Gold: $1062.90 down $1.80 (comex closing time)
Silver $13.74 up 8 cents
In the access market 5:15 pm
At the gold comex today, we had an extremely fair delivery day, registering 186 notices for 18,600 ounces.Silver saw 1 notice for 5,000 oz.
Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 196.86 tonnes for a loss of 106 tonnes over that period.
In silver, the open interest rose by 980 contracts even though silver was down in price by a considerable 20 cents with respect to Monday’s trading. We have an extremely low price of silver and a very high OI coupled with backwardation in silver at the LBMA. (negative SIFO rates). The total silver OI now rests at 169,167 contracts. In ounces, the OI is still represented by .846 billion oz or 120% 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 fell by 918 contracts to 395,436 contracts as gold was down $12.20 in price with respect to yesterday’s trading.
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 changes,in silver inventory at the SLV/Inventory rests at 323.509 million oz
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver rise by 980 contracts up to 169,167 despite the fact that silver was down in price to the tune of 20 cents with respect to yesterday’s trading. The total OI for gold fell by 918 contracts to 395,436 contracts as gold was down $12.20 in price
2 a) Gold trading overnight, Goldcore
3. ASIAN AFFAIRS
ii) Chinese officials finally admit to significantly faking data:
i) What took them so long: European nations now are against the EU plan to seize border sovereignty and to impose a standing border force:
The main power supplier, Aggreko, for the Brazil Olympic games has pulled out leaving unknown bidders left to do the job. Aggreko is well versed in the power supply business of Olympics and this is a blow to Brazil:
( zero hedge)
Chesapeake oil will be out of cash and going into chapter 11 by the summer of 2016:
( zero hedge)
Let us head over to the comex:
The total gold comex open interest fell to 395,436 for a loss of 918 contracts despite the fact that gold was down $12.20 in price with respect to Monday’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, the latter did not hold as the boys finally could not convince any remaining OI holders to accept fiat. We are now in the big December contract which saw it’s OI fall by 65 contracts from 1833 down to 1768. We had 65 notices filed yesterday, so we neither lost nor gained any gold contracts standing for delivery in this active delivery month of December. The next contract month of January saw it’s OI fall by 24 contracts down to 623. The next big active delivery month is February and here the OI fell by 1336 contracts down to 282,234. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 127,951 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 127,144 contracts. The comex was in backwardation in gold up to April (see James Turk)
December contract month:
INITIAL standings for DECEMBER
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz nil||nil|
|Deposits to the Dealer Inventory in oz||nil|
|Deposits to the Customer Inventory, in oz||nil|
|No of oz served (contracts) today||186 contracts
|No of oz to be served (notices)||1582 contracts
|Total monthly oz gold served (contracts) so far this month||496 contracts(49,600 oz)|
|Total accumulative withdrawals of gold from the Dealers inventory this month||nil|
|Total accumulative withdrawal of gold from the Customer inventory this month||156,898.5 oz|
Total customer deposits nil oz
DECEMBER INITIAL standings/
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||299,371.755 oz
|Deposits to the Dealer Inventory||nil|
|Deposits to the Customer Inventory||790,042.06 oz
|No of oz served today (contracts)||1 contract
|No of oz to be served (notices)||330 contracts
|Total monthly oz silver served (contracts)||3599 contracts (17,995,000 oz)|
|Total accumulative withdrawal of silver from the Dealers inventory this month||nil oz|
|Total accumulative withdrawal of silver from the Customer inventory this month||4,4720,582.3 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 2 customer deposits:
i) Into Scotia: 302,572.770 oz
ii) Into Brinks: 487,474.29 oz
total customer deposits: 790,042.060 oz
total withdrawals from customer account: 790,042.060 oz
we had 1 adjustments:
Out of CNT:
we had 627,487.860 oz leave the dealer account and this landed into the customer account of CNT
And now the Gold inventory at the GLD:
Dec 15.2105/no changes in gold inventory at the GLD/Inventory rests at 643.63 tonnes
Dec 14.no change in gold inventory at the GLD/Inventory rests at 634.63 tonnes
DEC 11/no change in gold inventory at the GLD/inventory rests at 634.63 tonnes
Dec 10.2015/no change in gold inventory at the GLD/inventory rests at 634.63 tonnes
DEC 9/no change in gold inventory at the GLD/inventory rests at 634.63 tonnes
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
Nov 30/no change in silver inventory at the SLV/Inventory rests at 318.209 million oz
Comex gold backwardated to Apr. $1 premium to Jan. I don’t recall backwardation deeper than this. People want metal
And now your overnight trading in gold and also physical stories that may interest you:
Investors Beware – Credit Market Collapse Warning
If you were around during the financial crisis, you might remember that fund closures became one of the canaries in the coal mine.
