dec 8/Gold holds/silver whacked a bit/Amt of gold standing at the comex rises to 11.489 tonnes of gold but only 4.089 registered or for sale gold is held by bullion dealers to serve upon our patient longs/China’s exports collapse/China issues a red alert due to huge smog covering Beijing/Turkey now refuses to leave Iraq as they must protect their illegal oil smuggling/ Turkey to lay sanctions on Russia: closing of the Bosphorous?/Governor of the Bank of Canada warns that we are next for negative interest rates/Anglo American, 5th largest mining company in the world (base metals plus platinum plus a little gold) to layoff a massive 85,000 jobs worldwide/USA chain store sales plummet week over week/High yield junk bonds collapse in price (rise in yield) as somebody bit the dust/We are getting closer to the impeachment of Brazil’s Rouseff/

Gold:  $1076.30 down $.10   (comex closing time)

Silver $14.09 down 31 cents

In the access market 5:15 pm

Gold $1075.00

Silver:  $14.16

At the gold comex today,  we had an extremely poor delivery day, registering 120 notices for 12,000 ounces. And this is the biggest delivery month of the year for gold? Silver saw only 1 notice for 5,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 196.47 tonnes for a loss of 106 tonnes over that period.

In silver, the open interest rose by a smallish 512 contracts despite the fact that silver was down 19 cents with respect to Monday’s trading.  The total silver OI now rests at 162,910 contracts In ounces, the OI is still represented by .815 billion oz or 116% of annual global silver production (ex Russia ex China).

In silver we had 1 notice served upon for 5,000 oz.

In gold, the total comex gold OI rose by a large 5,288 contracts as the OI rose to 394,401 contracts despite the fact that gold was down by $8.10 with respect to Monday’s trading. Today the bankers provided the initial HFT and the specs longs continued their assault on the short side but this failed as the bankers continued their assault on the specs by continually buying.

We had no changes in  gold inventory at the GLD, / thus the inventory rests tonight at 634.63 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 no change in silver inventory at the 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 rise by 512 contracts up to 162,910 despite the fact that silver was down in price by 19 cents to with respect to Monday’s trading.   The total OI for gold rose by 5,288 contracts to 394,401 contracts despite the fact that gold was down by $8.10 with respect to yesterday’s trading.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)




Last night, 9:30 pm MONDAY night, TUESDAY morning Shanghai time.  Japan Nikkei closed down by 205.55  POINTS OR 1.04%, Shanghai finishes deeply in the negative /    Hang Sang falls.  Oil collapses into the 36 dollar column.  Also weakness in base metals stocks  (See Anglo American announcement).  Chinese exports tumble as demand from the west is extremely weak!
( zero hedge)

ii)  Also last night: two big executives from CITIC have been “disappeared”/the witch hunt intensifies.

It is amazing:  the executives knew that stocks were extremely overvalued but they are being punished for selling short.
( zero hedge)

iii)  China issues a red alert for smog:  The cost for a cleanup of the environment will be huge

( zero hedge)
i) We outline the hedge fund casualties caused by Draghi’s non announcement of more QE
(zero hedge)

i) The rhetoric is getting fierce by the minute.  Bilal Erdogan denies allegations but if you follow the iSIS oil trail it leads straight to Turkey and the Erdogans.

( zero hedge)

ii) the USA denies bombing Assad’s forces.  However the rhetoric against Russia continues unabated:

(courtesy zero hedge)
iii)  Turkey has now refused to withdraw troops form Iraq.  Iraq has gone to the UN security council which will do absolutely nothing to a NATO ally.  Turkey now threatens Russia with sanctions:  will it be the closing of the Bosphorus?:
(courtesy zero hedge)
i) Canada has been warned that they too can have negative interest rates
(zero hedge)
Now it is the turn of the VP Michel Temer who vented an angry letter to Rouseff.  That should hasten their impeachment:
(courtesy zero hedge)

i)Crude crashes into the 36 dollar handle and this should blow up many of our oil derivative players:

( zero hedge)

ii) The darling of Canada is Alberta and their oil production. The state of affairs inside Alberta is nothing short of a depression.  Now we see suicides in that province soar. Very sad indeed!

(courtesy zero hedge)

iii) and the above brings the Canadian stock exchange to its lowest levels in two years:

(courtesy zero hedge)
iv) It is possible for 20 dollar oil?:
( Euan Mearns/
v) As we have outlined on many occasions, as the price of oil drops, large oil producing countries are witnessing their currency collapse;
i)Anglo American, the 5th largest mining company in the world (mostly base metals) is laying off a whopping 85,000 workers
as they are facing huge deflationary problems exported to the world from China
(zero hedge)
ii) Mike Kosares on the flaws of Keynes economic theories
iii) Chris Powell of GATA writes about USA hegemony.  Basically hegemony is the issuance of paper fiat to receive real goods.
The USA may still raise rates in order to keep USA hegemony alive and well and the hell with the rest of the globe
(Chris Powell/GATA/Charles Hug Smith)
iv) James Turk explains why gold and silver are in backwardation.  We now have a two tiered system for gold/silver:
paper gold/silver vs physical.  The backwardation is getting deeper as investors with paper gold/silver fear that they may not receive their long paper upon which bankers have an obligation to deliver to longs.
(James Turk/Kingworldnews)
v) Ted Butler interview with Gold eagle
(Ted Butler)

vi) We reported last night on the huge withdrawal of 4.187 tonnes of gold from the GLD.  We also have been reporting on the lack of success India has in asking its citizens to convert their physical gold into paper gold obligations of India.  I pointed out to you that they would have zero chance of success(courtesy Julian Phillips/Lawrie on Gold/Sharp Pixley)

i) a)Chain store sales plummet week over week
(zero hedge)
b) Dave Kranzler comments on the poor chain store sales
(Dave Kranzler/IRD)
ii) Institutions are dumping stock
(zero hedge)
iii) a)The Dow heads southbound at the start of trading this morning!!
Two weeks ago, we witnessed high yielding bonds plummet, then last week it was the small caps who then joined the Dow transports heading south.    Then the Dow 30 stocks joined the party and today the S and P opened in the red for 2015 as energy crashed!!
( zero hedge)
b) Trannies are plummeting and this is a good bellwether as to the future direction of the Dow
(zero hedge)
iv) Morgan Stanley laying off 1200 top paid employees
(zero hedge)

v)Somebody big in the credit market must have crashed:

(courtesy zero hedge)

vi)  The ISM manufacturing has an uncanny track record of predicting growth/recession in the USA with a 4 month lead time.   You will recall that iSM mfg went below 50  (recession) in the last reporting month. suggests that we are 4 months away from a severe recession, however the Fed boys will probably raise rates next week:(courtesy

viii) Yesterday we brought you stories of some problems with the once darling on Wall Street, Kinder Morgan which is the largest USA pipeline operator.  Well today, they shocked their shareholders with a huge cut in their dividend from
51 cents down to 12.5 cents.  This is a stock owned by many seniors and held for its income:
the stock is plunging after hours>>>
(courtesy zero hedge)

Let us head over to the comex:

The total gold comex open interest rose to 394,401 for a gain of 5288 contracts despite the fact that gold was down by $8.10 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, which must be interpreted as a great sign, the OI for gold rose appreciably as somebody badly needed gold and yet there is very little registered or for sale gold.  We are now in the big December contract which saw it’s OI shockingly rise by 834 contracts from 2769 up to 3603.  We had 47 notices filed upon yesterday, so we gained 881 contracts or an additional 88,100 oz of gold that will stand for delivery in this active delivery month of December. The next contract month of January saw it’s OI rise by 36 contracts up to 622.  The next big active delivery month is February and here the OI rose by 3593 contracts up to 282,716. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 135,181 which is poor. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was also poor at 117,207 contracts.

Today we had 120 notices filed for 12,000 oz.
And now for the wild silver comex results. Silver OI rose by 512 contracts from 162,398 up to 162,910 despite the fact that the price of silver down 19 cents with respect to yesterday’s trading.  The big December contract month saw its OI fall by 21 contracts down to 412.  We had 6 contracts served upon yesterday so we lost 15 contracts or 75,000 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 404 contracts down to 943.  The next big active contract month is March and here the OI rose by 268 contracts up to 129,156. The volume on the comex today (just comex) came in at 40,861 , which is good. The confirmed volume yesterday (comex + globex) was very good at 45,055.
We had 1 notice filed for 5,000 oz.

December contract month:

INITIAL standings for DECEMBER

Dec 8/2015

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 131,975.85 oz (Scotia)
Deposits to the Dealer Inventory in oz  nil
Deposits to the Customer Inventory, in oz   nil


No of oz served (contracts) today 120 contracts

12,000 oz

No of oz to be served (notices) 3483 contracts

348,300 oz)

Total monthly oz gold served (contracts) so far this month 211 contracts(21,100 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 153,265.6 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 1 dandy customer withdrawal:
i) Out of Scotia: 131,975.85 oz
total customer withdrawal 131,975.85 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 120 contracts of which 114 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 Dec contract month, we take the total number of notices filed so far for the month (211) x 100 oz  or 21,100 oz , to which we  add the difference between the open interest for the front month of December (3603 contracts) minus the number of notices served upon today (120) 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 (211) x 100 oz  or ounces + {OI for the front month 3603) minus the number of  notices served upon today (120) x 100 oz which equals 369,400 oz standing in this active delivery month of December (11.489 TONNES)
we gained 881 contracts or an additional 88,100 oz that will stand for delivery.  Somebody was in great need of physical gold tonight.
We thus have 11.489 tonnes of gold standing and only 4.0890 tonnes of registered gold for sale, waiting to serve upon those standing
Total dealer inventory 131,462.711 oz or 4.0890 tonnes
Total gold inventory (dealer and customer) =6,316,783.284  or 196.47 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 106 tonnes over that period.
JPmorgan has only 10.5 tonnes of gold total (both dealer and customer)
Today we lost a massive 4 tonnes of customer gold from comex gold official vaults.
And now for silver


Dec 8/2015:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  56,692.46 oz oz


Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory nil
No of oz served today (contracts) 1 contract

5,000 oz

No of oz to be served (notices) 411 contracts 

(2,055,000 oz)

Total monthly oz silver served (contracts) 3514 contracts (17,570,000 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 1,709,004.2 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 CNT: 26,159.06 oz
ii) Out of Scotia:  30,533.400 oz

total withdrawals from customer account: 56,692.46   oz

we had 2  adjustments:
i)Out of Brinks
we had 9,861.200  oz adjusted out of the dealer and this landed into the customer account of Brinks
ii) Out of CNT:
605,206,140 oz was adjusted out of the dealer and this landed into the customer account of CNT
The total number of notices filed today for the December contract month is represented by 1 contracts for 5,000 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 (3514) x 5,000 oz  = 17,570,000 oz to which we add the difference between the open interest for the front month of December (412) and the number of notices served upon today (1) x 5000 oz equals the number of ounces standing
Thus the initial standings for silver for the December. contract month:
3514 (notices served so far)x 5000 oz +(412) { OI for front month of December ) -number of notices served upon today (1) x 5000 oz or 19,625,000  of silver standing for the December. contract month.
we lost 17 contracts or 75,000 additional oz that will not stand for delivery in this active month of December..
Total number of dealer silver:  42.271 million oz
Total number of dealer and customer silver:  down to 158.434 million oz
we again we more silver leave the dealer account and the customer account.
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 8/ no change in gold inventory at the GLD/inventory rests at 634.63 tonnes

Dec 7/another huge withdrawal of 4.23 tonnes of gold/inventory rests at 634.63 tonnes

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 8.  inventory 634.63 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 8.2015:no change in silver inventory at the SLV/rests tonight at 321.507 million oz/
Dec 7./no change in silver inventory at the SLV/rests tonight at 321.507 million oz/
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 8/2015:  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.
And now for our premiums to NAV for the funds I follow:
Sprott and Central Fund of Canada.(both of these funds have 100% physical metal behind them and unencumbered and I can vouch for that)
1. Central Fund of Canada: traded at Negative 11.0 percent to NAV usa funds and Negative 11.1% to NAV for Cdn funds!!!!!!!
Percentage of fund in gold 62.3%
Percentage of fund in silver:37.6%
cash .1%( Dec 8/2015).
2. Sprott silver fund (PSLV): Premium to NAV falls to -0.03%!!!! NAV (Dec 8/2015) (silver must be in short supply)
3. Sprott gold fund (PHYS): premium to NAV falls to- 0.73% to NAV Dec 8/2015)
Note: Sprott silver trust back  into negative territory at -.03% /Sprott physical gold trust is back into negative territory at -0.73%Central fund of Canada’s is still in jail.

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.


John Wilson
CEO, Sprott Asset Management



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:

Gold Buying Surges At U.S. Mint In November – China Buys 21 Tonnes In November Alone

Editors Note: Despite gold at near 6 year lows, global demand for physical bullion remains very high. This is clearly seen in the recent demand data from the U.S. Mint and other mints and demand data from GFMS and the World Gold Council which shows very robust demand from Germany, India and of course, China.

GoldCore: Total Sales of US Mint Gold Eagles and Buffalo Coins

There is also the very high official demand from central banks and, in particular, the Russian central bank and the People’s Bank of China (PBOC). Today came news that China’s gold reserves rose by another 21 tonnes in November, the biggest bout of gold buying since China began disclosing monthly data on China’s gold reserves in June – see Gold News.

Last week data showed that sales of American Eagle gold coins at the U.S. Mint surged in November, with gold demand nearly tripling month-over-month as bullion prices fell to multi-year lows.

Despite these very high levels of demand, gold prices fell sharply in November – from $1,141/oz to $1,070/oz or 6.6%.

Gold prices continue to be determined by traders and speculators in the futures market as evidenced by the Commitment of Traders (COT) data, showing that hedge funds now have record short positions. This typically occurs close to market bottoms and – along with the supply demand fundamentals – would suggest gold is close to bottoming.

