dec 4/Strong rally for gold and silver today as the commercials are close to net long at the comex/SLV has a huge addition of 2.21 million oz of silver/Draghi corrects his policy error of yesterday which causes North American bourses to rise/Brazil in a dire situation tonight/Opec announces no production cuts in oil/Jobs report in USA add 211,000 people but all of them part timers/also most of the gain was bartenders etc/USA trade deficit rises again by 3.4 % or 43 billion dollars/

Gold:  $1083.30  up $22.00   (comex closing time)

Silver $14.50 up 45 cents

In the access market 5:15 pm

Gold $1086.50

Silver:  $14.55

At the gold comex today,  we had an extremely poor delivery day, registering  4 notices for 400 ounces. And this is the biggest delivery month of the year for gold? Silver saw 29 notices for 145,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 200.52 tonnes for a loss of 102 tonnes over that period.

In silver, the open interest fell by smallish 419 contracts despite the fact that silver was up 7 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 with first day notice results.  I promised you that we should start to see the OI in silver start to rise from this level but today we had a tiny setback. The total silver OI now rests at 164,446 contracts In ounces, the OI is still represented by .822 billion oz or 117% of annual global silver production (ex Russia ex China).

In silver we had 29 notices served upon for 145,000 oz.

In gold, the total comex gold OI fell by a large 3802 contracts as the OI fell to 394,847 contracts despite the fact that gold was up by $7.50 with respect to yesterday’s trading. Yesterday it stated this:” It sure looks like the commercials were buying and the oblivious specs were the shorters.” I guess the specs started to cover today.

We had no change in  gold inventory at the GLD, / thus the inventory rests tonight at 638.80 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 deposit of 2.287 million oz  into SLV/Inventory rests at 321.507 million oz

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

1. Today, we had the open interest in silver fall by a tiny 419 contracts down to 164,446 despite the fact that silver was up in price by 7 cents to with respect to yesterday’s trading.   The total OI for gold fell by 3802 contracts to 394,847 contracts despite the fact that gold was up by $7.50 with respect to yesterday’s trading.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)

b) COT report

Harvey

3. ASIAN AFFAIRS

i) Last night, 9:30 pm THURSDAY night, FRIDAY morning Shanghai time.  Japan Nikkei closed down badly, Shanghai falls    Hang Sang falls. The housing bubble in Hong Kong looks like it is bursting
(courtesy zero hedge)
ii) more on China’s crackdown on short sellers:
(courtesy zero hedge)
EUROPEAN AFFAIRS
i)  Denmark votes to protect their sovereignty as they reject further EU integration. Please note that Denmark still retains their currency, the Kroner in the same manner as the UK
( zero hedge)

ii)

Just take a look at what is going on in northern “Apocalyptic”  Greek border as economic migrants battle refugees. The latter can leave for the rest of Europe but not the former.  What a mess
(courtesy zero hedge)
RUSSIAN AND MIDDLE EASTERN AFFAIRS
i) Draghi corrects his “policy” error of yesterday with a speech today.  He states that he will re calibrate if necessary more QE.
(courtesy zero hedge)
ii) Now a Turkish MP has evidence of Erdogan’s son in law,  Albayrak is also involved in the illegal smuggling of Syrian crude
( zero hedge)

iii) The vital Turkish stream pipeline project is suspended. This would definitely hurt Turkey:

(courtesy Tass)

iv) Israel conducts secret training exercises in Greece in order to avoid the SAM 300 Russian missiles on the ground.

Israel is afraid that Iran is arming Hezballoh and a well equipped Hezballoh is not in Israeli interest.
(courtesy zero hedge)
v)  Now Turkey with 1200 men ready to invade Iraq.  The entire middle east is red hot!
(zero hedge)
GLOBAL ISSUES
A great history lesson on why the 1929 crash happened and why we are going down
This is a must read..
(courtesy David Stockman/Contracorner)
EMERGING MARKETS
The situation in Brazil goes from bad to worse.  The markets are in total panic as Estevez needs to raise cash.  His company was junked by Fitch.  Needless to say, it would be impossible for the insolvent government to buy the company.
It seems totally hopeless over there:
(courtesy zero hedge)
OIL MARKETS
i) at the oil meeting in Vienna:  result no cut in production.
oil falls, and the rouble falls, gold/silver jumping.
( zero hedge)

ii)  Oil should have moved higher on rig count tumble but it stayed constant

(courtesy zero hedge)
PHYSICAL STORIES
i) Gold and silver trading today/huge advance
(zero hedge)
ii) Govt in India is targeting the gold hoard of the temples.
Not a chance of working
(Reuters/GATA)
iii) Great news guys and gals:  Goldman Sachs wants to issue its own paper currency
(London’s Financial Times)

iv) Alasdair Macleod talking about the bind that the Fed is in:(courtesy Alasdair Macleod/GATA)

v) Bill Holter’s important commentary tonight is entitled:

“Policy error or on purpose?”

(Bill Holter/Holter-Sinclair collaboration)

vi China’s demand for gold in the latest week is 49 tonnes (equals gold withdrawn from SGE)

So far this year:  2362 tonnes.
(courtesy Lawrence Williams/Sharps Pixley)

 

USA STORIES AND ISSUES
i) Official jobs report:  a gain of 211,000 jobs
(zero hedge/BLS)

ii) Where was all the gain?: we had a gain of 319,000 part time jobs.

Also the highest gain was construction??? with the housing sector in disarray??
The big gains occurred in low paying jumps
(courtesy zero hedge)

iii)  wage growth is occurring strictly with bosses or supervisory personnel,  not the general employee sector:

(courtesy zero hedge)

iv) Since January 2015,  the USA has added 294,000 waiters and bartenders and zero manufacturing workers

And our big economists in the USA are happy with this?
(courtesy zero hedge)

v) the mouthpiece for the Fed was spoken and expect a rate hike in two weeks:

( Hilsenrath/Wall Street Journal/zero hedge)
vi) An extremely important piece:  Judging from the reaction of the Euro and the stock markets around the globe, many think that yesterday’s non action by the ECB was a policy error.
We have a new development to go over with respect to the supposed .25 basis rate hike in two weeks.
The big question is what happens to the all important Repo trade as it is the most important component of the Fed’s rate hike strategy.  In essence, the Fed is tightening and therefore what is the cost in liquidity. The expert in this field, E.D. Skyrm suggests that the Fed must drain 800 billion of excess liquidity to make that .25% hike.  If they cannot, then overnight rates will just not react and then we have another policy error
(courtesy zero hedge/last night)
and continuing on the same vain…
vii  Again, another important piece:  Why didn’t the Euro drop with the “good news” from the jobs report today.  The reason is the policy error of Draghi.  The raising of 1/4 % interest rate rise of the Federal funds rate would need  a 800 billion USA drain from the global system.   That must be provided for by the ECB or else all asset prices come tumbling down:
(zero hedge)

viii) Michael Snyder…

a great review of all the global economic crisis indicators:
(courtesy Michael Snyder/EconomicCollapseBlog)
ix) USA trade deficit widens by 3.4%
(Associated Press)

Let us head over to the comex:

 

The total gold comex open interest fell to 394,847 for a loss of 3802 contracts despite the fact that gold was up by $7.50 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.  Today we witnessed the continuation of the drop in OI in the front month and as such the number of gold oz standing dropped considerably again.  We are now in the big December contract which saw it’s OI fall by 806 contracts from  3799 down to 2993.  We had 0 notices filed upon yesterday, so we lost 806 contracts or 80,600 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 fall by 55 contracts down to 562.  The next big active delivery month is February and here the OI fell by 3286 contracts down to 283,588.Today no doubt we had considerable short covering by the short specs. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 189,129 which is fair. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was fair at 183,745 contracts.

Today we had 4 notices filed for 400 oz.
And now for the wild silver comex results. Silver OI fell by 419 contracts from 164,865 down to 164,446 despite the fact that the price of silver up 7 cents with respect to yesterday’s trading.  The big December contract month saw its OI fall by 111 contracts down to 480.  We had 75 contracts served upon yesterday so we lost 36 contracts or 180,000 oz of additional 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 158 contracts down to 1582.  The next big active contract month is March and here the OI fell by 384 contracts down to 131,061. The volume on the comex today (just comex) came in at 46,562 , which is extremely good. The confirmed volume yesterday (comex + globex) was extremely good at 49,608.
We had 29 notices filed for 145,000 oz.

December contract month:

INITIAL standings for DECEMBER

Dec 4/2015

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   

nil

No of oz served (contracts) today 4 contracts

400 oz

No of oz to be served (notices) 3799 contracts

(379,900 oz)

Total monthly oz gold served (contracts) so far this month 44 contracts(4400 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 21,189.7 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 0 customer deposit:

Total customer deposits  nil oz

 JPMorgan has a total of 7975.14 oz or 0.2480 tonnes in its dealer or registered account.
***JPMorgan now has 369,271.339 oz or 11.48 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 4 contracts of which 4 notices were stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account.
 
To calculate the final total number of gold ounces standing for the Oct contract month, we take the total number of notices filed so far for the month (44) x 100 oz  or 4000 oz , to which we  add the difference between the open interest for the front month of December (2993 contracts) minus the number of notices served upon today (4) 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 (44) x 100 oz  or ounces + {OI for the front month (2993) minus the number of  notices served upon today (4) x 100 oz which equals 303,300 oz standing in this active delivery month of December 9.43 TONNES)
we lost 86 contracts or 8600 oz that will not stand for delivery.  These guys no doubt were cash settled and received a fiat bonus.
We thus have 9.43 tonnes of gold standing and only 3.7625 tonnes of registered gold for sale, waiting to serve upon those standing
The CFTC does not carry about the integrity of the comex as they allow the illegal cash settlements to occur.
Total dealer inventory 120,967.246 or 3.7625 tonnes
Total gold inventory (dealer and customer) =6,446,930.134   or 200.52 tonnes)
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 200.52 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/

Dec 4/2015:

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory   31,748.193 oz

(Delaware,Scotia),

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory  

 

nil

No of oz served today (contracts) 29 contracts

145,000 oz

No of oz to be served (notices) 516 contracts 

(2,580,000 oz)

Total monthly oz silver served (contracts) 3507 contracts (17,535,000 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 1,652,311.7 oz

Today, we had 0 deposit into the dealer account:

total dealer deposit; nil oz

we had no dealer withdrawals:

total dealer withdrawals:  nil

we had 0 customer deposits:

 

total customer deposits: nil oz

We had 2 customer withdrawals:
i) Out of Delaware: 1064.543 oz
ii) Out of Scotia:  340,683.65 oz

total withdrawals from customer account: 31,748.193  oz

we had 0 adjustments
The total number of notices filed today for the December contract month is represented by 29 contracts for 145,000 oz. To calculate the number of silver ounces that will stand for delivery in Dec., we take the total number of notices filed for the month so far at (3507) x 5,000 oz  = 17,535,000 oz to which we add the difference between the open interest for the front month of December (480 and the number of notices served upon today (29) x 5000 oz equals the number of ounces standing
Thus the initial standings for silver for the December. contract month:
3507 (notices served so far)x 5000 oz +(480) { OI for front month of December ) -number of notices served upon today (29} x 5000 oz or 19,790,000  of silver standing for the December. contract month.
we lost 36 contracts or 180,000 additional oz that will not stand for delivery in this active month of December..
Total number of dealer silver:  42.928 million oz
Total number of dealer and customer silver:  down to 157.915 million oz
we again we more silver leave  the customer account
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 4/no change in gold inventory at the GLD/Inventory rests this weekend at 638.80

Dec 3/ a massive withdrawal of 16.oo tonnes of gold heading straight to Shanghai/tonnage rests tonight at 638.80 tonnes

Dec 2.2015: no change in gold inventory at the GLD/inventory rests at 654.80 tonnes

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
Dec 4.  inventory 638.80 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.
Now the SLV:
Dec 4./a huge deposit of 2.287 million oz into the SLV/no doubt this would be a paper addition and not real silver
Inventory rests at 321.507 million oz/
Dec 3 a tiny withdrawal of 131,000 oz and this was probably sold to pay for fees/inventory at 319.220 million oz
Dec 2. no change in silver inventory at the SLV/Inventory rests at 319.353 million oz
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
Dec 4/2015:  tonight inventory rests at 321.507 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. Today the addition of silver was a paper silver entry and I extremely doubt that real silver entered the SLV vaults.
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 9.8 percent to NAV usa funds and Negative 9.7% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 62.7%
Percentage of fund in silver:37.2%
cash .1%( Dec 4/2015).
2. Sprott silver fund (PSLV): Premium to NAV falls to-0.46%!!!! NAV (Dec 4/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV falls to- 0.65% to NAV Dec 4/2015)
Note: Sprott silver trust back  into negative territory at -0.46% Sprott physical gold trust is back into negative territory at -.0.65%Central fund of Canada’s is still in jail.
end

Sprott Issues Open Letter to Unitholders of Central GoldTrust and Silver Bullion Trust

Dear Unitholder,

The Trustees of GTU and SBT have made clear their intentions. They have entered into an agreement with Purpose Investments that will put your investment at significant risk in order to protect their own fees. You made the choice to invest in a closed-end physical bullion security, and now the Spicers and their Trustees are ignoring this choice, and betraying the principles of physical bullion securities, to ensure they continue to profit.

The Purpose Investments transaction would convert your security to an open-ended ETF. Similar transactions have resulted in redemptions of greater than 50% of assets in the first three months of trading as an ETF. There is no reason to believe something similar will not occur with your investment, given the competitive landscape of the bullion ETF market. In short, you made the decision to invest in physical bullion, and the Trustees of GTU and SBT see fit to offer you a sub-standard investment. Do not be fooled.

The proposed transaction with Purpose is highly conditional, and may yet prove to be a defensive measure by the Spicers, as there is no guarantee, or likelihood, that it will close. Such a drastic step is a reflection of their weak position. GTU and SBT have been plagued by significant underperformance, gross mismanagement and questionable side payments to the Trustees and other friends of the Spicer family.

This transaction was principally negotiated by the Spicers themselves, not the Trustees, and there are undisclosed financial arrangements between the Spicers and Purpose. This is especially troublesome, given the history of fees and self-dealing involving the Spicers and their bullion products.

The Sprott offers provide you with an immediate and real premium, certainty, and most importantly, a direct investment in physical bullion. The GTU and SBT transaction with Purpose Investments offers you none of these things.

This proposed conversion presents a number of considerable risks, many of which the GTU and SBT Trustees have declined to disclose. The tax consequences to GTU and SBT unitholders of the anticipated significant redemptions that are likely to occur at GTU and SBT are highly uncertain, and the Trustees have elected to remain silent on the issue. Until further details are provided, it is reasonable to believe that U.S. unitholders are likely to be subject to material taxes. There is no possibility for unitholders to access their physical gold or silver bullion in this investment structure, and ETFs are designed to ensure that GTU and SBT will not trade at a premium, even in a gold or silver bull market.

We urge you to not be distracted by this desperate attempt and to tender into the Sprott offers. The Sprott offers represent an opportunity to preserve the nature of your investment, receive an immediate premium, close the historical discounts to NAV, and participate in a security that trades at, near or above NAV.

With the support of the majority of your fellow unitholders, we will take the necessary steps to remove the Trustees of GTU and SBT and call a special meeting to allow you to vote on the Sprott offers. You have the right to decide. Those have not yet tendered to the Sprott offers, we urge you to tender your units today.

Thank you for your support.

Sincerely,

John Wilson
CEO, Sprott Asset Management

 

end

At 3:30 pm the CME released the COT report which shows position levels of our major players.

For the past several weeks, we have seen the commercials continuing to cover their shorts and last week they were within a whisker of going net long.  Let us now see what happened.  I would like to point out that the COT report is from Tuesday the 24th of November to the Tuesday Dec 1.

 

And now for our gold COT:

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
158,792 149,042 40,887 155,554 158,465 355,233 348,394
Change from Prior Reporting Period
-648 5,904 -2,312 -155 -9,227 -3,115 -5,635
Traders
123 123 80 49 49 213 218
 
Small Speculators  
Long Short Open Interest  
35,707 42,546 390,940  
-3,650 -1,130 -6,765  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, December 01, 2015

Our large speculators:

Those large specs who have been long in gold pitched another 648 contracts from their long side

Those large specs who have been short in gold added a monstrous 5,904 contracts to their short side.

the spec longs are within a whisker of going net short.  If you just have the managed money sector for the large specs, these guys are net short.

Our commercials:

Those commercials that have been long in gold pitched a tiny 155 contracts from their long side

Those commercials that have been short in gold covered a huge 9227 contracts from their short side.

