was to see a voter repudiation of Kirchner and her policies, a bevy of hedge funds racked up outsized gains starting late last month as the market cheered a strong showing in the Oct. 25 first-round election by Macri. Here’s Goldman’s take on what the new President will be forced to confront:

There are four main economic challenges facing the next administration: (1) the large fiscal deficit; (2) elevated inflation; (3) exchange rate overvaluation and unwinding of capital controls; and (4) a normalization of external debt conditions. But in spite of this categorization, these issues will have to be addressed together due to their tight interconnectedness. Moreover, advancing solely in one front could lead to further deterioration on the others. 


Yes a “large fiscal deficit,” and by “large” Goldman means 7%. That’s a marked deterioration from the 2.2% surplus the country ran just ten years ago.

As for inflation, well, Goldman says it’s likely to “soon resume its rise” after falling to “just” 24% Y/Y in September. 

“They gave me a raise in January, but the costs nearly doubled,” one voter said. “Yesterday I went to buy bread and it rose 20% from last week.” 

Macri will also need to address the exchange rate. As WSJ reminds us, Kirchner “encouraged the sale of U.S. dollar derivatives by the central bank to contain rising demand for greenbacks,” but Macri says that strategy will likely cost Argentina “billions.” He “proposes a rapid lifting of most exchange rate restrictions to achieve a unified exchange rate that he expects would stabilize between the official and parallel parities (9.60 and 15.50 ARS/USD, respectively),” Goldman adds. But as The Australian wrotethis morning, Macri’s promise to lift controls on USD purchases and thus eliminate the black market for FX “would likely lead to a sharp devaluation of the Argentine peso [and] with low foreign reserves, the government would desperately need an immediate infusion of dollars.”

While the new President vows to eliminate poverty and help ensure that all citizens “can aspire to have homes with running water and a sewage system,” some voters who remember Macri’s tenure as mayor of Buenos Aires are fearful of what a shift away from the Left could mean. “Teachers in the capital went through a lot of suffering,” she said. “We had to stage a very tough fight to secure wage increases. He thinks we are ranch hands,”Buenos Aires schoolteacher Laura Lemes told The Journal.

And then there is of course of the default “problem” which Macri intends to solve. Here’s Bloomberg:

In the 14 years since the country carried out the biggest default the world had ever seen, international investors watched an economy that had long been one of their favorites turn into a pariah in global capital markets. Under the Kirchners — first Nestor and then his wife, Cristina — Argentina became best known for its byzantine foreign-exchange system, the seizure of privately-owned assets and the under-reporting of inflation.


Investor excitement is tangible, a rarity nowadays in a region that’s suddenly fallen out of favor. Companies, including Germany’s BayWa AG and Brazil’s BRF SA, are prepping to expand their presence in the country and Argentina’s benchmark stock index soared 30 percent in the past three months as traders anticipated a Macri victory. Even the country’s defaulted debt — the government fell back into default last year on legal grounds stemming from the 2001 debacle — has been rallying, with prices on benchmark bonds climbing well over par value. Eager to reinsert the country in foreign markets, Macri has said that settling the old debts will be a top priority after he’s sworn in as president on Dec. 10.



With 98 percent of the ballots counted, Argentine bonds extended their rally. The benchmark securities due in 2033 gained to a price — which includes interest owed since last year’s default — of 114 cents on the dollar, an eight-year high.

As Bloomberg goes on to note, “there’s no shortage of big-name investors — George Soros, Daniel Loeb and Richard Perry, to name a few — betting on Macri to successfully resolving the debt dispute and regaining access to international credit markets.” A big part of putting the 2001 default (a $95 billion fiasco) in the rearview will be resolving a dispute with Paul Singer, who was seen by the Kirchners as a “vulture.”

Below, find some further color from sell-side desks.

*  *  *

From Citi

At the time of writing and with 99.1% of the voting stations already counted, Mauricio Macri is Argentina’s new President Elect, after obtaining 51.4% of the votes in the November 22 second round. While Macri’s victory should not be a surprise, he won by a narrower margin than expected.

We are concerned the narrow victory may limit Macri’s room to deliver a series of much needed adjustments. The next administration will need to adjust FX, monetary and fiscal policy, in a context of an economy that is already contracting and seems to be heading to a new recession.

Strategy – Argentina bonds have rallied considerably in anticipation of a resolution of the long-standing holdouts conflict and a potential Macri victory. After the election, we think that spreads could move tighter yet most of the upside is behind us.

The most urgent challenge on the economic front is the FX policy, we believe. Over the last few weeks, the Central Bank of Argentina (BCRA) has tightened the FX controls faced by importers, has increased interest rates and has announced that the local banks will have to sell a fraction of their foreign currency denominated assets. The fact that the BCRA has been undertaking all these measures ahead of the second round reveals that the current FX policy is becoming increasingly difficult to sustain. According to an article (which had a great level of detail) from the local newspaper La Nación (see “Afirman que las reservas del Banco Central entraron en un punto muy crítico”), the BCRA has USD25.9bn of foreign currency liabilities. Thus, the non-borrowed reserves are none, roughly speaking.