Futures participants are eagerly awaiting the Fed’s interest rate decision next Wednesday, December 16th. Should the much heralded and anticipated 25 basis point rise materialise as is expected, then we expect gold could show further weakness.

Weakness into year end seems quite possible given the poor technical position, poor sentiment in western markets and momentum which can be a powerful thing. $1,000/oz gold seems increasingly likely and it appears to be gravitating to this big round number.

Chinese New Year looms and demand from China should provide support at these levels and should spur gains in January.

Dr Constantin Gurdgiev covered the surge in demand for gold coins from the U.S. Mint on his blog:

Following October fall-off, sales of U.S. Mint gold coins rose strongly in November to 135,000 oz by weight (+86.2% y/y) and 237,500 units (+95.5% y/y).

These figures include sales of both Eagles and Buffalo coins. Average weight of coin sold also rose strongly to 0.5684 oz compared to 0.4709 oz in October and close to 0.5967 oz/coin in November 2014.

As noted in my note covering October sales, October decline was a correction reflective of volatile demand and also significant uplift in sales in previous months.

As chart above shows, sales by weight are now well above period average and above peak period average. In 11 months of 2014, US Mint sold 679,500 oz of gold coins; over the same period of 2015 sales totalled 1,020,000 oz.

November 2015 also marked 20th consecutive month of gold sales/price correlations (12mo running) being negative, suggesting strong and entrenched demand from buyers pursuing long hold strategy and taking advantage of improving cost of holding gold.

Continue reading Dr Constantin Gurdgiev blog on U.S. Mint gold coin demand

Today’s Gold Prices: USD 1071.75, EUR 988.43 and GBP 714.79 per ounce.
Yesterday’s Gold Prices: USD 1082.70, EUR 1001.80 and GBP 718.26 per ounce.

GoldCore: Gold in USD - 10 Years

Gold in USD – 10 Years

Gold fell back yesterday after Friday’s gain, closing down $12.30 to $1072.90. Silver also fell by $0.27 to close at $14.28. Platinum lost $29 to closes at $849.

Essential Guide to Storing Gold Offshore

Download Essential Guide To Storing Gold Offshore

Mark O’Byrne
Anglo American announces massive layoffs of 85,000 poor souls and suspends their dividend.  They are also selling 60% of their entire portfolio

World’s Fifth Largest Miner Announces Massive Layoffs, Suspends Dividend, Sells 60% Of Portfolio

If you’re a miner, this is “not the time for courage” (to borrow a classic Gartman-ism).

The global slump in commodities shows no sign of abating and a stubborn OPEC isn’t doing anything to help matters. Meanwhile, China’s economy continues to decelerate and while last night’s trade data showed demand “improving”, it’s important to put the import “beat” in context – imports still fell by nearly 9% Y/Y last month and while iron ore imports were up M/M in November, average prices for the first eleven months of 2015 are still down more than 39%. As MNI notes, “customs data showed that after seasonal adjustment, November imports were still 3.6% lower than a month ago.”

All of this has become par for the course and indeed, it now appears we may have entered a new era where sluggish global growth and trade has become the norm.

Against this backdrop, commodities producers (both at the state and company level) are struggling to survive. The world is mired in a global deflationary supply glut, and without a commensurate pickup in aggregate demand, it looks like the oversupply and overcapacity problem may be here to stay.

In the latest example of just how bad things have gotten, Anglo American – the world’s fifth largest miner – just kitchen sink-ed it, announcing a sweeping restructuring, a massive round of layoffs, and a dividend cut. The company will reduce its assets by some 60% while headcount will be cut by a whopping 85,000 or, nearly two thirds. 

“We think the best answer for our shareholders is to go down to smaller, high quality, more resilient portfolio where we think we can deploy capital more effectively,” Anglo American Chief Executive Mark Cutifani said Tuesday.

Maybe, but shareholders weren’t happy to see their payout cut for H2 and for the entirety of next year. The stock fell sharply, dropping nearly than 10% at one point to a record low. “Anglo fell 7.9 percent to 339.95 pence by 11:12 a.m. in London, giving the company a market value of $6.5 billion. The shares earlier touched the lowest since being listed in 1999. The last time Anglo cut its dividend, during the depths of the global financial crisis in 2009, the shares plunged 17 percent in one day,Bloomberg reminds us.

“No one likes to suspend a dividend,” Cutifani said on a call with reporters. “We think it’s the right thing to do to make sure the company remains in good shape.”

As of now, the company will dump its niobium and phosphates business and will increased its divestment target from $3bn to $4bn but CEO Mark Cutifani says there could be more to come. “We are open to possibilities but in this market there will also be some closures. Any asset that is cash-negative will not remain in the portfolio it is a strategic call and we are not going to look back.”

Writedowns due to market conditions and business closures are set to total between $3.7 billion and $4.7 billion while capex for 2016 will now be $700 million lower than the $3.9 billion forecast.

As FT notes, “the decision confirms an industry pullback from investment. Rio Tinto also said on Tuesday that it would cut capex in 2016 from $6bn to about $5bn.”


“After the restructuring, Anglo will be a much smaller company,” Bloomberg goes on to note, adding that “it will control 20 to 25 assets split across three divisions of its De Beers diamond unit, industrial metals and bulk commodities. Anglo currently has about 55 assets.”

Here’s a bullet point summary of the portfolio restructuring from Citi who has Anglo at Neutral/High Risk:

  • The company will consolidate all business under three head from current six: namely – De Beers, Industrial Metals and Bulk commodities.
  • Mothballing cash negative Snap lake operations and closure of Thabazimbi mine as it reached end of life.
  • Reconfiguration of the Sishen pit, the company will target 2016 cost of $30/t FOB with reduced production by 10Mt from 36Mt to ~26Mt for Sishen (Citi est. at 35Mt)
  • Anglo’s London office co-locating with De Beers in FY’17
  • The company expects further cost and productivity gains of $1.1bn in FY’16 and $1bn in 2017 over and above $1.6bn delivered between 2013 and 15.

Meanwhile, WSJ notes that “the company’s majority owned unit, South African miner Anglo American Platinum Ltd., said that its 2015 profit would be at least 20% lower than it was last year.”

“[The company] just released a business update, announcing (i) headcount cuts of 2,300 people, (ii) R14bn of impairments, (iii) further capex cuts, and (iv) an update on asset sales,” Citi recounts, before saying that “although all these are necessary, they do not solve the core problem of oversupply in the industry, nor ensure AMS’s long-term profitability.”

Right. And we can probably say the same thing for the parent, because as we’ve said on too many occasions to count of late, the world’s engine of global growth and trade (China) is at damn near stall speed and the outlook for commodities is decidedly grim.

A must read..
(courtesy Chris Powell/GATA)

Gold is the ultimate weapon against the ‘imperial project’


1:40p ET Monday, December 7, 2015

Dear Friend of GATA and Gold:

Somebody else besides GATA not only understands but is writing about what he calls the “imperial project” behind the U.S. dollar.

It’s Charles Hugh Smith, who discusses the markets at his Internet site, Of Two Minds. In his December 4 commentary, “Why the Fed Has to Raise Rates” —

Smith writes:

“Those who argue the Fed can’t possibly raise rates in a weakening domestic economy have forgotten the one absolutely critical mission of the Fed in the Imperial Project is maintaining U.S. dollar hegemony.

“No nation ever achieved global hegemony by weakening its currency. Hegemony requires a strong currency, for the ultimate arbitrage is trading fiat currency that has been created out of thin air for real commodities and goods.

“Generating currency out of thin air and trading it for tangible goods is the definition of hegemony. Is there is any greater magic power than that?

“In essence, the Fed must raise rates to strengthen the U.S. dollar and keep commodities such as oil cheap for American consumers. The most direct way to keep commodities cheap is to strengthen one’s currency, which makes commodities extracted in other nations cheaper by raising the purchasing power of the domestic economy on the global stage.”

While Smith doesn’t quite get around to mentioning gold and the Western central bank gold price suppression scheme, the threat posed to dollar hegemony by gold is obvious. For gold is potentially what it long used to be, an independent world reserve currency. Indeed, as GATA often has asserted and as declassified U.S. government documents show, maintaining dollar hegemony is the primary objective of the gold price suppression scheme:

Controlling the world through currency market rigging is actually an old story. While the world imagines Nazi Germany’s looting of occupied Europe during World War II as a matter of soldiers with bayonets on their rifles breaking into banks, shops, and museums and carrying away the contents, the primary Nazi method of expropriation was actually currency market rigging.

This rigging was documented by a study by the U.S. War Department in November 1943 —

— and it is described at length by the German journalist, historian, and political scientist Gotz Aly in his 2005 history “Hitler’s Beneficiaries: Plunder, Racial War, and the Nazi Welfare State”:

Aly notes that expropriation through currency market rigging drafted every citizen of an occupied country almost unwittingly into the service of the occupier and made it more difficult for people to understand how they were being looted.

That’s why what is being called the “currency war” is an understatement. It is, as Smith writes, the “imperial project” — and free-trading gold is the ultimate weapon against it.

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




Mike Kosares: Keynes on the menace of printing money


2:18p ET Monday, December 7, 2015

Dear Friend of GATA and Gold:

USAGold’s Mike Kosares notes today that the great economist of the last century, John Maynard Keynes, was no fool about currency debasement. Rather, Kosares writes, Keynes warned against inflation, understood its consequences, and today might be buying gold aggressively. Kosares’ commentary is headlined “Keynes on the Menace of Printing Money” and it’s posted at USAGold here:

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




Another must read, as James Turk explains why silver and gold are in backwardation.  We basically have a two tiered market for gold and silver:  the physical one and the paper one.  Those investors that have paper gold/silver are nervous that there is a high probability of a counterparty risk as they may not receive the gold/silver that is obligated to be delivered by that counterparty.

(James Turk/Kingworldnews)



GoldMoney’s Turk discusses the two-tiered markets for gold and silver


7:55p ET Monday, December 7, 2015

Dear Friend of GATA and Gold:

GoldMoney founder and GATA consultant James Turk today discusses with King World News what he calls the “two-tiered” market in gold and silver, one tier for real metal, the other for paper claims to metal, the latter market priced by government intervention. Turk thinks he sees signs that the metals are turning back upward. An excerpt from the interview is posted at the KWN blog here:…

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



Gold-Eagle interviews silver market rigging whistleblower Ted Butler


11:20a ET Tuesday, December 8, 2015

Dear Friend of GATA and Gold:

Silver market rigging whistleblower Ted Butler is interviewed today by Gold-Eagle, discussing his confidence in reports on the positioning of gold and silver futures traders, the failure of the U.S. Commodity Futures Trading Commission to act against market manipulation, and the repeated fleecing of futures speculators by the big commercial traders. The interview is headlined “Straight Talk: An Interview with Ted Butler” and it’s posted at Gold-Eagle here:

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



We reported last night on the huge withdrawal of 4.187 tonnes of gold from the GLD.  We also have been reporting on the lack of success India has in asking its citizens to convert their physical gold into paper gold obligations of India.  I pointed out to you that they would have zero chance of success

(courtesy Julian Phillips/Lawrie on Gold/Sharp Pixley)


GLD sheds another 4 tonnes gold, but prices stabilizing as dollar slips

The New York gold price closed at $1,072.90 down from $1,085.20 on Monday, a fall of $12.30.  In Asia prices drifted higher to $1,073.70 as the dollar strengthened slightly to 98.58 up from 98.42 on the dollar Index. The euro is at $1.0856 stronger than yesterday’s $1.0818 against the dollar. The London a.m. LBMA gold price was set at $1,071.75 down from $1,082.70 on Monday’s.  In the euro the fixing was €986.79 down from Monday’s $1,000.65. Ahead of New York’s opening, the gold price was trading at $1,071.85 and in the euro at €986.79.  The price recovered after NY opening back to $1,075 as the dollar index slipped a little.

The silver price in New York closed at $14.28 down 27 cents. Ahead of New York’s opening the silver price stood at $14.23.


The short covering that drove gold and silver prices higher last week appears to be slowing down, leaving those prices vacillating in the $1,070 area. The fall was assisted by further sales from the SPDR gold ETF which now seem to be settling down to see the gold and silver prices consolidating. This may well persist throughout the week.

There were sales of 4.167 tonnes of gold from the SPDR gold ETF and nothing from the Gold Trust, on Monday. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 157.07 in the Gold Trust. The 4.167 tonne sale from the SPDR gold ETF was large and certainly contributed to the fall in the gold price. If gold does consolidate, we expect to see such sales dry up. But we don’t expect any large moves in gold and silver this week until next week after the Fed has stated its case.

Over in India the government’s weak attempts to monetize gold and prevent smuggling are continuing to fail, as expected. Government and bureaucratic corruption is so endemic there, that the Indian investor has lost trust in the government and banking system. This leaves the gold held at temples at a massive total of over 2,000 tonnes. While the temples on the surface are examining the schemes, they are not yet inclined to go along with them. We doubt that they will, willingly.

The problem of distrust in the Indian financial system translates into a gold market that hides smuggled gold and integrates it into the 2 million strong, gold markets. This will continue until duties are brought down to near to zero, when the advantages that come to smugglers are eliminated. We cannot see any schemes by government that requires the disclosure of personal gold holdings to the government, via the banks, succeeding. But the day will come when government reaches into the temples to ‘acquire’ that gold.

The silver price remains strong over $14.00 despite the current setback and should hold up over the week.

