Dec 1/A massive increase of 335 billion dollars added to the USA debt (normally it is 50 billion per month/what caused this massive rise?/China’s key manufacturing index falters last night/Chinese autosales plummet as inventories rise at their dealerships/Brazil’s GDP plummets again and now the question: who will default first Brazil or Turkey?/Bomb blast in Istanbul’s railway station/Atlanta Fed lowers 4th Q GDP from 1.8% down to 1.4% and they are going to raise rates?/ the comex gold only has 3.75 tonnes of registered (dealer) gold left to serve upon longs standing (18.143 tonnes)/Another huge addition of 1.144 million oz of silver into the SLV/

Gold:  $1063.80  down $2.00   (comex closing time)

Silver $14.05 unchanged

In the access market 5:15 pm

Gold $1058.50

Silver:  $14.08

 

 

At the gold comex today,  we had an extremely poor delivery day, registering 38 notices for 3800 ounces.  Silver saw 534 notices for 2,670,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 200.45 tonnes for a loss of 103 tonnes over that period.

In silver, the open interest fell by 2258 contracts despite the fact that silver was up by 4 cents with respect to yesterday’s trading. Generally we are witnessing a massive OI contraction once we approach the first few days of an active delivery month and they did not disappoint us today.. The total silver OI now rests at 162,306 contracts In ounces, the OI is still represented by .813 billion oz or 116% of annual global silver production (ex Russia ex China).

In silver we had 534 notices served upon for 2,670,000 oz.

In gold, the total comex gold OI fell by 4,123 contracts as the OI fell to 392,672 contracts even though gold was up by $9.60 with respect to yesterday’s trading.

We had no change in  gold inventory at the GLD/ thus the inventory rests tonight at 654.80 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold, after they deplete the GLD will be the FRBNY and the comex.   In silver, we had a huge addition of 1.144 million oz in silver inventory,  / Inventory rests at 319.353 million oz.

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

1. Today, we had the open interest in silver fall by 2258 contracts down to 162,306 despite the fact that silver was up in price to the tune of 4 cents with respect to yesterday’s trading.   The total OI for gold fell by 4123 contracts to 392,672 contracts despite the fact that gold was up by $9.60 with respect to yesterday’s trading.

(report Harvey)

 

2  Gold trading overnight, Goldcore

(Mark OByrne)

3. ASIAN AFFAIRS

i) Last night, 9:30 pm MONDAY night, TUESDAY morning Shanghai time.  Japan Nikkei closed up, Shanghai falls during most of the day  due to government probes but rebounds on government intervention in last hour/ Hang Sang rises. Base metals like iron ore falls but copper rises for the second day in a row. China’s key manufacturing index slumps badly to 3 year lows.  The Caixin index surprisingly rises for no reason.
(courtesy zero hedge)
ii) Strange data from other other Asian vantage points
(zero hedge)
iii) Chinese auto sales crash as inventories build.  Chinese growth now falters.
(zero hedge)
EUROPEAN AFFAIRS
i) The skies over Syria is getting crowded as both Britain and Germany is joining the battlefield against ISIS:
(zero hedge)

ii)  Europe’s  very large Bluecrest hedge fund is calling it quits  (almost) as 8 billion of its 9 billion in assets is being returned to shareholders. They just cannot make money!

(courtesy zero hedge)
iii) Coming to a theatre near you:  Greek citizens now as to declare cash under the mattress
and the value of their jewelry/this looks like a confiscation is coming
This is not good!!
 (courtesy Keep Talking Greece)
RUSSIAN AND MIDDLE EASTERN AFFAIRS
i)The following is big news;  Israel is to enter the fray with Syria.  The Israeli Prime Minister met with Putin and they have praised each other’s bilateral efforts to prevent unintended clashes with their respective air forces operating in Syria.  Israel has discovered a huge gas find in the Leviathan off the coast of Haifa, Israel.  Russia wants to make deals for that gas an transport it throughout Europe.
This will explain the detente , much to the anger of Obama who continually scolds Israel.
(courtesy  DefenceNews/Israel)

ii)  Egypt set to replace Turkey in supplying the Russian market with fruits and vegetables

(courtesy  RT)
iii) Bomb blast in Turkey
(zero hedge)
GLOBAL AFFAIRS
i) Fun and games in Kosovo!!  Is this going to be a repeat of the 1990s?
(courtesy zero hedge)

ii) Canada’s GDP plunges by .5% month over month as the oil industry suffers greatly.  You will see this happening to commodity countries all over the world.  The reasons for the global plunge is malinvestment caused by massive printing out money which was then used to produce overcapacity

(courtesy zero hedge)
iii)  David Stockman explains to us how the globe got itself in the mess that they are now in
(David Stockman/ContraCorner)
EMERGING MARKETS
(courtesy zero hedge)
OIL MARKETS

i)Can we blame the low price on oil on hedge funds

(McDonald/OilPrice.com)

ii) WTI falls as API reports another surprise inventory rise:

PHYSICAL STORIES
i)  Turd Ferguson/Craig Hemke discusses the huge problem facing the comex whereby the amount of gold standing far exceeds the registered or for sale gold
(Craig Hemke)

ii) How premiums on silver and gold bullion are calculated.

(courtesy JPM Bullion and GATA)

iii) Huge USA gold eagle sales and now silver sales at record levels

Gold eagle sales in November is 3.017 tonnes of gold.  The USA produces only 15 tonnes per month.
(zero hedge)
iii b)  Steve StAngelo of SRSRocco report talks about the huge demand for silver coins around the world
(SRSRocco report)
iv) Bill Holter’s important paper tonight is entitled:
None of it …”can go on forever”!
v) Dave Kranzler talks about the comex and how the bullion banks are now net positive and the hedge funds now net negative
(Dave Kranzler IRD)
USA IMPORTANT ISSUES
i). Manufacturing PMI falters again
(zero hedge)
ii)  the ISM manufacturing survey verifies the PMI as manufacturing in the uSA falters.
(zero hedge)
iii) D Day for Puerto Rico as 354 million dollars worth of bonds will default today.  Padilla comes to the uSA for help
(zero hedge)
iv) Millennials are staying at home instead of moving out due to the fact that they do not wish to get married.
The reason for not going to the alter is due to the fact that the economy is bad
(zero hedge)
v) USA special forces are now back into Iraq fighting ISIS
(zero hedge)
vi  The big CEO Economic Confidence Survey implodes as it drops to its lowest level in 3 years.
As we have mentioned to you on several occasions, the USA economy is imploding as per the CEO’s in the USA:
(courtesy zero hedge)
vii)  And with all of today’s news, the Atlanta Fed lowers its forecast for 4th quarter GDP from 1.8% down to 1.4%. How on earth can the Fed raise rates in December?
(zero hedge)

viii)  The way bond yields have been rising indicates that if the Fed does raise rates it is policy error. Also take a look at the number of shorts on the 10 year bond.  These guys have loaded the boat to one side expecting a rate hike  (they went short on bonds).  If it does not occur, the boat will capsize and the shorts will drown.

(courtesy zero hedge)

 ix(What on earth is happening with the huge increase in USA debt!! We know that when the USA were operating under emergency measures to avoid a breach of the debt ceiling, they borrowed from Federal pension account funds.  When they signed their new debt ceiling a total of 339 billion in debt was added to the previous level which is what was expected.

However today, the USA added another 335 billion in total debt for November bringing the total to 18.827 billion. Normally each month goes up by $50 billion or so.  What caused this massive increase in issuance of debt?
(courtesy zero hedge)

Let us head over to the comex:

The total gold comex open interest fell to 392,672  for a loss of 4123 contracts despite the fact that gold was up by $9.60 with respect to yesterday’s trading.   For the past two years, we have strangely witnessed two interesting developments with respect to the gold open interest:  1) total gold comex collapse in OI as we enter an active delivery month, and 2) a continual drop in the amount of gold standing in an active month and we are certainly witnessing both of those today.   We are now entering the big December contract which saw it’s OI fall by a considerable 2018 contracts from 7849 down to 5831 contracts.  We had only 2 notices filed upon yesterday, so we lost 2016 contracts or 201,600 oz of gold that will not stand for delivery in this active delivery month of December.  As we indicated to you on many occasions, the bankers are cash settling as they do not have physical gold to settle upon.The next contract month of January saw it’s of rise by 67 contracts up to 566.  The next big active delivery month is February and here the OI fell by 4,370 contracts down to 278,253. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 162,654 which is poor. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was very poor at 128,152 contracts.

Today we had 38 notices filed for 3800 oz.
And now for the wild silver comex results. Silver OI fell by 2258 contracts from 164,564 down to 162,306 despite the fact that the price of silver was up 4 cents with respect to yesterday’s trading.  The big December contract month saw its OI fall by 2,836 contracts down to 1242.  We had 2746 number of contracts served upon yesterday so we lost only 90 contracts or 450,000 oz of silver that will not stand in this active delivery month of December.The next non active month of January saw it’s OI fall by 6 contracts down to 1861.  The next big active contract month is March and here the OI rose by 812 contracts up to 128,767. The volume on the comex today (just comex) came in at 32,161 , which is fair. The confirmed volume yesterday (comex + globex) was fair at 31,816.
We had 534 notices filed for 2,670,000 oz.

December contract month:

INITIAL standings for DECEMBER

Dec 1/2015

Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil nil
Deposits to the Dealer Inventory in oz  nil
Deposits to the Customer Inventory, in oz  66,997.610 oz

HSBC

No of oz served (contracts) today 38 contracts

3800 oz

No of oz to be served (notices) 5793 contracts

(579,300 oz)

Total monthly oz gold served (contracts) so far this month 40 contracts(4000 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month nil oz
 Today, we had 0 dealer transactions
Today, we had 0 dealer transactions
Total dealer withdrawals:  nil oz
total dealer deposit:  nil oz
We had 0 customer withdrawals:
total customer withdrawal nil  oz
We had 1 customer deposit:
 i) Into HSBC: 66,997.610 oz

Total customer deposits  66,997.610 oz

 

we had 3  adjustments:

i) Out of Brinks:  3,641.600 oz was adjusted out of the dealer and this landed into the customer account of Brinks

 

ii) Out of Delaware:  578.700 oz was adjusted out of the dealer and this landed into the customer account of Delaware

iii) Out of Scotia: 9,689.41 oz was adjusted out of the dealer and this landed into the customer account of Scotia

 

:

 JPMorgan has a total of 7975.14 oz or 0.2480 tonnes in its dealer or registered account.
***JPMorgan now has 347,898.618 oz or 10.82 tonnes in its customer account.
.
Today, 0 notice 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 38 contracts of which 17 notices were stopped (received) by JPMorgan dealer and 4 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 (40) x 100 oz  or 4000 oz , to which we  add the difference between the open interest for the front month of December. (5831 contracts) minus the number of notices served upon today (38) x 100 oz   x 100 oz per contract equals the number of ounces standing.
 
Thus the initial standings for gold for the December. contract month:
No of notices served so far (40) x 100 oz  or ounces + {OI for the front month 5831) minus the number of  notices served upon today (38) x 100 oz which equals 583,300 oz standing in this active delivery month of December 18.143 TONNES)
we lost 2016 contracts or a huge 201,600 oz that will not stand for delivery.  These guys no doubt were cash settled and received a fiat bonus.
We thus have 18.143 tonnes of gold standing and only 3.7625 tonnes of registered gold for sale, waiting to serve upon those standing
Total dealer inventory 120,967.246 or 3.7625 tonnes
Total gold inventory (dealer and customer) =6,444,643.959   or 200.45 tonnes)
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 200.45 tonnes for a loss of 102 tonnes over that period.
 
JPmorgan has only 10.5 tonnes of gold total (both dealer and customer)
end
And now for silver

DECEMBER INITIAL standings/First day notice

Dec 1/2015:

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory   600,226.26 oz

(,Scotia),

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 600,725.97 oz

 

CNT

No of oz served today (contracts) 534 contracts

2,670,000 oz

No of oz to be served (notices) 708 contracts 

(3,540,000 oz)

Total monthly oz silver served (contracts) 3280 contracts (16,400,000 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 600,226.26 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 1 customer deposit:

i) into CNT:  600,725.97 oz

total customer deposits: 600,725.97 oz

We had 1 customer withdrawals:
i) Out of Scotia: 600,226.26 oz

total withdrawals from customer account: 600,226.26   oz

we had 0 adjustments
The total number of notices filed today for the December contract month is represented by 3280 contracts for 16,400,000 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 (3280) x 5,000 oz  = 16,400,000 oz to which we add the difference between the open interest for the front month of December (1242) and the number of notices served upon today (534) x 5000 oz equals the number of ounces standing.
Thus the initial standings for silver for the December. contract month:
3280 (notices served so far)x 5000 oz +(1242) { OI for front month of December ) -number of notices served upon today (534} x 5000 oz or 19,940,000  of silver standing for the December. contract month.
we lost 90 contracts or 450,000 oz that will not stand for delivery in this active month of December..
Total number of dealer silver:  43.646 million oz
Total number of dealer and customer silver:  down to 158.954 million oz
end
 

 

The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:i) demand from paper gold shareholders ii) demand from the bankers who then redeem for gold to send this gold onto China
And now the Gold inventory at the GLD:
Dec 1.2015:/no change in gold inventory at the GLD/inventory rests at 654.80 tonnes/
nOV 30/no change in gold inventory/rests tonight at 654.80 tonnes
Nov 27/we had a withdrawal of .89 tonnes of  gold inventory at the GLD/Inventory rests at 654.80 tonnes
Nov 25/no change in gold inventory at the GLD. Inventory rests at 655.69 tonnes
Nov 24/somebody was in great need of gold/GLD withdrawal of 5.06 tonnes today/inventory rests at 655.69 tonnes.
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 16.no 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/
 Dec 1.  inventory 654.80 tonnes
*this is the lowest level in quite some time.  It looks like physical gold acquired in the past few months have now left the GLD vaults heading for China.
end
Now the SLV:
dec 1.2015: a huge deposit of 1.144 million oz of silver into the SLV/Inventory rests at 319.353 million oz
Nov 30/no change in silver inventory at the SLV/Inventory rests at 318.209 million oz
Nov 27/no change in silver inventory at the SLV/rests at 318.209
Nov 25./no change in silver inventory at the SLV/Inventory rests at 318.209 million oz
Nov 24./no change in silver inventory at the SLV./Inventory rests at 318.209 million oz
Nov 23/we had another addition (deposit) of 1.053 million oz of silver into the SLV tonight/Inventory rests at 319.353 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 17.no 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/

Dec 1/2015:  tonight inventory rests at 318.209 million oz***
******Note the difference between the GLD and SLV.  GLD sees liquidation of metal but not SLV. Why?  because the SLV has no real silver behind it only paper silver.
end
 
And now for our premiums to NAV for the funds I follow:
Sprott and Central Fund of Canada.(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 11.2 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:37.7%
cash .1%( Dec 1/2015).
2. Sprott silver fund (PSLV): Premium to NAV rises to-0.30%!!!! NAV (Dec 1/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV falls to – 0.61% to NAV Dec 1/2015)
Note: Sprott silver trust back  into negative territory at -0.30% Sprott physical gold trust is back into negative territory at -.0.61%Central fund of Canada’s is still in jail.
end
And now your overnight trading in gold and also physical stories that may interest you:
Trading in gold and silver overnight in Asia and Europe
First gold/silver trading courtesy of Mark O’Byrne/Goldcore:

U.S. Mint Gold Eagles See Sales Surge, Silver at Record

“The U.S. Mint’s sales of American Eagle coins surged in November, with gold nearly tripling month-over-month and silver already reaching a new annual record as bullion prices fell to multi-year lows” reported Reuters.

GoldCore: US Mint Gold Coin Sales
The mint sold 97,000 ounces of American Eagle gold coins in November, up 185 percent from October and 62 percent higher from a year ago, after selling out of most of the 2015-dated coins as falling bullion prices attracted buyers.

Strong demand came as spot gold XAU= prices fell around 7 percent to the lowest in nearly six years. This was the gold market’s biggest monthly drop in 2-1/2 years as traders and investors widely anticipated that the U.S. Federal Reserve will raise interest rates at its next meeting in mid-December.

Higher interest rates raise the cost of holding non-yielding gold.

Toward the end of this month, the mint said it had sold out of all remaining 0.1-ounce, 0.25-ounce and 1-ounce American Eagle gold bullion coins dated 2015 and would not be making any more for the calendar year.

Demand for American Eagle silver coins has also been strong, with year-to-date sales already reaching an annual record at 44.67 million ounces, breaking the full-year record of 44 million ounces in 2014.

Prudent bullion buyers continue to accumulate gold and silver bullion coins and bars on price weakness.