Thus the commercials are only 2911 contracts from going net positive and they must have done this with Wednesday’s raid.

Our small specs:

Those small specs that have been long in gold pitched 3650 contracts from their long side

Those small specs that have been short in gold covered 1130 contracts from their short side.

Conclusions:  the large specs were hit pretty hard today and I will bet that this continues with the commercials continuing to buy and the spec shorts trying to buy back with a complete lack of sellers.

 

And now for our silver COT:

Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
72,909 51,019 13,123 53,239 83,060
2,699 202 -2,942 -5,479 -4,383
Traders
87 52 33 36 40
Small Speculators Open Interest Total
Long Short 163,286 Long Short
24,015 16,084 139,271 147,202
-1,084 317 -6,806 -5,722 -7,123
non reportable positions Positions as of: 137 117
Tuesday, December 01, 2015   © SilverSeek.com

Our large specs:

 

 

Those large specs that have been long in silver added 2699 contracts to their long side

Those large specs that have been short in silver added 202 contracts to their short side.

 

 

Our commercials;

Those commercials that have been long in silver pitched a large 5479 contracts from their long side

Those commercials that have been short in silver covered a large 4383 contracts from their short side.

 

Our small specs:

 

Those small specs that have been long in silver pitched 1084 contracts from their long side

Those small specs that have been short in silver added 317 contracts to their short side.

 

 

Conclusions: the commercials are still miles away from going net long in silver.  I guess we have many longs that refuse to liquidate at any price.  Still the action in the COT is very bullish for silver.

 

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:

Dovish ECB Disappoints – Gold Rises, Stocks and Bonds Fall Globally, Euro Surges

‘Super Mario’, the European Central Bank’s monetary magician, disappointed markets yesterday as continuing and unprecedented monetary easing failed to prevent a sharp sell-off in stock and bond markets which has continued today.

GoldCore: Super Mario

 

There are sharp losses on financial markets after the ECB’s President’s – nicknamed ‘Super Mario’ and more recently ‘Magic Mario’ – latest radical measures stopped well short of market expectations and traders desperation for more cheap money and deepening ultra loose monetary policies.

Draghi announced a deepening of probably the most radical monetary policies of any major central bank in history.

The ECB will extend its massive 60 billion euro ($63.5 billion) a monthmoney printing, or debt monetisation, scheme to at least March 2017, an additional six months. Debt monetisation will now include both regional and local government debt and be reinvested upon maturity.

The ECB cut its deposit rate to a historic low and further into negative territory by 10 basis points to a fresh low of negative -0.3 percent, down from -0.2 percent. The cut means banks in effect must pay more for the ECB to hold their money. The ECB kept its main refinancing rate (or the price that banks pay to borrow funds from the ECB) unchanged at an unprecedented, essentially 0 percent – exactly 0.05 percent.

While stocks and bonds fell, gold rose and the euro surged 3% against the dollar. Disappointment rattled stock markets on both sides of the Atlantic, with many European indices suffering their worst day since the chaotic August 24 rout.  The benchmark S&P 500 fell into negative territory for the year again.

Gold bullion prices rose 0.8% in dollar terms – the biggest one day rise in two weeks – after the ECB announcement. Although gold is being oversold it was due a bounce. Gold in euro terms fell 2.3% and is now marginally lower for the year to date – down 0.7% year to date to €978 per ounce  – see table.

[click to expand]
GoldCore: Gold Price Performance % Annual Change

Bond markets sold off very sharply yesterday. The benchmark 10-year bond yields of Germany, France, Italy, Spain, Portugal and the Netherlands all jumped by more than 20 basis points.  Even the US Treasury market took a battering with the 10-year Treasury yield jumping 15 basis points to 2.38 percent — its biggest one-day rise in over two years.

“The value of the U.S. fixed-income market slid by $162.5 billion on Thursday while the euro area’s shrank by the equivalent of $107.5 billion” according to Bloomberg.

Many analysts noted that the stock and bond market routs reflected the fact that speculators had bet too heavily on a further aggressive expansion of QE and money printing by the ECB. Risk assets are now extremely dependent on the drug that is ultra loose monetary policies, which does not bode well for their outlook in 2016 and the coming years.

The ECB has made it clear that its ultra loose and extremely “accommodative” policies can be expected to continue for some time to come which will be supportive of gold in euro terms at these depressed levels.

The continuation of the ECB’s and other major central banks radical monetary experiment shows how vulnerable  our economies are and how they remain very exposed to shocks in the Eurozone and indeed from outside shocks.

Significant global macroeconomic and geopolitical risks remain and may scupper the vulnerable Eurozone economy and indeed the global economy underlining the need for conservative asset allocation and safe haven assets.

DAILY PRICES
Today’s Gold Prices: USD 1063.00, EUR 977.56 and GBP 702.60 per ounce.
Yesterday’s Gold Prices: USD 1050.60, EUR 994.75 and GBP 703.13 per ounce.
(LBMA AM)

Gold in EUR - 1 Year

Gold in EUR – 1 Year

Gold made a significant jump yesterday, closing up $10.50 to close at $1063.20.  Silver also gained slightly by $0.08 to $14.11 at the end of day. Platinum regained some of its recent losses to close up $16 to $844.

Gold in euro terms fell over 2% – see above.  Silver, underperformed gold during yesterday’s bounce but was also higher and has eked out further gains today.Platinum, and palladium are marginally higher today.

 

Download Essential Guide To Storing Gold Offshore

Essential Guide to Storing Gold Offshore

 

Mark O’Byrne

end

 

Today’s big run up in gold and silver

Silver & Gold Are Surging

It appears OPEC (more production, lower prices, lower petrodollar revenues for longer, more uncertainty in global economy) trumps payrolls (Fed rate hike locked in, stronger dollar) for precious metals…

 

end
China’s demand for gold in the latest week is 49 tonnes (equals gold withdrawn from SGE)
So far this year:  2362 tonnes.
(courtesy Lawrence Williams/Sharps Pixley)

Another 49 t withdrawn from China’s SGE in week 46 – huge 2,362 t YTD

China’s Shanghai Gold Exchange withdrawals continue strong with another 49 tonnes taken out in the week ended November 27th bringing the year to date total to just over 2,362 tonnes.  For comparison the previous full year record total achieved in 2013 has already been exceeded by around  180 tonnes, with just over a month to go until this year end.  We are downgrading our full year forecast to 2,580 tonnes from the previous 2,600 tonnes plus, but this would still be 18% higher than the previous record – and around 23% higher than last year’s total withdrawal figure.

Much is made in the West of the downturn in the Chinese economy – but this is a reduction in percentage growth – not a recession.  Sometimes the two seem to be confused by the media.  The Chinese middle classes are continuing to grow and employment is being pushed in the government’s economic reboot to the services and domestic consumption sectors which tend to pay higher wages than manufacturing and thus the disposable wealth within this ever growing population segment is growing rather than diminishing.

As one of the speakers at this week’s Mines & Money conference in London pointed out, for thousands of years China and India were the world’s richest countries – a position they mostly lost in the 19th and 20th centuries.  They are becoming so again – a return to the status quo ante perhaps – and with their huge inherent disposition to accumulate gold (which has served their people well over the centuries as a store of wealth and protector against economic downturns and inflation) we can only see the gold acquisition trend continuing to build.

We are already close to the crunch situation in the supply/demand equation for gold and again, as a number of highly respected speakers suggested at Mines & Money, the gold price will go up, and likely go up very sharply, although none would really commit themselves on a timescale for this to occur.  Perhaps the nearest was Pierre Lassonde who reckoned the U.S. Fed has talked itself into virtually having to start raising rates this month, or lose all credibility, but that it will be forced to backtrack before the middle of next year, cutting rates again – or even implementing QE4 – and this would be the trigger for the start of a gold perception resurgence.  Grant Williams (no relation) talking at the same event somewhat concurred and commented that when gold does rise it will likely move rapidly and comfortably take out the previous all-time price high.  Good fodder for the remaining gold bulls!

 This has no chance of happening!!
(courtesy Reuters/GATA)

India targets temple gold hoard to rescue monetization plan

Section:

Call it “paperization.”

* * *

By Rajendra Jadhav and Krishna N. Das
Reuters
Thursday, December 3, 2015

India is trying to persuade rich temples to deposit some of their gold hoards with banks to revive a plan to recycle tonnes of the precious metal and cut gold imports, sources said.

The scheme has only attracted about 1 kilogramme in a month, prompting the government to nudge temples through banks to hand over their treasures, the sources said, but at least one temple said it was still unconvinced by the plan. …

 

“Convincing retail consumers is not an easy task, it takes time,” said a senior official with a state bank, who declined to be named. “We’re planning now to focus on institutions like temples.”But Mumbai’s two-century-old Shree Siddhivinayak temple, which is devoted to the Hindu elephant-headed god Ganesha, said it remained unconvinced about the benefits. …

Modi wants temples to deposit some of this with banks, in return for interest and cash at redemption. The government would melt the gold and loan it to jewellers. …

A finance ministry official said if banks fail to win over temples, the government could intervene directly as it is looking for a big boost to the scheme to keep both imports and the current account deficit under control. …

… For the remainder of the report:

http://www.reuters.com/article/2015/12/03/india-gold-temples-idUSL3N13S3…

end

 

My goodness!!  The crooks issuing their own currency!!

(courtesy London’s Financial Times)

 

Goldman Sachs has plan for investment banks to issue their own currency

Section:

Goldman Sachs Files Patent for Virtual Settlement Currency

By Jennifer Hughes
Financial Times, London
Thursday, December 3, 2015

Goldman Sachs has made a patent application for a cryptocurrency settlement system in a move that underlines bank hopes that the architecture behind bitcoin can revolutionise global payments.

The application for a new virtual currency, dubbed “SETLcoin” by the bank, said it would offer “nearly instantaneous execution and settlement” of trades involving assets including stocks and bonds.

Banks have been racing to tap the power of blockchain — the ledger system that backs digital currencies such as bitcoin. Harnessing the technology has been likened to the changes wrought by file transfer systems on the music industry, or to the effect that email had on communication.

Although electronic dealing platforms have increasingly made front-office trades virtually instantaneous, the actual swapping of payments often still takes days, creating risk in the banking system. …

… For the remainder of the report:

http://www.ft.com/intl/cms/s/2/b0d8f614-997c-11e5-9228-87e603d47bdc.html

end

 

And now Alasdair Mcleod talking about the bind that the Fed is in:

 

(courtesy Alasdair Macleod/GATA)

Alasdair Macleod: The Fed’s in a bind

Section:

2p ET Thursday, December 3, 2015

Dear Friend of GATA and Gold:

If the Federal Reserve really starts raising interest rates, ending decades of declining credit costs, it may prompt a vast change in world economic conditions, GoldMoney research director Alasdair Macleod writes today.

As a result, Macleod writes, “The next financial crisis could manifest itself in the coming months. … If so, it will mark the end of current central bank monetary policies and state control of markets, as free markets reassert realistic pricing. Government bond yields will normalize, stock markets will fall, and banks will almost certainly fail. Supressed commodity prices will rise as banks, short through paper contracts, will be forced to close their positions. Credit default swaps, where the banks are collectively exposed to losses when interest rates rise, will be a further source of grief.”

Macleod’s commentary is headlined “The Fed’s in a Bind” and it’s posted at GoldMoney’s Internet site here:

https://www.goldmoney.com/our-research/goldmoney-insights/the-fed-s-in-a…

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

end

Policy error or on purpose?

 

Before getting to the real point of the title “Policy error or on purpose?”, it needs to be pointed out the entire financial system is a “policy error”.  We live in a world where even the real economy is increasingly run via central planning.  As for the financial side of the coin, central planning has taken on an Alice in Wonderland hue.  Whether it be the suspension of mark to market, markets entirely managed and “priced” by force, debt by definition needing to expand or the central banks need for continual asset inflation …they all have ramifications.  What I am alluding to is the law of unintended consequences in relation to bad policy.
  Now, we hear day after day the Fed will raise rates by a quarter percent and are assured “this is a good thing”.  Well yes, in normal times when a central bank raises interest rates it means the underlying economy is strong and inflation (monetary growth) needs to be cooled off.  This is obviously not the case today and has not been for most of the last seven years.  We have been inundated with “negative surprises” and an economy only limping along.

The latest illustration of a weak economy being this:

The obvious needs to be pointed out here.  The last two times we had a recession (and EVERY recession prior), the Fed lowered rates or added liquidity into the system.  They did this to aid and jumpstart the economy.  Can you imagine the Fed talking about raising rates while ENTERING a recession?  This is exactly what is happening!  The only other time since 1913 where the Fed actually tightened during a business recession was 1937.  The tightening collapsed the markets and the economy turned down further.  Please keep in mind no matter what Keynesians or Monetarists tell you, the global and U.S. economies were in recession/depression until the first shots of World War II were fired.  No one knows what would have happened had there not been a war but I think it is safe to say the real economy would have languished much longer along with the financial markets.
The above said, I am having a hard time understanding what exactly the Fed and Ole Yeller are thinking?  Board governors including the chair are continually talking about “how strong” the economy is.  Are they looking at the same reports we are?  If they are looking at the same data, they are either mentally impaired or flat out lying when they say they “see strength”.  Mrs. Yellen made the comment “we need to raise rates now so we will have something to respond with should the need arise”.  Really?  A quarter point?  A quarter point “response” is .22 caliber when a bazooka is needed and will probably fail!  However, a quarter point move up is huge in relation to nearly zero, a discussion of what a rate hike can be read here  http://www.zerohedge.com/news/2015-12-03/its-just-025-rate-hike-whats-big-deal-here-stunning-answer  Please understand this, a solvency problem was treated with massive doses of liquidity.  Now, seven years later the solvency problem is far worse and the Fed wants to pull liquidity? 

  The Fed has built and presided over the biggest credit bubble in the history of history.  Liquidity simply cannot be pulled and rates CANNOT be raised now without affecting the mountain of outstanding credit (and derivatives).  We already have an unsustainable economy and financial markets walking a tightrope, raising interest rates will simply push them both off balance.  I have to say in my opinion, if the Fed raises rates here they are purposely pulling the plug on the system.  Will we be the recipient of some sort of false flag they point at and say their policy would have worked if not for …whatever?  They must come up with some sort of “reason” not to raise rates or they will be de facto pushing the big red button on the financial system!

  We also heard Mario Draghi speak this morning and disappoint with a mere 10 basis point cut further into the “negative”.  Europe is clearly collapsing, their idiocy of allowing refugees to further suck on what little life is left is mindboggling.  Higher rates in the U.S. and negative rates in Europe should add to an already overpriced dollar.  Whatever trade the U.S. has left will only be further injured with a higher dollar.
  That said, it is important to understand the “USDX” index compares fiat currencies with each other.  Whether the dollar goes to .56 or 1.56 is a measure of fiats versus each other.  It is this area where I have disagreed somewhat with my partner Jim Sinclair in the past but I believe he sees my point now.  The inverse relationship of the dollar and gold has held for many years but we are now in the “end game”.  This relationship worked when it was about “strength and weakness”.  I believe we are about to enter the realm of “existence or non existence”, I will explain this in a moment.

I believe “they know”.  They know we are approaching a critical point where the debt load will have completely taken over and the only way to pay is to hyperinflate.  They know there is little to no unencumbered collateral left and their efforts at reflation after 2008 have failed.  I also believe they know the rig on markets cannot be held much longer and that the gold supply which has supported excess demand of 2,000 tons per year is about to run out.  It will be at this point a complete cleansing of the system will take place where some currencies even disappear.  Could the dollar go to 1.56 and the Euro collapse or even be disbanded in a financial meltdown?  I believe it could.  Would a strong dollar versus other fiat currencies mean “stuff” got cheaper for Americans?  Not necessarily.  This could and in my opinion will coincide with a reset of “stuff” versus ALL currencies and we may be there now.  The dollar would simply hyperinflate “less” or might continue to exist versus a currency that failed and went away. 
  Breaking this down a little further and I guess in essence “denting” the deflationist case, much of the debt itself will be downgraded or even wiped out.  When there is too much debt in the first place, history shows much of it will get wiped out.  The problem is this, whether you are talking about dollars, euros, pounds or yen …you are speaking of a “debt currency”.  ALL of these currencies are in fact themselves DEBT!  A big part of the problem is much of this debt is now “sovereign” debt.  The stronger dollar is exposing other sovereigns to the fact of over indebtedness, (think Brazil currently).  All it will take is one sovereign of any size to go upside down to start a domino effect.  When the debt implosion comes, all of these currencies including (and ESPECIALLY) the dollar will be devalued lower.  Think of it this way, these fiat currencies were worthless the day they were created except for confidence value.  Now, years and trillions of more debt later they are worth even less and the years of public largesse has eroded the original confidence.  Can the dollar be a grossly better currency than the euro while at the same time be a basket case in its own right?
The answer of course is “yes”.  Please remember this because it is the absolute  systemic root, today’s dollar is not the dollar of the 1930’s.  That decade started off with the dollar and gold being interchangeable.  Contrary to Martin Armstrong’s claim that gold was “devalued”, the fact remains it was the dollar which devalued from $20.67 required to purchase an ounce of gold to $35.  The world had too much debt back then and is the closest thing to resembling where we are now, do you expect a different result?  Today, the dollar and gold are the absolute opposites of each other rather than being tied like they were at the start of the Great Depression.  Do you really believe the currency issued by a bankrupt country with a bankrupt central bank will be revalued higher during the “bankruptcy proceedings”?  Credit gets eradicated in depressions and “money” becomes dear.  You need to decide for yourself what “money” truly is.  JP Morgan clearly knew when he said “Gold is money, everything else is credit”.  The system we live in today is almost entirely credit with no “money” supporting it, the policy error and collapse will be breathtaking!