Julian D.W. Phillips for the Gold & Silver Forecasters

GLD sheds another 4 tonnes gold, but prices stabilizing as dollar slips

The New York gold price closed at $1,072.90 down from $1,085.20 on Monday, a fall of $12.30.  In Asia prices drifted higher to $1,073.70 as the dollar strengthened slightly to 98.58 up from 98.42 on the dollar Index. The euro is at $1.0856 stronger than yesterday’s $1.0818 against the dollar. The London a.m. LBMA gold price was set at $1,071.75 down from $1,082.70 on Monday’s.  In the euro the fixing was €986.79 down from Monday’s $1,000.65. Ahead of New York’s opening, the gold price was trading at $1,071.85 and in the euro at €986.79.  The price recovered after NY opening back to $1,075 as the dollar index slipped a little.

The silver price in New York closed at $14.28 down 27 cents. Ahead of New York’s opening the silver price stood at $14.23.


The short covering that drove gold and silver prices higher last week appears to be slowing down, leaving those prices vacillating in the $1,070 area. The fall was assisted by further sales from the SPDR gold ETF which now seem to be settling down to see the gold and silver prices consolidating. This may well persist throughout the week.

There were sales of 4.167 tonnes of gold from the SPDR gold ETF and nothing from the Gold Trust, on Monday. The holdings of the two gold ETFs, the SPDR gold ETF and the Gold Trust remain at 634.63 tonnes in the SPDR gold ETF and at 157.07 in the Gold Trust. The 4.167 tonne sale from the SPDR gold ETF was large and certainly contributed to the fall in the gold price. If gold does consolidate, we expect to see such sales dry up. But we don’t expect any large moves in gold and silver this week until next week after the Fed has stated its case.

Over in India the government’s weak attempts to monetize gold and prevent smuggling are continuing to fail, as expected. Government and bureaucratic corruption is so endemic there, that the Indian investor has lost trust in the government and banking system. This leaves the gold held at temples at a massive total of over 2,000 tonnes. While the temples on the surface are examining the schemes, they are not yet inclined to go along with them. We doubt that they will, willingly.

The problem of distrust in the Indian financial system translates into a gold market that hides smuggled gold and integrates it into the 2 million strong, gold markets. This will continue until duties are brought down to near to zero, when the advantages that come to smugglers are eliminated. We cannot see any schemes by government that requires the disclosure of personal gold holdings to the government, via the banks, succeeding. But the day will come when government reaches into the temples to ‘acquire’ that gold.

The silver price remains strong over $14.00 despite the current setback and should hold up over the week.

Julian D.W. Phillips for the Gold & Silver Forecasters

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

1 Chinese yuan vs USA dollar/yuan falls in value , this  time to  6.4225/ Shanghai bourse: in the red , hang sang: red

2 Nikkei closed down 205.55 or 1.04%

3. Europe stocks all in the red /USA dollar index down to 98.57/Euro up to 1.0871

3b Japan 10 year bond yield: falls to .322%   !!!!(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: 37.43  and Brent:   40.79

3f Gold down  /Yen up

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund falls to  .588%. German bunds in negative yields from 5 years out

 Greece  sees its 2 year rate fall to 8.61%/:  still expect continual bank runs on Greek banks 

3j Greek 10 year bond yield rises to  : 8.76%  (yield curve now flat)

3k Gold at $1069.40/silver $14.18 (7:45 am est)

3l USA vs Russian rouble; (Russian rouble down 32/100 in  roubles/dollar) 69.76

3m oil into the 37 dollar handle for WTI and 40 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 0.9943 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0814 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 falls to  + .588%/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 2.21% early this morning. Thirty year rate at 3% at 2.96% /

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

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

(courtesy zero hedge)

China Chokes As Beijing Issues “Red Pollution Alert” For First Time Ever

Just a week after Beijing’s major literally had his head saved, thanks to a cold front which swept away some of the worst pollution ever, the city has raised the alarm once again.. but this time to a record level. For the first time ever, the municipal government has issued a so-called red pollution alert – imposed car bans and suspending schools – after acrid-smelling haze returned to the Chinese capital.


Beijing mayor, Wang Anshun, vowed last year, as JapanTimes reports, that if pollution wasn’t brought under control by 2017, he would cut off his own head and present it to the country’s leadership.

Time to sharpen up that ax again…


The “airpocalypse” of smog swirling over Chinese cities has reached its most dangerous levels yet. Gizmodo explains…

And here are some stills…


Now you see it…


Now you don’t…

As Bloomberg reports,

Local authorities upgraded the air pollution alert to red from orange, effective from 7 a.m. Dec. 8 to noon Dec. 10, according to a statement on Beijing Municipal Environmental Protection Bureau’s official Weibo Monday.


Some industrial companies must stop or limit production, outdoor construction work will be banned and primary schools and kindergartens are advised to cancel classes, the statement said. Even healthy people should try to avoid outdoor activity and choose public transportation.


“The red alert shows the local government has stepped up efforts to protect citizens from pollution,” said Dong Liansai, climate and energy campaigner at Greenpeace East Asia. “It’s probably because of pressure from the central government.”


Clear skies aren’t expected again until after the smog peaks Wednesday,according to the China National Environment Monitoring Center.


Monday’s bad air, coupled with five days of hazardous pollution on Nov. 27-Dec. 1,raised fresh concern about the government’s ability to tackle air quality despite repeated statements from leaders that cleaning up the environment in the country is a top priority. Last week, the concentration of fine particulates that pose the greatest risk to human health rose to 666, more than 25 times World Health Organization-recommended levels.

But who was to blame?

The latest round of bad air was the result of “factory discharges and unfavorable weather conditions,” the state-run China Daily reported, citing National Meteorological Center Senior Engineer Xue Jianjun. China will strengthen inspections of polluting factories, Environmental Protection Minister Chen Jining said, according to China Daily.


China urged local governments to start emergency measures to cope with the pollution, according to a statement on the Ministry of Environmental Protection on Sunday. Emissions from automobiles are the main contributor to Beijing’s smog, the ministry said on Dec. 1.

Some foreign firms let staff work from home…

Today appears no better either as at 7am, the air quialityindex is already at extreme highs…

And finally, as we have expressed numerous times, SCMP’s George Chen raises a very valid question…


Because who can blame them for weak economic performance when they are “saving the world… from its deadliest threat.



These Are The Biggest Hedge Fund Casualties From The ECB’s “Shocking” Disappointment

When last Thursday morning the ECB, widely expected to unleash an epic bazooka, instead revealed the tiniest of water pistols, it did not only impair its own credibility and “forward guidance”, it sent a shockwave through the markets by not only slamming European equity markets, but by send the Euro currency soaring by 3% or the most since 2009. To be sure, Mario Draghi did try to engage in some unprecedented market jawboning, when he admitted he was trying to talk markets up (“Not really… well of course“) but by then it was too late and the damage had been done.

How much damage?

Considering that virtually every macro hedge fund had fallen to Draghi’s hypnotic spell that the EUR was going lower, further abetted by Goldman’s confident call that the EURUSD would see a 300 pip move lower on Thursday, it is safe to say that everyone was on the same side of the boat.

CFTC Commitment of Traders data confirm this, showing that bets by hedge funds on the euro falling outnumbered bets on the euro rising by 4.7 to 1 as of Nov. 24. Which explains the violent, almost unprecedented market response to the ECB’s disappointing announcement.

“Everyone and their mother were short the euro,” one London-based hedge-fund investor told the WSJ.

And, as the WSJ adds betting on a weaker euro and a stronger dollar has been one of the most popular positions for macro hedge funds, if only until Thursday when things… changed.

Hedge-fund investors say the lion’s share of major macro funds had bet against the euro ahead of Thursday’s ECB meeting, when President Mario Draghi underwhelmed markets with news of a cut in the deposit rate to minus 0.3% and a six-month extension of its bond-buying program.


“I think it’s been painful for a lot of people,” said Michele Gesualdi, chief investment officer of Kairos Partners in London, which oversees €8 billion ($8.7 billion) in assets and invests in hedge funds. “Pretty much everyone was short the euro. The view was very clear for everyone.”

But while traders know that everyonesuffered massive losses, what they would especially like to know is “who specificallydid, just so their potentially forced liquidation trades can be frontrun. Here are some answers courtesy of the Journal:

Man Group, which runs $76.8 billion in assets, said on its website that its $4.4 billion AHL Diversified fund lost 5.1% on Thursday.


Among other funds to have been running bets, to a greater or lesser extent, against the euro were Brevan Howard Asset Management, which oversees about $25 billion in assets;Tudor Investment Corp.; Moore Capital Management; and Caxton Associates, said investors. It isn’t clear what the funds’ positions were at the time of the announcement.


Tudor lost about 1% on Thursday, an unusually steep loss, in part because of the euro positioning, a person familiar with the matter said. Brevan also fell a relatively large amount, said a separate person with knowledge of the fund’s performance.

If it was only the FX loss, the damage would have been manageable, however since “hedge” funds always do precisely the opposite of what their name suggests, and instead of actually hedging their exposure, they doubled down by also being long European stocks – a trade directionally equivalent to the short EUR position:

Many funds have also been positioned for rising European stock prices, a similar position to the bet on a weaker euro, as a way of profiting from what they thought would be greater ECB stimulus. Such positioning on stocks may have proved even more painful than currency bets, said Sam Diedrich, who manages a portfolio of investments in hedge funds at California-based Paamco, which runs $9 billion in assets. “This will be a painful surprise for a lot of hedge funds,” he said.

Here are the biggest culprits:

Among funds to report early numbers to investors was Winton Capital Management Ltd., a computer-driven manager that runs more than $30 billion in assets. Its flagship fund, which bets on market trends, fell 3.3% on Thursday, said one hedge-fund investor who had seen the performance number. Winton declined to comment.


Aspect Capital, which runs $5.1 billion in assets, saw its flagship computer-driven fund fall 4.5% on Thursday, according to an investor update reviewed by The Wall Street Journal.

Finally, please shed a tear for the robots, who were slammed the hardest in their attempts to extrapolate the future based on recency-bias and momentum:

Computer-driven funds, which latch on to trends, may have been hit even harder than funds run by humans, investors said. Broker Newedge’s Trend Indicator, a model portfolio that simulates the bets that these computer-driven funds may place, was positioned for the euro to fall as of Wednesday, while it has also been showing bets on rising German bond prices and rising stock prices. German bonds and stocks both fell sharply Thursday.

And so once again the “hedge” fund industry gets slammed, having put all of its eggs in a central banker’s basket, assuring even fewer investors who are willing to pay 2 and 20 next year just to underperfom the market, but nobody more so than macro funds. “The losses threaten to derail a recent recovery in macro funds, which have struggled in recent years as ultralow interest rates have made fixed-income trades hard to profit from and as central banks’ moves have often proved to be hard to anticipate.”

Finally, since most funds haven’t yet reported Thursday’s performance to investors, expect many more unpleasant surprises, perhaps coupled with yet quiet or not so quiet liquidation in a world in which even a 3% (levered) daily loss can mean the difference between life and death for even some of the most respected investors, all of whom have become an anacrhonism in a world where central bankers have been chief risk officers of the market since 2009.


The rhetoric is getting fierce by the minute.  Bilal Erdogan denies allegations but if you follow the iSIS oil trail it leads straight to Turkey and the Erdogans.
(courtesy zero hedge)

Bilal Erdogan Denies Allegations He Is Funding ISIS: Here’s The Problem

It was just three weeks ago that we posed “the most important question about ISIS that no one is asking.” Namely, we wanted to know who the middlemen are that assist Islamic State in smuggling some 45,000 barrels of stolen crude each and every day.

To be sure, that’s not a lot in the grand scheme of things, but it’s not exactly trivial either especially considering this is a non-state actor (well, Baghdadi would say his “caliphate” is most certainly a “state” actor, but you get the idea). We suggested that the answer may well lie with the the Glencores, the Vitols, the Trafiguras, the Nobels, the Mercurias of the world and indeed, when we look at one of the likely trafficking routes from Iraq and through Turkey, it seems possible that if ISIS is taking advantage of the same system that the KRG uses to get its crude to Ceyhan, these trading houses or at least their former employees may well be involved. After all, sources have said Trafigura and Vitol deal in Kurdish oil and when Kurdistan went looking for an advisor to assist in the effort to circumvent Baghdad, the KRG chose Murtaza Lakhani to help them find ships. Lakhani used to work for Glencore in Iraq in the 2000s.

Well when it comes to ships, Turkish President Recep Tayyip Erdogan’s son Bilal has a fleet via his BMZ Group. Here they are:

Mecid Aslanov

Begim Aslanova

Poet Qabil

Armada Breeze

Shovket Alekperova

Amusingly, they’re all Malta-flagged which seems rather convenient given what we know about the offshore, ship-to-ship transfer ruse conducted off the Malta coast by vessels seeking to prevent Baghdad from tracking illegal Kurdish oil shipments.

In short, we already know Erdogan is moving illicit crude from the KRG (with whom Ankara is friendly by the way, despite the fact that they are Kurds) via a son-in-law and in large quantities. What’s to say he isn’t moving ISIS crude via the same networks through his son Bilal? Or perhaps through his other son Burak who Today’s Zaman reminds us “also owns a fleet of ships [and] was featured in a report by the Sözcü daily in 2014 [when his] vessel Safran 1 was anchored in Israel’s port of Ashdod” (which Al-Araby al-Jadeed says is often the destination for ISIS crude shipped from Ceyhan).

(Bilal as Robin Hood)

Just days after we completed a four-part series (here, here, here, and here) outlining everything mentioned above in exhaustive detail, the Russian MoD delivered a devastatingly convincing presentationshowing photos of oil trucks, videos of airstrikes and maps detailing the trafficking of stolen oil. Moscow has been pounding the table ever since and The Kremlin has explicitly stated that Erdogan and his family are behind the trade.

“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-law was appointed Minister of Energy? What a brilliant family business!,”  Deputy Minister of Defence Anatoly Antonov said, in opening remarks before the press event. Then, late last week, CHP lawmaker Eren Erdem said 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, referring to Erdogan’s son-in-law.