 

DAILY PRICES
Today’s Gold Prices: USD 1069.25, EUR 1009.25 and GBP 708.55 per ounce.
Yesterday’s Gold Prices: USD 1055.65, EUR 998.20 and GBP 703.05 per ounce.
(LBMA AM)

GoldCore: Gold in Eur - 1 Year

Gold in EUR – 1 Year

Gold closed at $1065.00 yesterday, down by $6.40.  Silver fell by a cent to close at $14.09.  Platinum lost again, down by $5 to $828.

Essential Guide to Storing Gold Offshore

Download Essential Guide To Storing Gold Offshore

Mark O’Byrne
end
 A terrific commentary from Craig Hemke today as he is harping on the same things as myself with respect to the number of gold ounces standing at the comex vs the number of gold oz of registered gold that the banks have to service those that tender for their gold. The problem: they have 1/6 the amount standing!!
(courtesy Craig Hemke/Turd Ferguson/GATA)

Comex Conundrum

For a fair and honest market, the latest developments might be significant and noteworthy, perhaps even troublesome. But remember, we’re not talking about a fair and honest market, we’re talking about The Comex, instead.

As the “delivery month” of December begins on the Comex…and before we begin another exercise detailing what a sham, charade and illusion this all is…please take a few moments to review the links below. This is hardly the first time we’ve tried to draw attention to all of this and it likely won’t be the last:

Again, the only reason that the Comex price for gold (and silver) has any relevance whatsoever is the alleged physical delivery that takes place at the price “discovered” through the trading of paper derivatives. Without physical delivery, the only “price” that is being discovered is the price of the paper derivative contract, itself. Thus, physical delivery is what gives relevance to the paper derivative price.

So, what happens when the Comex “delivery” process is exposed as a fraud, an illusion and a charade? Does this mean that the Comex paper derivative price can no longer be the basis for physical pricing worldwide? YES IT DOES! That, my friend, is the reason we so diligently chronicle this stuff month after month. And, boy oh boy, it sure looks like December 2015 is going to be a doozy.

The actual delivery phase of the December Comex gold contract began back on Friday when the Dec15 futures contract “expired”. Though it still trades through December, as of today (Monday) any entity still holding a Dec15 contract had to supply 100% margin for the full cost of the contract or about $107,000. Why? Because, as a long holder of a contract in its delivery period, you are subject to having the metal delivered to you at any time and, at a price of $1070/ounce, 100 ounces will cost you $107,000.

But the Comex market isn’t about delivery, it’s about paper derivative trading. So, by the close of business last Friday, nearly all traders had liquidated their Dec15 contracts and rolled them into the next “front month”, which is the Feb16. However, some contracts always remain open at “expiration” and a few of these actually look to “stand” and “take delivery”. For Comex gold, here’s how it has played out in 2015:

CONTRACT MONTH     TOTAL OPEN AT EXPIRATION       TOTAL DELIVERIES MADE

DEC14                                                             11,507                                                      3,381 or 29.4%

FEB15                                                               8,455                                                       1,174 or 13.9%

APR15                                                               7,348                                                       2,801 or 38.1%

JUN15                                                               8,380                                                      2,959 or 35.3%

AUG15                                                               9,215                                                       5,113 or 55.5%

OCT15                                                               3,092                                                        950 or 30.7%

DEC15                                                               7,849                                                                 ?

Note the outlier and dramatic dropoff of total deliveries back in October. This was likely due to the fact that October is typically the lowest volume delivery month of the year. However, recall that total Comex registered gold has been falling to new alltime lows as 2015 progressed, too. Could this be having an impact?

Here are some random CME Gold Stocks reports. Check the date and the amount of gold listed as registered and available for delivery.

This from December of last year. Enough gold for 7,378 deliveries (if deliveries were actually made):

This from February of this year. Enough gold for 8,099 deliveries:

This from last April. Enough gold for 6,031 deliveries:

This from August. Now only enough gold for 4,888 deliveries:

And, uh-oh, this from October. Only enough gold for 1,616 deliveries. Good thing only 3,092 stood and just 950 total deliveries were made, huh?

So now here we are. The biggest and typically busiest delivery month of the year (December) is upon us and, at expiration last Friday, the Comex still had 7,849 contracts open and standing. And how many ounces of registered gold are currently available within the Comex vaulting system? As of today, total registered gold has fallen to a new all-time low of 134,877 ounces or enough gold to physically settle just 1,348 contracts!

See what I mean? What a conundrum! IF The Comex truly was a free and fair market and IF actual physical metal deliveries were taking place to “back up” the paper derivative price, The Banks and The Exchange would be in a bit of a jam. From where would they find the gold needed to physically settle all of those seeking delivery?

Ah, but no worries, I’m sure that the month of December will pass without any issues. There will be some small journal entry movements of gold back and forth between the categories and between The Banks. But no real gold will move and no real crisis will emerge. Instead, it will just be business as usual and CNBS, BBG et al will keep reporting the Comex paper price as the true “price” and “value” of gold.

And this draws us back to the questions posed at the beginning of this post:

  • So, what happens when the Comex “delivery” process is exposed as a fraud, an illusion and a charade?
  • Does this mean that the Comex paper derivative price can no longer be the basis for physical pricing worldwide?

The answer earlier was an emphatic “YES IT DOES!” and that’s still the case. You, as a gold investor, need to understand this important point. One day soon, this current paper derivative and fractional reserve bullion banking pricing scheme will fail. Maybe not this month and maybe not in 2016, either. But fail it will.That much is a certainty. And when it does, gold will have to be priced based upon physical availability at the offer. Call me crazy, but I suspect that physically-discovered price is going to be considerably higher than the one discovered through the current paper derivative system, a scheme that levers physical gold into paper at a ratio of nearly 300:1. How much higher will the new price be? Hmmm…well let’s just say that it’s not going to be $1070/ounce, that’s for sure.

Therefore, prepare accordingly.

TF

end
Strange things going on at the gold comex:
(courtesy Dave Kranzler/IRD)

The Comex Is A Zombie Market: Hedge Funds Record Short Paper Gold

December 1, 2015Financial Markets, Gold, Market Manipulation, Precious Metalsbullion banks, Comex gold shorts, COT report, economic collapse, Goldman Sachs, JP Morgan, stock market crash

Gold didn’t “hit a low,” it was driven down by the bullion banks who are agents of the Fed, acting on the Fed’s orders…the price of gold is not determined in the market in which gold actually gets bought and sold, it’s determined in a paper futures market in which the contracts are settled in cash. – Paul Craig Roberts on King World News

The Comex is like a grade-B horror movie – night of the living dead. Zombies that wreak havoc on society but can’t be destroyed. The Comex is the consummate symbol of the United States. It embodies extreme fraud, corruption, wealth theft, market manipulation, regulatory capture, etc. It is the ultimate manifestation of the end of Rule of Law in this country.

Last week the “managed money” hedge fund segment of the Comex took on a record net short position in Comex paper gold. As reported to the CFTC from the CME bullion bank trading reports, hedge funds are now net short over 16,000 contracts representing over 1.6 million ozs of paper gold – over 46 tons. Conversely, the “swap dealer” segment – otherwise known as the bullion banks – have assumed a record net long position of 29.5k paper gold contracts.

Now, assuming we accept the COT report prima facie – and this can be a problematic assumption considering that the data originates from the highly corrupted bullion banks – whenever the hedge fund trader class net position has reached an extreme level in either direction, and the banks take the other side of that position, the price of gold has always eventually moved inversely to the hedge fund positioning.

Meanwhile, the amount of gold that has been declared to be available for delivery into contracts standing for delivery has diminished down to 138k ozs as of last Friday. Against the net short of the hedge funds, this implies that the hedge funds are short 11.5 ozs of paper gold for every ounce of real gold made available for delivery. If this ratio of paper to the real underlying commodity developed in any other commodity market the CFTC would step in an enforce laws on the book designed to prevent this type of market manipulation.

The reason I now reference the Comex as a “Night of the Living Dead” zombie market is because this trading pattern between the bullion banks and the hedge funds has been in repetition since at least the time I began my involvement in the precious metals market nearly 15 years ago. It never received the kind of attention it gets now until after the big smash started in 2011. By then it was too late because the CFTC, SEC, Justice Department and Oval Office advisory staff had been stuffed with Wall Street’s emissaries, primarily of the Goldman Sachs and JP Morgan variety. It’s Wall Street’s version of using pedophiles to supervise the daycare school.

Based on history, it would appear that the hedge fund/swap dealer net position is indicating that the price of gold may be in for a wild ride higher at some point. But don’t expect this to happen immediately. I expect the hedge funds to get aggressive in trying to push the price of gold lower in order to “harvest” their short position. I mentioned to colleagues last week that this would explain the erratic, volatile intra-day moves in the price of gold we started to see recently.

Today is a good example, as gold traded up overnight – in the Asian physical markets referenced at the top by Dr. Roberts – only to be smashed just before data was released showing a collapse in U.S. manufacturing – data that should have been bullish for gold. However, if you want to trade on the side of the Government insiders – the bullion banks – now is a good time to buy the price smacks and sell the ensuing push higher. At some point the banks will decide to fleece the hedge funds once again and take the price of gold higher, forcing the hedge fund black boxes to cover their shorts.

Wash, rinse, repeat. You may ask yourself, how do you kill a zombie? As a market for the trading of physical gold and silver, the Comex is already dead. At some point, the entities who have stuck around to try their hand the rigged paper game will either go broke or simply fade away. At that point, the bullion banks will be left to play only with themselves. But at that point in time I suspect the U.S. economic, financial and political system will be in a full blown collapse.

http://investmentresearchdynamics.com/the-comex-is-a- zombie-market-hedge-funds-record-short-paper-gold/

***

end

 

How premiums on silver and gold bullion are calculated.
(courtesy JPM Bullion and GATA)

How are silver and gold bullion premiums calculated?

Section:

8:58p ET Monday, November 30, 2015

Dear Friend of GATA and Gold:

Our friends at J.M. Bullion in Dallas have constructed an interesting and elaborate graphic describing how premiums on gold and silver coins and bars are calculated. The graphic is titled “How Are Silver and Gold Bullion Premiums Calculated?” and it’s posted at the company’s Internet site here:

http://www.jmbullion.com/how-are-premiums-calculated/

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

 

 end
Huge USA gold eagle sales and now silver sales at record levels
Gold eagle sales in November is 3.017 tonnes of gold.  The USA produces only 15 tonnes per month.
Another strange phenomenon is that the USA in the last reporting month exported 40 tonnes. How could that be?
(courtesy Reuters/GATA)

U.S. Mint American eagle gold coin sales surge, silver at record

Section:

From Reuters
Monday, November 30, 2015

The U.S. Mint’s sales of American Eagle coins surged in November, with gold nearly tripling month over month and silver already reaching a new annual record as bullion prices fell to multi-year lows, data released today showed.

The mint sold 97,000 ounces of American Eagle gold coins in November, up 185 percent from October and 62 percent higher from a year ago, after selling out of most of the 2015-dated coins as falling bullion prices attracted buyers.

Strong demand came as spot gold prices fell around 7 percent to the lowest in nearly six years. This was the gold market’s biggest monthly drop in 2 1/2 years as traders and investors widely anticipated that the U.S. Federal Reserve will raise interest rates at its next meeting in mid-December. …

… For the remainder of the report:

http://www.reuters.com/article/2015/11/30/us-usmint-coins-idUSKBN0TJ2SY2…

 

end

 

A great commentary on the huge demand for silver coins around the world

(courtesy Steve St Angelo/SRSRocco report)

 

Record Silver Coin Demand Signals Financial Trouble Ahead

by SRSroccco on December 1, 2015

The world doesn’t realize it, but record global silver coin demand is warning that big trouble is coming to the financial system. More investors are waking up to the fact that there is something seriously wrong with the financial industry and broader stock markets and are buying more physical gold and silver than ever.

This is especially true for silver. During the huge surge in physical silver investment demand from June to September this year, I heard from several dealers that investors were buying a lot more silver than gold. And this wasn’t just from the typical Mom & Pop buyers… there were large silver volume purchases from wealthy clients.

According to the Silver Institute 2015 Interim Report, total sales of official silver coins will reach 130 million oz (Moz) this year. If we look at the chart below, we can see the huge increase in official coin sales since the first collapse of the U.S. Investment Banking and Housing Industry in 2008:

Global Official Silver Coin sales ranged between 35.7 Moz and 42.4 Moz from 2003 to 2007. However, demand surged to 64.3 Moz during the 2008 financial crisis and continued to increase to 110 Moz in 2011 when the price of silver peaked at $49. Then in 2012, as investors were unsure of the silver price trend, Official coin sales declined to 84.6 Moz that year.

Well, this all changed in 2013 as the price of silver fell from $30 down to $18 in just six months, motivating investors to purchase a record 116.4 Moz of official silver coins. Even though demand fell modestly in 2014, official silver coin sales are forecasted to hit a record 130 Moz this year.

Royal Canadian Mint Silver Maple Leaf Sales Hit Record Q1-Q3 2015

The Royal Canadian Mint just released their newest Q3 Report showing a huge increase in Silver Maple sales to 9.5 Moz, up 76% compared to 5.4 Moz during the same period last year:

Total Silver Maple sales Q1-Q3 are 25.2 Moz versus 20.8 Moz last year… up 21%. Here is my forecast for total 2015 Silver Eagle and Maple sales:

As we can see, Silver Eagle and Maple Leaf sales are estimated to reach 78 Moz compared to 73.2 Moz last year. This is one hell of a lot of 1 oz silver coins from just these two mints. Furthermore, total sales of Silver Eagles and Maples were only 9.5 Moz in 2005. In just ten years, sales from these two official coins have increased more than 8 times.

Gresham’s Law: Bad Money Drives Out Good… Official Silver Coins

If we take the global official silver coin data from the first chart above, and divide it into two periods, we have the following result:

Before the first collapse of the U.S. financial industry and economy in 2008, total global official silver coin sales for the period 2000-2007 were 292.1 Moz. Now compare this figure to the second period from 2008 to 2015 at 786.8 Moz. If we average the annual global silver coin sales, the first period (2000-2007) shows an average of 36.1 Moz per year versus 98.4 Moz after the U.S. financial and economic meltdown (2008-2015).

This huge surge in official silver coin demand represents a percentage of investors who have decided to exchange increasing worthless paper currency for sound money.This trend started in the 1960’s when the United States sold off the majority of its huge silver stockpiles and removed silver from its coinage.

I am working on THE SILVER MARKET REPORT using figures and information starting in the 1960’s. Investors need to understand the trend change in the silver market has been going on for more than 50 years. Understanding this ongoing silver market trend is important for investors who want to protect their wealth when the next major financial crash occurs.

Even though the forecasted 130 Moz of Official Silver Coin Sales did not translate into higher silver prices, it did hammer a few more nails into the Greatest Financial Ponzi Scheme in history. That’s how investors need to look at the silver market. I realize it’s frustrating to see that record buying of silver coins does not seem to impact price.

However, investors need to understand that Greatest Financial Ponzi Scheme in history can only survive if global oil production continues to increase. Unfortunately, we are about experience a peak and decline of global oil production shortly starting first with the collapse of the U.S. shale oil industry.

I will be writing more articles explaining the connection between skyrocketing debt and rising oil production. One can not take place without the other. Which means, when the massive amount of global debt finally collapses, it will take down world oil production with it.

Some of the safest assets to own at this time will be physical gold and silver.

 

end

 

And now Bill Holter/

 

(courtesyHolter-Sinclair collaboration)

 

None of it …”can go on forever”!

Over the Thanksgiving weekend I received over 1,000 e- mails in total, many suggesting potential topics to talk about. We’ll talk about several topics on the surface, each one obvious in their own right.
First, I have been asked to speak about “climate change” as that is the current topic today for the world meeting in Paris. Let me first say this, I am no scientist and do not pretend to be one. From a big picture standpoint, didn’t what is now currently known as “climate change” used to be “global warming”? I seem to remember hearing how some scientists who revealed some of the “global warming science” was faulty were fired. I even remember calls for prosecution of anyone who denies climate change. Maybe this is just an offshoot of the new American university system advocating censorship …if what is said is contrary to the censor’s opinions? That said, I believe if you put 100 scientists with no ax to grind into a room and had them vote, a very small percentage would believe and affirm “global warming”. If you asked about “climate change”, you might have a majority affirmation but no more than 50/50 would attribute it to “man”.
In the interest of not being “prosecuted” (persecuted), I do not deny climate change. We now regularly are seeing droughts, floods, heat and cold in more severity and in more places than I can remember. I would simply ask what has changed in the last 40-50 years that might account for these changes? In the U.S., please do not tell me “carbon” because we lived in a far dirtier world in 1970 than we do today. Engines of all sorts are far more efficient (and cleaner) today than they were then. The production of electricity today is far more efficient than it was back then also. No one even considered the environment until Lake Erie actually “died”, we have steadily become more responsible since then. China, not so much but can you imagine them actually paying the Rothschilds a “carbon tax” for their pollution?
The one thing I can see (with my own eyes) are chemtrails playing tic-tac-toe across our skies. Why did we not see these in the skies when we were little kids? Are the skies different today or are jet engines so radically different now from then? Please, do not insult my intelligence as these trails have been videoed being turned on and turned off. A very good source to learn more about “geo engineering” would be from Dane Wigintonhttp://www.geoengineeringwatch.org/ads/dane- wigington/ . I would simply say this, maybe our climate is changing because the efforts of “man” to change the climate are actually having an effect? …and they want to charge a tax for these changes? Why not try the most simple? Leave the climate to God for five or ten years and let’s see what happens? Maybe the proposed global “carbon tax” (a scam in my opinion) will be “seen” as unnecessary ? One last question, who pays for or funds these sky writers anyway?