Standing watch,
Bill Holter
HolterSinclair collaboration
Comments welcome  bholter@hotmail.com
end
And now your overnight FRIDAY morning trading in bourses, currencies, and interest rates from Europe and Asia.

1 Chinese yuan vs USA dollar/yuan falls in value , this  time to  6.401/ Shanghai bourse: in the red , hang sang: red

2 Nikkei closed down 435.42  or 2.18%

3. Europe stocks all in the red /USA dollar index up to 98.16/Euro up to 1.0895

3b Japan 10 year bond yield: rises to .341%   !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 123.14

3c Nikkei now just above 18,000

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

3e WTI: 41.67  and Brent:   44.50

3f Gold up  /Yen down

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 .670%. German bunds in negative yields from 5 years out

 Greece  sees its 2 year rate rise to 8.82%/:  still expect continual bank runs on Greek banks 

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

3k Gold at $1061.70/silver $14.17 (7:45 am est)

3l USA vs Russian rouble; (Russian rouble down 2/100 in  roubles/dollar) 67.52

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 0.9981 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0877 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 5 year German bund now  in negative territory with the 10 year rises to  + .67%/German 5 year rate negative%!!!

3s The ELA lowers to  82.4 billion euros,

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 2.31% early this morning. Thirty year rate above 3% at 3/07% /

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

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

Futures Rebound On Hope Today’s “Most Important Ever” Jobs Number Will Not “Draghi” The Market

Overnight global market action could be described with one word: disappointment in Mario Draghi’s bazooka which, as we warned previously, ended up being a water pistol: “The market was hoping for some Draghi magic, but instead got some Draghi shock” said Mitsuo Shimizu, deputy general manager at Japan Asia Securities. The result was a drop in European stocks for the second day as Asian shares tumbled, while global bonds held losses.

As Bloomberg shows in assessing the level of disappointment from the ECB’s meeting, look no further than the Euro-area bond market. Short-term yields in countries from Germany to Spain to Finland had sunk to record lows ahead of Thursday’s announcement. By the close, German 10-year bond yields had risen the most since 2011. European stocks sunk 3.1 percent on Thursday.

 

Whether Draghi’s action was driven by structural constraints and the previously laid out concerns that the ECB may run out of monetizable assets sooner rather than later, by a gentle reminder to markets that the level of risk assets is no longer the primary concern of central banks around the globe, or by a mutiny by the Germans on governing council to which Draghi had no choice but to relent is now irrelevant: what is relevant to hundreds of money managers who were positioned incorrectly into the ECB announcement are the massive P&L losses in the tens of billions suffered by hedge funds across the globe, who believed Draghi’s latest “whatever it takes” promise only to be left holding the bag. Who will be the next Fortress and BlueCrest will be revealed in the coming days if not hours.

For now, however, optimism in the US futures market appears to have returned, and as of this moment US equity futures are higher by 9 points to 2060 as the attention shifts to what, according to BofA, is truly the most important ever.

 

It is unclear just how the algos would take a second consecutive major disappointment in a row: should today’s NFP print be well below the 200,000 consensus, December rate hike odd will tumble and the EUR will surge even more after declining modestly from overnight highs just below 1.10, leading to even more losses in European equities and spilling over to the US.

 

In any event, since very few truly important things happens by accident, be prepared for another major disappointment if  the Fed wishes to keep its December options open “just in case” in the aftermath of the ECB’s unexpected relative tightening.

There is not much to be optimistic about in crude oil, which is trading at overnight highs currently on what appears to be algo-driven confusion over headlines from the OPEC meeting which started just hours ago.  As Bloomberg reports, WTI climbs for 2nd day, extends gains after slew of OPEC headlines before ministers gathered behind closed doors to discuss output policy, while Brent mirrors WTI momentum, climbs above $44/bbl. “There has been a bunch of headlines coming out of OPEC with each contradicting the other,” says Petromatrix analyst Olivier Jakob. “It is difficult to trade in front of OPEC – the general consensus is for nothing, but when we get a soundbite that creates a bit of a reaction.”

So with all of this, here is how markets stand right now:

  • S&P 500 futures up 0.4% to 2059
  • Stoxx 600 down 0.4% to 371
  • FTSE 100 down 0.2% to 6263
  • DAX down 0.3% to 10758
  • German 10Yr yield down 1bp to 0.65%
  • MSCI Asia Pacific down 1.1% to 132
  • Nikkei 225 down 2.2% to 19504
  • Hang Seng down 0.8% to 22236
  • Shanghai Composite down 1.7% to 3525
  • US 10-yr yield down 3bps to 2.29%
  • Dollar Index up 0.58% to 98.18
  • WTI Crude futures up 0.9% to $41.47
  • Brent Futures up 0.8% to $44.20
  • Gold spot down less than 0.1% to $1,062
  • Silver spot up 0.3% to $14.14

A look at regional markets shows Asian stocks trading lower following the weak close on Wall Street after the ECB disappointed markets by announcing a stimulus package that did not meet dovish expectations. Nikkei 225 (-2.2%) and ASX 200 (-1.5%) underperformed amid sharp broad based losses with a firmer JPY against the USD weighing on Japanese exporters, while the Shanghai Comp. (-0.5%) was dragged lower by losses in financials as the CSRC announced the resumption of IPOs, while margin debt balance also declined. Finally, 10yr JGBs tracked bunds and USTs lower amid spillover selling following the aforementioned ECB decision, while the BoJ entered the market to purchase JPY 1.08trl of government bonds ranging from the short end to super long end.

Top Asian News

  • China’s Bond Leverage Tops $1.2 Trillion in Replay of Stock Boom: Authorities seen using incremental curbs to cool market
  • China to Start Stock Circuit Breaker After New Year, Caixin Says: Rules revised to shorten share suspension time
  • Singapore Said to Mull Options for SMRT Including Train Sale: Govt to make proposals as early as 1Q 2016
  • Modi’s Japan Nuclear Deal May Need More Than Just Abe Visit: Indian prime minister seeking technology, funding cooperation
  • Didi, Lyft Enter Four-Way Alliance to Take on Uber for Rides: Ola, GrabTaxi complete global ride-hailing partnership

European markets appear to be in limbo this morning, still feeling the effects of yesterday’s ECB meeting, while also looking ahead to today’s US nonfarm payroll report and OPEC meeting. European equities have seen softness in early trade, with Euro Stoxx lower by 0.75%. Energy and material names are among the best performers so far today, with the sectors paring some of the heavy losses seen over the past few days and with some of the comments out of OPEC delegates suggesting that keeping production at current levels is not a definite outcome.

Fixed income markets have seen Bunds grind higher throughout the morning after their sharp fall yesterday, while interestingly flatter ECB dated EON lAs now price in a small or no further deposit rate cut from the ECB in 2016.

Top European News:

  • U.K. to Keep Selling Lloyds Stock Under Extended Plan: govt says trading plan to be extended to mid-2016
  • CaixaBank Sells Inbursa, Bank of East Asia Stakes to Parent: to get EU2.65b for stakes, deal seen completed in 1Q 2016
  • Motorola Agrees to Buy U.K.’s Airwave for $1.2b: Airwave’s communications network serves U.K. first responders
  • BBVA Bids for Turkey’s Finansbank, El Confidencial Reports: BBVA at final stages of bidding process for Finansbank along with ING and a fund from Qatar
  • Abengoa Seeks EU600m Through March, El Mundo Reports: funds needed to meet most urgent costs over next 4 months
  • LVMH’s TAG Heuer Has Orders for 100,000 Smartwatches: Le Matin: is suspending online sales as brand can only produce 1,200 smartwatches a week
  • Norwegian Property Received Indicative Bids for Some Assets: Arctic Securities, Union Corporate, Thommessen mandated to assist in a potential sales process
  • Philips Says It’s Not Interested in Bidding for B&O: Borsen: cites spokesman for Philips
  • Ladbrokes Appoints John Kelly Chairman of the Board: says appointment with immediate effect
  • Renault’s Ghosn Says 2016 Likely to Be Better Than 2015: Figaro: says co.’s financial solidity no longer a question

FX markets also appear to still be adjusting to yesterday’s less dovish than expected announcement from ECB’s Draghi, with EUR the notable underperformer to pare back some of the strength seen in the immediate aftermath of the announcement. However, EUR/USD still resides around 1.0900, while EUR/GBP has fallen back below the 50, 100 and 200 DMA.

In commodities, the energy complex has seen a bid in recent trade, with WTI and Brent Jan’16 futures trading around USD 41.50 and above USD 44.00, amid comments from OPEC members suggesting that oil demand continues to rise and many members are in favour of a cut. The UAE’s Oil Minister stated that oil demand continues to appear to be growing as a result of US and European growth and Ecuador’s Oil Minister has said that at least 6 OPEC members will back a proposal to cut production. Of these 6 countries, Venezuela is leading the way in terms of trying to reduce production and have proposed that OPEC cut by 5% in order to bolster prices.

However, analysts expect OPEC to maintain output at current levels today as Saudi Arabia announced that they would only consider reducing production if other OPEC and non-OPEC countries followed suit and it looks like a difficult task facilitating such an agreement. This is due to other non-OEC oil producers, most notably Russia having no desire to cut output. This comes after comments made by the Russian oil minister yesterday, who outlined the Russian strategy of maintaining output.

Looking ahead, as well as the much anticipated Nonfarm payroll report and OPEC meeting, today also sees Canadian unemployment data and comments from ECB’s Nowotny, Smets, Visco and Draghi and Fed’s Bullard, Harker and Kocherlakota.

 

Bulletin Headline Summary from Bloomberg and RanSquawk

  • EUR underperforms to pare back some of yesterday’s ECB inspired gains
  • European equities trade lower following on from US and Asia as global markets react to Draghi’s less dovish than expected measures
  • As well as the much anticipated nonfarm payroll report and OPEC meeting, today sees Canadian unemployment data and comments from ECB’s Nowotny, Smets, Visco and Draghi and Fed’s Bullard, Harker and Kocherlakota
  • Treasuries steady before reports forecast to show U.S. economy added 200k jobs in November with the unemployment rate holding at 5%.
  • After raising its benchmark this month for the first time since 2006, the Fed will be cutting again before the end of 2016 as the U.S. economy runs out of steam, according to StanChart chief economist Marios Maratheftis
  • OPEC looked on track to maintain the status quo after member states gave the strongest signal yet they wouldn’t agree to curb output at the group’s meeting in Vienna on Friday
  • When Glencore Plc meets with shareholders next week, one big question on the minds of investors will be how long the company’s credit rating can withstand an ongoing slide in commodity prices
  • Germany’s Bundesbank lowered its inflation forecasts for the next two years and kept its growth outlook unchanged, saying the country’s economy remains “healthy”
  • Outstanding repo in China’s interbank market, used by debt investors to amplify their buying power, surged to $1.25 trillion in November, the highest level since at least 2012
  • Federal agents have discovered preliminary evidence that suspected San Bernardino gunman Syed Rizwan Farook was in contact with at least one person who had been the subject of a terrorism probe by the FBI, according to two U.S. law enforcement officials
  • Greece bowed to Europe-wide criticism over its lax refugee policies by calling on EU patrols and emergency workers to monitor its Aegean Sea borders and process asylum-seekers fleeing war in the Middle East
  • NATO offered membership to Montenegro, extending its reach deeper into southeastern Europe and potentially adding to tensions with Russia
  • German lawmakers approved sending reconnaissance warplanes into Syria, taking Merkel into dangerous territory by joining Europe’s intensified fight against Islamic State
  • $5.85b IG priced yesterday, $1.8b HY. BofAML Corporate Master Index OAS -1bp to +162, YTD range 180/129. High Yield Master II OAS narrows 12bp to +632, YTD range 683/438
  • Sovereign 10Y bond yields mixed. Asian stocks fall, European stocks extend yesterday’s rout, U.S. equity-index futures gain. Crude oil and copper higher, gold unchanged

 

DB’s Jim Reid completes the overnight event wrap

There was a lot of screaming and howling in markets yesterday as the ECB made a mockery of all the high expectations for aggressive action. Not only did they disappoint but they gave no indication that they were on the brink of doing more in Q1. On such occasions it’s tempting to blame markets for getting ahead of reality but it does feel to us that the ECB have made communication errors in the last month or so that led to us all expecting much more. Our European Economists wondered whether Draghi failed to build a consensus for further action and had underestimated his ability to do so in recent weeks. They suggest that he yesterday changed emphasis in his comments towards the positive developments on growth after not having done so for the last few weeks which have helped expectations to build.

The main consequences for the Euro economy could be through the exchange rate and through tightening of financial conditions. Our European Economists’ forecast for 2016 growth of 1.6% was helped by an assumed 5% decline in the trade weighted index. If the currency doesn’t decline this would reduce by 0.2%. In terms of financial conditions, one day’s move doesn’t make a trend but the initial moves in equities, bonds and the currency already go someway towards tightening conditions. It’ll be interesting to see if they go further. Much might also depend on inflation expectations after this announcement. It doesn’t feel like a “whatever it takes” moment so will the market start re-pricing lower inflation again?

So in the terms of markets, European equities were broadly 3-4% lower by the close of play. The Stoxx 600 in particular closed down -3.14% which was the biggest single day slump since August 24th. The high-to-low range on the index of 4% was even more impressive. There were some huge moves in the Euro too. The single currency eventually closed +3.06% higher at $1.094 but again it was the h ge +4.34% intraday swing off the day’s low mark which was more telling – a range spanning a whopping 4 and a half big figures. In fact if we go back to the commencement of the Euro in 1999, yesterday was in fact the third biggest intraday range (by percentage) for the currency of all time and tenth largest by Dollar val e. The European bond market wasn’t to be outdone as 10y Bund yields climbed from 0.469% to 0.665% by the close, a move higher in yield of nearly 20bps and the most since August 2012. Moves in the periphery were even greater with Italy, Spain and Portugal up +25.2bps, +24.4bps and +21.8bps respectively, while 2y Bunds climbed off the record lows in yield to finished over +13bps higher at -0.315%. Unsurprisingly European credit indices came under huge pressure too, Crossover and Main finishing +17bps and +4.5bps wider respectively.

Markets in Asia this morning are trading with a similar negative tone. The Nikkei (-2.12%), Hang Seng (-1.08%), Shanghai Comp (-1.19%), Kospi (-1.02%) and ASX (-1.74%) are all heavily in the red as we go to print. Asia credit is a few basis points wider, while EMFX is the notable outperformer this morning, benefiting from the move lower for Dollar yesterday. The Euro is generally holding onto gains this morning.

So not an ideal build up to what could be the last payrolls number before the first US rate hike in 9 years. Market expectations are for a 200k print which would be down from that bumper 271k reading in October. DB’s Joe Lavorgna is a little less optimistic and is forecasting a 150k gain reflecting the payback from that big October surge. Joe believes that some of that strength reflected an earlier ramp-up in holiday hiring on the part of retailers, case in point being the big gain in retail trade during October which was the largest increase since November of last year. Joe also highlights the weakness in the non-manufacturing ISM yesterday and in particular the drop in the employment subcomponent. The headline reading declined 3.2pts to 55.9, the biggest one-month decline since November 2008. Interestingly the employment component declined a substantial 4.2pts to 55.0 last month. The last time this series fell by a similar amount was this past January (-4.1pts to 51.6) and this decline accurately foreshadowed a slowdown in the rate of private service sector hiring – job gains in the sector slowed to 151k in January 2015 from 255k in December 2014.