Various funds failed in the run-up to the crisis, as bad bets on risky assets went wrong and the economic backdrop became steadily less forgiving.
Why am I reminding you of this? Because we’ve just seen the biggest mutual fund failure in the US since 2008…
The full Money Week article can be read here
An Unprecedented Circumstance
December 14, 2015 – 8:11am
Today, I will speak of a completely unprecedented situation that has evolved over the past seven years. I define “unprecedented” as something that was never done or known before. The unprecedented circumstance is my seven year documented history of labeling the giant financial institution, JPMorgan Chase, as being engaged in an illegal price manipulation of the silver market. To my knowledge, never has it occurred that open allegations of serious criminal wrongdoing have ever been made about any financial institution with those allegations going unchallenged. No one would dare label any large financial institution of being crooked and expect that institution to turn the other cheek.
Yet JPMorgan has remained silent in the face of what most would consider to be statements damaging to its reputation. It’s one thing to label a government agency or congress as being a bunch of crooks; in fact, it’s common practice by many. But calling a publicly owned bank crooked is very different. The government turns its back on critics but call a big bank crooked and expect to get your heart ripped out. Therein lies the mystery.
Why would JPMorgan allow allegations of serious wrongdoing to go unchallenged? It can’t be that the allegations aren’t serious enough, as price manipulation is the most serious market crime possible, damaging just about everyone, including the market itself. It can’t be because my allegations aren’t specific enough, as I’ve detailed what the bank has done in silver twice a week for seven years; down to the number of short COMEX silver contracts JPMorgan has held weekly. It can’t be because I am relying on false data to back up my allegations because I rely exclusively on government and exchange statistics. It can’t be that my market structure analysis is wrong, because it has now come to be more copied than any other approach. Then what the heck is preventing JPMorgan from denying that it is the crook I allege it to be?
One reason could be that it was unaware of the allegations. But in this case, not only have I written many public articles accusing JPMorgan as being the big market crook in silver, I have sent the bank all the articles in which I have used its name – many hundreds (over 700) of private articles in which the allegations were contained. This started in late 2008, when CFTC correspondence to legislators confirmed that JPMorgan had taken over the big COMEX silver and gold short futures positions of Bear Stearns and used those positions to continue to manipulate prices.
At that time I called the chairman’s office at JPMorgan and requested and was given two email addresses in which to direct any allegations to its CEO, Jamie Dimon and the board of directors. I have done so ever since and, perhaps to the bank’s credit, not one of the hundreds of articles I sent to those addresses were ever returned as undeliverable. I can’t swear anyone at the bank read any of these articles over the past seven years, but I can attest to them being sent and received.
A few years ago, I wrote by regular mail to each board director at the time, detailing specific allegations of price manipulation by the bank and began to send each director my articles by email as well. While the two email addresses given to me by the bank seven years ago still accept my articles to this day, my emails to the directors were quickly blocked, so I stopped sending my allegations to them. I found it interesting that the bank’s general counsel at the time, Stephen Cutler, followed the lead of the directors and also blocked my emails. I always thought the top lawyer at JPMorgan and the board directors might object to the bank being called crooked and demand that I cease doing so. That never occurred and I would also consider that to be unprecedented.
Therefore, I think we can eliminate JPMorgan being unaware of my allegations as the reason it has ignored them. Perhaps the reason has to do with creating the impression that I am unqualified or unworthy of even making such serious allegations. You know, the bank posturing that it wouldn’t lower itself in even bothering to rebut such serious charges because I was a non-entity. The truth is that I am not even a flea on the back of the elephant JPMorgan and that extends to the bank being in position to crush me through legal intimidation. It shouldn’t make a difference who I am, but the nature and specifics of my allegations and whether they were made in good faith.