The last two subjects were both mentioned in my last article “Can you handle the ugly truth?”. First, so many e-mails sounded of capitulation …”this manipulation will go on forever”. I assure you it will not. In fact, I probably received this link two dozen times from readers
http://www.kitco.com/news/2015-09- 15/Don- t-Believe-The-Hype-Comex-Gold-Warehouses-Well-Stocked- Two- Analysts.html This was posted at the (in my opinion, so I don’t get pro-ersecuted) “anti gold” site Kitco. This article is a total joke as far as I am concerned. They quote both Barclay’s and CPM Group, two leading apologists of the manipulation scheme for many years. They even disparage Peter Hambro for saying gold is very tight in London. Who would know one way or the other better than him? James Turk? He agrees! Of course his (their) opinion is supported by the backwardation in the gold market there.
I would also ask, has the registered category for deliverable gold on the COMEX EVER been this low? Something very very strange has also happened this delivery month, ONLY two contracts of over 7,800 were served on the first day. Why would this be? As I have written before, what incentive could ANY “short” possibly have to not deliver on the first day? Or even first three days? The short must pay “storage” for their physical gold right up until it is delivered and stand NO benefit whatsoever in stalling to deliver. This of course assumes the gold is actually there and “storage fees” are actually being paid…

The last topic today is the upcoming Fed meeting. Will they or won’t they raise rates? As you know, I can’t see any way they will do this, “data dependent” or not. Many say the rate hike depends on the unemployment number out this coming Friday. Really? The unemployment report has been shown by John Williams and others to be a bad joke in totally poor taste and virtually a complete fabrication. Zerohedge has come out with article after article showing the real situation in many reports and various market measures, the latest is seen here regarding ISM manufacturing http://www.zerohedge.com/news/2015-12- 01/ism-manufacturing-collapses-worst-june-2009-new- orders- prices-paid-plunge . How is it possible the Fed is even contemplating a rate hike?
It cannot be because the financial system is so flush and the “punchbowl” needs to be taken away (this should have been done 20 or more years ago). From the financial side of things, stress is again beginning to build up, this chart:

clearly shows stress in high yield debt. Please understand this does not even include debt from the energy patch. How much stress do you believe is being felt there where their product has dropped over 60% in price and many are operating at giant losses! Will the Fed hiking rates help ease this pain?
From another standpoint, the dollar has become grossly overvalued and emerging markets are finding it more and more difficult to service their dollar debt. An interest rate hike will do what exactly to this situation? In my opinion the Fed is being driven out of fear. On the one hand they absolutely MUST raise interest rates as they have been zero bound for seven years …in other words “when do we begin to move toward normal again”? On the other hand, I believe they are petrified as to what will happen if they actually do raise rates. It is not as if they have any precedent or history to look at as to how markets will react …especially the behemoth $1 quadrillion plus in derivatives!
To finish, if the Fed does raise rates I will be shocked and petrified at the same time. If the Fed does ever actually shrink their balance sheet willingly I believe it is safe to say anyone reading this will no longer be living. This of course assumes the panicked sheep who believe “this can go on forever” are correct. I assure you they are not!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome, bholter@Hotmail.com

end

And now your overnight TUESDAY 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  6.3987/ Shanghai bourse: in the green , hang sang: green

2 Nikkei closed up 264.93 or 1.34%    

3. Europe stocks mixed  /USA dollar index down to 100.01/Euro up to 1.0594

3b Japan 10 year bond yield: falls to .299%   !!!!(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: 41.79  and Brent:   44.70

3f Gold up  /Yen up

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund  rises to .493%. German bunds in negative yields from 6 years out

 Greece  sees its 2 year rate rise to 7.58%/:  still expect continual bank runs on Greek banks 

3j Greek 10 year bond yield rises to  : 7.45%  (yield curve  inverted)

3k Gold at $1067.30/silver $14.18 (7:45 am est)

3l USA vs Russian rouble; (Russian rouble down 15/100 in  roubles/dollar) 66.58

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 1.0287 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0905 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  +.493%/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 2.23% early this morning. Thirty year rate above 3% at 3.00% /

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

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

 

Global Stocks Start Off December With A Bang, US Equity Futures Rebound; Yuan Drops

There was something for everyone in last night’s much anticipated Chinese PMI data, with the official number sliding to the lowest in over 3 years, suggesting the PBOC will need to do more stimulus and is thus bullish, while the unoffocial Caixin print rising to the highest since June, suggesting whatever the PBOC is doing is working, and is also bullish. Not unexpectedly, global stocks decided to take the bullish way out, and have risen across the globe led by Asia, where stocks rose as much as 1.8%, Europe also green and US equity futures up 10 points as of this writing.

“There seems to be some modest improvement in investor sentiment on the global outlook and that has supported equities and commodities,” Nick Kounis, head of macro research at ABN Amro Bank told Bloomberg. “The China data were on balance positive.” Sure enough global risk has been in a risk-on mood all morning:

  • S&P 500 futures up 0.4% to 2089
  • Stoxx 600 up 0.2% to 386
  • MSCI Asia Pacific up 1.7% to 134
  • US 10-yr yield up 2bps to 2.23%
  • Dollar Index down 0.15% to 100.02
  • WTI Crude futures up 0.6% to $41.90
  • Brent Futures up 0.3% to $44.76
  • Gold spot up 0.5% to $1,070
  • Silver spot up 0.8% to $14.20

The Chinese PMI “confusion” was deftly handled by Bloomberg which in two separate pieces wrote, on one hand, that “an official manufacturing gauge sank to the lowest in more than three years” while on the other “a private gauge of Chinese factory output unexpectedly rose.” Just as watched was how China’s Yuan would react in its first day of inclusion in the IMF’s SDR basket, and instead of jumping as some strategists had expected, the freely traded offshore yuan fell 0.3% while the onshore spot rate was little changed. Others such as HSBC, said this is precisely the priced in outcome.

Also of note, there were no surprises when it came to policy decisions from the central banks of Australia and India. Both kept their benchmark lending rates unchanged. Elsewhere around the globe, U.K. banks rallied after all seven major lenders passed the Bank of England’s stress tests.

The strong December start was perhaps factored in by the algos, which are well aware that global equities have risen in the last month of the year on all but five occasions since 1988. Helping push European stocks higher was PMI data out of the EU which saw the final German PMI also rise above the flash estimate, printing at 52.9, above the 52.6 expected, while German unemployment dropping to a record low.

A closer look at regional markets starts in Asia, where MSCI Emerging Markets Index rebounded from a two-week low, climbing 1.3 percent, as benchmark gauges rallied across Asia. Hong Kong’s Hang Seng China Enterprises Index advanced for the first time in seven days and the Shanghai Composite Index increased for a second day, adding 0.3 percent.

The ASX 200 (+1.9%) outperformed following a rebound in all sectors and commodity prices, while Nikkei 225 (+1.3%) was lifted by the stellar Japanese capex and continued gains in company profits albeit at a slower pace. Mainland China lagged (Shanghai Comp +0.3%) as participants digested the latest PMI releases in which official manufacturing PMI printed its lowest since August 2012 and Caixin manufacturing PMI was at a 9th month in contractionary territory despite beating expectations. 10yr JGBs traded higher following the well-received 10yr JGB auction which saw the highest b/c since September 2014.

Asian top news:

  • China’s Manufacturing PMI Gauge Weakens to Lowest in Three Years: Readings show two-speed pace of growth as services outperform
  • Macau Casino Revenue Falls 32% as China Curbs Hit VIP Gaming: Decline for 18th straight month, down 35% so far this year
  • Rajan Holds India Interest Rate With Eye on Inflation Target: Will use space for more accommodation when available
  • Australia Holds Key Rate as Economy Expands Despite Mining Bust: RBA leaves key rate at 2.0%, as seen by all economists surveyed
  • Japan Pension Whale Stands by Stocks After $64 Billion Loss: GPIF lost 5.6% last quarter as stocks slid on China surprise
  • Japan 3Q Capital Spending rose 11.2% Y/y; Est. +2.2%
  • S. Korea’s Nov. Exports Fall 4.7% Y/y; Est. -9%; S. Korea’s Nov. Consumer Prices Rise 1% Y/y; Est. +0.9%
  • Australia Nov. Manufacturing Index Rises 2.3 Pts M/m to 52.5
  • Indonesia Nov. Consumer Prices Rise 4.89% Y/y; Est. 4.85%

In Europe, equities initially drifted lower heading into the North American crossover after a relatively choppy start, while the notable outperformer today has been the FTSE-100 (+0.4%), which has been led higher by financials after the BoE announced that all UK banks passed their stress test. On the other hand Linde (-11.9%) are the notable laggard in Europe after lower their 2017 forecast and expecting 2015 earnings to be at the lower end of expectations. However, the initial weakness in Europe to an extent also driven by concerns about the ECB doing less than expected on Thursday, has since been absorbed and the Stoxx had returned back into the green at last check.

European top news:

  • Bank of England Sees Countercyclical Buffer Rising on Risk: BOE said it may begin forcing banks to set aside capital as soon as March to support lending in a downturn
  • Linde Drops as Lower U.S. Pricing Clips Outlook for Profit: CEO Wolfgang Buechele reduced earnings targets at the gases supplier for the third time in just over a year
  • German Unemployment Rate Falls to Record Low on Domestic Demand: Sign that robust domestic demand is bolstering confidence in the growth prospects for Europe’s largest economy
  • Swiss Economy Unexpectedly Stagnated in 3rd Quarter on Franc: Weak performance in energy, construction and financial sector
  • Zurich Says CEO Senn Steps Down, de Swaan Takes Interim Role: CEO resigned after insurer reported a loss at general insurance unit, abandoned takeover bid for Britain’s RSA Insurance Group
  • UBS Traders May Be First to Face Sanctions in Currency Probes: As many as seven UBS traders may face sanctions from Switzerland’s financial watchdog in the coming weeks
  • France Nov. Manufacturing PMI unchanged at 50.6; prelim. 50.8
  • U.K. Nov. Manufacturing PMI falls to 52.7, below est.
  • Euro-Area Oct. Jobless Rate falls to 10.7%; median est. 10.8%

Bunds remain in negative territory after falling below the 158.00 level in early trade amid touted profit taking following recent gains, although with little new fundamental catalyst driving the move the German benchmark rebounded off worst levels and while remaining in negative territory, did rise back above the 158.00 level. While T-Notes moved in tandem with their European counterparts, initially seeing softness however heading into the US open off their worst levels.

In FX, a gauge of developing-nation currencies rose for the first time in five days after closing on Monday within 0.03 percent of a record-low. India’s rupee strengthened as the nation’s central bank kept borrowing costs on hold Tuesday. Turkey’s lira strengthened 0.8 percent, advancing for a second day as a report showed manufacturing expanded in November. In a meeting with President Recep Tayyip Erdogan on Tuesday, U.S. President Barack Obama discussed how to deescalate the situation with Russia after tension over the downing of a warplane near the Syrian border.

The AUD/USD rose after Australian building approvals smashed estimates (Y/Y 12.3% vs. Exp. 5.7%, M/M 3.9% vs. Exp. -2.5%), while AUD found additional support following the RBA’s decision to stand pat on rates and maintained a neutral bias. While also of note, the RBI kept all three of their main rates on hold as expected. In a similar fashion to yesterday, FX markets experienced volatility in early European trade, with GBP benefiting from UK/GE yield differentials and a softer USD index, as GBP/USD initially broke above the 1.5100 handle, however coming off best levels in the wake of a below expectation reading of manufacturing PM! (52.7 vs. Exp. 53.6). USD softness also benefited EUR/USD, which briefly broke above 1.0600 after reports that European names have taken off short bets today, before running into touted real money offers at 1.0620.

In commodities,  Oil futures in New York erased a gain of as much as 1.3 percent to trade little changed at $41.65 a barrel before this week’s meeting of the Organization of Petroleum Exporting Countries. Gold climbed a second day. Bullion for immediate delivery climbed 0.5 percent to $1,069.69 an ounce. Copper rose 0.5 percent to at $4,606.50 a metric ton in London.

Copper clawed back some of November’s 10 percent losses, the worst month since January. It wasn’t alone. An LME gauge of six industrial metals has now sunk for seven consecutive months, the longest losing stretch since 2009. The worst might not be over for copper, which is languishing near a six-year low. Hedge funds are betting there’s more pain in store as economic growth slows to the weakest pace in more than two decades in China, the world’s top consumer. Citigroup isn’t so bearish. It forecasts many commodity markets, including copper, may strengthen in the second half of 2016 as the collapse in prices shrinks production.

Looking at today’s calendar, this morning in Europe was be all about the manufacturing PMI numbers for November, where we got the final Euro area (match), Germany (beat) and France (miss) readings along with the indicators for Italy, Spain and also the UK. We’ll also get some labour market data with the latest unemployment reads due for the Euro area and Germany. This morning will also see the release of the BoE stress tests with Governor Carney set to speak shortly after. In the US, the final manufacturing PMI will also be released for the US while the focus will be on the November ISM data (manufacturing and prices paid). October construction spending data is also set to be released, while later this evening the November vehicles data will be released. Fedspeak wise we’ve got the Chicago Fed President Evans set to discuss the economic outlook and monetary policy at 12.45pm.

Global top news:

  • U.K. Banks Lead Europe’s Stock Rally After Stress-Test Results: Britain’s lenders led rally in Europe equities after Bank of England said all 7 major lenders passed stress tests
  • ECB’s Split With Fed Risks Running Until Draghi Near Retirement: Market indicator shows next ECB rate hike not before Nov. 2018
  • Yuan Drops as SDR Approval Seen Prompting PBOC to Reduce Support: Yuan weakened in offshore trading amid speculation China’s central bank will rein in intervention now that the IMF vote on reserve-currency status is out of the way
  • Euro Area’s Modest Recovery Sets Scene for Draghi Stimulus: Factory growth in euro area accelerated amid a continued decline in unemployment, extending a tepid recovery that may require more stimulus from the European Central Bank. Euro to Bear Brunt of Yuan’s Inclusion in IMF Reserve Basket
  • Oil Bulls Brace for Repeat of OPEC’s Bearish Blow at Meeting: Hedge funds are betting this week’s OPEC meeting will deliver another bearish blow to crude
  • Zurich Insurance CEO Steps Down, De Swaan Named Interim CEO
  • Putin Snubs Erdogan, Sees Obama in Test of Anti-Terror Front: In meeting, Obama and Putin don’t advance anti-terror alliance
  • Einhorn’s Hedge Fund Plunged 5.2% in November, Set for 2015 Loss: David Einhorn’s main hedge fund at Greenlight Capital is poised for only its second losing year in almost two decades
  • Power-Line Operator ITC Starts Review That May Lead to Sale: Study is part of effort to maximize value to shareholders
  • Anadarko Ordered to Pay $159.5 Million for 2010 Gulf Spill: Fine due to role as part-owner of doomed Gulf of Mexico well that in 2010 caused biggest offshore oil spill in U.S. history
  • Cyber Monday Sales Slow as Web Shopping Spans Holiday Season: Web-based sales climbed 17% Monday from year earlier as of 6pm in New York, after jumping 26% on Saturday and Sunday, IBM said

Bulletin Headline Summary from Bloomberg and RanSquawk

  • The Asia-Pacific session saw RBA and RBI keep rates on hold, while Chinese mfg PMI printed  lowest reading since Aug’12 and China Caixin mfg PMI print the highest reading since June
  • FTSE-100 outperforms in Europe after financials bolster the index, with the BoE announcing that all major seven UK banks passed their stress test
  • Looking ahead, today sees US manufacturing PMI, construction spending, ISM manufacturing and API crude oil inventories as well as comments from Fed’s Evans and Brainard and ECB’s Visco
  • Treasuries decline led by 5Y and 7Y notes as markets wait for Yellen speech tomorrow, ECB and Draghi Wednesday, Nov. payrolls Friday and FOMC Dec. 16.
  • Factory growth in the euro area accelerated amid a continued decline in unemployment, extending a tepid recovery that may require more stimulus from the ECB
  • China’s manufacturing conditions slipped to the weakest level in more than three years as sluggishness in the nation’s old growth drivers add to risks facing the government’s growth target
  • The euro’s worst year in a decade is looking even grimmer after the Chinese yuan’s inclusion in the IMF’s SDR basket, with its weight set to drop to 30.93% from 37.4%
  • A U.K. manufacturing gauge fell more than economists forecast in November, while still signaling solid growth after reaching a 16-month high the previous month
  • Obama urged Turkey and Russia to refocus their efforts on the common goal of combating terrorism, after Putin traded barbs with his Turkish counterpart, Recep Tayyip Erdogan
  • Merkel’s Cabinet yesterday backed the deployment of German troops against Islamic State, including 1,200 troops along with Tornado reconnaissance planes, refueling aircraft and a frigate in support of France, according to the document obtained by Bloomberg News
  • Swedes are responding to their government’s historic intake of refugees by turning to an anti-immigration group that both the ruling coalition and opposition deem too xenophobic to work with
  • $110.825b IG priced yesterday, $21.405b HY. BofAML Corporate Master Index OAS narrows 1bp to +162, YTD range 180/129. High Yield Master II OAS widens 2bp to +640, YTD range 683/438
  • Sovereign 10Y bond yields higher. Asian stocks rise, European stocks mixed, U.S. equity-index futures gain. Crude oil lower, copper and gold higher.