The challenge on the FX front is twofold. On the one hand, the ARS is grossly overvalued. On the other hand, there is a clear monetary imbalance.Regarding the real overvaluation of the ARS, we estimate that real effective exchange rate has dropped (appreciated) 44% since 2011. Thus, for Argentina to have the same REER than four years ago, the USDARS should stand at 17. A different approach would be to compare the evolution of the real exchange rate vis-à-vis the USD in Argentina and other countries in the region. While the LatAm currencies (BRL, CLP, COP, MXN, PEN and UYU) real exchange rates relative to the USD have increased on average 36% since 2011, the USDARS has dropped 19% in real terms. Thus, from this point of view, the USDARS should stand 68% higher at 16.1.

On the monetary front, the next administration will need to deal with a monetary overhang – i.e, an excess of local currency. The monetary overhang puts pressure on the FX market, as people try to get rid of an excess of pesos by purchasing foreign currency – that is the reason why Argentina has FX controls, to prevent this from happening.

There is also a flows problem. Besides the accumulated stock of trapped pesos, money printing is out of control. This is the first time that a marked increase in BCRA’s interventions in the FX market has not led to a deceleration in money printing (Figure 5). As shown below, money printing remains unabated, with the M0 increasing at a rate slightly above 35%. Basically, this means that despite that the BCRA is absorbing pesos by selling foreign currency, the other sources of money printing have increased.

From BofAML

We see potential for a significant policy shift after this Sunday election, following 12 years of a Kirchner-led government. In our view, the incoming government has an opportunity to bring Argentina back to a sustainable growth path after years of inward policies, distortionary regulations, financial repression and capital controls.

We expect the next administration to remove capital controls and some inefficient regulations, while implementing a strong FX and fiscal adjustment to restore debt sustainability. We forecast true growth at only 0.7% in 2016, due to the fiscal contraction, the crisis in Brazil and lower commodity prices. But we expect growth to rebound to 3.6% in 2017 amid a confidence shock due to the policy shift and the return to international capital markets.

We expect the next administration to remove most capital controls within a year. The government will likely move faster to remove restrictions on dollars allocated for production (capital and inputs) and slower on stocks (arrears with importers of up to $9bn and remittances of trapped dividends for about $7bn at current FX). While we also expect restrictions on dollars to be removed for savers and tourism eventually, we would not be surprised if the government keeps some restrictions on these for a while if the financial situation is worse than expected. In this sense, the large negative position of the Central Bank in the FX futures market generate incentives to postpone a full FX-unification before the future contracts mature, to avoid realizing quasi-fiscal losses.

To stop the drain of international reserves, we expect the central bank to allow a strong depreciation of the official FX. We forecast the official FX at ARS13 and 16 by yearends 2015 and 2016, respectively. To improve the FX flow rapidly, we expect the government will negotiate with exporters the reduction of grain stocks, which we estimate at $4bn, offering a higher FX, elimination of export permits and an export tax cut of about 0.4% of GDP. Fiscal. The fiscal consolidation is a pre-condition to generate a confidence shock to stimulate investment and stabilize inflation and FX expectations, in our view. We expect the next government to reduce the fiscal deficit from our estimated 7.3% of GDP in 2015 to 4.3% by the end of the 2017, mostly by cutting subsidies by about 2% of GDP in stages in 2016 (see The fiscal gift). We estimate the government could also reduce the fiscal deficit by another 1.4% of GDP in two years, keeping the spending pace below GDP growth and cutting capex, more than offsetting a tax cut to exporters of about 0.4% of GDP.

*  *  *

The bottom line, as Jody LaNasa, the founder of the $1.5 billion hedge fund Serengeti Asset Management, told Bloomberg: “The question is whether this is going to be something like the rebirth of Argentina or another failed dream that people get excited about, but then they can’t overcome the challenges.”


JPMorgan sounds the alarm bell on emerging market debt:

(seeking alpha)

JPMorgan: “Hazard ahead” for EM debt and banks as Fed hikes

Nov 23 2015, 12:30 ET | By: Stephen Alpher, SA News Editor

“Hazard ahead: The emerging market credit cycle has turned down,” is the title of a recent JPMorgan report, arguing credit markets will tighten as the Fed boosts rates.

A shoe not yet dropped, says the team, is that debt to GDP ratios are not decreasing.

“Remember that a lot of the credit growth in emerging markets is no more than the flip side of easy money in developed markets,” and as the Fed normalizes, this can reverse, though Europe and Japan keeping their feet on the gas pedal should mitigate the turn.

The ratio of broad emerging market nonfinancial private credit to GDP hit 128% of GDP in Q1, up 51 percentage points from 2007. Exclude China, and the numbers are not nearly as gaudy, but still frothy, and the moves resemble those from that of developed markets in the years leading up to the global financial crisis.

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/MONDAY morning  7:00 am

Euro/USA 1.0619 down .0025

USA/JAPAN YEN 123.19 up .441

GBP/USA 1.5128 down .0058

USA/CAN 1.3390 up.0046

Early this morning in Europe, the Euro fell by 25 basis points, trading now well below the 1.07 level falling to 1.0619; 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 and falling bourses. Last night the Chinese yuan down in value (onshore). The USA/CNY up in rate at closing last night:  6.3890  / (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 44 basis points and trading now well above the all important 120 level to 123.19 yen to the dollar.

The pound was down this morning by 58 basis points as it now trades well below the 1.52 level at 1.5128.

The Canadian dollar is now trading down 46 in basis point to 1.3390 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 MONDAY morning:closed up 20.00 or 0.10% 

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

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

Gold very early morning trading: $1070.85


Early MONDAY morning USA 10 year bond yield: 2.29% !!! up 4 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  3.04 up 2 in basis point.