I didn’t wake up one day 30 years ago and plot that over the next three decades I would be involved in a never-ending effort to stop an ongoing silver manipulation. Neither did I wake up one day seven years ago plotting how I would accuse JPMorgan of the most serious market crime of all. The truth is that when I started to allege that JPMorgan was manipulating silver prices to their own financial benefit, it scared the dickens out of me; especially my concern for how it might adversely impact my wife. Who in their right mind wouldn’t be afraid of going up against a behemoth like JPM whose army of lawyers could easily tie you up in a legal and financial quagmire lasting perhaps beyond your natural life?
But fear is the most fleeting of all emotions, in markets or daily life, and I am less fearful of what JPMorgan (or the CME Group) may do to me than I am determined to bring this issue to a head. For many years, I was forced to allege that silver was manipulated in price as a result of a concentration on the short side of COMEX futures by the four and eight largest traders, which is still the case. But because commodity law shields traders’ identities, I couldn’t put a name on the biggest manipulator for sure. Oh, I had some good guesses, including an early one that it was AIG, but I failed to uncover that AIG passed the main silver and gold manipulator role to Bear Stearns, until after Bear bit the dust in early 2008.
Bear Stearns’ demise and its takeover by JPMorgan changed everything. First there was the shock of the Bank Participation Report of August 2008 which revealed one or two US banks held an unprecedented and manipulative share of the short side of COMEX gold and silver (which I speculated was JPM) and then there was the actual confirmation by the CFTC that JPMorgan was the big short.
After more than 20 years, I was able to name the big silver crook as being JPMorgan. Let’s face it – in any manipulation, there has to be a central player on which the manipulation depends. CFTC data prove that JPMorgan has been the prime manipulator in silver since March 2008. Without that data, I would have never named JPMorgan as the big silver crook and it is only because CFTC data since then have continued to prove JPMorgan has remained the big silver crook have I remained on the bank’s case. What data am I talking about?
I am talking about the data over the past seven years that show JPMorgan of having sold short on every silver rally to cap those price rallies to the extent that the bank held short positions that sometimes totaled over 200 million ounces and more than 30% of the entire market. And then the bank buying back every short position it added at a profit, never once taking a loss. Now this crooked bank has amassed more than 400 million ounces of physical silver at the depressed prices it created itself by continuing to short futures on the COMEX.
So let’s get back to why JPMorgan has been silent in the face of allegations that would constitute libel if they weren’t true. There is only one possible explanation – the bank just doesn’t want to go there. To react in any way to allegations that it is crooked in silver would bring outside attention to this issue. Any blowback from JPM against me would invite an investigation by the media and the investment community into what this issue is all about. I believe JPMorgan knows this and is doing what it can to prevent exposure, namely, allowing the allegations to go unanswered.
Ironically, I desire the opposite – my goal is to secure an open and fair review of the facts. I have always taken the high road, by bringing my allegations first to the regulators and now to JPMorgan directly and giving them the opportunity to explain why my allegations are misdirected. I do so again today.
If my analysis is wrong and my allegations of silver price manipulation mistaken, I should be required to retract anything I’ve written that was wrong. JPMorgan is the big silver crook; I say that not to damage the bank, but to persuade it to end its criminal ways. I fully realize that I am laying more than 30 years of intense and specific analysis on the line and please know I recognize just how daunting is that prospect. At this point, however, I’d rather be proven wrong than to see JPMorgan’s unprecedented silence and the silver manipulation continue.
Jeff Nielson/Sprott Asset Management….
At the beginning of 2010, readers were presented with what was (at the time) merely a theory. The Big Bank crime syndicate was engaged in the serial manipulation of credit default swaps, in order to (among other things) destroy the economies of entire nations. It’s one of the reasons these “financial weapons of mass destruction” (Warren Buffett) were illegal in the U.S. for roughly 100 years, banned under anti-gambling statutes.
The theory was supported by a combination of compelling empirical evidence and logical deduction (i.e. “circumstantial evidence”) – roughly the same evidentiary basis by which we obtain most of our criminal convictions in our courts of law. The difference here is that with our governments having abandoned the Rule of Law, there was no one ready or willing to adjudicate over such evidence.