 

DB’s Jim Reid completes the overnight recap

Welcome to what looks set to be one of the busier December months that we can remember, certainly for central banks with the ECB and Fed very much in play. The month could be a battle between monetary policy Scrooge and Santa as we close out the year. December is rarely a bad month for risk but conditions are hardly normal at the moment. November was a month highlighted by what were huge declines across the commodity complex – Oil included – which makes this Friday’s OPEC meeting all the more important to keep a close eye on.

Although news-flow is still reasonably thin, European risk assets closed out November on a high yesterday reflecting the high hopes for this Thursday’s ECB meeting. The Stoxx 600 ended the session up +0.46% and at a three-month high while credit indices generally closed with some modest gains. The Euro continues to tumble, trading below $1.06 for all of yesterday’s session and is now at its weakest level since April. 2y Bund yields edged ever so slightly lower to -0.422% with the spread versus similar maturity Treasuries at 135bps which is the widest it’s been since 2006.

Those gains in European equities were in stark contrast to what was a generally weaker day in the US. The S&P 500 finished -0.46% having dipped lower into the close, although in reality it traded with a weaker tone for most of the session reflecting perhaps the soft second-tier data yesterday which did little to sway Fed expectations though. That said US credit indices outperformed with CDX IG finishing half a basis point tighter.

Before we go on, we’re straight to China this morning where the November PMI numbers are in. There are some mixed messages in the data, with the official reading falling 0.2pts to 49.6 (vs. 49.8 expected) which is the lowest since August 2012. This compares to a modest rise in the non-official Caixin reading, which was up 0.3pts to 48.6 (vs. 48.3 expected), albeit also in negative territory. Meanwhile and highlighting the divergence between sectors, China’s non-manufacturing PMI climbed 0.5pts to 53.6 – the highest level since July. Chinese bourses were initially weaker post the data but have rebounded for modest gains post the midday break. As we go to print, the Shanghai Comp and CSI 300 are +0.15% and +0.35% respectively.

Elsewhere, it’s been a pretty positive start for markets in December. The Nikkei is up +0.95% despite Japan’s manufacturing PMI declining a tad (52.6 from 52.8). The Hang Seng is +2.09% while the Kospi (+1.61%) and ASX (+1.93%) have also gained. The AUD is half a percent better off following some better than expected net exports data in Q3, while the RBA also left the cash rate on hold. Oil markets have made modest gains along with industrial metals this morning.

The notable newsflow from yesterday’s session was the widely expected confirmation from the IMF of the inclusion of the Chinese Yuan in its SDR basket. The currency will be added from the 1st October 2016 and will comprise 10.92% of the overall basket which was a little bit lower than the 14-16% previously drawn up from the IMF staff estimates. Speaking on the decision, IMF Chief Lagarde said that ‘the renminbi’s inclusion in the SDR is a clear indication of the reforms that have been implemented and will continue to be implemented and is a clear, stronger representation of the global economy’. In a note published this morning, DB’s China Chief Economist Zhiwei Zhang noted that the inclusion is structurally positive for China, as he believes that this may act as a catalyst to boost the momentum of reforms in China and indicates that the authorities are keen to integrate China’s economy further with the global economy. The onshore CNY was set 0.02% weaker this morning at the fix and has been little changed for much of the session.

In terms of the data flow yesterday, in the US the notable takeaway was a much softer than expected Chicago PMI for November, which fell 7.5pts to 48.7 (vs. 54.0 expected) and back to where it was in September after some falls for new orders and prices paid. The ISM Milwaukee (45.3 vs. 48 expected) also fell deeper into contractionary territory, down 1.4pts last month although there was better news for the Dallas Fed manufacturing survey which was up 7.8pts to -4.9 (vs. -10.0 expected), the highest since July albeit remaining in negative territory. These reports came before today’s ISM manufacturing print which our US economists expect slipped into negative territory in November to 49.0 (which is more bearish than the current market consensus of 50.5) having fallen to 50.1 in October. They note that this is based on the recent weakness in the NY and Philadelphia Fed surveys also, which is consistent with a decline in factory activity but not the overall economy (for the overall economy to be contracting, the level of the manufacturing ISM would have to be near 43). The other notable data point yesterday in the US was a slightly more disappointing than expected pending home sales report for October, with sales up just +0.2% mom (vs. +1.0% expected).

The economic data yesterday in Europe was focused on Germany where there was a disappointing start for Q4 retail sales with the November reading printing at -0.4% mom, which was below the +0.4% expected. It’s worth noting that this data can be very volatile, while sales do not have a strong correlation with overall consumption. Also out in Germany was the preliminary November CPI reading, although this offered no surprises at +0.1% mom for the month as expected, helping to nudge the YoY rate up one-tenth to +0.4%. Italy’s CPI print was a bit more disappointing at -0.5% mom, while in the UK mortgage approvals for the month of October nudged to 69.6k from 60.0k the previous month.

Also of interest yesterday was the news that the Fed is to adopt Dodd-Frank bailout limits, aimed at limiting the Fed’s ability to rescue individual companies during a crisis, the likes of which we saw for AIG and Bear Stearns during the financial crisis. The revised rule now means that the Fed will only be able to save companies with a ‘broad-based program’ rather than to select individual institutions.

end

ASIAN AFFAIRS

 

 i) i) Last night, 9:30 pm MONDAY night, TUESDAY morning Shanghai time.  Japan Nikkei closed up, Shanghai falls during most of the day  due to government probes but rebounds on government intervention in last hour/ Hang Sang rises. Base metals like iron ore falls but copper rises for the second day in a row. China’s key manufacturing index slumps badly to 3 year lows.  The Caixin index surprisingly rises for no reason.
 (courtesy zero hedge)

China Manufacturing Slumps To 3-Year Lows And Soars To 5-Month Highs

Following the earlier onslaught of weak (and strong) economic data, China has revealed its official and Caixin-based PMI surveys for Manufacturing and Services. Sure enough, while China’s official manufacturing data missed (to Aug 2012 lows), Ciaxin’s survey beat, jumping to June 2015 highs. even as China’s official Services PMI beat expectations, bouncing off 15-month lows. The question now is – given The IMF’s inclusion of the Yuan in the SDR basket – will The PBOC devalue (as offshore Yuan implies) to juice a collapsing manufacturing sector…  or is China’s manufacturing now improving if one looks at the “other” PMI?

Lots of confusion, even if just as we suggested before the Caixin PMI print:

And so, behold – China Manufacturing. The official print missed expectations and heads deeper into a 4-month contraction.. but the Caixin survey surged to 5-month highs, beating expectations

 

And if you do not believe that the central planners know what they are doing – Dr. He Fan, Chief Economist at Caixin Insight Group explains…

“The Caixin China General Manufacturing PMI for November continued to show signs of recovery, reaching 48.6, compared to October’s 48.3. This indicates that pressure on economic growth has eased and fiscal policy has had a strong effect.

 

Overall, the economy is still on track to become more stable.”

Let’s get some context on this so-called “stability” – it moved up 0.3pts and is still at 48.6 – a very contractionary level!  So ‘contraction’ is the new ‘killing it’.

China Services… [delayed for now – no explanation from source]

 

Finally we note that China services PMI is indeed likely to outperform manufacturing at every turn going forward. If we see China services PMI fall off a cliff with manufacturing, then it exposes the gaping wound that reforms are not working and that the glorious five-year plan transition away from the smokestack isn’t working…

However, someone needs to tell Chinese stocks to get with the program – following yesterday’s afternoon session rescue, Chinese equity investors are again selling to government buyers.

 

Because US equities are loving it – Dow Futs up over 100 points from the close – running stops above the US open cliff dive…

Charts: Bloomberg

end
 strange data from Asia last night:
(courtesy zero hedge)

AsiaPac Unleashes Baffle ‘Em With Bullshit Data Bonanza

From South Korean exports (beat) to Aussie PMI (multi-year highs) and from China Manufacturing PMI (2012 lows) to Japan CapEx (multi-year highs), AsiaPac was awash with the exact kind of baffle ’em with bullshit data that provides just enough “see everything is awesome after all” to balance the “umm, but what about…” less glass half full perspective. For your viewing pleasure – 5 WTF charts for AsiaPac economies.

WTF1 – Aussie PMI surprises to the upside to 2 year highs as Aussie Consumer confidence collapses…

 

WTF2 – While Aussie business spending collapsed at tits fastest pace on record Aussie PMI surged to near cycle highs…

 

WTF3 – Japanese CapEx surged by the most since 2007 as GDP dropped for the 5th time in 5 years…

 

WTF4 – South Korean exports dropped (again) but beat expectations notably despite not having any positive impact at all on the cost of ‘exporting’…

 

And finally…

WTF5 – China Services PMI jumps unexpectedly as the official manufacturing PMI just collapsed to its lowest level since August 2012, as the broad-based contraction accelerates.

Charts: Bloomberg

Confused yet? The answer is simple – if it’s bad news, buy stocks because the central bank will be forced to ease. If it’s good news, buy moar stocks because it proves central planners have fixed the problem.

end

The early this morning: Chinese auto sales crash putting a dent into the story of China’s growth
the entire world’s economic scene is crumbling!!
(courtesy zero hedge)

Chinese Auto Sales Crash, Inventories Soar In November

Despite ongoing exuberance at auto sales in America (which disappointed) – as crashing credit standards enable every Tom, Dick, and Muppet to buy too much ‘depreciating asset’ for their incomes – there arenumerous problems few are talking about for automakers worldwide. Aside from “plans to buy a car” tumbling in the latest confidence surveys, and inventories-to-sales surging, China just poured ice cold water on any hope of stability in that ‘growth’ market as auto dealers issue the highest inventory alert since June. November data from China shows demand plunging, sales collapsing, and inventories soaring – a triple whammy of “no, things are not ‘stabilizing’.”

As sales begin to disappoint…

  • *GM NOV. TOTAL U.S. VEHICLE SALES UP 1.5%, EST. UP 2.9%
  • *FORD NOV. U.S. LIGHT-VEHICLE SALES UP 0.3%, EST. UP 3.2%
  • *FIAT CHRYSLER NOV TOTAL U.S. VEHICLE SALES UP 3.0%,EST. UP 3.2%
  • *TATA MOTORS: TOTAL NOV. SALES DOWN 7% YEAR OVER YEAR

First, Inventories are at record (absolute) highs and at recession-signalling ratios to current sales…

 

Second, and that is a problem because the much-hyped and hoped-for future sales to soak all this excess inventory up is not coming soon… As the consumer confidence survey shows the lowest level of “plans to buy an auto” since January 2013…

 

And finally, Third, do not look to China for any help at all… China November Vehicle Inventory Alert Index rose to 61.8% (from 54.1% in Oct.), the Beijing-based China Automobile Dealers Association says in e-mailed statement.

Source: CAAM

 

Automakers appear to have two options, offer buy-one-get-one-free to all new Syrian refugees or cut production dramatically in hopes of easing inventory excess. Good luck.

 

Charts: Bloomberg

 

end

EUROPEAN AFFAIRS
The skies over Syria is getting crowded as both Britain and Germany is joining the battlefield against ISIS:
(courtesy zero hedge)

Britain May Launch ISIS Strikes “Within Days”; Germany To Join With Warship, Planes, Troops

On Saturday, in “‘The Redcoats Are Coming!’ Britain Moves Closer To Launching Anti-ISIS Airstrikes,” we warned that the skies above Syria were about to get even more crowded as David Cameron pushed British lawmakers to approve RAF strikes on Raqqa.

“It is wrong for the United Kingdom to expect the aircrews of other nations to carry the burdens and the risks of striking ISIL in Syria to stop terrorism here in Britain,” Cameron said.

“I don’t think this is a country that lets others like the French or the Americans defend our interests and protect us from terrorist organizations – we should contribute to that effort,” Finance minister George Osborne added, underscoring the perception that Britain’s military prowess is but a shadow of what it once was.

We also noted that Labour leader Jeremy Corbyn would not use a party whip to influence MP’s decisions. Over the weekend, Corbyn expressed serious reservations about the number of “moderate” rebels on the ground in Syria and also suggested that to the extent there are enough fighters to occupy the territory held by Islamic State once the group is routed, the UK shouldn’t assume that the fighters can be trusted. “I seriously question the number, I seriously question the motives and loyalty of those forces,” Corbyn said.

On Monday, Corbyn apparently attempted to compel party members to vote against military action in line with his own stance on the issue but after what FT described as a “fraught meeting”, the Labour leader bowed to internal pressure and conceded that MPs would be allowed to vote as they choose. Additionally, Corbyn abandoned the idea of setting an official policy of opposing air strikes no matter how party members voted after Andy Burnham, shadow home secretary, said that was “unacceptable”. Here’s where Corbyn’s shadow cabinet stands:

Against airstrikes

  • Jeremy Corbyn, leader of the Labour party
  • John McDonnell, shadow chancellor
  • Jon Trickett, shadow communities secretary
  • Diane Abbott, shadow international development secretary
  • Ian Murray, shadow Scotland secretary
  • John Cryer, chairman of the parliamentary Labour party
  • Nia Griffith, shadow wales secretary

For airstrikes

  • Tom Watson, deputy leader (who has asked Cameron to delay the vote pending proof that there are actually 70,000 moderate rebels on the ground)
  • Angela Eagle, shadow first secretary of state and shadow business secretary
  • Hilary Benn, shadow foreign secretary
  • Heidi Alexander, shadow health secretary
  • Lucy Powell, shadow education secretary
  • Chris Bryant, shadow leader of the house of commons
  • Vernon Coaker, shadow northern Ireland secretary
  • Michael Dugher, shadow culture secretary

With that, the stage is set for Britain to join the fray. As FT goes on to note, Corbyn’s concession to his divided party “effectively guarantees that [David Cameron] can secure a Commons majority for war.” British military action could start “within days” as the PM “reacted quickly to Corbyn’s capitulation, announcing after he returned from the Paris climate summit that he would recommend to the cabinet on Tuesday that a one-day debate and vote on military intervention in Syria be held on Wednesday.”

With the vote thus set, “RAF crews could be bombing the Isis headquarters in Raqqa by the end of the week,”The Guardian says. On Tuesday, Cameron said “the decision to take military action is one of the most serious a prime minister can make. Isis poses a very direct threat to the United Kingdom – and as we have already seen in Iraq, British airstrikes can play a key role in degrading them; but they are only part of a comprehensive strategy for Syria.

But that’s not all. Germany is now set to enter the fight as well. “German Chancellor Angela Merkel’s Cabinet approved deploying warplanes over Syria in the fight against Islamic State,”Bloomberg reported on Tuesday. Apparently, Berlin is set to send Tornado surveillance planes, a frigate to protect France’s carrier, and aerial refueling for French fighter jets.

Parliament will need to approve the deployment and a vote is expected within days. All told, around 1,200 German troops are expected to participate. This should do wonders when it comes to stemming the flow of refugees into Germany because as France explained earlier this year, by far the best way to solve a refugee crisis is to drop more bombs on the place from which the refugees are fleeing.

And with that, two more world powers will now have planes in the sky and ships in the Mediterranean. Just to be clear, this means that by the end of next week, it’s possible that American, French, Turkish, Russian, and German planes will all be flying missions above Syria, a decisively dangerous scenario now that Ankara has forced Moscow into a state of paranoia regarding the safety of The Kremlin’s aircraft. With Russian S-400s at the ready, and with Su-34s now armed with air-to-air missiles, the potential exists for another “accident.” 