USA dollar index early Monday morning: 99.85 up 17 cents  from Friday’s close. (Resistance will be at a DXY of 100)

This ends early morning numbers Monday morning


The Saudis are desperate as they realize that they made a policy error:
(courtesy zero hedge)

Oil Surges After Saudi Arabia Pulls A Draghi, Says Will Do “Whatever It Takes” For Stable Oil Market

The oil producers are rapidly learning from the central banks how to jawbone markets higher. With both Brent and WTI sliding as recently as ten minutes ago, suddenly a buying frenzy was unleashed following a Bloomberg headline which cited the Saudi Press Agency, according to which the world’s largest crude exporter was ready to pull a Draghi and would do “whatever it takes” for a stable oil market, and that it would cooperate with OPEC and non-OPEC members for stable prices.

Here is the Bloomberg take:


Which however is somewhat different from the actual SPA press release, which says The Cabinet stressed the Kingdom’s role in the stability of the oil market, its constant readiness and continuing pursuit to cooperate with all oil producing and exporting countries.”

So just another “lost in translation” attempt to jawbone prices higher, in the finest of ECB traditions.

Also whether this means that Saudi Arabia, which has been pumping record amounts in recent months will slow down, is unclear: after all the entire strategy by the Saudis has been to put marginal, high cost producers out of business. So did they just wave the white flag of surrender? We seriously doubt it.

If anything, this is more of a market test to see just how much impact jawboning has on market prices. And judging by the immediate reaction, it is substantial.

Draghi would be proud.

Of course, whether the Saudis will actually do anything, well that’s a different story.

Charts: Bloomberg

But the jawbonning was not enough as oil re circles back into the 40 dollar column:
(courtesy zero hedge)

Oil Tumbles Back Into Red As Saudi “Whatever It Takes” Jawboning Is Not Enough

Just 2 hours after news broke of Saudi officials discussing the need to do “whatever it takes” to stabilize the oil market – sending crude soaring – half the gains are gone. With the algos tagging Friday’s highs, WTI Crude has tumbled back into the red from Friday’s close as traders want action not words to solve the massive global oil glut…



And now for your closing numbers for Monday night: 3:00 pm
Closing Portuguese 10 year bond yield: 2.54% up 5 in basis points from Friday
Japanese 10 year bond yield: .324% !! par in basis points from Friday and extremely low
Your closing Spanish 10 year government bond, Monday up 1   in basis points.
Spanish 10 year bond yield: 1.65%  !!!!!!
Your Monday closing Italian 10 year bond yield: 1.52%  down 2  in basis points on the day: Monday/ trading 14 basis points lower than Spain.
Closing currency crosses for MONDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
 Euro/USA: 1.0622 down.0023 (Euro down 23 basis points)
USA/Japan: 122.81 up 0.063 (Yen down 6 basis points)
Great Britain/USA: 1.5191  down .0094 (Pound down 94 basis points
USA/Canada: 1.3373 up .0028 (Canadian dollar down 28 basis points)

USA/Chinese Yuan:  6.3890 (up.0055 on the day (yuan down)

This afternoon, the Euro fell by 23 basis points to trade at 1.0622.  The Yen fell to 122.81 for a loss of 6 basis points. The pound was down 66 basis points, trading at 1.5120. The Canadian dollar fell by 28 basis points to 1.3373. The USA/Yuan closed at 6.3890
Your closing 10 yr USA bond yield: down 1 in basis points from Friday at 2.24%// ( trading at the resistance level of 2.27-2.32%)
USA 30 yr bond yield: 3.00 down 2  in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries
 Your closing USA dollar index: 99.80 up 13 cents on the day  at 2:30 pm
Your closing bourses for Europe and the Dow along with the USA dollar index closings and interest rates
London:  down 29.14 points or 0.46%
German Dax: down 27.52 points or 0.25%
Paris Cac down 21.85 points or 0.44%
Spain IBEX: down 12.90 points or 0.13 %
Italian MIB: up 154.55 points or 0.70%
The Dow down 31.13 or 0.17%

The Nasdaq:down 2.16 or 0.04%

WTI Oil price; 41.76
Brent OIl:    44.82
USA dollar vs Russian rouble dollar index:   65.86 down 1 1/8 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:

Stocks Dip As Credit, Copper, & Yield Curve Dump Trumps Crude & Dollar Pump

Triple whammy of dismal US data (CFNAI, Manufacturing PMI, and Existing Home Sales) but FedSpeak remained hawkish, Terror fears remain elevated (in Belgium and France), and credit and copper markets continue to carnage… is it any wonder stocks gave some back… and mainstream media was quick to assert…


Before we start, there appears to be some convergences (now OPEX week is over)…

Stocks caught down to credit (a little)…


And Trannies catching down to crude..

*  *  *

On the day, Trannies were worst, Small Caps best…and the rest marginally red amid very low holiday-week volume..


But last week’s ramp to Payrolls’ cliff-edge could not hold…


Valeant took another spill after hope ran amok early on…


KaloBios ended the day up 123%… (up 2000% in a week)…


Away from Tax inversions, Crude was probably the big story of the day as more Saudi jawboning sparked panic algo buying to Friday’s highs before drifting back to end teh day unchanged…


But copper was ugly… 14th down day in a row – a record according to our data – hovering just above 2.00.