Oil markets staged a bit of a recovery yesterday, helped by that weakness in the US Dollar and after the steep declines we had the day prior. WTI was back above $41 after rebounding +2.85% while Brent closed with a +3.62% gain. The other big event today is of course the OPEC meeting in Vienna where a press conference is scheduled for the late afternoon, although we’d imagine headlines will start appearing well before that.

The weakness that we saw in European risk assets extended over into US markets yesterday also, while more reinforcement from Fed Chair Yellen also added to a tough day for risk. The S&P 500 finished -1.44% which is the biggest single day fall since September 28th. 10y Treasury yields were up over +13bps by the close at 2.314%, while 2y yields (+1.6bps) struck a fresh closing high in the cycle at 0.952% (although did touch as high as 0.990%). In comments which largely reflected those she made on Wednesday, Yellen added that ‘I currently judge that US economic growth is likely to be sufficient over the next year or two to result in further improvement in the labour market’. She added to this ‘ongoing gains in the labor market, coupled with my judgement that longer-term inflation expectations remain reasonably well anchored, serve to bolster my confidence in a return of inflation to 2%’.

In terms of the remaining US data-flow yesterday, initial jobless claims last week came in as expected at 269k. The final services PMI was revised down 0.4pts to 56.1, meaning the composite was nudged down to 55.9 from 56.1, albeit still the highest since May. Factory orders in October were slightly ahead of market at +1.5% mom (vs. +1.4% expected).

Over in Europe, the final Euro area composite PMI was nudged down 0.2pts to 54.2 for November. This was based on weaker than expected services readings in France and Italy. Our colleagues in E rope noted that the recent set of PMI’s in Europe point to a slight increase in euro-area momentum. They highlight however that euro area surveys have tended to be a bit more optimistic than hard data over the past two quarters. Case in point was the softer than expected October retail sales numbers for the Euro area yesterday (-0.1% mom vs. +0.2% expected).

In terms of the day ahead, there’s not much of note in the European session this morning with German factory orders data the only notable release. This afternoon in the US it’s all about the November payrolls print d e o t at 1.30pm GMT. The usual associated employment indicators will be released alongside including the unemployment rate (expected to hold steady at 5.0%), labour force participation rate (62.4% expected) and average hourly earnings (+0.2% mom expected). It’ll also be worth keeping an eye on the October trade balance reading, d e o t at the same time. It’s a b sy day for Fedspeak also with Harker (3.15pm GMT), Kocherlakota (9.00pm GMT) and Bullard (9.10pm GMT) all scheduled. ECB President Draghi is now said to be speaking at an event at the Economic Club of New York which will be watched closely in light of yesterday’s events. The aforementioned OPEC meeting is also due today in Vienna.

end

ASIAN AFFAIRS

i) Last night, 9:30 pm THURSDAY night, FRIDAY morning Shanghai time.  Japan Nikkei closed DOWN BADLY BY 435.34 POINTS OR 2.18, Shanghai falls    Hang Sang falls.  Over in Hong Kong, their housing bubble has suffered a spectacular collapse as sales are plunging (see below)
(courtesy zero hedge)

Hong Kong Housing Bubble Suffers Spectacular Collapse As Sales Plunge 42% To Record Low

Over the weekend we reported that in the aftermath of China’s crackdown on capital controls, “Chinese buyers have left the U.S. housing market.” But if potential Chinese buyers are unable to transfer funds out of the mainland, it wouldn’t be just the U.S. and Australia where the housing bubble is now rapidly bursting, it would be everywhere else too as said potential buyers hunker down and instead scramble to avoid the government’s attention and to preserve dry powder.

Sure enough, nowehere was this more clear overnight than in Hong Kong, where the once-upon-a-time raging housing bubble just got its last rites after November home sales sank to a record low as an imminent interest rate in the US this month scared away prospective buyers.

According to Land Registry data, reported by SCMP, November saw 2,826 registered residential transactions, down 14.4% from October and 41.7% less than in November last year. This was the lowest print in the history of the series.

In terms of value, residential transactions dropped 7.7% month on month to HK$20.8 billion.

 

“Total home sales including those in primary and the secondary market dropped to the lowest level since we have started to gauge property transactions in 1996,” said Wong Leung-sing, an associate director of research at Centaline Property Agency.

As cited by SCMP, he said prospective buyers in general held back their purchases in view of softening home prices and a potential rate hike also dented interest. Given the peg of the Hong Kong dollar to the US dollar, any increase in interest rates in Washington would impact the home market here. “Sales volume in the secondary market fell for the fourth straight month to a 20-year low,” Wong said.

That… and not to mention the whole Chinese economy grinding to a halt while severely limiting capital flows to avoid further uncontrolled devaluation of its currency.

Hong Kong home prices fell 4.5 per cent after peaking in September, according to the Centa-City Leading Index, but was still up 6 per cent from the beginning of the year. Last week, 20 out of 50 housing estates monitored by Ricacorp Properties recorded zero transactions.

The weakness was sharp and widespread: sales of new homes also declined to a three-month low, said Centaline. In the primary residential market, the number of home sales also declined 26.4 per cent month on month to 1,023 last month, according to Centaline. The total value reached HK$8.97 billion, down 15.4 per cent from October’s HK$10.6 billion.

Local analysts, perhaps unwilling to accept the reality, remain optimistic:

“The fall in transaction volume and value for new home sales due to an absence of big project launches early last month,” said Derek Chan, head of research at Ricacorp Properties.

 

He expects to see an obvious increase in sales of new homes this month given more major projects are due to be offered for pre-sale.

 

“Most of new projects launches will focus in the western New Territories ,” he said.

Optimism is good. But in the meantime, it will have to overcome a surge in supply: in the upcoming weekend, more than 570 units in four new projects are due to be offered for sale. They are 238 units in the second round of Cheung Kong Property’s Yuccie Square in Yuen Long, Sun Hung Kai Properties will kick off the sale of the first batch of 269 units at Park Vista in the same area, Henderson Land Development will put 38 units at The Zutten in To Kwa Wan while Chinachem Group will release 33 houses and villas in Tuen Mun.

If and when this global housing luxury weakness mostly due to the withdrawal of the Chinese marginal “hot money” buyer crosses back into the Chinese border, all bets about the so-called tepid Chinese economic will be off, and since it will be just the moment when China resumes cutting rates, devaluing its currency and maybe even officially (as opposed to the ongoing unofficial iterations) launching QE, that will be when one should buy commodities, as China does everything in its power to keep the house of $30 trillion in cards from toppling and sending a deflationary tsunami around the entire world.

 

end

More on China’s crackdown on short sellers with the hiring of Fu Zhenghua, a tough police chief who will asset Xi is finding these “felons”

(courtesy zero hedge)

 

China “Terrifies” Investors With Crackdown: “If You Don’t Do What They Ask, There Will Be Blood”

We’ve spent quite a bit of time over the last five months documenting China’s epic “kill the chicken to scare the monkey” campaign.

In the wake of a dramatic unwind in the half dozen or so backdoor margin lending channels that helped to pump some CNY1.5 trillion into Chinese equities during the first half of the year, Beijing embarked on an epic quest to shore up the market. Initially, authorities attempted to stabilize things by pumping hundreds of billions of yuan into the market via CSF. When that became too expensive, the Politburo simply started arresting people.

The witch hunt (and that’s exactly what it is) spread quickly to a number of high profile brokerage houses and before you knew it, China was arresting members of the plunge protection team.

Money managers were so terrified by late September that at least one market participanttold a friend to “look after his wife” in the event he didn’t come home after being “summoned” by Chinese investigators.

On November 18, Guotai Junan Chairman and CEO Yim Fung simply disappeared. “We can’t find him,” the company said in a statement. As it turns out, Yim was “taken away” by authorities in connection to an investigation into CSRC vice chairman Yao Gang.

Now, we get a look at the new face behind Xi’s crackdown on “malicious” sellers:

That’s Fu Zhenghua, who Bloomberg describes as “a 60-year-old former Beijing police chief who led a corruption case against one of China’s richest men and busted a huge prostitution ring in 2010.”

Zhang Lifan, a Beijing-based political commentator told Bloomberg that Fu is “a capable assistant to Xi because his cutthroat style would help the investigation get to the very bottom of things, and to make sure things under Xi’s full control.”

Yes, Xi needs to “get to the bottom of things”- so much so that Beijing has created a hotline for people to call should they see any short sellers. “They put a notice on all the floors with the number that you can call anonymously to encourage people to dial in,” an unnamed source at the abovementioned Guotai Junan told Reuters. “They say they just want people to report corruption.”

But tipsters aren’t just “reporting corruption”, they’re angling to get their bosses fired on trumped up charges. “It’s creating a very dog-eat-dog environment. People collect evidence on their bosses, because if they get rid of their boss, it means that they can get promoted faster,” said a partner at a Chinese mutual who also spoke to Reuters.

At a meeting in July – when the wheels first started to come off for China’s equity miracle – Fu told officials from the securities regulator, the police, and the party’s anti-corruption watchdog to be on the look out for “malicious” shorts. Fu has a reputation for no being afraid to ruffle the feathers of powerful Chinese. As Bloomberg documents, he “cut his teeth in investigating financial crimes in 2008, when he put away Huang Guangyu, China’s richest man at the time [who] was sentenced to 14 years in prison for bribery and insider trading.” Subsequently, a former Assistant Public Security Minister was convicted of corruption over his links to Huang. He received a suspended death sentence.

Fu’s other exploits include an infamous prostitution bust, a campaign against “popular bloggers whose sometimes anti-establishment comments drew the ire of party leaders,” and a decree prohibiting police officers from drinking alcohol outside of their homes.

All of this has foreign firms running scared. “Everyone is absolutely terrified of China,” a director at an international brokerage in Hong Kong quoted by Reuters said this week. “At the moment, if you don’t do what the CSRC asks you to do, there will be blood,” another source at a “large US hedge fund” warned.

We’ll close with a particularly amusing quote from an attorney who helps foreign firms ensnared by Fu:

“You can’t ‘comply’ because there is no rule of law. The best thing you can do is establish processes for who is likely to be taken away, and how to make sure they aren’t disappeared forever.”

EUROPEAN AFFAIRS
 Draghi corrects his “policy” error of yesterday with a speech today.  He states that he will re calibrate if necessary more QE.
and the key words spoken by Draghi being interviewed by former Bank Governor of the Bank of England:

But nothing was a bigger catalyst in setting the market’s euphoric mood than the following exchange between Mervyn King, in which the former BOE chief askedwas today’s speech deliberately designed to try offset some of the reaction yesterday?” to which Draghi had a response that shocked every central bank watcher in its brutal honesty that all that matters to the ECB at this point is the market:

Not really… well, of course.”

(courtesy zero hedge)

Market Soars After Draghi Corrects His “Error”

Following yesterday’s crash in the DAX, and historic surge in the Euro after an ECB announcement which many suggested was another central bank policy error, moments ago Mario Draghi did everything in his power to reverse said error, when in a speech in New York which concluded moments ago followed by a Q&A session, he effectively tripled down on his “whatever it takes” position (remember his double down took place in Malta at the end of October) and said that not only is “QE there to stay”, but could be “calibrated” if needed and the ECB can use “further tools” if needed as there is “no limit” to the “size of the ECB’s balance sheet.”

  • DRAGHI SEES NO SPECIFIC LIMIT TO ECB BALANCE-SHEET SIZE
  • DRAGHI: CAN’T BE LIMIT TO HOW FAR ECB USES TOOLS WITHIN MANDATE
  • DRAGHI: CHANGES TO QE PROGRAM ADD EU680B IN LIQUIDITY BY 2019
  • ECB’S DRAGHI Q&A: ON MKT REACTION, PKGE PROPOSALS PUT FWD,APPROVED
  • ECB DRAGHI: QE THERE TO STAY; IF NEEDED COULD BE RECALIBRATED
  • ECB’S DRAGHI: CAN USE FURTHER TOOLS IF NEEDED TO MEET INFLA TARGET
  • ECB’S DRAGHI: NOT REVOLUTION BUT RECALIBRATION;WAS RIGHT PKGE
  • ECB’S DRAGHI: EURO FX NOT POLICY TARGET; AS VEHICLE IS IMPORNT

So he was only joking the last time he warned the market he would go full mad dove, but this time he is serious?

Rhetorical questions aside, he made it very clear that yesterday’s ECB announcement was not meant to address market expectations:

  • ECB DRAGHI: NOT PKGE TO ADDRESS MKT EXPECTATIONS

No: addressing market expectations is what today’s speech was for, and as one can see, while it had a very modest impact on the EUR (for the reasons laid out yesterday), which is supposedly what this is all about, it has sent the S&P soaring as market expectations of a European central bank that will do anything to support markets have been reset.

 end
Denmark votes to protect their sovereignty as they reject further EU integration. Please note that Denmark still retains their currency, the Kroner in the same manner as the UK
(courtesy zero hedge)

“Dis-Union” Grows – Danes Vote To Protect Sovereignty, Reject Further EU Integration

To be sure, just about the last thing the EU needed was another blow to European solidarity.

The monumental challenge of coping with the millions of refugees who have inundated the Balkans on their way to Germany has splintered the bloc and now, the debate on how best to deal with the flood of asylum seekers threatens to shatter the sacred Schengen ideal altogether.

On Wednesday we reported that the EU has now threatened Greece with indefinite suspension from the Schengen passport-free travel zone unless it overhauls its response to the migration crisis by mid-December, as frustration mounts over Athens’ reluctance to accept outside support. At the same time, Turkey (who is now fond of starting world wars) is set to receive a €3 billion check to support Ankara’s efforts to “keep migrants in the region.”

Well, in case the situation wasn’t fractious enough, Denmark voted against further integration on Thursday in a referendum that boasted a turnout of 72%. As WSJ reports, “voters were asked if parliament should have the power to opt-in on a total of 22 EU justice and home affairs laws, from which the small Nordic country has hitherto been exempt.”

53% of Danes said “no”. 


“The outcome is a defeat both for the Danish government and the main opposition parties who had urged voters to back the proposal, arguing it was necessary for Denmark to combat cross-border crime and remain a member of Europol even after a planned overhaul of the intergovernmental police agency next year,” WSJ goes on to note.

“The result of the election is based on a general skepticism toward the EU,” PM Lars Loekke Rasmussen said. Rasmussen contends that deeper integration is paramount if the country wants to “fight cross-border crime.” “At stake is the ability to coordinate everything from tracking cyber crime to ensuring family disputes get the same legal treatment across EU borders,” Bloomberg adds.

“Danes are saying yes to cooperation but no to relinquishing more sovereignty to Brussels,” Kristian Thulesen-Dahl, head of the EU-skeptic, anti-immigration Danish People’s Party, said on Thursday. The DPP is the big winner here and the vote effectively means the majority of Danes do not support a move to subject the country to Brussels’ migrant quota system. “DPP leaders have said that adopting the government plan could compel Denmark to participate in joint EU efforts to tackle the region’s migrant crisis,” WSJ says. Rasmussen says that isn’t the case.

Now, the PM will have to struggle to keep his country in Europol. “Rasmussen said he now would have talks with European Council President Donald Tusk and European Commission President Jean-Claude Juncker aimed at reaching so-called parallel agreements that would allow Denmark to continue cooperation with Europol, among others,” AP says.

As for the consequences of preserving the opt-out, Denmark will now be cut off from critical information given last week’s changes to the role of the European police agency. Danes “won’t have immediate access to Europol registers on foreign fighters in Syria, criminal motorbike gangs, etc.,” Henning Soerensen, a lecturer in EU law at the University of Southern Denmark, warns.

So there you go. No access to centralized data on “motobike gangs,” which means that if the Hell’s Angels decide to stage an attack on Copenhagen, Denmark will be out of luck when it comes to shared intelligence.

The vote has wider ramifications. As WSJ goes on to suggest, “the result of the Danish vote could have implications for British Prime Minister David Cameron as he seeks to renegotiate Britain’s relationship with the EU.”

As a reminder, Brexit is one of SocGen’s five black swans for 2016 and “Denmark voting against further European integration could strengthen Cameron’s negotiating hand, since he could use the Danish referendum to show the U.K. isn’t the only country with major concerns about the EU and that other European populations are weary about further integration.”