Additionally, it’s worth reiterating that the West and the Russians still haven’t resolved the most pressing issue when it comes to airstrikes in Syria. Namely that Moscow and Iran are still attacking the FSA and other rebel groups that are receiving guns and money on a weekly basis from the US, Turkey, Saudi Arabia, and Qatar. This means that while the West bombards Raqqa (or perhaps the better way to put is “while the West thinks they’re bombarding Raqqa based on the ‘intelligence’ they receive from Washington”), America and its regional allies are engaged in a proxy war with Moscow and Tehran in the northwest part of the country. This makes absolutely no sense and it isn’t at all compatible with David Cameron telling British lawmakers that the “moderate” opposition is in a position to hold territory formerly governed by ISIS. Not only are the rebels not in a position to secure towns and cities, they are being routed at Aleppo by the Russians and Iranians. At some point this has to be addressed but for the time being, everyone seems content with being invited to the party.

end
wow!! they are all dropping like flies!!!
Europe’s  very large Bluecrest hedge fund is calling it quits  (almost) as 8 billion of its 9 billion in assets is being returned to shareholders. They just cannot make money!
(courtesy zero hedge)

Legendary Hedge Fund Calls It (Semi) Quits: $8 Billion BlueCrest To Return Outside Client Money

Hedge funds are dropping like flies now.

Following news that both Ackman and Einhorn have suffered dramatic losses, in the -20% ballpark YTD, and after reporting that numerous metal-focused commodity hedge funds have liquidated in recent months, most notably Trafigura’s own Galena, the latest firm to wave the flag of surrender to the forced of central planning is none other than Michael Platt’s legendary $8 Billion BlueCrest Capital, which until recently was the third largest hedge fund in Europe, and as recently as two years ago was the topic of the Bloomberg profile “BlueCrest Builds a Hedge Fund Empire“, will return a whopping $7 billion of its current $8 billion AUM held currently in the form of outside money.

Just hitting the headlines:

  • MICHAEL PLATT’S BLUECREST TO RETURN ALL OUTSIDE CLIENT MONEY
  • BLUECREST CAPITAL MANAGEMENT TO BECOME PRIVATE INVESTMENT PARTN
  • BLUECREST HAS $8B AUM, $7B IS SAID TO BE OUTSIDE MONEY
  • BLUECREST: CLIENTS TO GET 75% INVESTMENT CAP BEFORE JAN END
  • BLUECREST: CLIENTS TO GET 90% INVESTMENT CAPITAL BY END OF 1Q
  • BLUECREST SAYS BSMA TO CONTINUE TO HOLD CERTAIN MANAGED ASSETS

From the press release:

BlueCrest Capital Management Limited “BlueCrest” announces it will, over the next several months, transition to a Private Investment Partnership, and will return to its clients the $8 billion it currently manages on their behalf.  Following the transition, BlueCrest will manage assets solely on behalf of its partners and employees.

It will continue to trade all current major strategies and retain all the firm’s offices around the world and anticipates strong growth in employees and AUM over the next several years under the new business model.

During its 15 year history, BlueCrest has delivered trading profits of over $22bn for its investors, and has won numerous industry awards for excellence. It has built an industry leading global team of over 250 investment professionals in nine offices operating in fixed income, currencies, emerging markets, credit and equity trading.

However, ongoing secular changes in the industry, including trends in fee levels, the cost of hiring the best trading talent, and the challenges in tailoring investment products to meet the individual needs of a large number of investors, have weighed on hedge fund profitability.  A Private Investment Partnership strategy of concentrating on a reduced number of funds, managed exclusively on behalf of BlueCrest’s partners and employees, will facilitate higher returns and greater profitability for the firm’s stakeholders, and give it greater flexibility to compete aggressively for trading talent.

BlueCrest’s existing partner fund, BSMA, will continue to hold assets managed in the fixed income, currency and credit trading strategies, and the BlueCrest Equity Strategies Fund and the BlueCrest Emerging Markets Fund will be retained as the vehicles through which partners and employees invest in equity market and emerging market trading strategies respectively.  All other funds, including BlueCrest Capital International, and the AllBlue Fund, are expected to close during 2016.

The process of closing the client funds has been agreed with the Boards of Directors of those funds and communications with clients as to the timetable is now taking place.  Clients are expected to receive approximately 75% of their investment capital before the end of January and 90% by the end of Q1 2016. The divestment of investment portfolios will be carried out in an orderly manner, balancing the requirements for speed and value for investors.

BlueCrest’s founder and Chief Executive, Michael Platt, said:

“Firstly, I would like to thank all of the investors who have entrusted money to the BlueCrest funds over the last 15 years and to wish them well in their future investment endeavours.”

“We are embarking on an exciting new phase in the development of BlueCrest.  We will be stronger and more flexible under our new business model, and see exciting opportunities to grow significantly in terms of numbers of trading teams and assets under management.  The new model provides the opportunity to create significant value for our partners, our traders and our staff, due to a step-change in our profitability.  It will also allow us to enhance further our ability to attract the highest quality investment talent in markets across the globe.  We have delivered industry-leading returns to our investors over the past 15 years but believe that BlueCrest is now better suited to a Private Investment Partnership model.

We have always been an industry innovator, and this transition will be no exception.  We have sold and repurchased a stake in our business, we have seeded new strategies using bank loan financing, and been among the first to launch a permanent capital vehicle in the UK.  We seeded and spun out BlueMountain Capital and more recently have spun out and divested of a significant stake in Systematica, a major business division. This transition, though not unique, will make us one of the largest and most diverse managers to adopt a Private Investment Partnership model.”

* * *

BlueCrest Capital Management, one of the world’s premier hedge fund managers, was founded in 2000 by Michael Platt, and manages c. $8bn of assets.  With an award-winning reputation for excellence BlueCrest combines a “specialist portfolio management approach”, tight risk management and research excellence.  BlueCrest has c.570 members of staff located in offices in Jersey, London, New York, Geneva, Singapore, Hong Kong, Boston, Westport and Toronto.

end

 

And Bluecrest’s holdings:

among thing, CNOOC and Petrochina both darlings to the Shanghai exchange!

(courtesy zero hedge)

Here Are BlueCrest’s Biggest Holdings

Following the the stunning news that BlueCrest, until recently one of the Europe’s largest and fastest growing hedge funds, will be essentially unwinding as it returns the bulk of its managed money to outside investors (according to Bloomberg $7 billion of the $8 billion in AUM will be returned), and will liquidate the vast majority of its holdings, the question is just which securities will have the overhang of a forced seller over the next few months.

The (partial) answer comes from BlueCrest’s latest 13-F, which lists some 846 securities amounting to just over $3 billion. And while the breakdown includes various fixed income investments and derivatives (both calls and puts), here are the Top 10 pure-play stock investments listed by the fund.

 

China’s “regulators” will hardly be pleased that one of the world’s most prominent hedge funds is about to take an axe to 2 of its three biggest holdings which just happen to be Chinese market darlings, CNOOC and Petrochina.

And a breakdown by industry courtesy of Bloomberg:

 

 

One thing stands out in the chart above: the fund’s surprising overexposure to Energy assets. Perhaps that is also the reason for its fund’s premature quasi demise?

 

end
Coming to a theatre near you:
This is not good!!

 (courtesy Keep Talking Greece)

Greeks Told To Declare Cash “Under The Mattress”, Jewelry And Precious Stones

When earlier today we read a report in the Greek Enikonomia, according to which Greek taxpayers would be forced to declare all cash “under the mattress” (including inside) or boxes that contain more than 15,000 euros as well as jewelry and precious stones (including gold) worth over 30,000 euros, starting in 2016, we assumed this has to be some early April fools joke or a mistake.

After all, this would be merely the first step toward full-blown asset confiscation, conducted so many times by insolvent governments throughout history, once the government cracks down on those who made a “mistake” in their asset declaration form or simply refuse to fill such a declaration, thereby making all their assets eligible for government confiscation.

It was not a joke.

Here is the take of Keep Talking Greece, whose stunned response mirrors ours.

Cash “under the mattress” totaling more than 15,000 euro, jewelry and other valuable items such as diamonds and gemstones, should be declared to electronic system of tax authorities, Taxisnet, as of 1 January 2016. Next to properties and vehicles and shares, now the taxpayers will also have to declare their deposits. And not only that. They will have to fill if they rent bank lockers and if yes, also the name of the bank and the branch, even if abroad.

A joint ministerial decision issued by the Ministries of Justice and Finance indicates that taxpayers in Greece should add all their valuables into a new category of the tax declaration, the “Assets declaration.”

Specifically, the decision provides that:

“Assets declarations” are submitted electronically and mandatory via Taxisnet.
Starting date for the submission is 1.1.2016

Declared must be cash money if more than 15,000 euro and precious items if their total value exceeds 30,000 euro. These amounts apply cumulatively per household (husband, wife, underage children).

To facilitate the completion of the declaration, data from the income statements (E1 and E9) will be drawn automatically.

Note that this Assets declaration process will initially apply to lawmakers, journalists, public servants etc and is the rehearsal for the creation of the electronic property & assets register that will be extended to all taxpayers.

The new assets declaration form has a total of 56 pages.

The decision has been taken “in the context of support and development of the economy,” the ministers state.

Some thoughts

First of all, the ministerial decision will certainly support and help to growth the noble profession of accountants.

How can a bride know the value of the jewelry her parents-in-law gave as a wedding gift?

If the retail price of X valuable item was 10,000 euro in 2005, what is the value today?

And what will happen if one will not declare his assets? The tax authorities will raid the home and search under the mattress to find grandma’s ring?

Are you kidding me, Greek Syriza state?

PS we should note that this assets declaration was in plan before SYRIZA came into power. Not sure about what minister promoted this, I vaguely reckon it was form New Democracy. Or most likely it was a Troika’s idea in order to grab the so-called ‘black money’ that starts with 15,001 euro in cash and diamonds worth 30,001 euro.

Average:
RUSSIAN AND MIDDLE EASTERN AFFAIRS
 The following is big news;  Israel is to enter the fray with Syria.  The Israeli Prime Minister met with Putin and they have praised each other’s bilateral efforts to prevent unintended clashes with their respective air forces operating in Syria.  Israel has discovered a huge gas find in the Leviathan off the coast of Haifa, Israel.  Russia wants to make deals for that gas an transport it throughout Europe.
This will explain the detente , much to the anger of Obama who continually scolds Israel.
(courtesy  DefenceNews/Israel)  and a special thanks to Robert H for sending this to us

Russia, Israel To Broaden Defense Coordination in Syria

Military Leaders To Meet, Flesh Out Air-Ground Deconfliction

TEL AVIV — Russian President Vladimir Putin and Israeli Prime Minister Benjamin Netanyahu on Monday praised bilateral efforts to prevent unintended clashes of their air forces operating in Syria and pledged to broaden so-called deconfliction measures to include forces operating from the ground as well.

Meeting in Paris less than a week after the Turkish Air Force downed a Russian fighter that had allegedly entered Turkish airspace for a brief period of time, Putin characterized measures first proposed by Netanyahu as efficient and said both leaders were “satisfied with the progress of bilateral” ties.

“The mechanism … [that] presupposes contacts between the militaries to prevent incidents due to the dramatic developments in the region has been efficient,” Putin told Netanyahu.

Referencing Ankara’s downing of the Russian fighter, Netanyahu said to Putin: “The events of recent days prove the importance of our coordination, our deconfliction mechanisms, our attempts to cooperate with each other to prevent unnecessary accidents and tragedies, and I believe that we’ve been successful. It’s important.

“I hope that Israel and Russia can see eye to eye on all the strategic matter, but I want to assure you that we believe that it’s within our powers to have very good coordination on the ground and in the air so that we do not create the kind of problems that we’ve been experiencing,” Netanyahu said.

Netanyahu said he was “very satisfied by the fact that our militaries have been very careful to coordinate with one another and will continue to do so.”

After his meeting with Putin, Netanyahu announced that senior military officers from both countries would meettomorrow to flesh out the nascent mechanisms endorsed by the two leaders Sept. 21 in Moscow.

In a Nov. 29 interview with Israel Radio, Israeli Defense Minister Moshe Ya’alon revealed that the Israeli Air Force used the coordination mechanism to warn away a Russian fighter aircraft that had briefly violated Israeli airspace during operations against Syrian rebels just north of the Israeli border.

Ya’alon did not specify when the breach occurred and described the incident as “a small infraction,” with the Russian fighter penetrating Israeli airspace for about one mile before correcting course.

He credited the direct Israeli-Russian channel of communications for preventing unintended clashes between the two countries, which are pursuing very different policies in Syria.

“Russian aircraft do not intend to attack us and therefore there’s no need to automatically down them. Until today, there’s been one small incident, and it was immediately corrected through our communications channel,” Ya’alon said.

The Israeli defense minister said Israel has not hesitated in the past to down Syrian aircraft — both UAVs and manned Russian-built fighters — that breach Israeli airspace.

But in the case of Russia, which for nearly three months has been operating in Syria on behalf of the regime of Syrian President Bashar Assad, Ya’alon said neither Israel nor Russia have an interest in interfering with one another’s activities in Syria.

“I want to remind you that about a year ago, we shot down a Syrian Su-24 that crossed our border into our territory as well as unmanned aerial vehicles,” Ya’alon told veteran Israel Radio broadcaster Arieh Golan. “But when we understood that the Russians planned to operate in Syria, immediately the prime minister met with President Putin and also military officers [from Israel and Russia] met … and we created an open channel for coordination in order to prevent misunderstandings.”

Email: bopallrome@defensenews.com

 

end

Here is a road map of the various players fighting for control of Syria and the removal of ISIS

 

*  *  *

And here, for those who missed it, is The New York Times’ attempt to explain who’s fighting who:

 

 

end

 

Terror at the Istanbul train station

(courtesy zero hedge)

Roadside Bomb Explosion At Istanbul Train Station Kills 1, Injures 6 – Live Feed

Update: *ISTANBUL EXPLOSION WAS BOMB PLACED ON ROADSIDE: YENI SAFAK (via Google Translate)

Istanbul Bayrampa?a explosion near a metro occurred. Citizens suffered bomb panic. Explosion sound was heard from other districts. Subway service was stopped. The blast was reportedly caused by a car bomb inside.’

One person has been killed and at least six more injured as Turkey’s Haberturk TV reports an explosion occurred at an Istanbul Metro station. The trains have been halted, passengers evacuated, and ambulances are on their way. While the cause is unknown (some are suggesting it was a power transformer), sounds of the explosion were heard across several districts of Istanbul according to local press, and residents of the city remain on high alert following Erdogan’s actions last week.

 

 

Live Feed…

http://www.dha.com.tr/dhayayin/dhafeed.asp

As DPA reports,

Train services were suspended Tuesday at a metro station in Istanbul after a loud explosion, state-broadcaster TRT reported.

 

The cause of the blast near the Bayrampasa station on the European side of the Turkish city was unclear, but media reports indicated it may have been an explosion at an electrical transformer.

 

Emergency crews were responding to the incident on the overpass next to the station.

Headlines…

  • *EXPLOSION AT BAYRAMPASA METRO STATION IN ISTANBUL: SABAH
  • *CAUSE OF REPORTED EXPLOSION AT ISTANBUL METRO STOP UNKNOWN
  • *ISTANBUL EXPLOSION WAS ON OVERPASS NEAR BAYRAMPASA METRO: AA

 

 

Police are out en masse…

 

Trains have been halted…

 

And Passengers are being evacuated…

 end
Egypt set to replace Turkey in supplying the Russian market with fruits and vegetables
(courtesy  RT)

Egypt ready to replace Turkey in the Russian market

Customers in Russian supermarket © Vladimir Fedorenko
Cairo has asked Moscow to provide it with the list of banned Turkish goods, saying it is ready to export Egyptian products to Russia.

The issue was raised at the meeting between Egyptian Trade Minister Tarek Kabila and his Russian counterpart Denis Manturov, according to Egypt’s Ministry of Trade and Industry website.

“Egypt is interested in filling the needs of the Russian market in goods, especially those that were supplied from Turkey, in the wake of Russia’s decision to restrict Turkish imports of fruits and vegetables to 66 percent, as well as clothing items,” the Egyptian minister said.

On Monday, the Izvestia daily published a list it got from a source in the Russian Ministry of Agriculture of banned Turkish products. It includes meat, dairy products, fish and seafood, nuts, fruit and vegetables, berries and herbs. The complete list will be issued on December 1.

Moscow will find no difficulty in substituting Turkish fruit and vegetables, according to Russian Agriculture Minister Aleksandr Tkachev. “Russians won’t feel the absence of Turkish products,” he said, adding that Azerbaijan, Uzbekistan, Morocco and Israel could be alternative suppliers.

On Saturday, Russian President Vladimir Putin signed a decree imposing a package of economic sanctions against Turkey following its downing of a Russian Su-24 jet in Syria. The measures include banning several Turkish organizations and the import of certain goods.

According to the decree, employers in Russia will be prohibited from hiring Turkish nationals for work starting January 1, 2016. The visa-free regime for Turkish nationals traveling to Russia will be suspended starting next year.