With USD strength (USD Index > 100.00 today)…


Weighing on PMs…


Treasury yields were mixed with the long-end outperforming… (30Y <3.00%)


Smashing the 2s30s curve to 7 month lows…


And 2Y TSY yields are now at their widest to Bunds since 2006…

Charts: Bloomberg

This has to be a big tax evasion event and they defied Jack Lew.
Let us see if the USA tries to overrule this:
(courtesy zero hedge)

It’s Official: Allergan, Pfizer To Combine In Biggest Ever Tax-Inversion, Defy Jack Lew

As was extensively reported over the weekend, the Pfizer-Allergan tax-inverting, reverse-merger (in which the far smaller Allergan would end up “buying” Pfizer, courtesy of fungible debt which doesn’t care where it ends up as long as there are cash flows) would be announced this morning, and sure enough, moments ago the long-awaited press release finally hit.

Here are the details:

Pfizer and Allergan to Combine

  • Creates a new global biopharmaceutical leader with best-in-class innovative and established businesses
  • Enhances revenue and earnings growth profile of innovative and established businesses
  • Broadens innovative pipeline with more than 100 combined mid-to-late stage programs in development
  • Transaction expected to close in the second half of 2016
  • Expected to be neutral to Pfizer’s Adjusted Diluted EPS in 2017, accretive beginning in calendar year 2018 and more than 10% accretive in 2019 with high-teens percentage accretion in 20202
  • Expect combined Operating Cash Flow in excess of $25 Billion beginning in 2018
  • Increased financial flexibility facilitates continued investment in the United States
  • Preserves opportunity for a potential future separation of innovative and established businesses

And the full press release:

Pfizer Inc. (PFE) and Allergan plc (AGN) today announced that their boards of directors have unanimously approved, and the companies have entered into, a definitive merger agreement under which Pfizer, a global innovative biopharmaceutical company, will combine with Allergan, a global pharmaceutical company and a leader in a new industry model – Growth Pharma, in a stock transaction currently valued at $363.63 per Allergan share, for a total enterprise value of approximately $160 billion, based on the closing price of Pfizer common stock of $32.18 on November 20, 2015. The transaction represents more than a 30 percent premium based on Pfizer’s and Allergan’s unaffected share prices as of October 28, 2015. Allergan shareholders will receive 11.3 shares of the combined company for each of their Allergan shares, and Pfizer stockholders will receive one share of the combined company for each of their Pfizer shares.

“The proposed combination of Pfizer and Allergan will create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world,” stated Ian Read, Chairman and Chief Executive Officer, Pfizer. “Allergan’s businesses align with and enhance Pfizer’s businesses, creating best-in-class, sustainable, innovative and established businesses that are poised for growth. Through this combination, Pfizer will have greater financial flexibility that will facilitate our continued discovery and development of new innovative medicines for patients, direct return of capital to shareholders, and continued investment in the United States, while also enabling our pursuit of business development opportunities on a more competitive footing within our industry.”

“The combination of Allergan and Pfizer is a highly strategic, value-enhancing transaction that brings together two biopharma powerhouses to change lives for the better,” said Brent Saunders, Chief Executive Officer, Allergan. “This bold action is the next chapter in the successful transformation of Allergan allowing us to operate with greater resources at a much bigger scale. Joining forces with Pfizer matches our leading products in seven high growth therapeutic areas and our robust R&D pipeline with Pfizer’s leading innovative and established businesses, vast global footprint and strength in discovery and development research to create a new biopharma leader.”

Under the terms of the proposed transaction, the businesses of Pfizer and Allergan will be combined under Allergan plc, which will be renamed “Pfizer plc.” The companies expect that shares of the combined company will be listed on the New York Stock Exchange and trade under the “PFE” ticker. Upon the closing of the transaction, the combined company is expected to maintain Allergan’s Irish legal domicile. Pfizer plc will have its global operational headquarters in New York and its principal executive offices in Ireland.

Pfizer’s innovative businesses will be significantly enhanced by the addition of a growing revenue stream from Allergan’s durable and innovative flagship brands in desirable therapeutic areas such as Aesthetics and Dermatology, Eye Care, Gastrointestinal, Neuroscience and Urology. The combined company will benefit from a broader innovative portfolio of leading medicines in key categories and a platform for sustainable growth with diversified payer groups. With the addition of Allergan, Pfizer will enhance its R&D capabilities in both new molecular entities and product line extensions. A combined pipeline of more than 100 mid-to-late stage programs in development and greater resources to invest in R&D and manufacturing is expected to sustain the growth of the innovative business over the long term. Through product approvals, launches and inline performance the combined company aspires to be a leader in growth.

The combination of Pfizer and Allergan will significantly increase the scale of Pfizer’s established business, and their complementary capabilities will maximize the combined established portfolio. The addition of Allergan’s Women’s Health and Anti-Infectives portfolio will add depth to Pfizer’s established business, and Pfizer will expand the reach of Allergan’s established portfolio using its existing commercial capabilities, infrastructure and global scale. In addition, Allergan brings topical formulation, manufacturing and its Anda distribution capabilities to the combined company.

As a result of the combination with Allergan and subsequent integration of the two companies, Pfizer now expects to make a decision about a potential separation of the combined company’s innovative and established businesses by no later than the end of 2018.