(Berat Albayrak)

Erdogan is of course furious with the allegations, calling them “immoral” and “unacceptable,” and now,Bilal has joined his father in denying the family’s role in the smuggling of ISIS crude. 

“We build offices in Istanbul … We do not do business in the Mediterranean, in Syria or Iraq,” Bilal told Corriere della Sera. “ISIS is an enemy of my country. ISIS is a disgrace. It puts my religion in a bad light. They don’t represent Islam and I do not consider them to be Muslims.”

We assume Baghdadi will understand that those comments were made under duress.

Bilal also said he had no operational shipping activities, and that his company has a contract to build “river tankers”, but that it did not operate the ships itself. As Reuters notes, and as we’ve shown,“Bilal has shipping and maritime assets and controls several oil tankers through his company and partnerships in other firms.” The idea that he owns all of the tankers shown above and yet somehow has “no operational shipping activities” seems absurd.

Furthermore, Bilal doesn’t think his brother is a terrorist and resents the implication.

“He has a cargo ship, but it cannot be used as a tanker,” he said.

Ok, but someone is buying the oil, and if it’s not Bilal and the Turks, then who is it? Bilal has an answer:“If you follow ISIS oil, you will find Assad,” he contends.

Note that’s the exact same line the US is trying to use, and as we said two weeks ago, it’s not clear why Assad would buy oil from a group that uses the cash at its disposal to wage war against Damascus, especially when one considers that Assad’s closest allies (Russia and Iran) are major oil producers. We went on to qualify that by noting that between all the shady middlemen and double dealing, there’s really no telling.

Of course the main problem with Bilal’s statement is that when “you follow ISIS oil,” you do not find Assad, you find Turkey. And on that note we’ll simply close with the following video from the Russian MoD:

the USA denies bombing Assad’s forces.  However the rhetoric against Russia continues unabated:
(courtesy zero hedge)

US Denies Bombing Assad’s Forces, Blames Russia

On Sunday, someone bombed an SAA position in eastern Syria killing three of Assad’s soldiers and wounding more than a dozen. 

As we reported on Monday, the strike allegedly took place in Paris mastermind Abdelhamid Abaaoud’s old fiefdom of Deir ez Zor. “Syria strongly condemns the act of aggression by the US-led coalition that contradicts the UN Charter on goals and principles,” Damascus said. The Ministry of Foreign Affairs sent letters to the UN Secretary General and the UN Security Council, stating that the strike “hampers efforts to combat terrorism and proves once again that this coalition lacks seriousness and credibility.” Washington claims to have no idea what Damascus is talking about. “We’ve seen those Syrian reports but we did not conduct any strikes in that part of Deir ez Zor yesterday. So we see no evidence,” coalition spokesman Colonel Steve Warren said.

Presumably the “evidence” is the three dead soldiers and on Tuesday, the war of words intensified. The Syrian Observatory for Human Rights monitoring group (or, as it’s more commonly known, “one guy in London”) said the jets were likely coalition aircraft. The US, on the other hand, now says it is “certain” that the Russians are to blame.

“A U.S. military official, speaking on condition of anonymity, said the United States is certain that Russia was responsible for the deadly strike on the Syrian army camp,” Reuters reports, adding that “the official flatly dismissed claims that U.S.-led coalition jets were responsible.”

“Reports of coalition involvement are false,” Obama’s envoy to the coalition insists.

The aforementioned Steve Warren admitted that the US did indeed carry out at least four strikes in Deir ez Zor on Sunday but claims that they were all “against well heads.” Furthermore, Warren said, the coalition was operating “approximately 55 kilometers (35 miles) southeast of Ayyash [and struck] no vehicles or personnel targets.”

“We have no indication any Syrian soldiers were near our strikes,” he concluded.

Still another US official told Reuters that Washington is “aware that Russia conducted long-range bomber strikes into Syria (on Sunday).” Apparently, official line will be that a Russian TU-22 bomber is responsible.

To be sure, the more planes there are in the skies above Syria, the bigger the potential for “accidents” to occur. We’ll be the first to admit that.

That said, obviously Moscow wouldn’t be bombing a Syrian army position on purpose which means Washington wants you to believe this was an example of the SAA accidentally taking some friendly fire.But Syria’s foreign ministry says nine missiles were fired at the camp, suggesting that this wasn’t simply an errant bomb. Surely Russia is in close communication with Assad’s ground forces. After all, that’s the whole arrangement: Russia provides air cover for Syrian and Iranian soldiers who will do most of the fighting on the ground. It would be a rather egregious logistical failure if Russian bombers didn’t know where their ground forces are operating and it would be all but inexplicable for Moscow’s warplanes to shoot nine missiles directly at an SAA encampment.

In any event, we’ll likely never know the truth, but it’s certainly interesting that Assad’s forces are being killed in mysterious airstrikes near ISIS oil fields.

Additionally, it’s worth noting that the US doesn’t have the best track record lately when it comes to hitting the “right” targets. Perhaps this, like the incident in Kunduz that resulted in the massacre of dozens of MSF hospital employees, is but another example of AC-130 pilots “relying on a physical description of the target” after a “system malfunction.”



Well that did not last long:  Turkey has now refused to withdraw troops form Iraq.  Iraq has gone to the UN security council which will do absolutely nothing to a NATO ally.  Turkey now threatens Russia with sanctions:  will it be the closing of the Bosphorus:
(courtesy zero hedge)

Turkey Refuses To Withdraw Troops From Iraq, Threatens To Slap Sanctions On Russia

Last Friday, Turkey invaded Iraq.

That sounds more dramatic than it actually was. Turkey sent around 150 soldiers and two dozens tanks to Bashiqa, just northeast of Mosul in what Ankara described as an effort to replace an existing contingent of around 90 troops that have supposedly been on a “training” mission with the Peshmerga for the better part of two years.

As we documented over the weekend, this is hardly the first time the Turks have entered the country.

However, the circumstances are quite different this time around. That is, this isn’t a anti-terror mission aimed at tracking the PKK. Over the weekend, we asked if Turkey was simply trying to protect lucrative oil smuggling routes run by both ISIS and the KRG. On Sunday, an angry Iraq gave Ankara 48 hours to withdraw the troops – or else. 

Ok, or else what? Or else Iran’s Shiite militias will hunt them down and kill them according to a statement from Kata’ib Sayyid al-Shuhada. On top of that, at least one influential Shiite politician (the infamous Moktada al-Sadr-linked Hakim al-Zamili) wants PM Abadi to appeal to Moscow for “direct military intervention.”

Baghdad is also set to appeal to the Security Council. But when it comes to being belligerent, Erdogan is right up there with the best of them, which is why we weren’t at all surprised to learn that Turkey is refusing to pull its troops out of Iraq. On Tuesday, the Turkish foreign ministry said that while it would halt the deployment (there are now as many as 300 Turkish boots on the ground at Bashiqa) Ankara would not comply with Baghdad’s demands regarding the withdrawal of the troops and tanks.

“The arrival of a heavily armed Turkish contingent at a camp near the frontline close to the city of Mosul has added yet another controversial deployment to a war against Islamic State that has drawn in most of the world’s major powers,” Reuters notes. “Russia, already furious after Turkey shot down one of its jets flying a sortie over Syria last month, said it considered the presence of the Turkish forces in Iraq illegal.”

And Russia is correct. Iraq is a sovereign state and the Turks were most certainly not invited which means that by definition, what Ankara is doing is illegal. Hilariously, Turkey contends that Baghdad did invite them – it’s just that Iraq doesn’t remember doing it. “Training at this camp began with the knowledge of the Iraqi Defence Ministry and police,” Turkish PM  Ahmet Davutoglu says. Iraq says no such agreement exists.

Still more absurd is Davutoglu’s contention that it is in fact Baghdad who’s being “provocative.” “Those who make different interpretations of the Turkish military presence in Mosul are involved in deliberate provocation,” he claims.

So breaking that down, Turkey deploys 300 troops and 21 tanks to a sovereign country without that country’s permission, then tries to claim that the “host” country agreed to the deployment even if they don’t recall doing so, and finally, when the country that was invaded cries foul, they are being “provocative.” It doesn’t get much more ridiculous than that.

Meanwhile, Davutoglu also suggested that Ankara may impose sanctions on Russia in retaliation for the raft of measures announced by The Kremlin late last month. “We are ready for talks and every kind of exchange of ideas with Russia but will never allow anything to be dictated to us. In the face of Russia’s sanctions, we will implement our own sanctions if we regard it necessary,” the PM warned.

Again, this is a bizarre attempt to pretend as though Turkey is somehow the victim. It was Turkey that shot down a Russian plane, not the other way around. When Ankara suggests that The Kremlin is trying to “dictate” Turkish affairs with the imposition of retaliatory economic sanctions, Turkey is effectively pretending Putin just decided out of the clear blue to cut lucrative trade ties with no provocation whatsoever. A message to Davutoglu: when you shoot down someone’s aircraft, you should expect a response. It’s not an attempt to “dictate” anything. It’s an attempt to let you know that you can’t simply blow planes out of the sky with impunity.

Finally, just to make sure he covered all the bases, Davutoglu lashed out at Iran, saying that if certain “attitudes continue, the traditional Turkey-Iran friendship will suffer great harm.” “I know the Russian and Iranian people do not share this hostile stance of their leaders towards Turkey,” he added.

As Reuters notes, it’s not entirely clear what “attitudes” he’s referring to, but we’d guess the PM’s comments have something to do with the series of statements we highlighted on Monday evening incuding this, from Iranian diplomat and analyst Seyed Hadi Afghahi:

“It is important to point out a few key points. Firstly, it is important to understand whether it is sure that the purchase by Turkey of Daesh’s stolen oil was carried out with the full knowledge of President Erdogan, his son and son in law. The reaction of Erdogan and Turkish authorities can say one thing: they were stunned and shocked that Moscow has such evidence. This significantly affected the position of Turkey’s NATO allies.” 

Speaking of Turkey’s “NATO allies”, one has to believe that the only reason Erdogan has been able to get away with the troop deployment in Iraq is because Turkey is a member of the alliance. If Russia had simply sent 300 marines to Mosul and rolled in 25 tanks against Baghdad’s wishes, the Western powers would have lost their minds.

Unsurprisingly, the KRG is remaining “neutral”. Here’s Rudaw:

“Before, there were agreements between Turkey and Baghdad and local authorities of Mosul over training (Sunni) Arab volunteers to be well-prepared for an anticipated battle for Mosul,”Kurdish President Masoud Barzani told Rudaw.


“The Kurdistan region is not part of the problem. I will discuss this topic in Turkey tomorrow and we will also talk to Baghdad,” he added. “If Turkish troops came to fight ISIS, it would be good.”

Of course it would also “be good” for the KRG if Turkish troops came to protect the illicit crude trade which is the lifeblood of Barzani’s government and pays the Peshmerga’s salaries.

As for what comes next, here’s Peshmerga commander Hazhar Omer:

“Iraq will probably turn to the United Nations to file a complaint against Turkey than use military force to evict the Turkish force stationed in Bashik now.”

Once again, given Turkey’s status as NATO member, don’t expect the Security Council to be much help, as Russian objections will largely fall on deaf ears – and we all know what happens when diplomatic channels fail…

oh my goodness, Canada has been warned that negative interest rates is upon us;

Canada Just Warned That Negative Interest Rates Are Coming

Moments ago, the Bank of Canada’s chief finally said what we had been patiently waiting for over the past several months: admission that Europe’s experiment with negative rates is about to cross the Atlantic. From Market News:


That, as they say, is “forward guidance” of what is coming.

And what is coming, is also precisely what Keith Dicker from IceCap Asset Management said in his latest monthly letter, would happen in Canada in the very near future. To wit:


Now that the election is over, the new government can quickly get down to work to missing all of their economic forecasts and budgets.

IceCap is apolitical – we support neither the left, the center or the right. Instead, we see the world with our global goggles and can confirm that despite any and all economic policies from the new (or old) government – the Canadian economy will continue it’s downward trend.

This negative outlook for Canada isn’t driven by an insular view or perspective. Rather, the global trend is downward. The economic and monetary foundation for the global economy has shifted and this is the reason for our downward view for the Great White North.
During the election campaign, we shared this view with the eventual winning party. The response was a slow yawn and disapproving look which suggested either we didn’t know what we were talking about or they were not really interested in our answer to their question.

This lack of empathy for the escalating global government debt crisis is also shared by many in the financial sector as well. Yes, increasingly more and more investment managers are echoing concerns similar to ours – but make no mistake, the majority, and especially the really big investment and mutual fund companies continue to see a recovery right around the ole corner.

Of course, this mythical corner continues to be just as elusive as unicorns, trolls, elves and dragons. In 2014, Canada’s top Bay Street economists were all clamouring for the Bank of Canada to begin raising rates – after all, these economists had very big spreadsheets, with all kinds of neat formulas and corporate logos that predicted the Canadian economy was about to shoot to the moon.

Yes, the good times were back.

But they weren’t.

At the time, IceCap stated that the global economy was beginning to roll over and that the Canadian economy would begin shooting in the opposite direction. As well, based upon our outlook for declining growth, we also expected the Bank of Canada to REDUCE interest rates, not INCREASE interest rates as predicted by Bay Street.

Naturally, our view meant that the Canadian Dollar would decline significantly relative to the US Dollar. This provided us with a great opportunity to add a significant USD currency strategy within every Canadian Dollar Client Portfolio.

Now here we are in 2015, and the Canadian Dollar (and other currencies) has in fact declined significantly, and the Bank of Canada has in fact REDUCED interest rates not once, but twice.

We share this investment success story for 2 reasons:

  • Taking an insular view of your Country’s economy will lead you to losing money.
  • The global economy and financial markets continue to move in the direction which we expect. And this direction is going to produce outcomes that are being completely missed by many in the investment community.