The Russian government has also been tasked to introduce a ban on charter flights between Russia and Turkey and to enhance security control at Russian ports in the Sea of Azov and Black Sea.

end

GLOBAL AFFAIRS
Fun and games in Kosovo!!  Is this going to be a repeat of the 1990s?
(courtesy zero hedge)

Meanwhile In Kosovo’s Parliament…

While Americans are used to tears (and jeers) in The Capitol as politicians go about their ‘business’, none of that compares to the behavior of lawmakers in Kosovo this morning.

As The Irish Times reports, three opposition lawmakers were arrested in Kosovo on Monday amid chaotic scenes in parliament, filled once more with tear gas in a fresh protest against an accord with former master Serbia.

Opposition MPs have been disrupting the work of parliament for two months by releasing tear gas in the chamber each time it tries to sit.

 

 

They are demanding the government revoke a deal, brokered by the European Union, to grant minority Serbs greater local powers and the possibility of funding from Belgrade. They also oppose a border demarcation deal with Montenegro.

 

Opposition supporters have rioted several times on the streets of the capital, Pristina, heightening the sense of a young country in crisis almost eight years since it declared independence from Serbia.

Caught on tape…

 

Government lawmakers met alone in the afternoon after the earlier disruptions, which, as AP reports, garnered the following response from the locked-out opposition…

“In a country with no opposition in the parliament, there is no parliament and it cannot be called a democracy,” said main opposition Self-Determination Movement lawmaker Aida Derguti.

 

In a statement, the European Union called for a return to dialogue in Kosovo.

 

“This kind of violent obstruction is neither acceptable nor will it solve any problem for the citizens of Kosovo,” it said.

*  *  *
Don’t worry though – As US Secretary of State John Kerry is due  to visit Kosovo on Wednesday in a gesture of support for its development as an independent state, 16 years after a U.S.-led Nato air war to halt the killing and expulsion of ethnic Albanians by Serbian forces. Parliament Speaker Kadri Veseli urged the opposition not to disrupt parliament this week, when he arrives… grab your popcorn.

end
Canada’s GDP plunges by .5% month over month as the oil industry suffers greatly.  You will see this happening to commodity countries all over the world.  The reasons for the global plunge is malinvestment caused by massive printing out money which was then used to produce overcapacity   (see David Stockman below)
(courtesy zero hedge)

Looney Plunges As Canadian GDP Collapses Most Since 2009

Who could have seen that coming? It appears, for America’s northern brethren, low oil proces are unequivocally terrible. Against expectations of a flat 0.0% unchanged September, Canadian GDP plunged 0.5% – its largest MoM drop since March 2009 and the biggest miss since Dec 2008. WithCanada’s housing bubble bursting, it’s time for the central planners to get back to work and re-invigorate the massive mal-invesment boom (and ban pawning of luxury goods).

In the past year, we have extensively profiled the collapse of ground zero of Canada’s oil industry as a result of the plunge in the price of oil, in posts such as the following:

Since then it has gotten far, far worse for Canada… GDP is down 0.5% MoM (and unchanged YoY – the worst since Nov 09)

 

The initial reaction is a tumbling looney…

 

Charts: Bloomberg

end
The following is a must read as Stockman explains to us how the globe got into this mess and it is going to get real bad
(courtesy David Stockman/Contracorner)

The Lull Before The Storm—–An Ideal Chance To Exit the Casino, Part 1

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Last night’s Asian action brought another warning that the global deflation cycle is accelerating. Iron ore broke below $40 per ton for the first time since the central banks kicked off the world’s credit based growth binge two decades ago; it’s now down 40% this year and 80% from its 2011-212 peak.

Embedded image permalink

As the man said, however, you ain’t seen nothin’ yet. That’s because the above chart is not merely reflective of too much supply and capacity growth enthusiasm in the iron ore industry or even some kind of worldwide commodity super-cycle that has gone bust.

Instead, the iron ore implosion is symptomatic of a much deeper and more destructive malady. Namely, it reflects the monumental malinvestment generated by two decades of rampant credit expansion and falsification of debt and equity prices by the world’s convoy of money printing central banks.

Since 1994 the aggregate balance sheet of the world’s central banks has expanded by 10X—— rising from $2.1 trillion to $21 trillion over the period. This rise does not measure any kind of ordinary trend which temporarily got out of hand; it represents an outbreak of monetary insanity that is something totally new under the sun.

What it means is that the Fed, ECB, BOJ, People’s Bank of China (PBOC) and the manifold lesser central banks purchased $19 trillion of government bonds, corporate debt, ETFs and even individual equities and paid for it by hitting the electronic “print” button on their respective financial ledgers.

This central bank balance sheet expansion, in fact, represented 70% of the world’s entire GDP as of the time the print-fest began in 1994. Yet as an accounting matter this monumental expansion was inherently suspect .

That’s because the asset side was mushroomed by the acquisition of already existing assets——-financial claims which had originally funded the purchase of real goods and services.

By contrast, the equal and opposite liability side expansion consisted of newly bottled monetary credit conjured from thin air; it represented nothing of tangible value, and most especially not savings obtained from the prior production of real economic output.

Stated differently, the central banks substituted $19 trillion of fiat credit for $19 trillion of real savings from current income that would have otherwise been required to fund debt and equity issued by businesses, households and governments during the last two deades.

Needless to say, this giant substitution drastically falsified the price of money and capital. It represented a big fat bid in the financial markets that drove cap rates to deeply sub-economic levels, meaning that bond yields were far too low and equity prices and PE ratios way too high.

Had the world economy tried to issue trillions of new securities and loans in the absence of this massive central bank balance sheet expansion, interest rates would have soared and PE ratios would have weakened, thereby short-circuiting the reckless expansion of finance which actually occurred.

In short, the torrid pace of central bank bond buying during the last 20 years has caused the global economy to became bloated with over-financialization.

In the case of debt, for example, the expansion ratio was nearly 4X. That is, total worldwide public and private debt outstanding soared from $40 trillion to $225 trillion. This astounding $185 trillion gain compared to just a $50 trillion gain in GDP, meaning that the world’s leverage ratio has soared to unprecedented heights.

Global Debt and GDP- 1994 and 2014

The expansion of equity capital on the traded stock markets of the world showed the same trend. Global equity market cap rose by $60 trillion or at a 11% annual rate during the two decades through the May 2015 peak. That was more than double the 5.0% growth rate of nominal GDP, meaning that the implicit capitalization rate of world income was soaring——even as the world economy was being bloated and deformed by the greatest credit bubble ever imagined.

World Stock Market Capitalization

At the recent peak, therefore, worldwide finance stood at $300 trillion ($225 trillion of debt plus $75 trillion of market equity) compared to just $60 trillion ($40 trillion of debt and $20 trillion of equity) in 1994. Needless to say, this 5X gain fueled, among other things, the greatest CapEx binge the world has ever seen.

But is was not healthy, sustainable CapEx because the underlying debt and equity which financed it—– a 5X surge in listed company investment during this period—– was drastically under-priced. Consequently, the world is now drowning in uneconomic, excess capacity along the entire food chain of production—–mining, bulk shipping, manufacturing, warehousing, containerships and air freight and downstream distribution.

The collapse of iron ore mining in Australia and shale drilling in North Dakota alike, therefore, denote not just traditional commodity cycles in petroleum and steel. They mark the arrival of what will be a long-running CapEx depression that will shrink final demand for energy and steel products for years to come.

Global Capex- Click to enlarge

Global Capex- Click to enlarge

The chart below  purports to show a difficult outlook for iron ore prices in the next several years owing to an expected further reduction of demand, while supply is expected to grow by another 5% through 2017 owing to the completion of projects already in the pipeline.

But that is wishful mainstream thinking. In fact, all the major sources of steel demand are in deep contraction. World shipbuilding is coming to a screeching halt; industrial infrastructure building in Brazil, Turkey and throughout the EM economies is in freefall; and China’s credit Ponzi, which generated massive overinvestment in apartment buildings, industrial production and public infrastructure, is visibly toppling.

Accordingly, global iron-ore demand is likely to plunge by 20%, not 2% as shown in the graph. Prices are therefore heading far lower, perhaps into the $20 per ton range. There will be unprecedented, sweeping bankruptcies in the global metals industries and a multiplier effect among adjacent supplier sectors.

WSJ

END

EMERGING MARKETS
(courtesy zero hedge)

Brazil Releases Shocking GDP “Obituary”: “It’s Mutated Into An Outright Depression,” Goldman Exclaims

To be sure, we haven’t exactly been shy about characterizing Brazil’s economic malaise as more akin to a depression than a recession. Here are a few representative headlines:

The problem, you’re reminded, is that Brazil is in the midst of a dramatic economic downturn that’s left the country to suffer through the worst inflation-growth outcome (i.e. stagflation) in more than a decade. Unemployment and inflation are soaring (annual headline IPCA inflation at 10.28%, unemployment at 7.9% in August, up from just 4.7% a year earlier) while output is plunging (IBC-Br monthly real GDP indicator down 6.1% Y/Y in September) and the market is losing confidence in the government’s ability to end a political stalemate on the way to shoring up the fiscal books and hitting primary surplus targets. Last week’s arrest of prominent lawmaker Delcidio Amaral in connection with the ongoing Carwash investigation didn’t help.

Thanks to the above mentioned IBC-Br monthly indicator (which showed an economy in “free fall” to quote Barclays) we already knew Q3 was going to be bad on the GDP front. But this is Brazil we’re talking about, which means that as bad as consensus is, there’s always the distinct possibility that the actual numbers will be far worse than expected and that’s exactly what happened on Tuesday.

Real GDP fell 1.7% Q/Q and 4.5% Y/Y while Q2’s already abysmal -1.9% contraction was revised down to -2.1%.

All of those prints missed expectations and the headline number was worse than all but three estimates from the 44 economists Bloomberg surveyed.

If you dig down a bit further you can begin to see why we’ve been so adamant about calling this a depression. Here’s Goldman with the summary:

Private consumption has now declined for three consecutive quarters (at an average quarterly rate of -8.5% qoq sa, annualized), and investment spending for nine consecutive quarters (at an average rate of -10.0% qoq sa, annualized). Overall, gross fixed investment declined by a cumulative 21% from 2Q2013. The declining capital stock of the economy (declining capital-labor ratio) hurts productivity growth and limits even further potential GDP. The sharp contraction of real activity during 3Q was broad-based: both on the supply and final demand side. Final domestic demand weakened sharply during 3Q2015 (-1.7% qoq sa and -6.0% yoy) with private consumption down 1.5% qoq sa (-4.5% yoy) and gross fixed investment down 4.0% qoq sa (-15.0% yoy). Finally, on the supply side, we highlight that the large labor intensive services sector retrenched again at the margin (-1.0% qoq sa; -2.9% yoy).

Yes, “the services sector retrenched again,” and as WSJ noted earlier, “Brazil’s service sector, including beauty salons, banks and realtors, employs more than any other sector in the country by a wide margin,and represents about 60% of GDP.” Here’s the full breakdown:

“At first read, the report recalls an obituary. There is no room for any growth in the coming quarters. The situation is really, really bad,” according to Andre Perfeito, chief economist at Gradual Investimentos, who spoke to Bloomberg by phone. “It’s a substantial hit coming not only from investment, which has fallen nine quarters in a row, but this year the big change is the substantial drop in consumption. We have not seen such a string of bad numbers for consumption,” Carlos Kawall, chief economist at Banco Safra and former Treasury secretary added.

This of course comes back to a worsening unemployment picture. Remember, employment fell 3.5% Y/Y and real wages slumped a whopping 7.0% in October. As Goldman put it, “the real wage bill of the economy shrank by a large 10.3% yoy in October; the largest decline since October 2003.” The unemployment rate hit 7.9% in August, up from just 4.7% a year ago.

That means people like Rossini Santos, the 43-year old, unemployed steelworker with an $80,000 mortgage and a $17,000 Chevy Prizm note that Bloomberg profiled in October, will have a harder and harder time finding work and thus servicing their debt. “The idea that consumers might not have income to service debt in the years to follow I think is what terrifies them. Even if there is a recovery of sentiment, we believe the labor market will continue suffering throughout the next year, and that will hold down household consumption,” Barclays economist Bruno Rovai said.

Meanwhile, Copom is completely stuck. Inflation is soaring and will likely get worse to lagged FX pass through which means if anything, rates need to rise. As Daniel Weeks, chief economist at Garde Asset Management put in on Tuesday, “the negative GDP may influence BCB, but rising inflation will prevail.” That means that Brazil, much like some of its Andean neighbors will need to consider pro-cyclical policy measures – i.e. Copom will need to hike. 

Bradesco BBI sees two hikes, one in January and one in March. “Although BCB kept Selic unchanged in last meeting, the dissent in the decision (two members voted for a 50 bps hike) and the change in the post-communique text (removing the phrase ‘keeping interest rates unchanged for a sufficient period’) are indicatives that the BCB may change its course of action soon,” the bank says, adding that “given soaring inflation expectations, it is now too much of a risk for the BCB to wait and see if the recession will eventually lead to lower inflation in 2016.”

So with no counter-cyclical maneuverability, the economy (specifically investment, manufacturing, and the credit impulse) will continue to suffer mightily going forward. We’ll close with a quote from Goldman’s Alberto Ramos, Brazilian commentator par excellence:

What started as a recession driven by the adjustment needs of an economy that accumulated large macro imbalances is now mutating into an outright economic depression given the deep contraction of domestic demand.

 end
OIL MARKETS
In a nutshell, probably not
(courtesy Michael McDonald/OilPrice.com)

Can We Blame Hedge Funds For Low Oil Prices?

Submitted by Michael McDonald via OilPrice.com,

When oil prices were spiking in 2008 and some commentators were predicting prices of $200 a barrel, many pundits and politicians turned to blame speculators and hedge funds for pushing prices upwards. That period of high prices passed and speculators avoided any tough new regulations in part due to mix empirical evidence surrounding the causes of price volatility. Now though, the opposite case is being made; hedge funds shorting oil may be behind recent volatility and the current low price of oil.

Given the benefits to consumers from low oil prices, there is little talk of new regulation to prevent hedge fund shorting, but it is unclear if regulation would do much good in any event. While there is a correlation between hedge fund positions and oil prices, it is unclear if hedge funds are causing moves in the price of oil, or if oil markets are simply responding to a third set of unobserved causal factors.

At a basic level, oil prices are based on the intersection of supply and demand. On the supply side are producers from OPEC to U.S frackers. The demand side is a little more complicated. Of course consumers and businesses fall into the demand category, but it could be that hedge funds also play a role here. If hedge funds and other investors buy up oil in anticipation of a future recovery in prices, then they might be able to help prop up the price of oil or even drive the price of oil higher. That was the case often made in 2007 and 2008.

There is definitely some evidence that is going on today. When investors buy and store oil, they will eventually have to sell it, which moves them to the supply side of the price equation. As a result, theoretically investors should help to limit volatility in oil markets by buying in anticipation of future higher prices and selling in anticipation of future lower prices.As each type of trade is unwound, it acts as a stabilizer for the market and should help to cushion price changes. This is true even when hedge funds and others short oil since eventually they have to buy to cover those short positions.

Still the bigger issue is whether hedge funds and other investors are large enough to materially move the overall oil market, which is one of the largest and most liquid of all markets globally. While the hedge fund industry as a whole manages roughly $2.7 trillion in assets, managed futures or commodity trading advisors (CTA) only manage around $330 billion according to Barclays. For comparison purposes, the overall oil market tradesabout 96-97 million barrels of oil per day. At an average price per barrel of around $50, that implies a total value of all oil traded of roughly $4.8 billion per day.

Obviously CTA firms could be influencing the price of oil given their level of assets and the level of the traded market size in oil, at least in the short term. CTA firms could represent an additional 10 percent of demand in the market on days when the price of oil appears too low or 10 percent supply on days when it appears too high. That would be feasible and require about $500 million in capital versus total CTA AUM of $330B. Still over the course of a year, total oil trades come to more than $1.25 trillion in value which dwarfs CTA assets and represents a sizeable piece of the overall hedge fund industry.

So what is the moral of this story? It is unclear if CTA firms are having a sizeable impact on the oil industry, but they could be in the short term. Over the medium and long term, the oil markets are far too large to be consistently influenced by hedge funds or other investors especially since at any given point investors are likely to be taking opposite sides of the same trade.

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

Euro/USA 1.0594 up .0024

USA/JAPAN YEN 123.12 down .089

GBP/USA 1.5076 up .0020

USA/CAN 1.3333 down.0015

Early this morning in Europe, the Euro rose by 24 basis points, trading now just below the 1.06 level rising to 1.0594; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore,and now Nysmark and the Ukraine, along with rising peripheral bond yield. Last night the Chinese yuan down in value (onshore). The USA/CNY up in rate at closing last night:  6.3987  / (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 northbound trajectory  as settled up again in Japan by 9 basis points and trading now well above the all important 120 level to 123.12 yen to the dollar.