So there you have it, more “dis-union” and just one more reason to believe that the EU project has entered what might fairly be described as a terminal decline. If the Denmark vote tells us anything, it’s that terrorists need not waste time attacking Europe – it’s going to fall apart on its own.

end
Just take a look at what is going on in northern Greece:
(courtesy zero hedge)

Meanwhile On The “Apocalyptic” Northern Greek Border…

In a somewhat depressing show of the farce that is Europe’s immigration policy, local media reports“apocalyptic scenes” on the northern Greek border where “economic migrants” who are not entitled to leave Greece’s provisional camps are fighting with ‘refugees’ who are entitled to leave, and head into other European nations. Petrol bombs and stones flew through the air, fists, kicks and wrestling on the ground as migrants hindered refugees from entering Macedonia (FYROM). People have injured, trampled and faint, among them many babies as some migrants tried to pass together with the refugees and were apparently hindered with stun grenades fired by the FYROM police.

As KeepTalkingGreece reports, for one more day tension rose on Greece’s northern borders with FYROM.“Economic migrants” and refugees battled with each other as the first are trapped inside Greece and only the latter are allowed to leave. Petrol bombs and stones flew through the air, fists, kicks and wrestling on the ground as migrants hindered refugees from entering FYROM. some migrants tried to pass together with the refugees and were apparently hindered with stun grenades fired by the Fyrom police, while the Greek police tried to diffuse tension on its own soil.

?????? ??? ???? ???? ???????? - ???????????? ??? ??????????????

A growing number of ‘economic migrants’ who are not allowed to enter the Former Republic of Macedonia have camped near the village of Idomeni in a provisional settlement and under appalling conditions. Greek media report that as of Friday, they were some 7,000 people: men, women and children.

Note by Video uploader: “Apocalyptic scenes and chaos in Idomeni Greece as FYROM authorities have dramatically reduce the flow of refugees and close borders for hours. People have injured, trampled and faint, among them many babies. The situation gets even worse because of freezing low temperatures during the night.”

Following EU’s instructions, FYROM authorities allow only refugees from Syria, Afghanistan and Irak to enter its territory and then move northwards to other European countries. People form other countries are considered as “economic migrants” and Greece is entitled to keep them on its soil.

Migrants who are not allowed to leave Greece reportedly block the FYROM borders when they are opened and this creates tension among the two categories of people seeking a future in Europe.

Embedded image permalink

Many of the migrants have been allegedly ‘sitting’ in the provisional Idomeni camp for the last 18 days. On Thursday, a Moroccan migrant, 22, was electrocuted when he grabbed the wires of a stopped train. His death triggered tensions in the crowd.

Despite the deadlock in the area, the appalling conditions and the rising tension, more and more buses with refugees and migrants keep transporting refugees and migrants from Athens to Idomeni.

On Thursday, Greek Migration Minister Yannis Mouzalas, announced that there would be an “operational plan in the next 4-5 days” for those migrants who cannot travel to Europe but refrained from disclosing details.  There are rumors that 3 camps for migrants are under construction in the broader area of the Greek capital. Greek media reported that there will be trains to transport the migrants to Athens and Thessaloniki.

But the problem is: A) these people do not want to stay in Greece and B) where will these people be located in the two major cities, who will come up for their expenses, how long will they stay in the debt-ridden country.

Embedded image permalink

There were reports that NGOs had left Idomeni after angry migrants had looted their supplies, but on Friday the NGOs have returned.

Embedded image permalink

Hot tea offered to migrant kids by @DresdenBalkanKonvoy

Today, Friday, EU interior and foreign ministers are meeting to take important decisions on how to deal with the Refugee Crisis. So far, the European Union proved that it is well-skilled and capable in creating aperfect mess.

With one country after the other closing their borders to migrants and imposing segregation policies, Slovenia, Croatia, Serbia and FYROM confirmed their loyalty to Brussels and cut the Balkan-route for thousands of people who could have also be coming from other war zones or been persecuted for political, religious or other reasons in the ‘democratic’ world of Middle East and Africa.

So far, the Only Solution that the EU was capable to find is that these people can stay in …Greece!

Meanwhile, even their countries of origin do not want these citizens back and Pakistan sent 30 migrants back to three European countries on Thursday after refusing to allow them to disembark from a chartered plane at an airport in Islamabad. A spokesman for the Pakistani Interior Ministry, described the migrants as “unverified deportees,” most of whom were sent back from Greece, saying “the authorities would not permit anyone to enter the country without proper documentation.” !!!

 

end

RUSSIAN AND MIDDLE EASTERN AFFAIRS
Now a Turkish MP has evidence of Erdogan’s son in law,  Albayrak is also involved in the illegal smuggling of Syrian crude
(courtesy zero hedge)

ISIS Oil Plot Thickens: Turkish MP Has Evidence Erdogan’s Son-In-Law Involved In Illegal Crude Trade

 

 

 

On Thursday, Turkish PM Ahmet Davutoglu said the following about Russia’s allegations that Turkey and more specifically, President Recep Tayyip Erdo?an and his family, are involved in the trafficking of illegal ISIS crude:

“In the Cold War period there was a Soviet propaganda machine. Every day it created different lies. Firstly they would believe them and then expect the world to believe them. These were remembered as Pravda lies and nonsense. This was an old tradition but it has suddenly reared its head again. Nobody attaches any value to the lies of this Soviet-style propaganda machine.”

As we went on to note, Davutoglu’s assessment isn’t exactly correct. Quite a few people “attach value” to Moscow’s allegations, not the least of which are the authorities in Baghdad, from whom Turkey is effectively stealing not only by facilitating the trafficking of ISIS oil, but also by piping over 600,000 b/d from Kurdistan to Ceyhan.

In fact, Iraq is so agitated that they’re set to ask the Security Council to investigate the situation and brand anyone found to be involved “criminals.” 

Of course the thing about being an autocrat – and that’s most certainly what Erdogan is despite the West’s ridiculous contention that Turkey is a democracy – is that you make a whole lot enemies in your own country and while you can suppress dissent with force, eventually it all catches up to you and between Russia’s accusations and opposition political parties still stinging from AKP’s move to nullify June’s election outcome by starting a civil war and calling for snap elections, Erdogan may be in trouble.

Underscoring that contention is CHP lawmaker Eren Erdem who says he, like Moscow, will soon provide proof of Erdogan’s role in the smuggling of Islamic State oil. “I have been able to establish that there is a very high probability that Berat Albayrak is linked to the supply of oil by the Daesh terrorists,” Erdem said at a press conference on Thursday (seemore from Sputnik).

Berat Albayrak is Erodan’s son-in-law and is Turkey’s Minister of Energy and Natural Resources.

(Berat Albayrak)

Erdem isn’t the only person to mention Albayrak this week. Recall that in his opening remarks at the dramatic Russian MoD presentation on Wednesday Deputy Minister of Defence Anatoly Antonov said the following:

“No one in the West, I wonder, does not cause the issue that the son of the President of Turkey is the leader of one of the largest energy companies, and son-in-appointed Minister of Energy? What a brilliant family business!” 

“There is one company, headquartered in Erbil, which in 2012 acquired oil tankers, and which is currently being bombarded by Russian aircraft,” Erdem said. “I am now studying this company’s records. It has partners in Turkey, and I am checking them for links to Albayrak.”

(Erdem)

Note that this is entirely consistent with what we said last week, namely that in some cases, ISIS takes advantage of the Kurdish oil transport routes, connections, and infrastructure in Turkey. It will certianly be interesting to see if there’s a connection between Albayrak, the energy ministry, and Bilal Erdogan’s BMZ Group. 

If you know anything about Erdogan, you know that he doesn’t take kindly to this kind of thing and as Erdem goes on to account, he’s already been the subject of a smear campaign:

“Today, the Takvim newspaper called me an American puppet, an Israeli agent, a supporter of the [Kurdish] PKK, and the instigator of a coup…all in the same sentence. I am inclined to view this attack on me as an attempt to belittle my significance, to attack my reputation in the eyes in the public, given that my investigation is a real threat to the government. Such a sharply negative reaction suggests that my assumptions are fair, and I am moving in the right direction to find the truth.”

The lawmaker says that type of attack has “only convinced [him] further on the need to carry this investigation through to the end.”

In the meantime, we can only hope that, for the sake of exposing the truth, “the end” doesn’t end up being a Turkish jail cell, or worse for Erdem.

end
The vital Turkish stream pipeline project is suspended. This would definitely hurt Turkey:
(courtesy Tass)
a special thanks to Robert H for sending this to me

Turkish Stream pipeline construction project suspended — Russia’s Energy Minister

December 03, 13:21 UTC+3

Gazprom CEO Alexey Miller said Turkey should first of all turn to Russia if it’s interested in the project
© EPA/FILIP SINGER

MOSCOW, December 3. /TASS/. The Turkish Stream pipeline construction project has been suspended, Russia’s Energy Minister Alexander Novak told TASS on Thursday.

“The negotiations have been suspended,” the minister said.

Earlier on Thursday Gazprom CEO Alexey Miller said that in case Ankara needs the Turkish Stream project it should turn to Moscow. “As far as the Turkish Stream is concerned Turkey should first of all turn to Russia if it’s interested in the project. As of now Turkey has not turned to us with this proposal,” Miller said, adding that in case such an offer follows it will be considered.

On December 1, Russian government took a decision to suspend operations of the mixed intergovernmental Russian-Turkish commission on trade and economic cooperation headed by Energy Minister Alexander Novak from the Russian side.

As TASS reported earlier with reference to a source familiar with the process of negotiations, consideration of the Turkish Stream project will be suspended due to termination of operations by the intergovernmental commission between Russia and Turkey.

The intergovernmental agreement between Russia and Turkey on the Turkish Stream gas pipeline project was prepared within the intergovernmental commission. It was expected that the intergovernmental agreement could be already signed in December or January. Russia considered it reasonable to sign the agreement on 2 lines while Turkey insisted on including only one line into the document.

The agreement to construct the pipeline within the Turkish Stream project was reached in December 2014. According to the initial plan, the capacity of 4 lines of the pipeline will be 63 bln cubic meters of gas per year, with 16 bln to be supplied to Turkey and 47 bln – to the gas hub on the Turkish-Greek border. In October, Gazprom CEO Alexey Miller said the company will only construct 2 lines of the pipeline so far as the Nord Stream 2 pipeline can cover Europe’s growing demand for gas.

At the same time it was announced that the talks on signing the intergovernmental agreement were postponed due to the political situation in Turkey where the cabinet of ministers was being appointed at the moment.

end
Israel conducts secret training exercises in Greece in order to avoid the SAM 300 Russian missiles on the ground.
Israel is afraid that Iran is arming Hezballoh and a well equipped Hezballoh is not in Israeli interest.
(courtesy zero hedge)

Israel Conducts Secret Training Exercises Against Russian Air Defense Systems

Late last month in “ISIS Oil Trade Full Frontal: ‘Raqqa’s Rockefellers’, Bilal Erdogan, KRG Crude, And The Israel Connection”, we highlighted a report from Al-Araby al-Jadeed which implicates Israel in Islamic State’s lucrate illegal oil trade.

You’re encouraged to read the entire article, but summing up, the contention is that ISIS crude is transported through Turkey to the port of Ceyhan and from there, it makes its way to the Israeli port of Ashdod.

Al-Araby al-Jadeed goes on to quote “a European official at an international oil company,” as saying that “Israel has in one way or another become the main marketer of IS oil. Without them, most IS-produced oil would have remained going between Iraq, Syria and Turkey. Even the three companies would not receive the oil if they did not have a buyer in Israel.”

But the connection between Israel and ISIS doesn’t end there. Earlier this year, Islamic State released a video threatening to bring down Hamas in Gaza. As Reuters noted at the time, “Islamic State insurgents threatened to turn the Gaza Strip into another of their Middle East fiefdoms, accusing Hamas, the organisation that rules the Palestinian territory, of being insufficiently stringent about religious enforcement.” Here’s the clip:

“Tensions between Hamas and radical Salafist groups have bubbled up from time to time, but many consider 2009’s deadly clash at a Rafah mosque as a turning point,” NBC added. “After an al Qaeda-inspired group challenged Hamas’ authority, Hamas security forces mounted a deadly raid which killed more than a dozen people to effectively crushed that perceived uprising.”

Were ISIS to make good on its threats, it would mean they have an enemy in common with the Israelis. More recently, Israel has sought to connect Hamas with Islamic State. On Thursday for instance, Israeli media reported that “the commander of Islamic State forces in the Sinai is currently on what was intended to be a secret visit to the Gaza Strip, meeting with Hamas terror leaders to widen their cooperation and coordinate attacks on Egyptian and Israeli targets.”

In short, there’s no telling what’s actually going on there although now that Israel has been implicated in the ISIS oil trade, we suspect we’ll find out more soon enough.

But we do know that Jerusalem has a vested interest in the outcome of the conflict in Syria. Were Bashar al-Assad to fall to a Western puppet government, it would cut off Iran’s supply line to Hezbollah on the way to rolling back Tehran’s regional influence. In that regard, one might assume that Israel has even more to gain from Assad’s ouster than the Saudis, Turkey, or the US. Here’s the official line (via Reuters):

Seeing enemies on all sides of the insurgency that erupted in the neighboring Arab state in 2011, Israel has been formally neutral but initially called for Assad to be toppled, arguing this would deny its arch-foe Iran a key ally in the Levant.

 

That view hewed to the strategy of the United States and its Arab partners, which back some Syrian rebels and say Assad has lost legitimacy to lead. But with Assad holding on and now helped by a Russian military intervention, Israel has gone mum.

 

“What is our policy in Syria? We say: We do not intervene. We have an opinion as to what we would like to be there. But we are not in a position nor do we have the status, for sensitive reasons, to say we are in favor of Assad or against Assad,” defense minister Moshe Ya’alon said in a speech to a farm collective near Jerusalem last month.

 

“We deal with our own interests,” he said, reiterating “red lines” that Israel says will trigger military action by it if crossed – attacks from Syria or attempted transfers to Lebanon’s Hezbollah or other militias of advanced weapons systems or chemical warfare agents.

 

Yaalon said Israel had armed no side in the civil war.

Somehow we’re suspicious of that claim, but we’ll leave that aside for now.

When it comes to battling Hezbollah, there’s no question that the Russian and Iranian presence is hindersome. Israel can’t, after all, simply fly over Latakia and bomb Iran’s militias as Hezbollah is effectively operating as Moscow’s ground force. Additionally, the Russians are now hyper-sensitive about potentially hostile aircraft which is why The Kremlin sent the Moskva to the coast and deployed the S-400s.

Now, we learn that Israel has been training against an S-300 in Greece in what certainly looks like an effort to determine whether the IAF could hit Hezbollah in Syria without getting shot down by the Russians. Here’s more from Reuters:

Israel has quietly tested ways of defeating an advanced air-defence system that Russia has deployed in the Middle East and that could limit Israel’s ability to strike in Syria or Iran, military and diplomatic sources said.

 

The sources said a Russian S-300 anti-aircraft system, sold to Cyprus 18 years ago but now located on the Greek island of Crete, had been activated during joint drills between the Greek and Israeli air forces in April-May this year.

 

The activation allowed Israel’s warplanes to test how the S-300’s lock-on system works, gathering data on its powerful tracking radar and how it might be blinded or bluffed.

 

One defense source in the region said Greece had done so at the request of the United States, Israel’s chief ally, on at least one occasion in the past year. It was unclear whether Israel had shared its findings with its allies.

 

The S-300, first deployed at the height of the Cold War in 1979, can engage multiple aircraft and ballistic missiles up to 300 km (186 miles) away. Israel is concerned by Russia’s plan to supply S-300s to Iran.

 

Israel says Egypt, with which it has a cold peace, has bought a variant of the system. The Israelis also worry about Moscow’s announcement last month that it will deploy the S-300 or the kindred system S-400 from its own arsenal in Syria, in response to Turkey’s shooting down of a Russian jet there.

 

Israel has bombed Syrian targets on occasion and is loath to run up against the Russians. Israeli Prime Minister

 

Benjamin Netanyahu has met President Vladimir Putin at least twice in recent weeks to discuss coordination and try to avoid accidents.

Yes, “avoid accidents,” but as we put it back in September, “Netanyahu’s position is complicated by the fact that the Prime Minister is now at odds with the US over Washington’s handling of the Iran Nuclear Deal. At the end of the day, one is certainly left to believe that Israel’s “worries about accidentally coming to blows with Russian reinforcements in Syria” will quickly evaporate should Netanyahu get confirmation that the Quds are indeed on the ground as some reports have recently suggested. If it becomes clear that weapons are being funneled to Hezbollah, well, then all bets will officially be off.”

(Hezbollah chief Hassan Nasrallah)

Well guess what?

Since we penned that warning, thousands of Iranian troops have deployed to Syria and Hezbollah has become Russia’s go-to ground army which of course means Hassan Nasrallah’s forces are likely better equipped than ever. The question then, is this: if pro-Assad forces continue to rollback the rebels, will Israel sit idly by and watch as Iran scores an epic victory on its borders, or will Netanyahu test out the IAF’s S-300 training?