Which brings us back to Canada. Currently, both the Bank of Canada and Bay Street economists predict the Canadian economy to recover in 2016, and then to accelerate in 2017.

The ONLY way for this to occur is if the global economy sheds it’s government debt problem. IceCap places a 0% probability of this occurring.

Instead, everyone should expect:

  1. Canadian economy to be in recession in 2016
  2. Bank of Canada will be at 0% interest rates in 2016
  3. Bank of Canada will be at NEGATIVE interest rates in later 2016
  4. Bank of Canada will be PRINTING MONEY in later 2016

And for the Canadian Dollar? It’s headed lower, a lot lower. If you are not Canadian, just know that you are in a similar boat. And when it comes to boating, there is one simple rule – going against the flow is difficult, it’s exhausting, and it can be humbling.

* * *

So, in order to force the Bank of Canada’s hand, is this what’s coming next?


Now it is the turn of the VP Michel Temer who vented an angry letter to Rouseff.  That should hasten their impeachment:
(courtesy zero hedge)

In “Extraordinary” Turn, Brazil’s VP Pens Angry Letter To Rousseff: “I Should Have Vented This Long Ago”

“I’ve always known about your and your people’s complete lack of trust in me and the PMDB. A lack of trust that is incompatible with what we’ve done to maintain personal and partisan support for your government.”

That’s from a letter penned by Brazilian VP Michel Temer and addressed to embattled President Dilma Rousseff. In what WSJ describes as “an extraordinary turn of events,” the letter was published in its entirety by local media on Tuesday. Temer, like House Speaker Eduardo Cunha, is a member of  the Brazilian Democratic Movement Party which WSJ notes “has provided crucial support and multiple ministers to Ms. Rousseff’s government since she was first elected in 2010.”

As anyone who follows the Brazilian train wreck is no doubt aware, Cunha is on a mission to have Rousseff impeached for allegedly cooking the fiscal books. That effort took on a new degree of urgency last week after the Workers’ Party said lawmakers are set to vote in favor of a motion to open an investigation into Cunha’s role in the Carwash corruption probe. In other words, it’s a race against time to see if the house ethics committee will force Cunha’s resignation before he can secure the lower house support to initiate a Senate impeachment trial.

“The letter comes at a bad time for Ms. Rousseff, who will probably need the support of at least part of the PMDB to avoid being removed from office,” WSJ goes on to say. In the letter, Temer says he “should have vented this a long time ago,” before accusing the President of reducing him to a “figurehead.” Gabriel Petrus, a political analyst at business consulting firm Barral M Jorge who spoke to Bloomberg says Temer is “opening the door for a possible break with the government,” and although “he may not be actively promoting impeachment, this could well heighten the chances of her ouster.” 

“The PMDB will have eight members in a lower house committee that will hear Rousseff’s defense and make a recommendation on whether the floor should approve the start of impeachment hearings in the Senate,” Bloomberg adds, laying out the logistics of the process (read more about the steps involved here).

Here’s a bit of color from Barclays on how things are set to unfold:

According to Brazilian laws, any citizen can file a petition asking for an impeachment of the president, based on evidence of high crimes or misdemeanors. The Speaker of the House of Representatives can either reject or accept the petition. If the latter occurs, a committee is created within the House to investigate the allegations and prepare the petition to be discussed and voted on the House floor.


The petition voting session needs two-thirds (342) of the 513 deputies of the House to approve the impeachment and move the process to the Senate. Were this to happen, the president would have to step down for 180 days to prepare her defense, and the vice president would temporarily assume the post. If two-thirds of the 81 Senators approve the impeachment, the president would have to step down permanently and would lose her political rights for eight years, and the vice president would assume the role of president until the end of the current term. The Supreme Court can stop the impeachment process if it is an alleged violation of or threat to the Constitutional rights of the president.


The most recent impeachment in Brazil was in the early 1990s, and it lasted for seven months. The House of Representatives voted for the impeachment of then-President Fernando Collor on September 29, 1992. On October 2, Collor’s presidential powers were suspended, and Vice President Itamar Franco became acting president. As the judgment process evolved and it became clear that the Senate would also vote for an impeachment, Collor resigned the post on December 29, 1992. On the same day, Itamar Franco was sworn in as the new president of Brazil and finished Collor’s presidential term, which ended in 1994.

And here’s a timeline which shows that the political drama isn’t likely be resolved any time soon:

Finally, here’s Barclays’ full Dilma Rousseff flowchart:

As for how the market is likely to respond any one of the scenarios laid out above, Rafael Cortez, an analyst at Tendencias Consultoria, says the impeachment proceedings will be a positive development no matter what the outcome. Although “the market would react more positively to an impeachment, given Rousseff’s previous policies weren’t popular with investors [and given that] VP Michel Temer is seen as having the ability to negotiate with more of Congress and deal better with the current opposition party PSDB,” but should Rousseff emerge victorious, she’ll be “stronger, especially if she stays in office and House leader Cunha loses his post.”

Paulo Vieira da Cunha, former BCB director and a chief economist at Ice Canyon, is less sanguine. “While some investors have positive view on a potential new government led by current VP Temer, the scenario isn’t clear and if Rousseff stays in power, she will still likely fail to fix the economy as recession may weaken the government further,” he told Bloomberg by phone.

We’re inclined to agree with Vieira da Cunha, but don’t tell the market. For investors, the prospect of a protracted impeachment battle is apparently a good thing because not only has iShares MSCI Brazil Capped ETF seen inflows equivalent to 4.7% of its market cap this month, the BRL also jumped sharply after House Speaker Cunha decided to get the Rousseff ouster ball rolling last week.

*  *  *

Full letter

São Paulo, December 7 2015.

Madam President,

“Verba volant, scripta manent” [Spoken words fly away; written words remain].

This is why I am writing to you. In particular, to discuss the intense news of recent days and everything that I have heard in conversations in the Planalto [Palace].

This is a personal letter, and something I should have got off my chest a long time ago.

First and foremost, I want to say that it is not necessary to prove my loyalty. I have shown it over the last five years.

This is institutional loyalty as defined by article 79 of the Federal Constitution. I know what the duties of the Vice-President are. To my natural discretion I added that inherent to my constitutional role.

Nonetheless, I have always been conscious of the absolute mistrust of you and your allies towards me and the PMDB. This mistrust is incompatible with what we have done to maintain personal and party support for your government.

It is enough to recall that in the last convention just 59.9% [of PMDB delegates] voted for the alliance.

And they only did so, in my opinion, because I was candidate for the vice-presidency.

I have maintained the PMDB united behind your government using my political prestige, which is fruit of the credibility and respect I have acquired in the party.

But that has not generated trust in me. It has generated mistrust and contempt on the part of the government.

Let’s take a look at the facts. I shall provide a few examples.

1. I spent the first four years of the government as a decorative Vice-President. You know this. I lost all the political leadership that I had in the past and that could have been used by the government. I was only ever called to resolve PMDB voting and political crises.

2. The PMDB and I were never called to discuss economic or political policymaking; we were mere accessories, secondary objects, subsidiaries.

3. In your second term, you decided at the last minute not to renew the Ministry of Civil Aviation, where [Wellington] Moreira Franco had done such excellent work, which was praised during the World Cup. You knew he was my choice. Therefore, it was an attempt to disparage me. This suspicion was confirmed the following day, when we spoke on the phone.

4. In the more recent Eliseu Padilha episode, he left the Ministry because of many “insults”, culminating with what the government did to him, blocking without any prior notice the appointment of a technician that he, the Minister, had chosen for ANAC [National Agency of Civil Aviation].

It is clear that a) this was retaliation towards me and b) that he left because he is part of a supposed “conspiracy.”

5. When you asked me to become the government’s chief negotiator in Congress, at a moment when the government had been badly discredited, I responded and Padilha and I got the fiscal adjustment approved.

This is a difficult issue because it affects both workers and business leaders.

We didn’t flinch. The future of the country was in the balance. When the adjustment was approved, nothing of what we started had continuity in the government. The agreements made in Parliament were not respected. We held more than 60 meetings of leaders and blocs, using our credibility to garner support. But we were obliged to abandon that mission.

6. In any case, I am president of the PMDB and you decided to ignore me, calling the leader [Leonardo] Picciani and his father to make an agreement, without giving any notice to your Vice-President and the president of the party.

The two ministers, as you know, were named by him. And you had no hesitation in removing from the government Deputy Edinho Araújo, a deputy for São Paulo and an ally of mine.

7. Democrat that I am, I talk, Madam President, with the opposition. I have always done so, throughout the 24 years I have been in Parliament.

By the way, the first provisional measure of the fiscal adjustment was approved thanks to 8 (eight) votes by Democrats (DEM), 6 (six) by the Brazilian Socialist Party (PSB) and 3 by the Green Party (PV), and was approved by just 22 votes. I have been criticized for this, though this reflects a mistaken vision of our system. And it wasn’t without reason that on two occasions I reemphasized that we should reunite the country. But the government decided to divide and criticize.

8. I addition, I recall that you had a two-hour meeting with Vice-President Joe Biden – with whom I have built a good friendship – without inviting me. This led Biden’s team to ask: what must have happened, if in a meeting with the Vice-President of the United States, his Brazilian counterpart is not present? Beforehand, during the episode of the American “spying”, when relations began to improve, you sent the Minister of Justice to talk with the Vice-President of the United States. All this suggests an absolute lack of trust.

9. More recently, a conversation of ours (the two highest authorities in the country) was published, but in a misleading manner that had nothing to do with the content of the conversation.

10. Even the program “Uma Ponte para o Futuro” [“A Bridge to the Future”], which has been welcomed by society, and the proposals of which could be used to help recover the economy and rescue confidence, was seen as a disloyal maneuver.

11. The PMDB is conscious that the government aims to promote its division, something it has tried in the past without success.

You know that as president of the PMDB, I must maintain a cautious silence, seeking that which I have always sought: party unity.

Once this critical time has passed, I am sure that the country will have the stability to grow and consolidate social progress.

Finally, I know that you do not trust me and the PMDB today, and that you shall not tomorrow.

I am sorry, but this is my conviction.

Respectfully, ML TEMER

To Her Excellency Madam President


President of the Republic of Brazil

Palácio do Planalto

Brasília, D.F.

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

Euro/USA 1.0871 up .0038

USA/JAPAN YEN 122.97 down .325

GBP/USA 1.4982 down .0063

USA/CAN 1.3585 up .0073

Early this morning in Europe, the Euro rose by 38 basis points, trading now just above the 1.08 level rising to 1.0807; 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 as the EU is moving more into NIRP and moving in the opposite direction that they were suppose to with the USA tightening on Dec 16. Last night the Chinese yuan down in value (onshore). The USA/CNY up in rate at closing last night:  6.4225  / (yuan down)

In Japan Abe went all in with Abenomics with another round of QE purchasing 80 trillion yen from 70 trillion on Oct 31/2014. The yen now trades in a northbound trajectory  as settled up again in Japan by 33 basis points and trading now well above the all important 120 level to 122.97 yen to the dollar.

The pound was down this morning by 63 basis points as it now trades just below the 1.40 level at 1.4982.

The Canadian dollar is now trading down 73 in basis points to 1.3585 to the dollar.

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

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

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

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

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


The NIKKEI: this TUESDAY morning: closed down 205.55 or 1.04% 

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

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

Gold very early morning trading: $1073.50


Early TUESDAY morning USA 10 year bond yield: 2.21% !!! down 1 in basis points from MONDAY night and it is trading well below resistance at 2.27-2.32%.  The 30 yr bond yield falls to 2.96 or down 2  in basis points.

USA dollar index early TUESDAY morning: 98.55 down 24 cents  from MONDAY’s close. ( Now below resistance at a DXY of 100)

This ends early morning numbers TUESDAY MORNING

Crude crashes into the 36 dollar handle and this should blow up many of our oil derivative players:
(courtesy zero hedge)

Crude Crashes To $36 Handle – Down 15% Since OPEC

How many times were we told that an OPEC decision was “priced in” – well it wasn’t. WTI is now down 15% from pre-OPEC and has crashed through the $37 level for the first time since Feb 2009… time to catch a falling knife (again), or fold on all those ‘recovery’ bets?


The darling of Canada is Alberta and their oil production.  Very sad indeed!
(courtesy zero hedge)

Suicides In Alberta Soar In Wake Of Canada’s Oilpatch Depression

Over the past year, we have extensively chronicled the tragic story of Alberta – Canada’s once booming oilpatch – disintegrate slowly at first, then very fast, into an economic and financial wasteland:

And, in the last article in this sad series describing the Alberta “bloodbath”, we said that the biggest casualty of Canada’s recession has been the local commercial real estate market, where office vacancies are about to surpass the aftermath of the (first) great financial crisis.

We were wrong: the biggest casualty of Canada’s recession, which unless oil rebounds strongly soon will follow Brazil into an all out depression, are people themselves. As CBC reports the suicide rate in Alberta has increased dramatically in the wake of mounting job losses across the province.

According to the Canadian media, the most recent data only goes to June, but according to the chief medical examiner’s office, 30 per cent more Albertans took their lives in the first half of this year compared to the same period last year.

That’s how bad Canada’s economic recession is: the real casualties are no longer metaphorical economic objects, but the very people who until recently enjoyed comfortable lives only to succumb to an unprecedented collapse in the local economy.

Here are the statistics as reported by CBC:

  • From January to June 2014, there were 252 suicides in Alberta.
  • During the same period this year, there were 327.
  • If the trend continues, Alberta could be on track for 654 suicides this year.
  • In an average year, there are 500, according to the Centre for Suicide Prevention.

“This is staggering,” said Mara Grunau, who heads the Centre for Suicide Prevention.  “It’s far more, far exceeds anything we would ever have expected, and we would never have expected to see this much this soon.”