The pound was up this morning by 20 basis points as it now trades just below the 1.51 level at 1.5076.

The Canadian dollar is now trading up 15 in basis point to 1.3333 to the dollar.

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

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially  with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

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

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

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this TUESDAY morning: closed down 136.47 or 0.69%

Trading from Europe and Asia:
1. Europe stocks mixed

2/ Asian bourses mostly in the red     … Chinese bourses: Hang Sang green (massive bubble forming) ,Shanghai in the green barely on gov’t intervention/ (massive bubble ready to burst), Australia in the green: /Nikkei (Japan)  in the green/India’s Sensex in the green/

Gold very early morning trading: $1068.40

silver:$14.19

Early TUESDAY morning USA 10 year bond yield: 2.23% !!! up 2 in basis points from Wednesday night and it is trading well below resistance at 2.27-2.32%.  The 30 yr bond yield rises to  3.00 up 1 in basis point.

USA dollar index early TUESDAY morning: 100.01 down 19 cents  from Monday’s close. (Resistance will be at a DXY of 100)

This ends early morning numbers TUESDAY morning

OIL RELATED STORIES
(courtesy Michael mcDonald/Oil Price.com)

Can We Blame Hedge Funds For Low Oil Prices?

Submitted by Michael McDonald via OilPrice.com,

When oil prices were spiking in 2008 and some commentators were predicting prices of $200 a barrel, many pundits and politicians turned to blame speculators and hedge funds for pushing prices upwards. That period of high prices passed and speculators avoided any tough new regulations in part due to mix empirical evidence surrounding the causes of price volatility. Now though, the opposite case is being made; hedge funds shorting oil may be behind recent volatility and the current low price of oil.

Given the benefits to consumers from low oil prices, there is little talk of new regulation to prevent hedge fund shorting, but it is unclear if regulation would do much good in any event. While there is a correlation between hedge fund positions and oil prices, it is unclear if hedge funds are causing moves in the price of oil, or if oil markets are simply responding to a third set of unobserved causal factors.

At a basic level, oil prices are based on the intersection of supply and demand. On the supply side are producers from OPEC to U.S frackers. The demand side is a little more complicated. Of course consumers and businesses fall into the demand category, but it could be that hedge funds also play a role here. If hedge funds and other investors buy up oil in anticipation of a future recovery in prices, then they might be able to help prop up the price of oil or even drive the price of oil higher. That was the case often made in 2007 and 2008.

There is definitely some evidence that is going on today. When investors buy and store oil, they will eventually have to sell it, which moves them to the supply side of the price equation. As a result, theoretically investors should help to limit volatility in oil markets by buying in anticipation of future higher prices and selling in anticipation of future lower prices.As each type of trade is unwound, it acts as a stabilizer for the market and should help to cushion price changes. This is true even when hedge funds and others short oil since eventually they have to buy to cover those short positions.

Still the bigger issue is whether hedge funds and other investors are large enough to materially move the overall oil market, which is one of the largest and most liquid of all markets globally. While the hedge fund industry as a whole manages roughly $2.7 trillion in assets, managed futures or commodity trading advisors (CTA) only manage around $330 billion according to Barclays. For comparison purposes, the overall oil market tradesabout 96-97 million barrels of oil per day. At an average price per barrel of around $50, that implies a total value of all oil traded of roughly $4.8 billion per day.

Obviously CTA firms could be influencing the price of oil given their level of assets and the level of the traded market size in oil, at least in the short term. CTA firms could represent an additional 10 percent of demand in the market on days when the price of oil appears too low or 10 percent supply on days when it appears too high. That would be feasible and require about $500 million in capital versus total CTA AUM of $330B. Still over the course of a year, total oil trades come to more than $1.25 trillion in value which dwarfs CTA assets and represents a sizeable piece of the overall hedge fund industry.

So what is the moral of this story? It is unclear if CTA firms are having a sizeable impact on the oil industry, but they could be in the short term. Over the medium and long term, the oil markets are far too large to be consistently influenced by hedge funds or other investors especially since at any given point investors are likely to be taking opposite sides of the same trade.

end
 WTI falls as API reports another surprise inventory rise:

WTI Crude Slides After API Reports Another Surprise Inventory Build

After nine weeks of inventory builds in a row, expectations were for a modest 900k barrel draw in total inventory this week. Expectations were crushed as API reported a much-larger 1.6 million barrel build – the 10th week in a row. After three weeks of very significant builds, Cushing – having seen its storage capacity increased to 73mm (from 71.4mm) barrels – saw a smaller-than-expectd 433k build (+1mm build exp.). WTI prices had drifted higher into the API report (after an extremely volatile day) but slipped lower after the print, as anxiety builds ahead of OPEC.

 

Total Crude build extends to 10th week…

 

Crude reacted immediately…

 

The question for the OPEC meeting is just how much crude and its options will be manipulated?

 

Charts: Bloomberg

Average:
And now for your closing numbers for TUESDAY night: 3:00 pm
Closing Portuguese 10 year bond yield: 2.27% down 5 in basis points from Monday
Japanese 10 year bond yield: .299% !! down 3/10 in basis points from Monday and extremely low
Your closing Spanish 10 year government bond, Tuesday down 2 in basis points.
Spanish 10 year bond yield: 1.50%  !!!!!!
Your MONDAY closing Italian 10 year bond yield: 1.41% down 1  in basis points on the day: Friday/ trading 10 basis points lower than Spain.
IMPORTANT CURRENCY CLOSES FOR TUESDAY
Closing currency crosses for TUESDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
 Euro/USA: 1.0631 up.0062 (Euro up 62 basis points)
USA/Japan: 122.86 down 0.230 (Yen up 23 basis points)
Great Britain/USA: 1.5079  up .0023 (Pound up 23 basis points
USA/Canada: 1.3371 up .0022 (Canadian dollar down 22 basis points)

USA/Chinese Yuan:  6.3985 up .0005 on the day (yuan down)

This afternoon, the Euro rose by 62 basis points to trade at 1.0631.  The Yen rose to 122.86 for a gain of 35 basis points. The pound was up 23 basis points, trading at 1.5079. The Canadian dollar fell by 22 basis points to 1.3371. The USA/Yuan closed at 6.3985
Your closing 10 yr USA bond yield: down a full 7 in basis points from Monday at 2.15%//
(trading at the resistance level of 2.27-2.32%)
USA 30 yr bond yield: 2.92 down 7    in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries
 Your closing USA dollar index: 99.81 down 39 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:  up 39.56 points or 0.62%
German Dax: down 120.99 points or 1.06%
Paris Cac down 43.07 points or 0.87%
Spain IBEX:down 7.70 points or 0.07 %
Italian MIB: down 136.65 points or 0.60%
The Dow up 168.73 or 0.95%

The Nasdaq: up 47.64  or.0.93%

WTI Oil price; 41.67
Brent OIl:    44.26
USA dollar vs Russian rouble dollar index:    66.54  (rouble is down  12/100 roubles per dollar)
This ends the stock indices, oil price, currency crosses and interest rate closes for today.
And now for USA stories:
New York equity performances for today:

Collapse In US Manufacturing Sparks Buying Panic In Bonds… And Stocks

So to summarize the day, CEO’s outlook for next year is the weakest in 3 years, US Manufacturing ISM is the weakest in 2009, bond yields are collapsing, and rate-hike odds are dropping… so stocks rallied (because auto sales in the past were soaring?)…

 

Before we start, the faith remains strong in stocks…

 

But not in bonds…

 

Since The FOMC meeting in October…S&P +1% post Oct FOMC, 30Y Futs Unch, EURUSD -4%, Gold -10%, Crude -11.5%

 

To sum up today’s insane moves in equity markets… (via Nanex)

 

Chinese stocks did not love the weak data…

 

Today’s rally was all about the European close once again…

 

A look at the futures markets shows just how crazy the last two days have been…

 

The S&P 500 is now at Goldman Sachs’ new 2016 year-end target. And Trannies love low oil prices…

 

Some individual stocks that stood out…

Acorns can grow to the sky…

 

And Valeant is fixed…

 

VIX was crushed…

 

Shorts were squeezed after EU close…

 

Today’s crazy price action had the stench of QE-trades once again…

 

Bonds were very aggressively bid…

 

As 2s30s collapsed further to 8 month lows…about to break below 200bps

 

Just remind us again why you are buying financials?

 

The US Dollar slipped lower amid some buying in EUR and aggressive buying in AUD…

 

Commodities drifted higher modestly with gold leading the week..

 

But crude dropped amid crazy volatility…

 

Charts: Bloomberg

end

It’s D-Day For Puerto Rico As $354 Million Payment Comes Due, Padilla Heads To Capitol Hill For Help

Puerto Rico has a problem. The commonwealth needs to make a $354 million bond payment on Tuesday and the government is basically out of money.

We previewed this rather precarious situation twice in the last two weeks (see here and here), noting that this time is indeed “different.” Why? Because unlike August when the island paid only $628,000 of a $58 million payment (so, just about 1%), a large portion of what’s due Tuesday is GO debt guaranteed by the National Public Finance Guarantee Corp. A default on that spells litigation.

A default “would likely trigger legal action from creditors, commencing a potentially drawn-out process absent swift federal intervention,” Moody’s warned last month.

As a refresher, here’s a bullet point summary of recent developments from BofAML:

  • On 6 November, Puerto Rico released its unaudited quarterly financial and operating report. In the report, Puerto Rico makes plain that it faces a near-term liquidity crisis, has too much debt, limited ability to raise revenues, and a near-decade-long recessionary economy. As a result, it is our opinion that it will likely need to restructure its debt and, absent a voluntary restructuring, will prioritize essential government services at the expense of debt-service payments.
  • Moody’s believes Puerto Rico is likely to default on at least a portion of its scheduled debt-service payments due 1 December, which include roughly $273mn of GDB debt guaranteed by the commonwealth.
  • Moody’s Analytics opines that, without near-term Congressional action, Puerto Rico may very well suffer an economic depression.
  • The US Senate Judiciary Committee scheduled a hearing on Puerto Rico’s financial crisis for 1 December. The Committee’s Chairman stated that allowing a debt restructuring without requiring structural and fiscal reform would be throwing away taxpayer money.
  • The Puerto Rican House and Senate approved significantly amended local control board bills from the one the Governor submitted, turning the proposed “control” board into an “advisory” board. The two bills will need to be reconciled.
  • The Puerto Rico Highway & Transportation Authority (HTA) cancelled $228.5mn of Ambac-insured bonds, a positive for Ambac-insured bondholders, as the insurer will have more claims-paying ability should Puerto Rico or its public corporations default

Hedge funds became one of the islands go-to sources for funding in recent years and last month, the worried trustees of the New York City Employees’ Retirement System sent a letter to its hedge funds and distressed debt managers imploring them to “find a just and equitable solution.”

“Some hedge fund and other institutional investors’ reaction to the crisis suggests they will seek to impose draconian terms and conditions on Puerto Rico’s bond issuing entities,” the letter said. “The pension fund said it was concerned that large holders of Puerto Rico debt will raise their stakes and have the securities repaid at the expense of the island’s roads, bridges, sewer systems and other public assets,” Bloomberg added.

Late last month, the commonwealth’s Government Development Bank met with creditors’ advisors in New York in order to provide greater clarity on “the proposed restructuring process,” which the GDB says “is a comprehensive plan that will benefit all parties while supporting the creation of a sustainable path forward.” As Reuters put it earlier today, “Governor Alejandro Garcia Padilla wants to overhaul spending and restructure debt, but bondholders are resisting cuts to repayments, and restructuring discussions look to take months.”

Of course Puerto Rico doesn’t have “months,” they have “hours” and as of Monday evening, no decision had been made on whether to default in order to ensure that the government has the cash to provide public services. As we put it last week, “Padilla isn’t likely to sacrifice the public interest at the altar of the island’s debtors.” Even so, Daniel Hanson (the Height Securities analyst who recently warned that social unrest could be on the horizon as Padilla runs out of money to make government payroll), says a default may mean GDB goes into receivership, an outcome that would “almost certainly result in a stay” on the government’s ability to move money, hindering its ability to operate.

And it’s not just about the GO portion of today’s payment. “Even a default on the non-GO portion could result in litigation against the GDB,” Reuters warns before quoting a creditor source as saying that “of course” everyone would sue. “It would be really messy.”

As for what happens if Padilla defaults on the GO share, “there would be a new round of selling pressure,” John Miller, co-head of fixed income for Nuveen Asset Management told Reuters. The odds of Puerto Rico making another GO bond payment due on Jan. 1 “would drop precipitously,” he added.

As a reminder, the commonwealth owes another $303 million in 30 days. Here, courtesy of Barclays, is a look at debt service payments by entity to 2020:

Meanwhile, Padilla is a witnesses at a 10 a.m. Senate Judiciary Committee hearing today. The Committee, headed by Iowa Republican Charles Grassley, is meeting to discuss a legislative proposal to assist Puerto Rico. As Bloomberg put it last month, “Republicans would prefer that Puerto Ricans solve the crisis on their own, but if they can’t, lawmakers will probably seek to impose ‘something like’ a federal control board.” Here’s a preview of the hearing from Bloomberg:

Puerto Rico’s $70 billion debt crisis has already led to four hearings in the U.S. Congress this year, hours of testimony and no consensus over how to help the Caribbean commonwealth. Another hearing today is unlikely to change that.

As Governor Alejandro Garcia Padilla’s administration decides whether to default on $354 million of bond payments coming due, he will appear before a hearing of the Senate Judiciary Committee, which has power over a bill that would allow some Puerto Rico agencies to file for bankruptcy. That measure has stalled for lack of a single Republican sponsor.

 

Senator Chuck Grassley of Iowa, the committee’s chairman, and fellow Republicans are expected to echo criticism of Puerto Rico expressed at the previous meetings, when lawmakers reprimanded the island’s accounting practices and said any aid would be wasted if it doesn’t contend with its chronic budget shortfalls. Republicans control both houses of Congress.

 

“Grassley is likely to criticize the current Puerto Rico government for not doing enough in terms of austerity and not producing the audited financial statements,” said Brandon Barford, a partner at Beacon Policy Advisors in Washington and a former Senate aide. “And Grassley is crucial to passing any legislation that would help Puerto Rico.”

 

The lack of agreement has left the U.S. largely on the sidelines during the island’s escalating fiscal crisis, which resulted from years of borrowing to pay bills as the economy struggled to grow and residents left. Garcia Padilla in June said the island can’t afford to repay what it owes, and today it may default on bonds guaranteed by the central government for the first time.

 

Puerto Rico’s non-voting representative in Congress, Pedro Pierluisi, President Barack Obama’s administration and Democratic lawmakers have been seeking to grant the island or its agencies the ability to file for bankruptcy, which allows debt to be written down in court. While cities including Detroit have done so, that option isn’t available to Puerto Rico under the law.

As for creditors’ chances of getting paid, Matt Fabian, a partner at Municipal Market Analytics who spoke to Bloomberg, laments that “we’re a trust-based market [and] once that goes away, you’re cooked.” Fabian is referring to the concept of “willingness to pay” in the muni market. He says Puerto Rico’s willingness to pay is the only fundamental credit factor that’s changed, not its ability. Here’s more:

“In corporate situations, issuers and creditors are usually on the same team: more revenue is better, Fabian explained. For states and cities, that’s not always the case. More revenue often comes from an increase in taxes, one of the least popular moves an elected official can make.With an unlimited taxing power, a politician’s willingness to raise taxes to unpopular levels is just as important as its ability to do so, Fabian said.”

So stay tuned, as this will be a drama-filled 24 hours for Padilla and the commonwealth which, as Reuters colorfully puts it, is “a meteorological paradise mired in economic purgatory.”

 end
 Now it is the USA’s turn to report weakening PMI numbers as the entire world has excess capacity producing goods:
(courtesy zero hedge)

Majority Of World Economy Weakening As US Manufacturing PMI Tumbles To 2 Year Lows

Following China’s surging and tumbling Manufacturing PMIs, and mixed data in Europe, US Manufacturing PMI’s fell in November to 52.8 from October’s hope-strewn bounce above 54. This is the weakest PMI print since October 2013 (as ISM Manufacturing tumbled to its lowest since Dec 2012). 30 regions have reported PMIs so far with half (15) seeing weakness (and just 13 seeing improvements) as new orders plunge to lowest since Oct 2013.

Eurozone PMIs keep rising as US and China tumbles…

Charts: Bloomberg

Commenting on the final PMI data, Chris Williamson, chief economist at Markit said:

While the pace of manufacturing growth appears to have slowed in November, it remains encouragingly resilient, which is all the more impressive once headwinds such as the strength of the dollar and malaise in overseas markets are taken into account.

 

“The PMI results are indicative of the manufacturing sector growing at an annualised rate of around 2% in the fourth quarter so far.