 

end

WE WILL FOLLOW THIS DEVELOPMENT CLOSELY!!
(courtesy zero hedge)

Turkish Troops Said To Invade Iraq Near Mosul

CNN Turkey, citing security forces officials, is reporting what appears to be yet another escalation in the middle east maelstrom:

  • *TURKISH TROOPS ENTER MOSUL REGION IN IRAQ, CNN-TURK REPORTS
  • *ABOUT 1,200 TURKISH TROOPS IN BASHIQA NEAR MOSUL: CNN-TURK

As Bloomberg reportrs, about 1,200 Turkish soldiers have entered the Bashiqa region near the Islamic State-held Iraqi city of Mosul, CNN-Turk reports citing Turkish security forces.

  • Anti-Islamic State coalition members were informed of the move, Sabah newspaper reports

The number has now been “revised”:

Of course the fact that Turkey has invaded Iraq isn’t the curious thing here. After all, Turkey technically invaded Iraq on September 8 and has launched ground incursions across the border on a handful of occasions over the past two decades or so. There was “Operation Sun” in 2008. And then there was “Operation Steel” in 1995. And “Operation Hammer” in 1997.” And “Operation Dawn.” And the aplty named “Operation Northern Iraq.”

You get the idea. The question is this: what are they doing in Mosul, an ISIS stronghold where three Kurds were executed this week for “spying”?

Developing Story…

end

GLOBAL ISSUES
A great history lesson on why the 1929 crash happened and why we are going down
This is a must read..
(courtesy David Stockman/Contracorner)

Why This Sucker Is Going Down…….Again

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George Bush famously told an assembled group of Congressional leaders in the aftermath of the Lehman filing that unless they immediately passed an open-ended Wall Street bailout “this sucker is going down”.

They blindly complied. Yet for awhile it seemed of no avail.

By the post-crisis bottom in Q1 2009, household net worth had plunged from $68 trillion to $55 trillion or by nearly 20%. That reflected a 60% collapse in the stock averages and a 35% meltdown of housing prices.

For a fleeting moment it appeared that economic truth had come home to roost. Namely, that permanent gains in wealth and living standards cannot be achieved by the kind of rampant speculation and debt-fueled financialization that had generated the phony boom of the Greenspan era.

But that didn’t reckon with the greatest and most unfortunate accident of modern financial history. The clueless White House advisors who counseled George Bush in September 2008 to violate the free market in order to save it, had also advised him to appoint Ben Bernanke to the Fed in 2002, and then to promote him to the post of Chairman of the Council of Economic Advisors in 2005 and finally to become head of the Fed in January 2006.

But here’s the thing. Bernanke was an academic hybrid of the two worst economic influences of the 20th century——the out and out statism of John Maynard Keynes and the backdoor statism of Milton Freidman’s central bank based monetarism.

Both of these grand theoreticians got the causes of the Great Depression wrong, and Bernanke did doubly so. You can reduce all of his vaunted expertise about the 1930s to a single proposition.

To wit, the Fed should have bought up the entire $17 billion of government bonds outstanding at the time in order to liquefy the banking system and thereby arrest the plunge in economic output.

I have refuted that hoary tale in detail in the Great Deformation. The short of it is that the banking system collapsed because it was insolvent after the 15-year, debt-fueled boom of World War I and the Roaring Twenties, not because it was parched for liquidity or because the Fed had been too stingy in the provision of reserves.

In fact, money market interest rates barely exceeded 1% during the 1930-1932 period when Friedman and Bernanke claim the Fed was too tight; and excess (i.e. idle) reserves in the banking system soared by 15X.

There is no evidence that any solvent bank that was a member of the Federal Reserve System was denied discount loans or that solvent main street business that wanted more credit couldn’t get it.

Instead, what happened was that the reckless expansion of bank credit during the years prior to the 1929 crash was liquidated because it couldn’t be serviced or repaid.

Total loans outstanding had grown from $15 billion to $40 billion during the proceeding decade and one-half, but much of it had gone into margin loans on Wall Street, real estate speculation and massive over-investment in US export and capital goods industries that collapsed once Wall Street financing of foreign customers dried up after the crash.

So the money supply measured as M1 shrunk by about 30% during the three years after the crash because bad loans were being liquidated and bank deposits extinguished. There was no disappearance of that Keynesian ether called “aggregate demand”. Rather, it was that the phony wealth of the prior credit boom which inexorably evaporated.

Needless to say, the events in the fall of 2008 had nothing to do with what actually occurred after the 1929 crash. Back then the US was the world’s powerhouse exporter and creditor, but like in China today the apparent prosperity of the times depended upon vendor finance.

That is, with the help of the Federal Reserve, the US banking system and bond market had advanced the equivalent of $2 trillion in today’s economic scale to foreign customers of US farmers and manufacturers.

When the stock market bubble collapsed in October 1929, however, the Wall Street market in foreign debt went stone cold, triggering a cascade of worldwide defaults. By early 1933, the booming foreign debt market of the 1920s had become the subprime mortgage market of its day—-with debt prices sinking to less than ten cents on the dollar.

In short order, Warren Buffett’s famous metaphor about naked swimmers being exposed when the tide goes out was well demonstrated; it transpired that US export customers had been borrowing new money in order to pay interest on their accumulating debts, but without access to new credits they had no option but to drastically curtain new orders.

Accordingly, US exports collapsed by 80% during the three years after the 1929 peak, leaving US industry stranded in excess capacity and overloaded with working inventories of raw materials, intermediate goods and finished products.

The latter, for example, dropped from $40 billion to $18 billion and capital spending dropped by 75% during 1930-1933. Likewise, with the collapse of the stock market and the easy credit boom, sales of durable goods like autos, washing machines and radios dropped by upwards of 70%.

In short, the Great Depression was not an avoidable mistake of the Fed during 1930-1933 as Bernanke falsely demonstrated when he Xeroxed Milton Friedman’s erroneous history of the 1930s; it was the economic consequence of the 1916-1929 credit and financial bubble that had been fostered by the Fed.

So Bernanke had it upside-down as a historical matter, and way out in left field as a contemporary policy matter. That is, as he ran around Washington in the fall of 2008 yelling that Great Depression 2.0 was at hand he was preaching groundless hysteria.

The fact is, at the time of the housing and mortgage bust the US economy did not resemble that of 1929 in the slightest; and there was not even a remote risk of the kind of industrial depression that had occurred thereafter.

That’s because after 20 years of Greenspan-Bernanke money printing and its replication by China and the rest of the EM export mercantilist central banks, the US economy had been essentially de-industrialized. There was not a remote risk that the kind of capital spending reduction and inventory liquidation that had occurred in the early 1930s would be replicated.

Indeed, for a short period of time, the brunt of the industrial production adjustment occurred in China and the EM. The Hoovervilles were in the Chinese interior as 100 million migrant workers streamed home after suddenly being thrown out of work when world trade collapsed in the fall/winter of 2008-2009.

By the same token, spending by US households after the 2008 crisis was bolstered by a surge of automatic income transfer payments for unemployment insurance, food stamps, Medicaid/Medicare and other safety net programs; and by employment in the vast domestic service sector that as an inherent structural matter does not shutdown to liquidate inventories because it has none. During a spending recession it shrinks incrementally, not radically.

Needless to say, the global debtor, massive importer, service-based deindustrialized welfare state that the US had become by September 2008 was the polar opposite of the 1930s economy that Bernanke so badly misunderstood in the first place. And for that reason, a classic industrial depression was not remotely possible.

To take one example, inventory liquidate during the Great Depression amounted to a 20% shrinkage of GDP, but only a 2% reduction during the Great Recession.

In fact, as I also demonstrated in The Great Deformation, the moderate liquidation of the excess inventories and labor that had built-up during the Fed’s unsustainable housing and credit boom was over and done by mid-2009. Indeed, the recession had cured itself even before the massive Obama stimulus program or the Fed’s massive QE maneuver had any measurable impact on the US economy.

So Bernanke lunatic money printing spree which took the Fed’s balance sheet from $900 billion on the eve of the crisis to $4.5 trillion did not prevent any semblance of a Great Depression 2.0 whatsoever.

What it did instead, was inflate the mother of all financial bubbles. Not only was the phony household wealth that was destroyed by the last crisis entirely recovered, but it has been increased by another $18 trillion to boot.

Needless to say, the above chart is the product of massive asset price inflation, not increases in the ingredients of real societal wealth. That is, gains in labor hours employed, productivity gains realized and entrepreneurial innovation.

In the case of labor hour growth, for example, there has been none.

That’s right! Between the Q3 2007 pre-crisis peak and the most recent quarter, household wealth as measured by the Fed soared by $18 trillion or 24%, but labor hours have risen less than one-half of one percent.

Likewise, labor productivity has stalled dramatically. Since the pre-crisis peak nonfarm business productivity has grown by only 1.1% annually or at just half its historic rate. Moreover, during the last five years productivity has grown at just 0.4% per annum.

There is obviously no way to quantify entrepreneurial activity. Indeed, the various facets of it—- creative destruction, innovation and disruptive technological change—-are crucial to capitalist prosperity precisely because they can’t be quantified in recurring statistical series from the government data mills.

Nevertheless, Gallup has long tracked the birth, death and net change in US business firms, and that trend is unequivocal. has been heading south for many years, but took a step change south after the financial crisis and still has not recovered.

Net Number of New U.S. Firms Plummets

Finally, its just a plain fact of history that without gains in real net investment there can be no gain in real wealth. Yet real net investment in the US business economy today is 8% lower than at the 2007 peak and 17% below turn of the century levels.

So how do you grow household wealth by $18 trillion in the face of these dismal real world trends?

In a word, with a printing press. But what happened today is that Draghi showed he is out of tricks and Yellen confessed she is out of excuses.

Yes, this sucker is going down. And this time all the misguided economics professors turned central bankers in the world will be powerless to reverse the plunge.

 

(to be completed)

 

end

 

EMERGING MARKETS
The situation in Brazil goes from bad to worse.  The markets are in total panic as Estevez needs to raise cash.  His company was junked by Fitch.  Needless to say, it would be impossible for the insolvent government to buy the company.
It seems totally hopeless over there:
(courtesy zero hedge)

“People Are Afraid”: Market Panics As Brazil’s “Goldman Sachs” Scrambles To Raise Cash, Junk’d By Fitch

There aren’t many things we know for sure about Brazil these days. As Gabriel Petrus, a political analyst at business consulting firm Barral M Jorge, told Bloomberg last week, “never before in history have we had so little certainty about tomorrow.” 

That said, we do know one thing with absolute certainty: BTG Pactual is most assuredly not“Better Than Goldman”, as its billionaire CEO Andre Esteves once joked.

How do we know this? Because Lloyd Blankfein would have never been arrested at his home and then hauled off to jail with “no tie and light stubble on his face” like Esteves was last Wednesday.

As we documented in “CEO Of Brazil’s ‘Goldman Sachs’ Is Arrested” and then further in “Market Panics After Arrest Of Brazilian Lawmaker”, Esteves, along with prominent lawmaker Delcidio Amaral, is accused of attempting to bribe a former Petrobras director who was set to give testimony to federal prosecutors in connection with the Carwash probe. Esteves resigned his post last Sunday.

As we went on to detail, BTG clients pulled nearly a third of their money (around $1.1 billion) from the bank’s fixed income funds in the space of 48 hours after news of Esteves’ arrest hit the wires. By Thursday of this week, BTG’s 10 fixed-income funds had lost half of their AUM, or around $1.8 billion. 

The equity:

And the debt (which rallied this morning after the news of the credit line hit):

Although outflows have slowed to a little over BRL200 million per day, the cash crunch caused the firm to sell its stake in Rede D’Or Sao Luiz SA, Brazil’s biggest hospital chain, for some BRL2.4 and has prompted the bank to seek a buyer for its private banking arm, BSI, and for a debt collection business it owns. On Friday, we learn that bank has tapped a $1.6 billion lifeline from Brazil’s deposit guarantee fund. “Credit from the deposit-guarantee fund will help BTG gain time to weather the crisis as it sells assets to raise funds”, a person with direct knowledge of the company’s strategy told Bloomberg earlier today.

But that likely won’t be sufficient, some say. Wholesale funding is apparently drying up, causing BTG to pull back on trading in an attempt to preserve cash. And before you start thinking JPM-Bear of BofA-ML, note that some manner of shotgun merger isn’t likely here. As Bloomberg puts it, “there simply aren’t many Brazil lenders with the heft to take on BTG.”

Needless to say, a government bailout at this point is a laughable proposition. The country is in a state of legislative gridlock as Rousseff desperately tries to shore up the budget while facing impeachment calls from lower House Speaker Eduardo Cunha, who the Workers’ Party is attempting to remove before he gets a crack at ousting the President. “As we saw from the credit line, the bank is trying whatever it can to raise money and they seem to be doing it in an effective way,” a fixed income strategist who spoke to Bloomberg said, before adding that no matter how “effective” BTG is at securing funds, people “don’t like to see the headlines and that is why they are withdrawing their money – it shows the panic that is going on from the investors’ perspective.”

“It all boils down to the liquidity on one side of their balance sheet versus the other. The reality is that people often make investments that are less liquid than their liabilities,” said Wilbur Matthews,San Antonio-based Vaquero Global Investment LP.

Well yes, Wilbur, that’s how the system works or, in cases like this, doesn’t work. From giant investment banks to your friendly neighborhood lender, everyone is borrowing short to lend long. The whole thing is one giant, duration mismatched ponzi scheme and when some exogenous or endogenous shock takes the “confidence” out of the “confidence game,” it’s liquidation time as people come wanting their money which naturally, is tied up in illiquid “investments.”

It’s BTG now, but as we saw in 2008, it can just as well happen anywhere when something suddenly spooks investors and, more importantly, counterparties. What happens next for BTG is anyone’s guess but you can be sure that considering that fractious political environment, and considering the state of the economy, finding a “solution” will not be easy.

And just to underscore how dire the situation truly is, moments ago Fitch just cut the bank to junk:

  • BANCO BTG PACTUAL CUT TO JUNK BY FITCH, MAY BE CUT FURTHER
Average:
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings/FRIDAY morning  7:00 am

Euro/USA 1.0895 down .0022

USA/JAPAN YEN 122.82 up .176

GBP/USA 1.5123 down .0009

USA/CAN 1.3337 down .0009

Early this morning in Europe, the Euro fell by 22 basis points, trading now just above the 1.08 level rising to 1.0895; 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, Nysmark and the Ukraine, along with rising peripheral bond yield and now further stimulation and moving more into NIRP. Last night the Chinese yuan down in value (onshore). The USA/CNY up in rate at closing last night:  6.401  / (yuan down)

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31/2014. The yen now trades in a southbound trajectory  as settled down again in Japan by 18 basis points and trading now well above the all important 120 level to 122.82 yen to the dollar.

The pound was down this morning by 9 basis points as it now trades just above the 1.51 level at 1.5123.

The Canadian dollar is now trading up 9 in basis points to 1.3337 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 FRIDAY morning: closed down 435.42  or 2.18%

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

2/ Asian bourses all in the red     … Chinese bourses: Hang Sang red (massive bubble forming) ,Shanghai in the red with no gov’t intervention / (massive bubble ready to burst), Australia in the red: /Nikkei (Japan) red/India’s Sensex in the red/

Gold very early morning trading: $1062.00

silver:$14.15

Early FRIDAY morning USA 10 year bond yield: 2.31% !!! down 3 in basis points from Thursday night and it is trading well below resistance at 2.27-2.32%.  The 30 yr bond yield stays at 3.07 or par  in basis points.

USA dollar index early FRIDAY morning: 98.16 up 24 cents  from Thursday’s close. ( Now below resistance at a DXY of 100)

This ends early morning numbers FRIDAY MORNING

end
OIL RELATED STORIES
 at the oil meeting in Vienna:  result no cut in production.
this results in oil and the rouble falling, gold jumping.
(courtesy zero hedge)

Oil & Ruble Dump, Gold Jumps On Leaked OPEC Decision – “No Cut In Production”

With just over an hour until OPEC’s press conference, details are leaking:

  • OPEC SETS TARGET AT 31.5 M B/D AFTER INDONESIA JOINS: DELEGATE
  • OPEC HAS AGREED TO OIL OUTPUT POLICY ROLLOVER

OPEC agreed to set a new oil-output ceiling of 31.5 million barrels a day, according to a delegate with knowledge of the decision.