What is taking place is hardly surprising: in this year of mass layoffs in the energy sector, calls to the Calgary Distress Centre have changed tone and have become more frequent, says counsellor David Kirby.

Unfortunately, when one can no longer slide the tragic reality under the rug of double seasonal adjustments and media propaganda meant to boost confidence despite economic collapse, human tragedy is what always follows.

“For me it says something really about the horrible human impact of what’s happening in the economy with the recession and the real felt effect, the real suffering and the real struggle that people are experiencing,” he said.

Kirby says demand for counselling services has increase by 80 per cent — and the problems people are struggling with are more complex. “There might be substance abuse issues. There might be imminent financial collapse,” he said.

“Anxiety, depression. Relationship conflict, maybe concurrent domestic violence. So there are many more things that people are trying to juggle I think at the same time.”  Nancy Bergeron, who has answered distress centre phone lines for a few years, says this year has been the hardest.

“People are just at wit’s end and they’re contemplating it, right?”

Why? Simply because the price of a commodity has dropped to a third of what it was just over a year ago, and the shocking impact has been a paralysis of every aspect of financial, economic and social life, first in Alberta, and soon everywhere else across Canada, as the local recession (on its way to a depression) spreads across the country and eventually crosses the U.S. border.

and the above brings the Canadian stock exchange to its lowest levels in two years:
(courtesy zero hedge)

Deja-Vu Eh? Canadian Stocks Plunge To 2-Year Lows

Canadian stocks are down 15% from their highs in 2008 (and down 18% from the 2014 highs) as the blowback from a collapsing energy market ripples across the entire “not unequivocally good” economy. However, perhaps more worrying is the 2008-esque dynamic playing out almost perfectly for America’s northern neighbor…

Canadian stocks are at a 2-year closing low…


Deja vu, eh?


Charts: Bloomberg

(courtesy Euan Mearns/

This Is Why $20 Oil Is A Possibility


The day of reckoning has arrived for the oil price with the head and shoulders pattern I have been tracking for two months finally being completed in recent weeks. It became a rather drawn out affair with markets awaiting the outcome of the OPEC meeting of 4 December where OPEC elected to stay the course and do nothing. With WTI closing at $40 and Brent on $43 on Friday both are testing support levels. WTI in particular has had strong support at $40 in recent weeks. Should this support be broken then another major down leg is to be expected to the vicinity of $20. I can see nothing in the numbers presented below to provide hope that $40 may hold. The market remains over-supplied and awash in oil. Lower price is required to remove supply from the market.

  • World total liquids production up 240,000 bpd to 97.09 Mbpd, a new record high.
  •  OPEC production down 20,000 bpd to 31.72 Mbpd (C+C)
  •  N America production up 260,000 bpd to 19.66 Mbpd.
  •  Russia and FSU up 90,000 bpd to 14.01 Mbpd
  •  Europe down 10,000 bpd to 3.40 Mbpd (compared with October 2014)
  •  Asia down 50,000 bpd to 7.99 Mbpd.
  • Middle East rig count is rising. The international oil rig count is stable. The US oil rig count is falling.

Figure 1 The oil price has trended down this month in a saw tooth pattern to support levels and to complete the head and shoulders pattern. Friday’s close was just above the near term lows of $38.22 for WTI and $41.59 for Brent, both on August 24th. If these lows are broken traders and companies should be prepared for a plunge.

The October 2015 Vital Statistics are here. EIA oil price and Baker Hughes rig count charts are updated to the beginning of December 2015, the remaining oil production charts are updated to October 2015 using the IEA OMR data.

Figure 2 The bigger picture shows how the second shoulder has already breached the long-term trend line and the chart appears to be very bearish. Chart patterns alone do not tell the whole story, but it is difficult to find ANY near term bullish indicators in the production and rig count data.

Figure 3 The US oil rig count has resumed its fall but at a lower pace than the plunge post-October 2014. The blip represents 675 rigs on 28 August and has since fallen to 545 oil rigs on 4th December, a fall of 130 rigs in 14 weeks. At this rate the 200 count will arrive in 38 weeks, sometime in September 2016. A fresh plunge in the oil price may accelerate this process. 545 rigs still drilling, used to drill better wells in sweet spots, is sufficient to substantially offset declines which is why US production is trending down only slowly. In my analysis of US Shale Oil: drilling productivity and decline rates (June 2015) I forecast that LTO production would fall 830,000 bpd with about 630 rigs drilling. The fall in US production so far has been 540,000 bpd. A large backlog of drilled and uncompleted wells complicates this picture.

Figure 4 This expanded scale shows that the rate of decline in US oil directed drilling is muted compared with the big drop seen earlier this year. Gas drilling has flat lined at around 200 units. The total rig count was 737 on 4 December compared with a post-crash low of 876 seen on 20 June 2009. Hence, the current drilling slump is already worse than the post-crash slump and there is no respite in sight.


Figure 5 The near-term peak in US production was 13.24 Mbpd in April 2015. The October figure was 12.70 Mbpd, down 540,000 bpd from that peak. US oil production has been amazingly resilient in the face of the collapse in drilling. In recent post, Art Berman points out The Problem With Oil Prices Is That They Are Not Low Enough. And that’s why I believe that another plunge in the oil price is required to thrust a dagger through the heart of US shale drillers and the banks that have supported them. To be clear, low oil prices are wonderful for the US economy and a nightmare for OPEC.

Figure 6 OPEC production stands at 31.72 Mbpd down 20,000 bpd on September which is effectively unchanged. This level was first attained in the summer of 2008, at the end of the great energy squeeze in the lead up to the financial crash. This appears to define a plateau level in OPEC production. There has been very little action in the OPEC producers, all pumping flat out, pouring gasoline on the bonfire of oil wealth destruction. Iran is waiting in the wings to introduce a further 720,000 bpd (IEA) when / if sanctions are lifted early 2016.

Figure 7 OPEC booked spare production capacity stands at 3.18 Mbpd with 2.01 in Saudi, 0.72 in Iran and 0.45 in the rest. One has to be skeptical about Saudi Arabia’s 2 Mbpd and OPEC, with the exception of Iran, is pumping flat out. There is of course degraded and unused capacity in Libya.

Figure 8 In October Saudi production rose by 50,000 bpd to 10.23 Mbpd. NZ = neutral zone which is neutral territory that lies between Saudi Arabia and Kuwait where production from the Wafra heavy oil field is now effectively zero.


Figure 9 The ME OPEC oil rig count is on a rising trend with operational cycles superimposed. In October, ME OPEC rig count began inching up once more with the main action in UAE that added 8 oil rigs. This is a sure sign that ME OPEC are pumping at capacity and need to drill new wells to cancel declines and to maintain plateau production. This also underlines the determination of the big ME OPEC producers to maintain production levels that is BAD news for the OECD producers and Russia.

Figure 10 The international oil rig count has been stable for 6 months. Total international rigs are down 17 to 854. This number is still substantially above the 2008 peak of 832 units (dashed line). While the international oil industry is racking up huge losses, the level of drilling activity still exceeds the previous high of 7 years ago. I suspect that the pause in the fall will shortly reverse as it did in the USA and we will see many more rigs layed up in the first half of 2016.

Figure 11 Russia and other FSU produced 14.01 Mbpd in October, up 90,000 bpd on September but little changed for 3 years.

Figure 12 The cycles in European production data are down to summer maintenance programs in the offshore North Sea province. To get an idea of trend it is necessary to compare production with the same month a year ago. The dashed line shows that European production has been essentially flat for three years. The post-peak declines have been arrested. Compared with Oct 2014, European production is down 10,000 bpd to 3.4 Mbpd. Declining North Sea production was one of the drivers behind the rise in oil prices since 2002. Arresting and reversing those declines has removed that driver.

– Norway Oct 2014 = 1.93 Mbpd; Oct 2015 = 1.91 Mbpd; down 20,000 bpd YOY
– UK Oct 2014 = 0.88 Mbpd; Oct 2015 = 0.95 Mbpd; up 70,000 bpd YOY
– Other Oct 2014 = 0.60 Mbpd; Oct 2015 = 0.54 Mbpd; down 60,000 bpd YOY

Figure 13 This group of S and E Asian producers has been trending sideways since 2010. The group produced 7.99 Mbpd in October, down 50,000 bpd on the revised September figure.

Figure 14 N American production looks like it topped in April at 20.12 Mbpd:

– USA Sep 2015 12.73 Mbpd; Oct 2015 12.70 Mbpd; down 30,000 bpd
– Canada Sep 2015 4.08 Mbpd; Oct 2015 4.35 Mbpd; up 270,000 bpd
– Mexico Sep 2015 2.59 Mbpd; Oct 2015 2.61 Mbpd; up 20,000 bpd

Group production up 260,000 bpd from September to 19.66 Mbpd in October. Group production down 460,000 bpd from the April peak. Canadian production dipped in September but bounced back in October.

Figure 15 Total liquids = crude oil + condensate + natural gas liquids + refinery gains + biofuel. October production was 97.09 Mbpd up 510,000 bpd on the revised September figure. The October figure sets a new global production record, up 10,000 bpd on the prior July 2015 high. Global production remains 3 Mbpd above the 2004-15 trendline and has a long way to fall to restore balance to the market.

Figure 16 This great chart from Art Berman brings it all together. The oil price crash is simply explained by supply and demand. What we are witnessing is “unprecedented” over supply. Huge supply growth momentum was built during the era of record high price that also acted as a drag on the global economy. Low price will at some point result in the situation reversing and the price will turn very quickly. Predicting when that will happen is gold dust. But before that can happen, the production momentum needs to be switched off and I dare say that requires sharply lower oil price in the near term.

Concluding Comments

After a year of “Oil Price Crash” in October the world managed record production of 97.09 Mbpd.Production momentum built in the period of high price, 2007 to 2014, is proving very difficult to switch off. It must be switched off and it seems to me the most likely scenario is sharply lower oil price in the near term. The geo-political backdrop also has mounting hazards and uncertainty with the USA, Russia, The UK, France and Germany all operating in the same combat arena, chasing a phantom menace.



As we have outlined on many occasions, as the price of oil drops, large oil producing countries are witnessing their currency collapse;

Oil Producer’s Currencies Are Collapsing As Brent Breaks Below $40

With the oil price collapse accelerating (Brent just dropped below $40 for the first time since Feb 2009), the currencies of major oil-exporting nations – such as the Canadian dollar and Norwegian crown – are plunging…

Not helped by weakness in China trade data, questions over global growth and inflation expectations are growing. Oil-exporting nations  (and growth-linked currencies) are getting monkey-hammered…


Just when traders thought the bottom was in…


As Reuters notes, with lower oil prices likely to add to global deflationary concern and Chinese data doing little to improve sentiment, risk appetite remained fragile.

The Canadian currency fell 0.4 percent against the U.S. dollar, to C$1.3555. That was the U.S. dollar’s strongest level since mid-2004.


Similarly the Norwegian crown fell a six-week low against the euro.


“If you are looking to play weak oil prices, you would want to sell the Canadian dollar and the Norwegian crown,” said Jeremy Stretch, head of currency strategy at CIBC World Markets. “With oil prices falling and some even talking about oil falling to $30 a barrel, revenues for these countries will take a beating and hence their currencies will remain under pressure.”



The Australian dollar fell 0.6 percent to $0.7220 AUD=D4 as this week’s tumble in iron ore and the latest Chinese data weighted on the currency’s woes.


Citi recommended that investors sell the Aussie through options. “The weakness in the Chinese economy will spill over to Australia through commodities demand as well as reduced demand for the Australian dollar via reserves and other channels. This should leave it vulnerable to an eventual leg higher in the dollar,” they said.

Charts: Bloomberg

And the end of the day, oil got a little reprieve with this:
(courtesy zero hedge)

Crude Pops As API Reports Surprise Inventory Draw After 10 Weeks Of Builds

After 10 weeks of inventory builds, API reports a 1.9mm barrel draw (hugely missing DOE expectations of a 1.3mm build). The initial reaction was a knee-jerk higher by 25c, but we note that Cushing saw a 614k barrel build (5th week in a row) and is perhaps the more crucial storage level to montori. As one trader noted, “OPEC wants to produce as much as they want,” and as global land (and sea) storage fills, so “$35 is clearly a level of interest.”



But Cushing saw yet another build…


The reaction is not exactly exuberant…



Charts: Bloomberg


We have pointed out to you on several occasions that the USA/et al is running out of space to store the oil.

Now  PIRA energy predicts that space will be entirely full by the end of first quarter 2016:

(courtesy zero hedge)

Overflowing Global Oil Storage Leads To Soaring Supertanker Rates

One month ago when oil was attempting another break out above $50, we wrote that the black gold had officially reached its “tipping point” when as we noted China had finally reached the limits of its onshore oil storage capacity.

This followed rather dire warnings by both us earlier in the year…

… and Goldman more recently, that US oil storage is also rapidly approaching it own tipping point, something which the oil market has finally priced in with the collapse in crude to levels not seen since the financial crisis.

Fast forward to today, when none other than the PIRA Energy Group warned that the oil market is set to exhaust onshore crude storage some time in 1Q 2016, which considering there are just 23 days left in 2015, could be as soon as 4 weeks from today, and judging by the way oil is trading, that’s increasingly what the market (if not so much Andy Hall) thinks.

PIRA adds that global oil stocks seen 500m bbl above normal by end-2015, and that Brent will “continue to struggle” because of surplus.

To be sure, if land storage is exhausted, even Goldman’s rather dire prediction of $20 oil may prove optimistic.

But while ongoing soaring supply in the face of sliding demand is terrible news for the price of oil, it is great news of oil tankers, which courtesy of contango have become the equivalent of offshore storage platforms in which to store oil until better times emerge. Only… the contango trade is no longer working for one simple reason – oil tanker rates have gone stratospheric to the point where it is no longer economic to store oil in ships.