Financial Highlights

Pfizer anticipates the transaction will deliver more than $2 billion in operational synergies over the first three years after closing. Pfizer anticipates that the combined company will have a pro forma Adjusted Effective Tax Rate1 of approximately 17%-18% by the first full year after the closing of the transaction. The transaction is expected to be neutral to Pfizer’s Adjusted Diluted EPS1 in 2017, modestly accretive beginning in calendar year 2018, more than 10% accretive in 2019 with high-teens percentage accretion in 2020. These expectations include the impact of expected share repurchases following the transaction. The combined company is expected to generate annual operating cash flow in excess of $25 billion beginning in 2018.

The transaction is not expected to have an impact on Pfizer’s existing dividend level on a per share basis. It is expected that the combined company will use its combined cash flow to continue to support an attractive dividend policy, targeting a payout ratio of approximately 50% of Adjusted Diluted EPS.1

Independent of the transaction and consistent with 2015, Pfizer anticipates executing an approximately $5 billion accelerated share repurchase program in the first half of 2016. Pfizer has approximately $5.4 billion remaining under its previously announced repurchase authorization.

Transaction Details

The completion of the transaction, which is expected in the second half of 2016, is subject to certain conditions, including receipt of regulatory approval in certain jurisdictions, including the United States and European Union, the receipt of necessary approvals from both Pfizer and Allergan shareholders, and the completion of Allergan’s pending divestiture of its generics business to Teva Pharmaceuticals Ltd., which Allergan expects will close in the first quarter of 2016.

Pursuant to the terms of the merger agreement, the Allergan parent company will be the parent company of the combined group. A wholly owned subsidiary of Allergan will be merged with and into Pfizer, and subject to receipt of shareholder approval, the Allergan parent company will be renamed “Pfizer plc” after the closing of the transaction. Immediately prior to the merger, Allergan will effect an 11.3-for-one share split so that each Allergan shareholder will receive 11.3 shares of the combined company for each of their Allergan shares, and the Pfizer stockholders will receive one share of the combined company for each of their Pfizer shares. Pfizer’s U.S. stockholders will recognize a taxable gain, but not a loss, for U.S. federal income tax purposes. The transaction is expected to be tax-free for U.S. federal income tax purposes to Allergan shareholders.

Pfizer stockholders will have the opportunity to elect to receive cash instead of stock of the combined company for some or all of their Pfizer shares, provided that the aggregate amount of cash to be paid in the merger will not be less than $6 billion or greater than $12 billion. In the event that the aggregate cash to be paid in the merger would otherwise be less than $6 billion or greater than $12 billion, then the stock and cash elections will be subject to proration.

Following the transaction, and assuming that all $12 billion of cash is paid in the merger, it is expected that former Pfizer stockholders will hold approximately 56% of the combined company and Allergan shareholders will own approximately 44% of the combined company on a fully diluted basis.

Governance and Leadership

Pfizer plc’s board is expected to have 15 directors, consisting of all of Pfizer’s 11 current directors and 4 current directors of Allergan. The directors from Allergan will be Paul Bisaro, Allergan’s current Executive Chairman, Brent Saunders, Allergan’s current Chief Executive Officer (CEO), and two other directors from Allergan to be selected at a later date. Ian Read, Pfizer’s Chairman and CEO, will serve as Chairman and CEO of the combined company. Brent Saunders will serve as President and Chief Operating Officer of the combined company. He will be responsible for the oversight of all Pfizer and Allergan’s combined commercial businesses, manufacturing and strategy functions.




This is not a good sign:  the national economic activity indicator contracted for the 3rd month in a row

(Chicago Fed/zero hedge)


National Economic Activity Contracted For 3rd Month In A Row, Chicago Fed Signals

National Activity contracted for the 3rd month in a row according to The Chicago Fed’s index. Printing -0.04 (missing expectations of +0.05 for the 9th time of the last 11 months), CFNAI has now been below 0 (contraction) for 8 months this year. Under the surface the biggest problem is the collapse in the sales-to-inventories index to cycle lows (contracting 7 of the last 8 months).

The heradline index is seen contracting for the 3rd month in a row…


as sales collapse relative to inventories…


Charts: Bloomberg


The big USA manufacturing PMI collapses to a 2 year low, with new orders and empolyment faltering:

(national USA manufacturing Index)

US Manufacturing PMI Collapses To 2 Year Low As New Orders, Employment Slow

Despite EU PMIs surging, US Manufacturing PMI has re-collapsed to 25 month lows as manufacturing employment showed “one of the smallest monthly gains seen over the past five years.” The 52.6 print is below October’s 54.1 and expectations of 54.0. Export orders saw renewed weakness and overall new orders, output, and employment slowed. Of course, hope remains that the Services side of the economy will maintain the dream of escape velocity but if last month’s drop in Services PMI is anything to go by, it seems unlikely.



Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:
“November’s flash PMI survey indicates that the manufacturing sector lost some growth momentum after the nice pick up seen in October, but still suggests the goods producing sector is expanding at a robust pace which should help support wider economic growth in the fourth quarter. The survey data are broadly consistent with manufacturing output growing at an annualised rate of at least 2% in the fourth quarter so far.
Domestic demand appears to be holding up well, but the sluggish global economy and strong dollar continue to act as dampeners on firms’ order book growth. Export orders showed a renewed decline, dropping for the first time in three months.
“Manufacturers consequently took a more cautious approach to hiring, with employment showing one of the smallest monthly gains seen over the past five years.
“With the survey continuing to show modest growth, and any weakness linked to the global economy rather than a deterioration in domestic demand, there seems little in the survey results to throw up any roadblocks to a Fed that seems intent on hiking interest rates in December.
Charts: Bloomberg


And now existing home sales tumble as consumers just do not have the money to trade up on their homes:
(courtesy zero hedge)

Existing Home Sales Tumble, Weakest Annual Growth Since January

Dominated by an 8.7% collapse in The West, existing home sales fell 3.4% in October MoM (worse than the 2.7% drop expected) to a 5.36mm SAAR. Year-over-year, existing home sales are up just 3.9% – the weakest since January. And finally, in a mind-numbing reality for The Fed’s wealth creation plan, median home prices have now dropped for 4 months in a row.

This is the weakest growth in existing home sales since January..


By region, its extremely mixed…

October existing-home sales in the Northeast were at an annual rate of 760,000, unchanged from September and 8.6 percent above a year ago. The median price in the Northeast was $248,900, which is 1.3 percent above October 2014.


In the Midwest, existing-home sales declined 0.8 percent to an annual rate of 1.30 million in October, but are 8.3 percent above October 2014. The median price in the Midwest was $172,300, up 5.7 percent from a year ago.


Existing-home sales in the South decreased 3.2 percent to an annual rate of 2.14 million in October, but are still 0.5 percent above October 2014. The median price in the South was $188,800, up 6.2 percent from a year ago.


Existing-home sales in the West fell 8.7 percent to an annual rate of 1.16 million in October, but are still 2.7 percent above a year ago. The median price in the West was $319,000, which is 8.0 percent above October 2014.

But overall, home prices have now dropped for the last 4 months in a row…

As the high-end sales shrink…

Lawrence Yun, NAR chief economist, says a sales cooldown in October was likely given the pullback in contract signings the last couple of months.

New and existing-home supply has struggled to improve so far this fall, leading to few choices for buyers and no easement of the ongoing affordability concerns still prevalent in some markets,” he said. “Furthermore, the mixed signals of slowing economic growth and volatility in the financial markets slightly tempered demand and contributed to the decreasing pace of sales.”


Adds Yun, “As long as solid job creation continues, a gradual easing of credit standards even with moderately higher mortgage rates should support steady demand and sales continuing to rise above a year ago.”

First things first – October saw an epic rally in stocks worldwide; and we thought looiming rate hikes were a) a sign of strength, and b) going to bring forward sales as people rush to buy before it gets too expensive?

Charts: Bloomberg


I want to you read the following commentary as it is very significant.  The author correctly states that the negative swap in interest rate is upon us again and for the past few weeks, much deeper into the negative.  It only happens when markets are broken.  In simple language it means that the swap for a variable rate/fixed rate has the counterparty:  the banks, less risky than the sovereign  (government USA treasuries).  Should should never ever happen.  Why is this occurring:
from the author of this report!

“Now, that demand is clearly falling we find ourselves with massive overcapacity of manufacturing capacity and commodity output. Inventories, both in manufactured goods and commodities are breaking record levels every day now. We are “swimming in oil” in North America, Europe and China while desperate producers keep churning out a product no one wants. The story is no different in coal, gas, iron ore, steel, cement, cars, glass, trucks, heavy-duty equipment etc. A massive inventory liquidation is underway which will lead to a new global recession in 2016.

This is the real reason why SWAP spreads are negative. The complete unwind, or even reversal, of global wholesale ?dollar? funding put extreme pressure on corporations (which overwhelm the market for hedging) as they realize they can no longer roll over debt to maintain their overcapacity.With a scramble for real dollars (note, a ?dollar? is a claim on dollars for which no dollars actually exists) the dollar exchange rate is surging; both compounding and reflecting the problem at hand.”

(courtesy Eugen von Bohm Bawerk)

What A Negative Swap Spread Really Means (Spoiler Alert: Nothing Good)

Submitted by Eugen von Bohm-Bawerk via,

SWAP spreads recently took a nosedive and are once again trading at negative levels, even for shorter maturities. As can be seen from the chart below, treasury yields, here represented by the 10 year maturity, rose during QE policies programs contradicting the very raison d’être spouted by the central bankers. Interestingly enough we also see the same pattern in SWAP spreads. As QE programs were enacted SWAP spreads started to move upwards, just to rollover as the central bank program was getting close to a conclusion.

10Yr and SWAP Spread

Source: Bloomberg, Federal Reserve,

Also, note that the exact same pattern in yields occurred during the taper period with the all too familiar plunge in the immediate aftermath as the program ended. In addition, SWAP spreads also drifted downward as one would expect.  However, something changed in 2015. Yields started to move upward, while SWAP spreads collapsed and even became negative.

This market perversion suggest that Wall Street is a safer counterpart than the very institution that underwrites the whole fractional reserve fraud in the first place. To price in a higher risk premium on the US government than on US banks is a contradiction in terms so there need to be another explanation behind this puzzling market phenomenon.

One reason, which seem very popular among the mainstream pundits, relates to new banking regulations post-GFC. It has become more expensive for banks to make markets compared to what it used to as higher capital requirements means holding “inventory” of bonds are costlier. In addition, banks are now required to maintain a total loss absorbing capacity (TLAC) which equate ?safe? government bonds with other more risky paper. Overall, globally systemically important banks, here represented by US Primary Dealers have reduced their bond inventories dramatically since 2008 to reduce their cost of capital. Initially, before the TLAC proposal, they also changed the composition. Corporate bonds fell precipitously from 2008 while a net short positon in TSYs became a net long position (front -running QE).