Before moving to the new evidence of an open conspiracy by the Big Banks to manipulate this market, it is necessary to review this older evidence. The chronology begins after the Crash of ’08, and takes the form of a comparison of two nations and their economies: Greece and the U.S.
Both nations were clearly hopelessly insolvent. Both nations’ insolvency came largely through absurd levels of military over-spending. The main difference is that one nation – the U.S. – was even more insolvent than the other. It simply pretended (and still pretends) to be “solvent” through enormous and absurdly transparent accounting fraud, which would be instantly prosecuted if attempted by any U.S. corporation (other than a Big Bank).
Yet despite these two similar economies, there was nothing similar about their interest rates. The benchmark U.S. interest rate was permanently frozen at an ultra-fraudulent 0%. This meant paying no interest on loans to the U.S. government, despite the enormous risk of lending money to history’s most-indebted nation.
Similarly, the (supposed) “market rate” on various maturities of U.S. bonds remained at near-zero, despite the gargantuan risk. Such a disconnect between risk and interest rates has never before been seen in our debt markets. Then there was Greece’s interest rates, an even larger, logical disconnect.
Two nations with very similar economies, and very similar problems: bankruptcy. Yet the interest rates on their debt were not only different, but radically opposite. However, this impossible dichotomy is not the only unequivocal evidence of interest rate fraud. We also have the incredibly steep rise, in Greek interest rates, during a time when there was virtually no change in the government’s fiscal policy. All that changed was the size of the interest payments on Greece’s debts as a result of this interest rate manipulation.
Readers were presented with a detailed explanation of the tag-team of fraud which made possible such extreme manipulation of interest rates. It begins with manipulation of the credit default swap “market,” a crooked book-making operation where the “bookies” taking the bets not only place most of the bets themselves, they also adjudicate on any disputes on the settlement of bets. More pure fraud.
First the Big Banks manipulate credit default swap prices higher in the debt market of the intended victim. Then the tag-team operation moves to the corporate media, another tentacle of the crime syndicate which readers know as the One Bank. The media mouthpieces gasp-and-moan in mock anguish about the supposed “increased risk” in the debt market of the victim, while nothing has changed except the manipulative betting of the Big Bank crime syndicate.
The last tag-team partner in this chain of economic terrorism is the so-called “credit rating agencies.” These agencies claim to assess the manipulative betting in the CDS market, and the Chicken Little hysteria from the mainstream media, and then downgrade the debt of the victim’s market on the basis of a supposed “change in risk” – when, still, nothing has changed in the victim’s economy.
The downgrade on the victim’s debt results in automatic, upward revisions in the interest which the victim must pay on all of its debt. With essentially no regulation of the crime-saturated “derivatives market,” the crime syndicate could (and did) repeat this cycle of manipulation as often as was necessary to officially bankrupt Greece.
Via the economic terrorism of credit default swap manipulation alone, the Wall Street terrorists were able to drive interest payments on Greece’s debt higher by roughly a factor of 600%. Meanwhile, U.S. interest rates were manipulated in the opposite direction. What would have happened if those on Wall Street manipulated U.S. interest rates to 30% (the same level as Greece), resulting in U.S. interest payments rising by more than 1,000%?
Just to pay the interest on its debt (to the same, Big Bank crime syndicate), the U.S. government would have to begin by shutting down the entire government, and disbanding the U.S. military, in order to bring spending down to zero. Then it would have to double everyone’s taxes in order to come up with the full payments to the parasitic bankers. And then, in a few weeks, the U.S. economy would totally collapse – just as Greece’s economy did in 2011.
This is no longer a “conspiracy theory,” however, it is now a(nother) conspiracy fact, as shown by this headline.
Banks Said to Face SEC Probe Into Possible Credit Default Swap Collusion
First some translation. Whenever the (pretend) justice officials, (pretend) regulators, and media propaganda machine announce a “probe” into more, Big Bank serial crime, what it actually means is that another Big Bank mega-conspiracy can no longer be covered up.