According to Bloomberg, oil tanker rates soared to the highest in seven years amid an acceleration in the number of bookings and signs that the ships are being delayed when unloading due to a lack of space in on-land storage tanks. This means that day rates for 2 million-barrel carrying ships sailing to Japan from Saudi Arabia, the industry’s benchmark route, surged to $111,359, the highest since July 2008, according to the Baltic Exchange in London.

This chart was as of last week: in the aftermath of the latest epic fiasco from OPEC, which has sent the price of oil even lower, we are confident that supertanker rates are set to surge even higher, especially as more and more land-based oil depositories fill up.

As Bloomberg adds, oil tankers are increasingly having to store cargoes while they wait for space to clear in on-land storage tanks that are too full, according to Erik Nikolai Stavseth, a shipping analyst at Arctic Securities ASA in Oslo. Vessels able to hold more than 100 million barrels of crude were waiting days or weeks at a time off the coasts of oil consuming countries in mid-November, vessel-tracking data compiled by Bloomberg show.

We wrote about this a month ago when we showed an unprecedented build up of more than 39 crude tankers w/ combined cargo capacity of 28.4 million bbls anchored near Galveston (Galveston is area where tankers can anchor before taking cargoes to refineries at Houston and other nearby plants), according to vessel tracking data showing that vessels now had to wait an average of 5 days, compared with 3 days May.

We are confident that the build up of tankers off the Texas coast will only get greater with every passing day.

“We’ve seen the number of vessels for storage move higher,” Stavseth said. “There have been several reports of congestion in Chinese ports” while the flow of cargoes being transported toward the U.S. Gulf is also rising, employing a growing number of vessels, he said.

Some more details on route costs from Bloomberg:

Rates measured in the industry’s Worldscale pricing system jumped 6.7 percent to 91.18 points on the Saudi to Japan route, the highest since at least the start of the year, according to the Baltic Exchange. The Worldscale mechanism helps oil companies calculate and negotiate dollars-per-ton freight costs on thousands of different trade routes.

Meanwhile, the trend continues and the number of available ships is shrinking as a result of extra cargoes.

As a result of the soaring rates, chartered contango trades have become unprofitable virtually across the board.

Furthermore, there will be 12 percent more tankers than cargoes in the next four weeks for loading in the Persian Gulf, according to a Dec. 1 Bloomberg survey of owners and brokers involved in the trade. That’s the smallest excess in seven weeks.

Part of the rates surge is because of increased shipments going into winter, said Per Mansson, a shipbroker at Affinity Shipping LLP in London, who’s worked in the industry for more than four decades.


“When the market has been high and there is a thin balance of vessels available, even a small spark in activity can lead to a spike in rates,” said Eirik Haavaldsen, an analyst at Pareto Securities ASA in Oslo.

And while we are confident that tanker operators around the globe will rush to put as many tankers as are available into operation imminently to capture the soaring rates, this may not be sufficient to normalize the situation: after all if OPEC has indeed entered full meltdown mode, and the cartel has devolved into an “every insolvent petroproducer for himself” mode, not even a surge in tanker supply may be enough to offset the more than equivalent increase in oil production.

Which means that only one potential “renormalizing” near-term catalyst exists: if central banks, or China, openly announce they will monetize oil, although unlike digital fiat 1s and 0s, it is not exactly clear just where this monetized oil will be stored, as the world suddenly appears to have hit its global oil infrastructure “tipping point.”

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

Portuguese 10 year bond yield:  2.45% up 2 in basis points from MONDAY

Japanese 10 year bond yield: .32% !! down 1  basis points from MONDAY and extremely low
Your closing Spanish 10 year government bond, TUESDAY down 2 in basis points.
Spanish 10 year bond yield: 1.60%  !!!!!!
Your TUESDAY closing Italian 10 year bond yield: 1.55% par  in basis points on the day:
TUESDAY/ trading 5 basis points lower than Spain.
Closing currency crosses for TUESDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
 Euro/USA: 1.0893 up .0059 (Euro up 59 basis points)
USA/Japan: 122.99 down 0.294 (Yen up 29 basis points)
Great Britain/USA: 1.5000  down .0045 (Pound down 45 basis points
USA/Canada: 1.3586 up .0076 (Canadian dollar down 76 basis points)
This afternoon, the Euro rose by 59 basis points to trade at 1.0893 as more and more people believe that the ECB can no longer do QE.  The Yen rose to 122.99 for a gain of 29 basis points. The pound was down 45 basis points, trading at 1.5000. The Canadian dollar fell by 76 basis points to 1.3596 due to the collapsing oil price.
The USA/Yuan closed at 6.4162
Your closing 10 yr USA bond yield: par from MONDAY at 2.23%//
(trading below the resistance level of 2.27-2.32%)
USA 30 yr bond yield: 2.97 up 1    in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries
 Your closing USA dollar index: 98.42 down 33 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 88.30 points or 1.42%
German Dax: down 212.49 points or 1.95%
Paris Cac down 74.55 points or 1.57%
Spain IBEX:down 105.30 points or 2.04 %
Italian MIB: down 499.13 points or 2.26%
The Dow down 162.51 or .92%

The Nasdaq down 3.57 or .07%


WTI Oil price; 37.85
Brent OIl:    40.65
USA dollar vs Russian rouble dollar index:    69.46  (rouble is up 8 /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:

Trannies Turmoil Amid Crude Chaos As Credit Crashes To 6 Year Lows

In the Nasdaq today…

Trannies were by far the day’s worst performer…


Nasdaq managed to hold on to gains post Draghi but the S&P and Dow gave it all back…


Since San Bernardino…


This would be the first four-quarters-in-a-row drop in Transports since 1994 and the worst year since 2008…


As they caught down once again to oil’s reality…


Stocks and credit decoupled again…


High yield bonds broadly collapsed to August 2009 lows…worst day in 3 months…


As CCCs crashed to new wides…not seen since July 2009


Treasury yields trod water within a very narrow range today…almost comploetely retraced the ECB sell-off


As The USDollar drifted lower again after recovering some of the ECB losses…


Commodities continue to flatline broadly with crude having a wild ride today…


A lot of chatter in the crude oil trading complex today.. which left the commodity practically unchanged as dip-buying algos rescued WTI from $36 and Brent from $40…


But Open Interest in $35 Puts expiring shortly have reached record highs…



Charts: Bloomberg

Bonus Chart: Canadian Stocks hit a 2 year lows… playing out 2008/9 perfectly…

Institutions dumping stocks for the 5th consecutive week as their record selling is hitting industrials:
(courtesy zero hedge)

Institutions Dump Stocks For Fifth Consecutive Week; Record Selling Capitulation Hits Industrials

Over the past month (and year) the market may appear rangebound driven mostly by a handful of top stocks, but below the surface the “smart money” continues to sell.

According to Bank of America last week, during which the S&P 500 was essentially flat, BofAML clients were net sellers of $1.3bn of US stocks, following two weeks of net buying. Net sales were led by institutional clients, who have sold US stocks for the last five consecutive weeks. Hedge funds were also net sellers following two weeks of buying, while private clients were the sole net buyers. Private clients have bought US stocks in four of the last five weeks, and net buying by this group last week was the biggest in two months (chiefly due to ETFs).

But while the traditional “smart money” marginal buyers may have said enough especially after the Draghi debacle, the traditional source of stock demand remains as buybacks by corporate clients picked up last week, and the four-week average trend is tracking slightly above levels we saw this time last year.

As the chart below shows, while Private Clients have been small net buyers of stocks in 2015, hedge funds are net sellers but nothing compares to the revulsion by big institutions whose selling has been relentless.


And while the non-buyback activity last week was broadly negative, one sector saw what may have been its capiulation moment: industrials, where selling just hit record levels.

Clients sold stocks in eight of the ten sectors last week, led by Industrials and Materials. Commodity-oriented sectors have seen a consistent string of outflows in recent weeks, which could continue given OPEC’s decision on Friday. Materials has seen net sales for the last thirteen weeks, while Energy has seen eight weeks of net sales. Industrials has seen net sales in eleven of the last thirteen weeks, and net sales of this sector last week were the second-largest in our data history (since ‘08) and the largest since mid-Sept.Sales of Industrials were chiefly from private clients (whose sales of the sector were the largest in our data history—see chart below), in a week full of downgrades from our Industrials analysts on numerous railroads, truckers and machinery companies. Meanwhile, net buying of Financials last week—a week which ended with a better-than-expected payrolls number that, in our economists’ views, supports a December rate hike—was the largest in three months. Staples and Tech stocks also saw net buying, while ETFs saw the largest inflows.


Some more details by client type.

Hedge Funds:

  • Hedge funds net selling was led by Health Care and Consumer Discretionary last week. Net selling of Health Care was a reversal from recent trends for this group.
  • ETFs saw the biggest net buying from this group, followed by Industrials stocks.

Institutional Clients:

  • Institutional clients were net sellers of stocks in seven of the ten sectors plus ETFs last week.
  • ETFs saw the biggest net sales, followed by Discretionary and Materials stocks.
  • Staples, Health Care and Financials saw net buying by this group.

Private Clients:

  • Private clients’ net buying was led by ETFs (as is also true on a four-week average basis); their purchases of ETFs were the biggest since January and the fifth-largest in our data history.
  • Financials, Tech and Discretionary stocks also saw net buying by this group.
  • Net sales were the largest in the Industrials sector (biggest net sales of Industrials by private clients in our data history).

Corporate Clients:

  • Corporate buybacks were largest Tech and Staples last week, with Tech buybacks picking up relative to recent trends.
  • Meanwhile, Financials buybacks have decelerated relative to their four-week average trend.

* * *

Some other notable flows:

  • Mid-caps saw net sales by institutional clients, private clients and hedge funds alike last week, with net buying of mid-caps by our clients the largest in eight months. No size segment saw net buying by all three groups.
  • Materials and Utilities saw net sales by all three client groups last week; no sector saw net buying by all three.
  • Pension fund clients sold stocks for the fifth time in six weeks, after the prior week’s net buying. Net sales were chiefly due to ETFs and Discretionary stocks. Financials and Health Care stocks saw the biggest net buying. See pg 9 for details



Two weeks ago, we witnessed high yielding bonds plummet, then last week it was the small caps who then joined the Dow transports heading south.    Then the Dow 30 stocks joined the party and today the S and P opened in the red for 2015 as energy crashed!!
(courtesy zero hedge)

S&P 500 Opens In The Red For 2015 As Energy Crash Continues

The last week has seen Small Caps first drop into negative territory for the year (joining Dow Transports). Yesterday The Dow joined the un-party. And today, following growth concerns from China trade data, The S&P 500 has tumbled to open in the red for the year…


Nasdaq remains the year’s big winner (thanks to NFLX…) but the rest of the ‘markets’ are now in the red… with Trannies getting crushed…


Is this where it’s heading?


Charts: Bloomberg

late in the day, trannies are trounced and this is a good indicator for the strength of USA markets i.e. very weak
(courtesy zero hedge)

Trannies Trounced – Plunge Most Since Black Monday

Dow Transports are in reverse. Down over 3% today, the biggest drop since the Black Monday collapse, Trannies are now below the lows of the Bullard bounce from October 2014 and down a shocking 16% in 2015. This would be the first four-quarters-in-a-row drop in Transports since 1994 and the worst year since 2008…



Who could have seen that coming?



Charts: Bloomberg


Chain Store Sales Collapse Following Already Disappointing Black Friday

Just as we warned, based on credit card data, this holiday spending period is a disaster. Following disappointing sales over the Black Friday to Cyber Monday weekend, there has been absolutely no follow-through momentum as is usually seen. Chain Store same-store-sales crashed 6.3% week-over-week…



This should not be a surprise with a mere 1.7% YoY gain that fits with credit card data…

Well, if this year the annual comps are solidly negative then applying the same delta, it would mean that the “seasonally adjusted” retail sales data will be about 1.2%, a 70% drop from last year. Not sure how one can spin that.



As Stone McCarthy details,

The Retail Economist-Goldman Sachs Chain Store Sales Index was down 6.3% week-over-week for the period ending December 5.


It appears that shoppers were sated after the hefty promotions offered in the prior week associated with Black Friday. There may also have been a drop off in brick-and-motor shopping activity while many on-line retailers were offering deals for Cyber Monday.

Charts: Bloomberg

Dave Kranzler comments on the poor chain retail sales:
(courtesy Dave Kranzler/IRD)

Retail Sales: It’s Going To Be A Slaughter

The Goldman Sachs ICSC chain store sales plunged 6.3% for the week ending December 5 (measured through Saturday each week).  The index measures same-store sales for retail chains.   A small decline is expected, as this is the week that follows Black Friday week. But I pulled up the data from last year and the same metric declined only 1.8%.  And, in 2013 chain store comp sales actually rose 1.5% for the week following Black Friday week.

The economy is collapsing.  This is evident from the ongoing crash in commodities, especially the price of oil and natural gas.  The consumer is tapped out.   There’s a law of economics called the Law of Diminishing Returns.   It says that if one input in the production of a commodity is increased while all other inputs are held fixed, a point will eventually be reached at which additions of the input yield progressively smaller, or diminishing, increases in output.

Traditionally this law would apply to production and manufacturing.  But in an economy based on the digital printing press, this law applies to money printing and credit creation. At a certain point, the ability of money printing and credit creation reaches a limit at which it can no longer stimulate consumption.  Consumption of homes, cars and discretionary purchases.

Retail sales this holiday season will reflect this law as it applies to retail spending.   We’ve already seen credit card data from Bank of America that indicates a 10% drop in spending for the November holiday season for through the first three weeks.  Goldman’s chain store sales indicator reinforces this stunning fall-off in holiday spending.