In times of stress, corporates may want to hedge large positions while the main conduit, the global banks, are nowadays unable to respond accordingly. Pricing in the SWAP market then reflect the demand / supply mismatch driving the TSY spread negative.

Primary Dealer Net - All

Source: Federal Reserve Bank of New York,

By isolating the holdings of corporates, we see how dramatic the change has been in the post-GFC period (note that there is a break in the time series from 2013, which exaggerates the effect, but the shift is remarkable nonetheless).

Primary Dealer Net - CORP

Source: Federal Reserve Bank of New York,

In addition, we know that foreign exchange (FX) reserve managers have been net sellers for quite some time now.It is safe to assume these are mostly US treasury securities being sold to prop up various Emerging Market currencies, of which China is the most notable. The next chart depict a moving average of monthly change in FX reserves of those countries that as recently as last year used to be large accumulators. From this it is clear that there have been significant selling pressure in the TSY market, and with the Fed now being a neutral bystander this has led to lower prices (higher yields) which have helped intensify the SWAP spread perversion.

FX Reserves EM

Source: Bloomberg,

To substantiate this argument we look at Primary Dealers holdings of TSYs, and it is clear that they have had to be more active in the market when FX managers started to sell in earnest in July. Funding this position must have had an impact on repo market, as witnessed in the rising GC collateral rate, which in turn have propagated into TSY markets, id est helped raise rates relative to SWAP markets.

Primary Dealer Net - USG

Source: Federal Reserve Bank of New York,

As a side note, it is interesting to witness Caterpillar’s retail sales and how it tracks the ebb and flow in FX reserves. See how, in particular, Asia/Pacific retail sales track their changing FX reserves. As a supplier to the construction- and its consequent commodity boom Caterpillar has been highly dependent on global ?dollar? funding; a system which paradoxically fed on itself. As ?dollar?, funding became ever more available, first through fractional reserve expansion (pre-Lehman) and subsequently by QE (post-Lehman) final sales demand for manufactured goods rose almost uninterrupted, leading to an unprecedented expansion in Chinese fixed asset investments, which in turn incentivized commodity producers to expand their output. These surpluses where promptly recycled back into the very same pockets of those expressing demand for their products in the first place. This virtuous cycle of higher demand feeding the global ?dollar?-funding scheme obviously benefited the likes of Caterpillar.

CAT Retail Sales

Source: Caterpillar,

The other side of this structure was debt accumulation, both private and public. ?Dollar? recycling means the producing nation accumulate claim on the consuming nation’s capital stock and future output.In addition, as Emerging Markets took over what used to be highly paid jobs from the spoiled western worker, wages would eventually start to converge, meaning stagnate and ultimately falling in the west. Lower incomes could thus not keep pace with the relentless surge in leverage so the demand was clearly unsustainable. QE unfortunately prolonged the process for almost a decade even though the market tried to correct the capital consuming process several times.

Now, that demand is clearly falling we find ourselves with massive overcapacity of manufacturing capacity and commodity output. Inventories, both in manufactured goods and commodities are breaking record levels every day now. We are “swimming in oil” in North America, Europe and China while desperate producers keep churning out a product no one wants. The story is no different in coal, gas, iron ore, steel, cement, cars, glass, trucks, heavy-duty equipment etc. A massive inventory liquidation is underway which will lead to a new global recession in 2016.

This is the real reason why SWAP spreads are negative. The complete unwind, or even reversal, of global wholesale ?dollar? funding put extreme pressure on corporations (which overwhelm the market for hedging) as they realize they can no longer roll over debt to maintain their overcapacity.With a scramble for real dollars (note, a ?dollar? is a claim on dollars for which no dollars actually exists) the dollar exchange rate is surging; both compounding and reflecting the problem at hand.

Dollar Index

Source: Federal Reserve Bank of St. Louis,

Historically, large and sudden shift in the value of the global reserve currency is synonymously with global turmoil. We guarantee you that this time is notdifferent. We are heading straight into a massive deflationary inventory liquidation with mass defaults across the globe. This is what a negative SWAP spread is really telling us.


it seems that there are more shares shorted that outstanding.  Last man will have to pay an exorbitant price to buy back in

(zero hedge)

Shorts Executed As KaloBios Goes Full Volkswagen: Here’s Why

Just as we warned was very likely last Friday, KBIO is going full Volkwsagen up another 150% today alone (up from $1 last Wednesday to over $45 today), the stock has just been halted halted againhalted for the 3rd time.

Here is what we said may be happening:

In other words, Shkreli’s consortium had acquired 70% of the company, and should they decide to pull the borrow, on the odd chance that the short interest had soared to above 30%, KBIO – which until a few days ago – suddenly has the potential to become the next Volkswagen: a company which has more shares short than there is float available to cover them.

And, as of today, it appears to be happening just as previewed:


From 44c to $45.82 in a week…


It seems we were spot on:

What happens if Shkreli’s plan is indeed to rerun the “Volkswagen” scenario and unleash an epic short squeeze that sends the price of the company into the stratosphere, unlinked from any fundamentals, but merely soaring ever higher as desperate shorts pay any price just to get out.