The increase is from a previous ceiling of 30 million barrels and does not include production from Indonesia, which joined the producer group after a break of almost seven years, according to the delegate, who asked not to be identified because the decision hasn’t been made public.

But current production is at 31.5 million barrels, and so this is OPEC adjustinmg up to the current reality.

 

And Crude is plunging back below $40…

 

And gold is jumping…

 

As The Ruble tanks…

 

The Russians are not happy:

  • *ROSNEFT: OPEC DECISION IN LINE W/ MASSIVE DUMPING TREND: RIA
  • *ROSNEFT DOESN’T SEE RISK FOR ITSELF FROM OPEC DECISION: RIA
  • *ROSNEFT SAYS ITS PRODUCTION COSTS ONE OF LOWEST IN WORLD: RIA

 

*  *  *

So what does all this mean for oil prices? Nothing good: according to a WSJ report on an internal OPEC document written to prepare a crucial meeting Friday warns oil prices will remain under pressure in the near future while markets would remain oversupplied even if the cartel cut its production.

The analysis, which was reviewed exclusively by The Wall Street Journal, underscores the conundrum faced by the Organization of the Petroleum Exporting Countries as it tries to respond to an oil price slump. At the meeting Friday in Vienna, a heated debate is expected between a faction that wants a reduction in production to boost prices and another arguing such a move would only give away market share to competitors such as U.S. tight oil.

 

The document, a transcript of a technocrat meeting last week to prepare the summit, warns that “overall the current surplus, while easing, should continue to cap the upside in oil prices for the coming quarters.” OPEC’s secretariat says in a transcript of its meeting that took place last week. The Economic Commission Board—as the technocratic meeting is called—gathers experts to advise ministers before an OPEC meeting on the possible outcomes of their decisions.

 

The document shows that, if current production remains unchanged at 31.5 million barrels a day, markets will still be oversupplied by 700,000 barrels a day in 2016—though that would be less than the glut of 1.8 million a barrel a day OPEC estimates for this year.

With non-OPEC production bringing about a global oil glut, countries like Venezuela and Iran have called in recent days for an output reduction to bring back the group’s production to its agreed level of 30 million barrels a day.  They won’t get it, and the result is that oil may very well trade to Goldman’s near-term target in the mid-$20s on very short notice.

end
Oil should have moved higher on rig count tumble but it stayed constant
(courtesy zero hedge)

Oil Unmoved As US Rig Count Tumbles To May 2010 Lows

For the 13th week of the last 14, US Oil rig counts declined. Down 10 to 545 rigs, this is the lowest since May 2010 as the temporary respite in the early Fall has given way to reality and rig counts track the lagged crude price lower…

 

 

Charts: Bloomberg

end

And now for your closing numbers for FRIDAY night: 3:00 pm

Portuguese 10 year bond yield:  2.49% par in basis points from THURSDAY

Japanese 10 year bond yield: .341% !! up 2 basis points from Thursday and extremely low
Your closing Spanish 10 year government bond, Friday up 1 in basis points.
Spanish 10 year bond yield: 1.74%  !!!!!!
Your FRIDAY closing Italian 10 year bond yield: 1.65% up 1  in basis points on the day:
FRIDAY/ trading 9 basis points lower than Spain.
IMPORTANT CURRENCY CLOSES FOR FRIDAY
Closing currency crosses for FRIDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
 Euro/USA: 1.0871 down .0047 (Euro down 47 basis points)
USA/Japan: 123.22 up 0.570 (Yen down 57 basis points)
Great Britain/USA: 1.5101  down .0031 (Pound down 31 basis points
USA/Canada: 1.3375 up .0030 (Canadian dollar down 30 basis points)
This afternoon, the Euro fell by 47 basis points to trade at 1.0871 as the Euro continues to stay strong despite the “good” USA report. We have an extremely important commentary tonight on this issue and it is a must read.  The Yen fell to 123.22 for a loss of 57 basis points. The pound was down 31 basis points, trading at 1.5101. The Canadian dollar fell by 30 basis points to 1.3375.
The USA/Yuan closed at 6.401
Your closing 10 yr USA bond yield: down 7 basis points from Thursday at 2.27%//
(trading above the resistance level of 2.27-2.32%)
USA 30 yr bond yield: 3.01 down 6    in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries
 Your closing USA dollar index: 98.37 up 44 cents on the day  at 2:30 pm
Your closing bourses for Europe and the Dow along with the USA dollar index closings and interest rates
London: down 36.71 points or 0.59%
German Dax: down 37.14 points or 0.34%
Paris Cac down 15.42 points or 0.33%
Spain IBEX:down 14.20 points or 0.14 %
Italian MIB: up 25.65 points or 0.12%
The Dow up 369.96 or 2.12%

The Nasdaq up 104.74 or 2.08%

WTI Oil price; 40.05
Brent OIl:    43.07
USA dollar vs Russian rouble dollar index:    68.05  (rouble is down 55 /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:

“As If It Never Happened” – Stocks, Bonds, Gold Soar On Draghi “No Limits” Double-Speak

ssh!!!!

Did Draghi just open the ‘vault’ and expose the reality that everything central bankers do is about the market!!??

 

The day started with jobs data… we’ve seen that pattern before…

 

But it was Draghi’s comments that sparked the real idiocy in stocks.

Futures provide a little more clarity on what happened today… From the cliff-edge of the ECB statement, futures ramped to run stops…

 

Finally, on the week, it’s as if it never happened for Nasdaq, S&P and Dow (while Small Caps and Trannies had a tough time) – Trannies worst week since Black Friday collapse

 

Ugly week for Energy stocks, but financials love a flatter curve?

 

But shorts were not squeezed…

 

FANGs dominated by NFLX…

 

While stocks loved Draghi’s “no limits” speech… FX markets shrugged…

 

Stocks dropped with crude as OPEC hit… but then rallied magnificently…

 

And stocks ignored the bond market bid…

 

But The Dow (and S&P) is back in the green year-to-date… so Mission Accomplished!!

 

Quite a week… if you ignore the idiocy in stocks.

Treasury yields ended the week modestly higher (with 2s30s unch but the belly underperforming)…

 

The broad bond market has hit a 20-month low…

 

Mortgage bonds hit a 15-month low…

 

And high yield bonds are at the same level when Lehman hit…

 

FX markets were extremely volatile with Swissy and EUR best and JPY worst as the USD tumbled…

 

EURUSD’s biggest weekly rise in over 7 months…

 

As a near-record net short position crushed every hedge fund…

 

Commodities were a mixed bag with crude clubbed (by the cartel), copper up and PMs jumped on weaker dollar and global uncertainty…

 

Gold and Crude seem linked at the throat…

 

Charts: Bloomberg

end
the phony jobs report shows a surge in 211,000 bartenders, higher than expected.  However weekly hourly rate falls as does weekly earnings

(BLS/zero hedge)

November Jobs Surge 211K, Higher Than Expected As December Rate Hike Looms Despite Slump In Weekly Earnings

It appears the December rate hike is now cemented following the BLS’ report that November jobs rose by 211K, higher than the 200K expected, and well above Janet Yellen’s “whisper” number of just 100,000 being sufficient. This follows an even stronger revision to the October number from 271K to a whopping 298K. The unemployment rate remained flat at 5.00%, in line with expectations.

 

While the headline jobs number was good, a less pleasant statistic emerges below the surface where we see that while average hourly earnings rose 0.2% as expected, this was down from last month’s revised 0.4%.

But the punchline is that just like last month, average weekly earnings actually declined to $871.13 from $872.27, which represents just a 2% increase from a year ago, matching the lowest print over the past year. This is the result of weekly hours worked declining from an upward revised 34.6 to 34.5

 

From the report:

Total nonfarm payroll employment rose by 211,000 in November, about in line with the average monthly gain of 237,000 over the prior 12 months. In November, job growth occurred in construction, professional and technical services, and health care. Employment in mining and information declined over the month. (See table B-1.)

Employment in construction rose by 46,000 in November, with much of the increase occurring in residential specialty trade contractors (+26,000). Over the past year, construction employment has grown by 259,000.

In November, professional and technical services added 28,000 jobs. Job gains occurred in accounting and bookkeeping services (+11,000), and employment in  computer systems design and related services continued to trend up (+5,000). Over the year, professional and technical services has added 298,000 jobs.

Health care employment increased by 24,000 over the month, following a large gain in October (+51,000). In November, hospitals added 13,000 jobs. Health care  employment has grown by 470,000 over the year.   (harvey:  Obamacare)

Employment in food services and drinking places continued to trend up in November (+32,000) and has risen by 374,000 over the year. (harvey: more bartenders???)

Retail trade employment continued to trend up in November (+31,000) and has increased by 284,000 over the year. In November, job gains occurred in general merchandise stores (+12,000) and motor vehicle and parts dealers (+9,000). Over the past 12 months, these industries have added 85,000 jobs and 71,000 jobs, respectively.  (retail trade laying off massive amount of workers and this number increases)

Employment in mining continued to decline in November (-11,000), with losses concentrated in support activities for mining (-7,000). Since a recent peak in December 2014, employment in mining has declined by 123,000.

Information lost 12,000 jobs over the month. Within the industry, employment in motion pictures and sound recording decreased by 13,000 in November but has shown little net change over the year.

Employment in other major industries, including manufacturing, wholesale trade, transportation and warehousing, financial activities, and government, changed little over the month.

The average workweek for all employees on private nonfarm payrolls edged down by 0.1 hour to 34.5 hours in November. Both the manufacturing workweek and factory  overtime were unchanged in November, at 40.7 hours and 3.2 hours, respectively. The average workweek for production and nonsupervisory employees on private  nonfarm payrolls was also unchanged at 33.7 hours. (See tables B-2 and B-7.)

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 4 cents to $25.25, following a 9-cent gain in October. Over the year, average hourly earnings have risen by 2.3 percent. In November, average hourly earnings of private-sector production and nonsupervisory employees, at $21.19, changed little. (See tables B-3 and B-8.)

The change in total nonfarm payroll employment for September was revised from  +137,000 to +145,000, and the change from October was revised from +271,000 to +298,000. With these revisions, employment gains in September and October combined were 35,000 more than previously reported. Over the past 3 months, job gains have averaged 218,000 per month.

end
 where was all the gain?: we had a gain of 319,000 part time jobs.
Also the highest gain was construction??? with the housing sector in disarray??
The big gains occurred in low paying jumps
(courtesy zero hedge)

Where The Job Gains Were: 319,000 “Part-Time Jobs For Economic Reasons” Added

On the surface, the December jobs number was better than expected, adding a 211,000 jobs at least according to the Establishment survey. However, a less pretty picture emerges when looking at the Household survey, and specifically the composition of full-time vs part-time workers.

This is what the BLS said about the composition of job additions from the Household Survey:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) increased by 319,000 to 6.1 million in November, following declines in September and October. 

For those unfamiliar, this is a category of workers that includesindividuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.”

As such this includes far more than merely workers hired on a temporary basis by retailers to fill seasonal worker needs.

Furthermore, this 319K increase in part-timers for economic reasons more than accounts for the total increase in employed workers according to the Household survey, which rose by 244K to 149,364,000.

Charted, it shows that the November jump was the highest since September 2012.

 

Elsewhere, according to the Establishment survey, the breakdown in job additions in November was as follows: in the front inexplicably we had construction workers, which paradoxically comes at a time when recent US housing data has taken a turn for the worse as reported previously. It is follwed by the traditional low paying jobs of education and health, professional services, leisure and hospitality, and retailers. High paying jobs such as manufacturing, mining and logging and information all saw a decline in the month.

end

wage growth is occurring strictly with bosses or supervisory personnel,  not the general employee sector:
(courtesy zero hedge)

Wage Gains: For Your Boss – Yes; For You – Not So Much

There was a time when the “data-dependent” Fed was concerned not so much about the unemployment rate or the number of monthly payroll gains, as it was with employee wage gains and whether there is any “pent up inflation” hiding in worker compensation. While it has since emerged that the “data” the Fed has been focused on is that of the daily moves in the Dow Jones, a glimpse at wage growth whose that unfortunately, for the vast majority of the US population, there simply is none.

First, here is a chart showing total average hourly earnings.

 

Aside from the modest decline in November from the rather substantial jump in October, the chart looks good, at least until one looks at the change in total hours worked for all employees, which declined from 34.6 to 34.5 hours, suggesting that wage gains were at the expense of a contraction in the work week.

The impact of this on weekly earnings is rather dramatic, which as a result of the decline in hours saw a more than commensurate drop. In fact, after rising nearly 3% in October, weekly earnings in November returned to the red zone with just a 2% increase, the lowest since June, and matched the average since 2011.

 

But nowhere is the lack of rising wages for most of the US labor force more visible than in the breakdown between wages for nonsupervisory workers, that segment of the US population that accounts for 100 million or 82% of the work force, and wage growth for the sliver of workers at the very top, those who make up the balance, i.e., the managers and supervisors.

Here is what wage growth looked like for all supervisory workers – rising at a paltry 2 %, there is practically no core inflation-adjusted wage growth:

 

And here is the wage growth for these workers’ bosses, which also happens to include the economists living in various academic ivory towers and the Marriner Eccles building, and who have the erroneous tendency to equate what is happening to the paycheck of the broader population with their own.

So the next time you wonder where the Fed Chairwoman is seeing wage growth, the answer is simple: they are looking at your boss’ paycheck… yours, not so much.

end
Since January 2015,  the USA has added 294,000 waiters and bartenders and zero manufacturing workers
And our big economists in the USA are happy with this?
(courtesy zero hedge)

Since January The US Has Added 294,000 Waiters & Bartenders, And Zero Manufacturing Workers

Here is one of the reasons why the Fed is confident the US economy is strong and resilient enough to sustain a rate hike: since January, the US has added 293,900 waiter & bartender positions and zeromanufacturing workers.

Unless one is an economist, no further commentary is needed.

If one is an economist, we eagerly look forward to an extended discussion why one should focus only on the blue line and ignore the red one, debate the adverse impacts of the weather (both hot and cold) on manufacturing, listen to how the collapse of high-paying jobs is actually a good thing for low-paid food servers, and how this is merely a confirmation of the bullish split of the US economy into a growing services and a “slightly softer” manufacturing sector.

 

Here is the monthly change just in manufacturing jobs: three has been a decline in 3 of the past 4 months.

end

the mouthpiece for the Fed was spoken and expect a rate hike in two weeks:
(courtesy Hilsenrath/Wall Street Journal/zero hedge)

Fed Whisperer Hilsenrath Confirms ‘All-Clear’ For December Rate-Hike

As if any confirmation was needed, The Wall Street Journal’s Fed whisperer Jon Hilsenrath ‘reports’:

Friday’s employment report clears the way for the Federal Reserve to raise short-term interest rates by a quarter-percentage point at its Dec. 15-16 policy meeting,ending seven years of near-zero interest rates.

Noting that anything over 200k would have done it..

Fed Chairwoman Janet Yellen said in testimony to Congress on Thursday the economy needs to add fewer than 200,000 jobsa month to keep the unemployment rate moving down and to draw discouraged workers back into the labor force. Payrolls increases averaged 218,000 on a monthly basis in the September-through-November stretch, more than enough to meet the Fed’s objectives. On this front, too, the labor market is on track as officials want and expect.

But,it’s not all unicorns and ponies…

One slight stain in the report was a retreat in hourly average earnings from a 2.5% year-over-year increase in October to a 2.3% increase in November. Still, officials see signs that slack has diminished to the point in the labor market that wages will start rising more briskly.

So…

With the first move widely expected in financial markets, Fed officials are likely to go into the meeting debating how they can emphasize to the public that the central bank will proceed cautiously and gradually with subsequent rate increases in 2016.

In other words, The Fed is positioning this rate-hike as the most-dovish tightening of all-time…

end
Judging from the reaction of the Euro and the stock markets around the globe, many think that yesterday’s non action by the ECB was a policy error.
We have a new development to go over with respect to the supposed .25 basis rate hike in two weeks.
The big question is what happens to the all important Repo trade as it is the most important component of the Fed’s rate hike strategy.  In essence, the Fed is tightening and therefore what is the cost in liquidity. The expert in this field, E.D. Skyrm suggests that the Fed must drain 800 billion of excess liquidity to make that .25% hike.  If they cannot, then overnight rates will just not react and then we have another policy error
please read the following carefully…
(courtesy zero hedge/last night)

“But It’s Just A 0.25% Rate Hike, What’s The Big Deal?” – Here Is The Stunning Answer

After today’s market plunge, the result of what even Goldman admitted may have been a major policy error by the ECB, suddenly the Fed’s determination to hike rates in two weeks lies reeling on the ropes. After all, what the ECB did was an implicit tightening of reverse QE1 proportions (it is no accident that the EURUSD is soaring as much as it did in March 2009 when the Fed unleashed QE).