Do not get fooled into thinking that online sales will make up for the big decline in brick and mortar store sales.  Online sales represent just 6% of total retail sales. Even if online sales tick up to 7 or 8% of total sales, the increase of a few $100 million million will barely dent the decline in total sales, which will be in the billions.

One more point, November retail sales are due out this Friday at 8:30 a.m. EST.  The data is compiled and constructed by the Census Bureau.  There is no doubt in my mind that they will do their best to manipulate the data into showing an unexpected gain.  Consider the source when you see the report.

Next up we will see the application of the Law of Diminishing Returns as it applies to auto and home sales.  The Government is already trying to defer the onset of this law in housing as it is now rolling negative down payment, low interest rate mortgages for people with low credit scores.  The “negative down payment” is derived from the fact that the homebuyer can borrow money from others to fund the 3% down payment OR take a loan from the community.   Sheer insanity.


It is now Morgan Stanley that is presenting to 1200 of its best paid employees the pink slip:
(courtesy zero hedge)

Morgan Stanley’s Holiday Present To 1,200 Of Its Best-Paid Employees: Pink Slips

While it will hardly come as a surprise to its employees (who were warned a week ago that 25% of all fixed income workers would lose their jobs in the immediate future) most had hoped that the bailed out bank would at least have the ethics to wait with the layoffs until after the new year, now just three weeks away.

It did not.

As Bloomberg reported moments ago, Morgan Stanley announced it would take a $150 million severance charge in the fourth quarter as the company pares back its fixed-income trading business to improve profitability. The charge will cover the cost of cutting 1,200 workers worldwide, including about 470 front-office employees in its fixed-income and commodities trading business, according to a person briefed on the matter.

As Bloomberg calculates, the cuts amount to 25% of Morgan Stanley’s traditionally best paid fixed-income trading staff, and other reductions came in infrastructure and support roles at the firm, said the person, who asked not to be identified because the figures aren’t public.

And since the layoffs are strategically timed to take place just before bonuses are handed out, New York is looking at a another sizable drop in year-end consumption that would have come from its best paid cadre of residents, bond traders, who instead will now be scrambling to find jobs (there are none) and failing that, to get out of the city where rents sternly defy the Fed’s deflationary narrative.

Somebody big in the credit market must have crashed:
(courtesy zero hedge)

Credit Market Crashes Through 2011 Wides, ‘Triple-Hooks’ Worst Since July 2009

Last week we asked (rhetorically) if “something just blew up in junk?” We have the answer today, as triple-hooks (CCC-rated debt) in the junk bond market have crashed through the worst levels of 2011 and are now at the highest yields since July 2009. Amid this complacency still reigns in the equity market (just as it did when the last credit cycle turned).

As bas it’s been…


As we detailed previously, copmplacency today about the risks of contagion from the weakest segments of high yield to the rest of the corporate credit markets is strongly reminiscent of the complacency about contagion risks from subprime in mid-2007. At that time, investors and regulators realized that the sharp increase in subprime delinquency rates was an issue, but believed that losses would be contained to that sector. Even though housing leverage was at all-time highs and home prices had peaked a year prior, markets did not believe that other sectors were at risk. Today, with corporate leverage ratios at all-time highs and a year after corporate profits have peaked, markets are again largely ignoring the risks of contagion from the most distressed sectors of high yield to the rest of the corporate credit sector.

There is a silver lining to all this doom and gloom. Despite all of these warning signs, the window of opportunity is still wide open, with market prices and implied volatilities now back around where they were before the market swoon during August and September.

Like most turns in the credit cycle, it is uncertain exactly when the bottom will fall out of corporate credit markets, but the catalyst is likely to be an unexpected major event, perhaps even a single company getting into trouble. While we have been bearish on high yield for over a year now, we didn’t think the conditions were yet ripe for a collapse. Now they’re ripe.

As corporate leverage unwinds, distortions that have been magnified in credit index tranches are set to dissipate and eventually reverse. Yield-seeking investors can obtain leverage by buying equity and mezz tranches of the CDX HY and IG indices, compressing spreads at the bottom of the capital structure. We think the 0-35 tranche of CDX HY has the potential to be completely wiped out – not unlike the mezzanine mortgage bonds (subprime BBB through AA) that eventually got wiped out in the GFC. Banks, which have been slapped with onerous capital charges on low-spread synthetic instruments, no longer provide the bid for the top of the capital structure that they used to. In order to complete the capital structure, banks must now find a buyer for the senior and super-senior tranches that yield-hungry investors don’t want. This double-whammy of spread compression at the bottom and spread widening at the top presents capital structure opportunities that we have profited from in recent years. As the credit cycle turns, we expect these opportunities to change and likely become more compelling.

Opportunities Using Single-Name CDS

Different markets are telling us very different things about the price of credit risk today. As shown in Figure 23, the S&P LSTA Leveraged Loan 100 Index, which is a total return index designed to track the performance of the largest institutional leveraged loans, has declined almost 5.9% since June, while the CDX HY S24 index has declined by only 0.1%. These indices, which measure similar risks, tend to move in tandem. Most of this divergence has taken place since late September. In October alone, CDX HY S24 returned 3.5%, compared to -0.6% for the S&P Leveraged Loan 100 Index. This outperformance coincided with by far the strongest month ever for high yield ETF flows.

Using single-name CDS data, we are able to separate out the components of this outperformance since June to better understand whether we think it will revert. Nearly a third of this outperformance (1.23% of the 4.05% didifference) is a move in the basis between the CDX HY index and its constituents. This move is purely technical, reflecting an unusually large premium at which CDX HY currently trades to its constituents. Moreover, this basis has historically mean-reverted, especially when the basis is greater than 1% of NAV (today it is closer to 2%). The conclusion we make from the graph below is that two factors are at work: not only has single-name CDS outperformed the leveraged loan market, but the CDX HY index has outperformed single-name CDS. The price differential creates a large wedge between CDX HY and leveraged loans, which supports our thesis that synthetic corporate credit is especially overpriced today.

Opportunities in Corporate Credit ETFs

Perhaps the scariest corner of the corporate credit market today is the market for corporate bond ETFs and open-ended mutual funds. These funds, such as the LQD, HYG, and JNK ETFs, provide daily liquidity to investors where the underlying collateral is much more illiquid corporate bonds. These funds are scary because liquidity has been tested in only one direction. Fund flows have been mostly one-sided over the past 5-6 years. Retail investors and institutions have been buying fixed income ETFs at a record pace in their search for yield and liquidity.

Who will take the other side when these massive flows reverse? The answer before the crisis would have been the banks. Now the answer is much less clear. The spate of recent failed placements in distressed loan markets is symptomatic of a liquidity vacuum. Not only have banks reduced their own market-making activities in corporate bonds due to new onerous bank capital requirements, but banks have also wound down their repo financing businesses that are the lifeblood of cheap financing for non-banks to provide liquidity in corporate bonds.

Fixed income ETFs provide daily liquidity to investors by allowing authorized market participants to create or redeem ETF shares in exchange for the underlying corporate bonds at a NAV quoted using the bid prices of the underlying collateral. These authorized participants can therefore make a profit if ETF prices deviate sufficiently far from fair value, a mechanism that keeps these ETFs trading very close to NAV.

However, if flows are large enough to overcome the balance sheet capacity of these authorized participants, ETF prices could theoretically diverge significantly from NAV, and market-makers could be forced to liquidate their positions in the cash bond market. This divergence occurred during the GFC and to a lesser extent during the Euro crisis of 2011.

It is this sudden rush to the exits that concerns us most, in part because it will be hard to see coming. If a large group of investors suddenly decides to sell, there may not be enough market-maker capacity to take the other side. When these ETFs become rich to NAV or when the cash-synthetic basis gets very tight, we can use corporate bond ETFs as a tail hedge or as a source of alpha. The cost of these tail hedges is often surprisingly low.


The ISM manufacturing has an uncanny track record of predicting growth/recession in the USA with a 4 month lead time.   You will recall that iSM mfg went below 50  (recession) in the last reporting month. suggests that we are 4 months away from a severe recession, however the Fed boys will probably raise rates next week:



Why The Plunge In Manufacturing ISM Matters


Earlier this month (12/01/2015), the US ISM Manufacturing Purchasing Managers Index (a mouthful but each word is necessary) disappointed. It was released at 48.6 (the Bloomberg Economist’s survey was for 50.5). We want to take a minute to explain why this is important, because as with any negative economic news released, it has been roundly dismissed by the optimistic Wall Street group.

In the ISM’s case, the popular refrain is that manufacturing makes up such a small portion of the US economy (the service sector is much larger) that it shouldn’t be worried about. But, we counter that the power of this series has never been in describing the wholeeconomy, it has been in the much more valuable position of forecasting where thewhole economy is going.

This series stretches back 1948, and as you will see below, it has a great record of correlating to economic output, but with a 4 month lead time.


If markets stay as calm as they are, we have to concede, that yes, the Fed will raise rates by 0.25% next week on December 16th. The Fed raising a second time, however; we think is unlikely. 

Our thesis continues to be that no matter what the Fed does, disinflation reigns with an output gap, and the yield curve will bullishly flatten. The Fed raising rates just hastens this process.

Yesterday we brought you stories of some problems with the once darling on Wall Street, Kinder Morgan which is the largest USA pipeline operator.  Well today, they shocked their shareholders with a huge cut in their dividend from
51 cents down to 12.5 cents.  This is a stock owned by many seniors and held for its income:
the stuck is plunging after hours>>>
(courtesy zero hedge)

The Largest US Pipeline Operator Is Plunging After It Just Cut Its Dividend By 74%

Everything is not awesome. We have three small words for all those MLP-holders: “Paid to wait.”

From a dividend of 51 cents, expectations were for a cut to around 32c.. but the company slashed the dividend to just 12.5c – strongly suggesting the balance sheet is considerably worse than expected… a 74% collapse!


And some context for the drop… From a high of $44.71 in April, After hours of $14.62 show a67% collapse in 7 months


Kinder Morgan Statement:

Kinder Morgan, Inc. (KMI) today announced that its Board of Directors has approved a plan pursuant to which it expects to pay quarterly dividends of $.125 per share to its common stockholders ($.50 annually), down from its current quarterly level of $.51, beginning with the fourth quarter 2015 dividend payable in February 2016. This dividend enables the company to use a significant portion of its large cash flow to fund the equity portion of its expansion capital requirements, eliminate any need to access the equity market for the foreseeable future and maintain a solid investment grade credit rating. KMI anticipates enough retained internally generated cash flow to fund all of the required equity contribution projected for 2016 and a significant portion of its debt requirements. The company has reviewed its expected investments in 2017 and 2018 and believes that its stable and growing internally generated cash flow will allow it to continue to fund the equity portion of its capital budget without the need to access the equity market. It anticipates meeting all of the rating agencies’ requirements to remain investment grade, andexpects a net debt/EBITDA ratio of 5.5 for 2016 and anticipates reducing that ratio in subsequent years.


“We evaluated numerous options, including significant asset sales, but ultimately concluded that these other options were uneconomic to our investors in the long run. This decision was not made lightly, but we believe it is in the best interests of the company, its shareholders and employees,” said Rich Kinder, executive chairman of the KMI board. “It will allow us to continue to maintain and grow our outstanding set of midstream energy assets without being required to issue equity at valuations prevalent in today’s market while maintaining a solid investment grade rating on our debt obligations. We are directly addressing concerns about our investment grade rating and concerns about the need to issue additional equity. We believe today’s action is beneficial to our shareholders.”


“Our strategy always has been, and will continue to be, to focus on fee-based midstream energy assets that are core to North American energy markets,” said Steve Kean, president and CEO. “Our execution of that strategy has enabled us to grow distributable cash flow (DCF) per share and we believe we will continue to do so.”


The company has completed its budget process for 2016 and expects DCF available to its equity holders of slightly over $5 billion, an increase of approximately 8 percent over 2015. “We grew our DCF per share in 2015 and we expect to grow again in 2016, despite a very difficult environment in the energy sector. We believe we have the best set of assets in the midstream energy business and the cash generated by those assets is fee based and growing.Today’s action is not a reflection of our underlying business – our business is strong and growing. Today’s decision is about finding the most economic way to fund our set of attractive return expansion projects,” said Kean.

It’s the first time since 2011 that the pipeline giant co-founded by Texas billionaire Rich Kinder in 1997 has reduced its dividend. The stock has plunged by half since Oct. 21, when the company began scaling back promises to raise dividends in 2016. On Dec. 4, Kinder Morgan said $5 billion in expected 2016 distributable cash flow may be diverted to operations from dividends.

Energy and commodity companies from oil drillers to rig owners to coal miners have sacrificed dividends to conserve cash amid supply gluts and collapsing markets.

When there’s no traffic, toll roads don’t work.

Charts: Bloomberg

see you tomorrow night


  1. Yesterday’s sudden rise in the Gold December future contracts got to be foretelling. Expect more of that in the next few days. By month end, it’ll become clear that no Gold can or will be delivered at the Comex.. End result: A Major selloff of all the future gold contracts at the Crimex. This is going to be totally bearish for Gold as we get past December 31st, the last delivery day.


  2. I’m not sure why these alleged gold/silver “experts” can’t even see how the gold/silver ratio is about to be played out. The two metals are about to diverge in price, perhaps even reaching a one-to-one parity. Watch the price of Silver spike overnight, likely between December 11th and 18th!


  3. I like PSLV and my retirement account is all-in on it. However, in the last year, I’m starting to question this Sprott offer and all that’s going on with GTU/SBT. The timing of this offer is really strange, especially that it has been dragging on for months. Whether, it’s sprott,GTU or SBT, only one thing is for sure: The House never loses!


  4. Charles Hug Smith? Well, he does seem to be a hugable sort of guy. Your typos, Harvey, are still the best on the internet. Go, Harve!


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