We hope to find out as suddenly this until recently bankrupt company whose price has exploded in the past two days, has become not only a poster child for everything broken and manipulated with the market (think 2014’s CYNK one year forward) but has the market following with morbid to find out how the tragicomedy of “Shkreli vs the Shorters” concludes.

And here is the punchline: According to Markit, the short interest of float is now 38% up from just 5.7% on November 13!

  Why is this a problem?  

Because Shrekli’s investor “group” bought 70% of the company stock. If they pull the borrow and demand delivery, there will simply not be enough shares outstanding to satisfy all shorts, leading to, drumroll, the next Volkswagen. 

So is this next for the recently bankrupt company? 



It seems that Wall Street’s darling Valeant is heading to the morgue;
(courtesy zero hedge)

Valeant Dead-Cat-Bounce Dies As Stock Plunges 10% Off Morning Highs

From an intraday high of $97.64, Valeant shares are down 10% this morning as the last few days’ short squeeze and hope-fueled stability in the hedge fund hotel has given way to more ‘first mover advantage’ across the levered trading community. As we noted here,this is what hedge fund panic looks like.

It seemed like such a good morning…


But it’s just more of the same…

Because at last count there was still 87 hedgies neck deep in this..

And this is what hedge fund panic looks like: after being one of the top 10 most widely held names as recently as Q1, Valeant has seen a plunge in not only its stock price, but also the number of fund who own it. One can be 100% certain that as of November 20 the number is vastly lower than the 87, already a one year low, recorded as of Sept 30.

Perhaps if only these “smartest people in the room” had actually done their diligence instead of rushing to buy a stock just because others bought the stock or, gasp, hedged their exposure, none of this would have happened. But then again that means doing actual work – why bother when all the idea dinner participants can just hope nobody pulls a SIRF and uncovers a specialty pharmacy ticking time bomb hiding just below the surface.


on the criminal act of spoofing:

it is amazing that the Attorney General is attacking the criminality of foreign firms but not the USA boys

(zero hedge)


Why Is The NY Attorney General Not Prosecuting The Real FX Spoofing Criminalgos

In a world where every market is rigged and manipulated – either by central banks, by algos, or by human actors eager to “get rich quick” – we doubt many will care that the New York Attorney General has finally figured that the FX market was also rigged by spoofing (something we have pointed out since 2013), and yet this latest development is worth pointing out.

The reason for that is not so much the companies which are named in this latest crackdown on widespread manipulation in the world’s most important market (now that all central banks are engaged in currency warfare) but which are not.

According to Bloomberg, the NYAG is investigating possible manipulation in foreign-exchange trading, according to a person familiar with the matter, aiming more scrutiny at a market already tainted by scandals that have led to billions of dollars in fines. The new investigation of foreign-exchange options comes after several banks paid nearly $6 billion earlier this year for colluding to rig currencies. Only there they rigged FX using the oldest trick in the book: anonymous bandwagoning using chat rooms. This time the focus is on what Nav Sarao was blamed for doing when he “caused” the 2010 Flash Crash.

The investigation centers on brokers who may be placing fake orders, a technique sometimes called spoofing, according to the person. These practices are also referred to as ghosting, because they create the impression of activity that isn’t really there.

Who is implicated? According to Bloomberg, Schneiderman has sent subpoenas for records to interdealer brokers including TFS-ICAP, Tullett Prebon Plc, BGC Partners Inc. and GFI Group Inc.

Spokespeople for the brokers declined to comment. TFS-ICAP is an ICAP Plc joint venture, and BGC Partners owns GFI. Matt Mittenthal, a spokesman for Schneiderman, declined to comment.


The investigation, still in its early stages, is examining whether fake bids and offers in FX options were posted on the electronic trading platforms hosted by the interdealer brokers, in order to ramp up interest from options traders in largely illiquid emerging-market currencies, according to the person familiar with the investigation.

Sure enough the market reacted quickly and shares of ICAP dropped as much as 1.4 percent after the news broke. Tullett Prebon lost as much as 1.6 percent, and BGC slumped up to 3 percent.

But, as we said above, more interesting than who was named in this latest “investigation” is who wasn’t – and while the “carbon-based” interdealer traders are looking at billions more in settlement charges and fines over the coming months, the real culprits of constant FX spoofing remain unnamed. We refer of course, to the algo-based “FX traders” of the Virtus, the Volants, the Citadels of the world… but especially the latter, whose role in executing NY Fed trades and curb sharp market moves lower, is well known and has been documented in the past.

We also refer to the central banks themselves who trade either directly out of their own account, as the SNB, or via trust banks such as the BOJ, or like the NY Fed which transacts in various pathways, but most notably by spoofing FX using HFT trading firms.

So why not go after the true FX riggers?

Because as noted above, if one really begins pursuing the spoofers, one will ultimately have to charge central banks for engaging in this criminal behavior. And that is unacceptable because with central bank credibility already on the way out, the last thing the monetary “authorities” need is for the general population to realize that the concept of price discovery has been dead since 2008.

And yet, if one really wants true price transparency and discovery to ever return to markets, instead of focusing on various anonymous small-time traders in aptly-named chat rooms, they should look at just one thing: the central banker meetings every other month on Sunday at 7pm inconference room E at the eighteenth floor of the BIS tower in Basel.

They won’t.

First unofficial meeting of the BIS Board of Directors in Basel, April 1930.


See you tomorrow night


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