But assuming the Fed is still intent on hiking at all costs, and does just that in two weeks time, a question many are asking is where will General Collateral repo trade in case the Fed does decided to push rates higher by 0.25%: after all the Reverse Repo-IOER corridor is the most important component of the Fed’s rate hike strategy, one which better work or otherwise the Fed will be helpless to raise rates with some $3 trillion in excess liquidity sloshing around, and what little credibility it has will be gone for good.

And much more importantly, what are the liquidity implications from such a move.

For the answer we go to the repo market expert, Wedbush’s E.D. Skyrm. Here are his thoughts:

Where will General Collateral trade when the fed funds target range is moved 25 basis points higher to .25% to .50%? In the most simple method, GC has averaged about .15% for the past month, which implies a GC rate around .40% after the Fed move.

However, given the unprecedented amount of liquidity in the financial system, there’s a belief the Fed will have problems moving overnight rates higher.

We have two quantifiable events over the past few years where the Fed moved Repo rates higher or lower: quarter-end and the QE programs. Given there are so many moving parts, consider these to be very rough estimates: Beginning in 2015, when funding pressure began each quarter-end, the market, on average, took approximately $255B additional collateral from the Fed and, on average, GC rates averaged 20.5 basis points higher.

In 2013 on my website, I calculated that QE2 moved Repo rates, on average, 2.7 basis points for every $100B in QE. So, one very rough estimate moved GC 8 basis points and the other 2.7 basis points per hundred billion. In order to move GC 25 basis points higher, in a very rough estimate, the Fed needs to drain between $310B and $800B in liquidity.
If readers didn’t just have an “oops” moment, please reread the last bolded sentence until they do, because it explains precisely what the market is missing about the Fed’s rate hike cycle: according to Skyrm’s calculations, to push rates by a paltry 25 bps, the smallest possible increment, what the Fed will have to do is drain up to a whopping $800 billion in liquidity!

Putting that in context, QE2 – which pushed the S&P higher from November 2010 until June 2011 – was “only” $600 billion.

In other words, to “prove” to itself that it is in control and the economy is viable, the Fed will effectively conduct, via reverse repo, an overnight QE2…. only in reverse.

For those who think this will have a positive, or even neutral, impact on risk assets, we have several bridges located in Brooklyn that we are looking to offload at 150% of par. Please send your BWICs to the usual address.

end
Again, another important piece:  Why didn’t the Euro drop with the “good news” from the jobs report today.  The reason is the policy error of Draghi.  The raising of 1/4 % interest rate rise of the Federal funds rate would need  a 800 billion USA drain from the global system.   That must be provided for by the ECB or else all asset prices come tumbling down:
(courtesy zero hedge)

Why The Euro Didn’t Drop (Despite Payrolls ‘All Clear’ For Fed)

The positive US payrolls report has sent December rate hike odds up to around 80% and along with the ‘all clear’ from Hilsy, one would expect relative ‘strong dollar’ flows front-running the divergent policy directions about to be undertaken by The Fed. However, EURUSD continues to rise this morning… here’s why…

 

Given today’s ‘solid’ payrolls print, and the dovishly-hawkish chatter from each and every Fed speaker from Yellen down, it seems clear (and the market was priced for) a December rate-hike is a done deal.

As we detailed last night,a 25bps Fed rate-hike means a liquidity drain of up to around $800 billion… as repo market expert, Wedbush’s E.D. Skyrm explains:

 

Where will General Collateral trade when the fed funds target range is moved 25 basis points higher to .25% to .50%? In the most simple method, GC has averaged about .15% for the past month, which implies a GC rate around .40% after the Fed move.

 

 

However, given the unprecedented amount of liquidity in the financial system, there’s a belief the Fed will have problems moving overnight rates higher.

 

We have two quantifiable events over the past few years where the Fed moved Repo rates higher or lower: quarter-end and the QE programs. Given there are so many moving parts, consider these to be very rough estimates: Beginning in 2015, when funding pressure began each quarter-end, the market, on average, took approximately $255B additional collateral from the Fed and, on average, GC rates averaged 20.5 basis points higher.

 

In 2013 on my website, I calculated that QE2 moved Repo rates, on average, 2.7 basis points for every $100B in QE. So, one very rough estimate moved GC 8 basis points and the other 2.7 basis points per hundred billion. In order to move GC 25 basis points higher, in a very rough estimate, the Fed needs to drain between $310B and $800B in liquidity.

 

Putting that in context, QE2 – which pushed the S&P higher from November 2010 until June 2011 – was “only” $600 billion.

If readers didn’t just have an “oops” moment, please reread the last bolded sentence until they do, because it explains precisely what the market is missing about the Fed’s rate hike cycle: according to Skyrm’s calculations, to push rates by a paltry 25 bps, the smallest possible increment, what the Fed will have to do is drain up to a whopping $800 billion in liquidity!

*  *  *

All of which was supposed to be offset by an ‘easy’ ECB, ramping up Q€ and ‘stabilizing’ the market – avoiding the devastating consequences of a major net liquidity drain.

But Draghi did not! With only modest longer-term extensions, reinvestment, and muni expansion.

And so this happened… thus the markets largest transmission mechanism for central bank ‘efforts’ retraced the entire drop in EURUSD since October Payrolls confirmed the likelihood of a December rate-hike…

 

Simply put, Draghi blew it.

And now either The Fed folds on a rate hike... or Draghi has to over-promise once again that “whatever it takes” will mean even more next month and the market misunderstood (and fight the hawks that are building on his committee)or else the ker-plunk of a $800 billion collapse in collateral chains will ripple excessively through every asset class in the world unwinding consensus carry trades wherever it can.

*  *  *

And Sure Enough!!!

His speech today puts the market straight…

To help you appreciate the import of the overall recalibration of our asset purchase programme, you should consider that the extension of our net purchases to at least March 2017 and the decision to re-invest the principal payments on maturing securities for as long as necessary will add EUR 680 billion – some 6.5% of the euro area GDP – in liquidity to the system by 2019, relative to the situation that would have prevailed under previous policies.

 

 

But similar to the times when we steered policy primarily through interest rates, we are continuously monitoring economic and financing conditions, on which our policy action is always conditional. If these developments change in directions that make it necessary to respond again, we are of course ready at any time to adjust this array of tools to secure the return of inflation to our objective without undue delay. 

as Draghi tries to undo yesterday’s error which sent the EUR soaring…  but is it too late? And note that the €680 billion in calculated liquidity injection is precisely enough to offset the roughly $800 billion in liquidity that the Fed’s 25 bps hike is expected to drain.

 

Full speech here

Average:
Michael Snyder…
a great review of all the global economic crisis indicators:
(courtesy Michael Snyder/EconomicCollapseBlog)

11 “Alarm Bells” That Show The Global Economic Crisis Is Getting Deeper

Submitted by Michael Snyder via The Economic Collapse blog,

Economic activity is slowing down all over the planet, and a whole host of signs are indicating that we are essentially exactly where we were just prior to the great stock market crash of 2008. Yesterday, I explained that the economies of Japan, Brazil, Canada and Russia are all in recession.  Today, I am mainly going to focus on the United States.  We are seeing so many things happen right now that we have not seen since 2008 and 2009.

In so many ways, it is almost as if we are watching an eerie replay of what happened the last time around, and yet most of the “experts” still appear to be oblivious to what is going on.  If you were to make up a checklist of all of the things that you would expect to see just before a major stock market crash, virtually all of them are happening right now.  The following are 11 critical indicators that are absolutely screaming that the global economic crisis is getting deeper…

#1 On Tuesday, the price of oil closed below 40 dollars a barrel.  Back in 2008, the price of oil crashed below 40 dollars a barrel just before the stock market collapsed, and now it has happened again.

 

#2 The price of copper has plunged all the way down to $2.04.  The last time it was this low was just before the stock market crash of 2008.

 

#3 The Business Roundtable’s forecast for business investment in 2016 has dropped to thelowest level that we have seen since the last recession.

 

#4 Corporate debt defaults have risen to the highest level that we have seen since the last recession.  This is a huge problem because corporate debt in the U.S. has approximately doubled since just before the last financial crisis.

 

#5 The Bloomberg U.S. economic surprise index is more negative right now than it was at any point during the last recession.

 

#6 Credit card data that was just released shows that holiday sales have gone negative for the first time since the last recession.

 

#7 As I mentioned yesterday, U.S. manufacturing is contracting at the fastest pace that we have seen since the last recession.

 

#8 The velocity of money in the United States has dropped to the lowest level ever recorded.  Not even during the depths of the last recession was it ever this low.

1-TMS-2, annual rate of growth

 

#9 In 2008, commodity prices crashed just before the stock market did, and late last month the Bloomberg Commodity Index hit a 16 year low.

 

#10 In the past, stocks have tended to crash about 12-18 months after a peak in corporate profit margins.  At this point, we are 15 months after the most recent peak.

 

#11 If you look back at 2008, you will see that junk bonds crashed horribly.

Why this is important is because junk bonds started crashing before stocks did, and right nowthey have dropped to the lowest point that they have been since the last financial crisis.

Bonus Alarm #12: The US Services economy is weakening in its usual lagged way to manufacturing. This is a problem as the narrative has been that Services will save the economy even as manufacturing collapses.

 

If just one or two of these indicators were flashing red, that would be bad enough.

The fact that all of them seem to be saying the exact same thing tells us that big trouble is ahead.

And I am not the only one saying this.  Just today, a Reuters article discussed the fact that Citigroup analysts are projecting that there is a 65 percent chance that the U.S. economy will plunge into recession in 2016…

The outlook for the global economy next year is darkening, with a U.S. recession and China becoming the first major emerging market to slash interest rates to zero both potential scenarios, according to Citi.

 

As the U.S. economy enters its seventh year of expansion following the 2008-09 crisis, the probability of recession will reach 65 percent, Citi’s rates strategists wrote in their 2016 outlook published late on Tuesday. A rapid flattening of the bond yield curve towards inversion would be an key warning sign.

Personally, I am convinced that we are already in a recession.  There is a lag in the official numbers, so often we don’t know that we are officially in one until it is well underway.  For example, we now know that a recession started in early 2008, but in the summer of 2008 Ben Bernanke and our top politicians were still insisting that there was not going to be a recession.  They were denying what was actually happening right in front of their eyes, and the same thing is happening now.

And of course if the government was actually using honest numbers, we would all be talking about the recession that never seems to end.  According to John Williams of shadowstats.com, honest numbers would show that the U.S. economy has continually been in recession since 2005.

But just like in 2008, the “experts” at the Federal Reserve are assuring all of us that everything is going to be just fine.  In fact, Janet Yellen is convinced that things are so rosy that she seems quite confident that the Fed will raise interest rates in December

Federal Reserve Chair Janet Yellen signaled Wednesday that the Fed is all but certain to raise interest rates this month for the first time in nearly a decade, saying that gains in the economy and labor market have met the central bank’s goals.

 

Her comments at the Economic Club of Washington amount to the strongest indication the Fed has provided so far that it will take action at a December 15-16 meeting.

This is the exact same kind of mistake that the Federal Reserve made back in the late 1930s.  They thought that the U.S. economy was finally recovering, and so interest rates were raised.  That turned out to be a tragic mistake.

 

But this time around, any mistake that the Fed makes will have global consequences.  The rising U.S. dollar is already crippling emerging markets all around the globe, and an interest rate hike will just push the U.S. dollar even higher.  For much more on this, please see my previous article entitled “The U.S. Dollar Has Already Caused A Global Recession And Now The Fed Is Going To Make It Worse“.

Many people are waiting for “the big crash”, but the truth is that almost everything has crashed already.

  • Oil has crashed.
  • Commodities have crashed.
  • Gold and silver have crashed.
  • Junk bonds have crashed.
  • Chinese stocks have crashed.
  • Dozens of other stock markets around the world have already crashed.

But the “big event” that many are waiting for is the crash of U.S. stocks.  And just like in 2008, it is inevitable that a U.S. stock crash will follow all of the other crashes that I just mentioned.

Sometimes I get criticized for issuing these kinds of alarms.  But just think of how many people could have been helped if they would have known that the financial crisis of 2008 was going to happen ahead of time.

The exact same patterns that we experienced back then are playing out once again right in front of our eyes, and the more people that we can warn in advance the better.

end

 

USA trade deficit widens by 3.4% up to $43.9 billion.  This is understandable with a stronger dollar.

 

(courtesy Crutsinger/AP)

US trade deficit up 3.4 percent in October to $43.9 billion

By MARTIN CRUTSINGER
AP Economics Writer

WASHINGTON (AP) – The U.S. trade deficit widened in October as exports of U.S. goods fell to the lowest level in more than four years, a reflection of the impact of a weak global economy and stronger dollar.

The Commerce Department says the trade deficit widened 3.4 percent in October to $43.9 billion, compared to a revised $42.5 billion deficit in September.

Exports of goods and services fell 1.4 percent to $184.1 billion while exports of just goods dropped an even bigger 2.4 percent to $123.8 billion, the lowest level since June 2011.

Imports of goods and services were also down in October, dropping 0.6 percent to $228 billion. The drop in imports reflected in part falling oil prices, which pushed petroleum imports down to the lowest level in nearly 15 years.

Copyright 2015 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

end

Let’s close out the week with this wrap up courtesy of Greg Hunter/USAWatchdog

(courtesy Greg Hunter/USAWatchdog)

Middle East War Coming, Economy Tanks Fed Hikes, Obama Care Implosion and Bailout

89By Greg Hunter’s USAWatchdog.com WNW 218 12.4.15

As terrible as the terror attack in San Bernardino, California, is it’s not really the big story. I know you have been seeing wall to wall coverage of this attack. I am sure some Democrats and the President would like this to be workplace violence, but let’s face it, it was a terror attack carried out by violent Islamic extremists.   I am equally sure the President and some Democrats would like to use this as a way to have anti-gun legislation. Both of these views are delusional and out of touch with most Americans. Look no further than Black Friday gun sales. They broke records, and that was before this awful attack. Not all Muslims are bad, but the population is so big globally that if just 10% were radicalized, it would be 160 or 170 million people. This is the new asymmetrical warfare, and it will increase because conflict in the Middle East is increasing.

This brings us to the big story, and that is the increasing tensions mounting in Syria, and military assets and boots on the ground are converging there. Tensions between NATO and Russia have been mounting since Turkey shot down a Russian fighter jet. Russia has been hitting ISIS oil facilities and cutting off their financing. Evidence shows Turkey has been buying the oil and financing ISIS. I said months ago that the Obama Administration was not serious about defeating ISIS because it was not cutting off its oil and bombing the wells it controls and uses to finance terror. Now we know why. The U.S. had to know who was buying the oil and, therefore, was complicit in financing the terror. Not only that, but Democrats and Republicans are both worried about what is going on. Rep. Dana Rohrabacher is wondering if Turkey should even be in NATO after shooting down that Russian jet and how it is apparently backing ISIS. Meanwhile, House Democrat Rep. Tulsi Gabbard has questioned the wisdom of putting U.S. jets in a position to counter Russian jets on the Turkey/Syrian border and said it could lead the U.S. into a nuclear war with Russia. Retired General Wesley Clark pointed out how sticky this whole Middle East mess really is when he said, “Let’s be very clear: ISIS is not just a terrorist organization; it is a Sunni terrorist organization. That means it blocks and targets Shi’a. And that means it’s serving the interests of Turkey and Saudi Arabia – even as it poses a threat to them.”

Back home, Fed Head Janet Yellen is signaling an interest rate hike is in the cards for this year. The headline reads “Fed Chair Ready to Raise Rates at Own Pace.” What does that mean? Apparently, the stock market and bond markets think it means something bad because both tanked this week. Gregory Mannarino of TradersChoice.net called the stock market top in May, and it looks like he’s been right ever since. I don’t think we are going to see the Santa Clause rally this year. Meanwhile, the economy continues to sink. The latest bad news comes from imploding durable goods and factory orders.

Obama Care is being confirmed as the disaster I told you it would be. This huge Democrat lie of public policy is imploding. The so-called healthcare co-ops are dropping like flies. Now, Obama Care needs a bailout, and it doesn’t look the Republican Congress is going to come up with billions of dollars to keep this turkey of a healthcare plan afloat. It there is not taxpayer bailout, healthcare providers will go broke or pullout altogether. Democrats should be ashamed for lying and now asking for tax money to bail out their fraud on the American public.

Join Greg Hunter as he talks about these stories and more in the Weekly News Wrap-Up.

end

See you on Monday.

Harvey

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