 

“Growth is being driven by domestic demand, with exports falling back into decline.The uncertain global picture and strong currency are key areas of worry to manufacturers, which led to a more cautious approach to hiring during the month. However, there’s nothing new that will overly concern policymakers, leaving the door open for rates to rise later in the month.

A quick reminder of China’s baffle ’em with bullshit…The official print missed expectations and heads deeper into a 4-month contraction.. but the Caixin survey surged to 5-month highs, beating expectations

Charts: Bloomberg

On the first workday of a new month, global PMI manufacturing surveys are released around the world. That gives us an early read on the state of manufacturing. As the below table shows, 30 regions have reported so far. Thirteen saw improvements in their manufacturing sectors in November, and 15 recorded a weakening. Two indices were unchanged. A reading above 50 reflects expansion, while below 50 indicates contraction. In this regard, there were 20 countries in positive territory and 10 in negative.

 

end

 

And now its the important ISM manufacturing report which also shows a huge downfall:

“Time To Hike Rates?” The Last 2 Times ISM Manufacturing Was Here, The Fed Unleashed QE1 & QE3

While it is hoped that the economy can continue to expand on the back of the “service” sector alone, history suggests that “manufacturing” continues to play a much more important dynamic that it is given credit for… and that is a major problem as ISM Manufacturing just fell below 50 for the first time since Nov 2012, crashing to 48.6 – the weakest since June 2009. Across the components, new orders collapsed (worst since Aug 2012), and prices paid crashed.

 

When ISM Manufacturing dropped to this level in early 2008, people largely ignored it at first… then The Fed unleashed QE1 to save the world… same again in 2012…

 

As New Orders collapsed…

 

What respondents had to say…

  • “The oil and gas industry is realizing that [the] ‘low’ oil prices are now the new reality with expectations to continue at this level for some time.” (Petroleum & Coal Products)
  • “Still seeing deflation in raw materials.” (Chemical Products)
  • “Bookings and new orders are lower than expected.” (Computer & Electronic Products)
  • “Automotive remains strong.” (Fabricated Metal Products)
  • “Business is still good.” (Transportation Equipment)
  • “Downturn in China and European markets are negatively affecting our business.” (Machinery)
  • “Strong dollar is slowing our sales to China as they can buy in Europe.” (Primary Metals)
  • “Medical device continues to be strong.” (Miscellaneous Manufacturing)
  • “Incoming orders have leveled off from the summer.” (Furniture & Related Products)
  • “Month-over-month conditions are stable.” (Food, Beverage & Tobacco Products)

Still – it’s only manufacturing right? As we explained previously,

While it is hoped that the economy can continue to expand on the back of the “service” sector alone, history suggests that “manufacturing” continues to play a much more important dynamic that it is given credit for.

 

The decline in imports, surging inventories, and weak durable goods all suggest the economy is weaker than headlines, or the financial markets, currently suggest.

 

For now, however, that detachment can last a while longer as global Central Banks continue to suppress interest rates and flood the financial system with liquidity. With levels of subprime loans for autos and houses, debt issuance and share buybacks once again sharply on the rise, the “party” rages on. However, it is worth remembering what happened when the bartender previously shouted “last call.”

This won’t end well…

 

The last time ISM was here, The Fed first unleashed QE1.. and again QE3 in 2012 – Seems like a perfect time to raise rates!!

end
The big CEO Economic Confidence Survey implodes as it drops to its lowest level in 3 years.
As we have mentioned to you on several occasions, the USA economy is imploding as per the CEO’s in the USA:
(courtesy zero hedge)

CEO Economic Confidence Implodes, Drops To Lowest In Three Years

end
And with all of today’s news, the Atlanta Fed lowers its forecast for 4th quarter GDP from 1.8% down to 1.4%
How on earth can these guys raise rates!!
(courtesy zero hedge)

Atlanta Fed Slashes Q4 GDP Forecast From 2.3% To Just 1.4% In Under One Week

Less than a week ago, following the latest deteriorating US data, we noted that the Atlanta Fed had slashed its Q4 GDP forecast from a reasonable 2.3% to 1.8%. Then, earlier today, after the latest recessionary data from the US manufacturing sector, we expected further cuts to be imminent from the Federal Reserve which unlike its peers, actually has an accurate track record of predicting GDP growth.

We were not disappointed, and moments ago the GDPNow website announced that the latest model forecast for real GDP growth in the fourth quarter of 2015 has now tumbled to a paltry 1.4 percent on December 1, down from 1.8 percent on November 25. “The decline occurred this morning after the Manufacturing ISM Report On Business from the Institute of Supply Management and the construction spending release from the U.S. Census Bureau.”

The Atlanta Fed is now nearly 50% below the consensus Q4 GDP estimate of 2.5%

We are not sure when the last time the Fed started a tightening cycle with a 1.4% GDP baseline, but we are confident we will have to go quite far back in time to find out when this occurred.

 

 

end

 

 

The way bond yields have been rising indicates that if the Fed does raise rates it is policy error.  Also take a look at the number of shorts on the 10 year bond.  These guys have loaded the boat to one side expecting a rate hike  (they went short on bonds).  If it does not occur, the boat will capsize and the shorts will drown.

(courtesy zero hedge)

Treasury Bond Yields Are Collapsing As Dec Rate Hike-Odds Slide

With December rate-hike odds sliding the most since the last FOMC meeting (down from 75% to 70%), following abysmal data this morning, it appears investors are reaching for the safety of Treasuries as either a fed policy error is about to be unleashed and/or growth is signficantly weaker than all the talking heads proclaim. With traders the most net short in years, this rapid plunge in yields could quickly accelerate.

 

The entire curve is plunging…

 

With 30Y almost roundtripping to The FOMC (and back below 3.00%)…

 

Given up all the payrolls purge rise in yields…

 

The last time the world was this short Treasuries, the 10Y yield collapsed from 3.94% to 2.39% in just 3 months.

(Chart shows aggregate net short speculative positioning across the entire Treasury futures curve – rebased to 10Y-equivalents)

Simply put, The Fed has created – through its constant communication and confusion – the biggest bear trap for bond traders… if a hike does not come in December, 2010’s yield collapse could look like a stroll in the park, especially in the newly illiquid normal.

end
And all of the above caused the chance for a rate hike in two weeks to fall form 75% down to 71%
Also pay attention to the huge short position in bonds.  If their is no rate hike these guys sink!!
(courtesy zero hedge)

With 15 days left until the day that will live in monetary policy infamy, it appears investors are beginning to lose faith…

 

Following today’s ISM/PMI data collapse (and everything else recently), the odds of a December rate-hike have plunged most since the October FOMC meeting…

 

Perhaps this is why?

 

As we noted previously, here we are in the lull just as we were before that Sept. meeting, And what is happening this time? Well, don’t look now, but there indeed looks to be trouble brewing on the global stage (or should I say “international developments”) that could turn out to be just as big of a headache to the Fed’s reasoning’s on whether or not to “just do it.” Just one of those issues is – once again: China.

 

How long before Christine Lagarde raises some doubts? Again! And crushes The Fed’s credibility once and for all.

One thing is sure – despite Stan Fischer’s exclamation that The Fed will not surprise ‘the market’; given the massive short posiitioning…

 

The Fed better not let them down – The last time the world was this short Treasuries, the 10Y yield collapsed from 3.94% to 2.39% in just 3 months.

end
What!!!!
We know that when the USA were operating under emergency measures to avoid a breach of the debt ceiling, they borrowed from Federal pension account funds.  When they signed their new debt ceiling a total of 339 billion in debt was added to the previous level which is what was expected.
However today, the USA added another 335 billion in total debt for November bringing the total to 18.827 billion. Normally each month goes up by 50 billion or so.  What caused this massive increase in issuance of debt?
(courtesy zero hedge)

U.S. Total Debt Soars By $674 Billion In November

When the US reached a debt ceiling deal in the beginning of November, it was common knowledge that there would be a debt accrual “catch up” to make up for lost time when the US was operating under emergency measures to avoid breach of the debt ceiling. And sure enough, when the accurate total debt number was released on November 2, this was indeed the case, when we learned that the US had added some $339 billion in debt during the “emergency measures” period.

However, what is unclear is how in the remaining 4 weeks of November, the US managed to add another $335 billion in total debt, bringing the total increase for the month of November to a whopping $674 billion, and total US debt to a record $18.827 trillion.

 

Also, just to preempt the question, the chart below shows the change in US debt under president Barack Obama: starting at $10.6 trillion on January 21, 2009, total debt is now up just over 77% under Obama’s tenure, to $18.8 trilion. At the current pace of growth, it may double by the time Hillary is sworn in as America’s next president.

Average:
USA special forces are now back on the ground in Iraq fighting ISIS
(courtesy zero hedge)

The Boots Are Back On The Ground: US Officially Deploys Special Forces To Iraq

Just to be clear, everyone who’s been paying attention knows there have been US boots on the ground in Syria and Iraq for quite some time.

When Obama announced last month that Washington would be deploying “less than 50” Spec Ops to Syria, the public’s reaction (as exemplified by the painful presser with White House Press Secretary Josh Earnest) seemed to indicate that everyone had forgotten that just five months ago, US commandos executed a raid in Syria that purportedly killed Islamic State’s “gas minister” (and yes, that’s just as absurd as it sounds). And then there was the Peshmerga-assisted raid on an ISIS prison in the northern Iraqi town of Huwija that resulted in the first US combat death in the country since 2006. Footage from that operation was plastered all over the news in a desperate attempt to prove the US is still serious about fighting terror.

Additionally, Washington has made no secret of the now defunct “train and equip” program for Syrian rebels – clearly, the American public hadn’t thought very hard about who was doing the on-the-ground “training.”

Finally, there’s no telling how many CIA operatives and black ops have been running around in Syria assisting Saudi Arabia and Qatar’s proxy armies from the very beginning.

As Anthony Cordesman, a security and intelligence analyst for past US administrations told The Guardian, no boots on the ground “doesn’t mean every damn boot.”

Well just moments ago, Ash Carter announced that the US would deploy an “expeditionary targeting force” to Iraq. Here are the details via Bloomberg:

  • Specialized U.S. “expeditionary targeting force” to assist Iraqi, Kurdish Peshmerga forces, puts “even more pressure on” Islamic State, Defense Secretary Ashton Carter tells House Armed Services Cmte.
  • “These special operators will over time be able to conduct raids, free hostages, gather intelligence, and capture ISIL leaders,” Carter Says
  • Raid “creates a virtuous cycle of better intelligence, which generates more targets, more raids, and more momentum”
  • Iraq raids “will be done at the invitation of Iraqi government/ focused on defending its borders and building the ISF’s own capacity
  • Expeditionary force ‘‘ will also be in a position to conduct unilateral operations into to Syria,’’ Carter says in statement
  • NOTE: Carter statement does not indicate how many special operations force will be deployed in ‘‘expeditionary targeting force”

The announcement comes as lawmakers and former defense officials call for a greater US commando presence to fight ISIS (the same ISIS that US commandos armed and trained along with the Saudis, Turkey, and Qatar). “The goal is to start a chain reaction of intelligence-driven raids that increase in frequency and expand in scope over time. The metric becomes can you disrupt and dismantle the network faster than the enemy can repair and regenerate it” Robert Martinage, a former deputy assistant secretary of defense for special operations under Obama said this week.

As Bloomberg noted on Monday, “the model would be the commando raid that killed al-Qaeda leader Osama bin Laden in Pakistan in 2011. The tactics, honed in hundreds of raids in Iraq and Afghanistan, were developed by groups such as Task Force 714 in Iraq, which joined the intelligence resources of the CIA, FBI and National Security Agency with Navy Seal Team Six and Army Delta Force commandos.”

So in short, expect more helmet cam footage designed to drum up public support for an increased troop presence in Iraq and eventually in Syria because as last week’s events clearly demonstrate, the stakes are now quite high.

*  *  *

From “Kurdish fighters say US special forces have been fighting Isis for months,” via The Guardian

On a damp afternoon in Iraqi Kurdistan, a 29-year-old peshmerga fighter named Peshawa pulls out his Samsung Galaxy mobile phone, flicks hurriedly through his library until he finds the video he wants, and presses play.

The clip, filmed just after dawn on 11 September, shows four tall and western-looking men in the heat of a battle against Islamic State militants in northern Iraq. “These are the Americans,” says Peshawa in a secretive tone.

One is crouched behind a machine gun firing round after round from the top of a fortified mound; another lies on his front a few feet away, legs outstretched and taking aim at the enemy with a long rifle. A third wields a long-lens camera taking photo after photo, and the last stands back, apparently overseeing the others during the combat south-west of the city of Kirkuk.

The footage, Peshawa says, is evidence that US special forces have been waging a covert war on the frontline in Iraq for months. Such a claim could alter the feverish debate over whether Barack Obama should move farther and faster against Isis in the wake of the Paris attacks.

In another video, dated 11 June, an American soldier wearing the fatigues and insignia of a Kurdish counter-terrorism unit can be seen walking alongside two dozen peshmerga in the aftermath of a seven-hour firefight with Isis militants in the village of Wastana and Saddam settlement, according to the peshmerga who filmed the video.

The American special forces arrived in Kirkuk earlier this year to train, advise and support peshmerga forces fighting Isis. According to a Kurdish peshmerga commander, about 30 American special forces operatives set up an operations room in the city.

A senior peshmerga commander, who did not wish to be named, said: “In February, for the first time, four American snipers came to south Kirkuk because we had lost several peshmerga to the Isis snipers.

“The peshmerga snipers were weak and before we could hit a single Isis sniper, we would lose a few men. Therefore we desperately needed American snipers. They had taken part in all the fights in south Kirkuk and they had really good snipers.”

end
The number of millennials living with their parents climbs again.
Reason:  the kids are not getting married, too worried about the economy to tie the knot.
(courtesy zero hedge)

Number Of Millennials Living In Parents’ Basement Climbs (Again); Weddings Blamed (Again)

Three weeks ago, we noted with some alarm that the number of women age 18 to 34 living with their parents is now the highest since record keeping began more than seven decades ago.

According to a study by the Pew Research Center in Washington, 36.4% of young women have now moved back to the basement, so to speak. The culprit: weddings. No, really. From Bloomberg:

Eternal happiness can wait. Millennials are much less likely to be married than their parents were at their age, and marriage often serves as an impetus to move out. 

 

Of course the real reason why 18-34 year-olds are moving home is because the US economic “recovery” is characterized by a labor market that, far from being a “robust” creator of breadwinner jobs, actually churns out bartenders and waiters. The sad thing is, between lackluster wage growth, crippling student debt, and bad decision making when it comes to picking a college major, some millennials are finding out that serving drinks is a far better way to make ends meet than taking a full-time job for a meager salary that all but guarantees you a spot among America’s growing peasantry.

On Monday, we get still more evidence of the above, this time from the Commerce Department, who reports that 31.5% of 18-34 year-olds now live with their parents. As you can see from the following, this is one graph that is the definition of “up and to the right”:

If that were a chart of some “key metric” a startup founder dreamed up with the help of a VC backer, you’d have yourself a billion dollar unicorn. Unfortnately it’s not. It’s an illustration of just how abysmal the US economic “recovery” truly is and it’s also a reflection of what happens when you pair an inexorable rise in the cost of education with a jobs market that’s a shadow of its pre-crisis self.

Next, have a look at the chart of 25-34 year-olds living with their parents:

As you can see, that looks like the highest level on record. If we assume a student starts college at 18 or 19, and finishes in 4-5 years (which may be optimistic but should be a decent baseline), the 25-34 bracket should include quite a few graduates. If these young adults are moving home at a record pace, one has to believe that the labor market is anything but “robust.” 

But not so fast says Jed Kolko, an independent economist and senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley. As WSJ notes, Kolko – like te Pew Research Center – believes this can all be explained by a lack of weddings. Here’sWSJ:

Mr. Kolko says that the rise in children living with their parents is largely related to the fact that people are marrying and having children later, not to the weak economy and housing market. Single people without children are more likely to continue living at home much later.

Note that Kolko is asking you to make the following ridiculous assumption: if you aren’t married, you automatically want to live with your parents. Obviously, that’s absurd. 

But one thing Kolko does get right is this: “What I think it means is that the boost to housing from young adults will come more slowly than people expect.”

Indeed Jed. But not because unmarried people want to live in their parents’ basement until they find their soulmate. Rather, because soaring rents, student debt, and a lack of decent job opportunities have conspired to make independence and self-sufficiency a pipe dream for a third of the nation’s millennials. 

Also, someone should tell the Commerce Department that there’s no reason to put out this type of abysmal data. A “double seasonal adjustment” could fix this right up.

 

end
We will leave you with your humour for the day:
Obama pardons another Turkey?

Caption Contest: Obama Pardons Another Turkey?

By the look on President Obama’s face, Erdogan must have just announced the addition of dozens of coal-fired power plants…

 

 

It seems President Obama went full Queen Victoria – “we are not amused!”

end

I am a little tired, so I had better stop.
I see you tomorrow night.
Harvey

end

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