First we see the (reluctant) “probe.” Then we see the even more-reluctant token prosecution. Then we see the Big Banks handed their token “punishment”: microscopic fines (in relation to the size of the crimes). And then the same Big Banks repeat the same crimes, and are caught again and again.
We saw it when the Big Banks were caught and convicted of conspiring to manipulate the $500 trillion, LIBOR debt market. We saw it when the Big Banks were caught and convicted of conspiring to launder trillions for the global drug cartels and “terrorist” entities, despite the supposed “wars” the U.S. claims to be fighting against drugs and terrorism. We saw it when the Big Banks were caught and convicted of conspiring to serially manipulate all of the world’s currencies.
Of course neither the corporate media, nor the pretend-regulators, nor the pretend-justice officials ever use the word “conspiracy.” They instead use the word “collusion,” even though the two terms are synonymous. Why? Because the corporate media preaches to us again and again that there are no conspiracies.
We have more unequivocal evidence showing that this “probe” is a cover-up, and not a bona fide investigation. It starts with another headline.
Big Banks must face U.S. [credit default] swaps price-fixing lawsuit
This headline is from a September 2014 report that not only were litigants pursuing a major lawsuit against the Big Banks for conspiring to manipulate the credit default swaps market, but that a U.S. judge had ruled that their evidence was credible enough to proceed to trial.
It should have taken the pretend-regulators and pretend-justice officials about 15 minutes after this ruling to announce their own investigation, announcing that they would begin to investigate a market which they claim to be continually policing. Instead, it took 15 months for this “probe” to begin. That spells cover-up, which is in itself another conspiracy.
We know this is another Big Bank criminal conspiracy to cover up the original conspiracy, based upon the obvious attempt to deceive by the corporate media, as it attempts to downplay the latest, now-exposed, Big Bank conspiracy [from the previous, original headline]:
In the LIBOR scandal, regulators accused banks of making submissions on borrowing rates that benefited their trading positions. [emphasis mine]
Wrong! The Big Banks were convicted of conspiring to manipulate the LIBOR rate. Even more pathetically, for the first year of the LIBOR pretend-investigation, the pretend-justice officials tried to pass off the absurdity that only one Big Bank (Barclays) had conspired to rig the LIBOR rate.
This lie was pedaled, even though the LIBOR rate is set (in secret) collectively by roughly a dozen Big Banks. It would be akin to accusing a single voter of rigging an election. It was only when the pretend-justice officials finally accepted that they couldn’t sell a “one-bank conspiracy” that a few more Big Banks were added to this token prosecution.
In our system, the general principle is “guilty until proven innocent.” However, the logic behind this has ceased to apply to the Big Bank crime syndicate. Where there is smoke (i.e. some new “probe”), not only do we always see a subsequent fire, we get glimpses, even through the cover-up, of a massive wildfire.
Then we have the confessions of the criminals. A full one-quarter of Wall Street’s and London’s senior banking executives freely admit that crime is a way of life in their industry — organized crime. Even in our justice system (or what remains of it), once armed with confessions, the principle of “innocent until proven guilty” no longer applies – the guilt is conceded.
The Big Banks manipulate credit default swaps to perpetrate economic terrorism against other nations in the world, where they literally destroy the economies of those victim-nations. It used to be a theory, but now the proof is finally emerging. You heard it here first.
Copper’s Dumping As Crude’s Pumping
NatGas Crashes To Lowest Since 1999
One word… “glut”
Has GATA taken things out of context? China doesn’t think so
Submitted by cpowell on Tue, 2015-12-15 18:46. Section: Daily Dispatches
1:53p ET Tuesday, December 15, 2015
Dear Friend of GATA and Gold:
In commentary posted at Kitco yesterday, “Confessions of a Gold Analyst: Will You Let The Inmates Run The Asylum?” —
— ElliotWaveTrader.net writer Avi Gilburt criticizes GATA for being “wrong” for more than four years.
But wrong about what exactly?
Gilburt mistakenly perceives GATA’s work as being to predict imminently higher prices for gold. While higher prices are implicit in the huge short position central banks long have been underwriting in the gold market, GATA’s work is not to give investment advice, nor to predict prices. Rather GATA’s work has been to document, publicize, and oppose the largely surreptitious intervention in the gold market by central banks, and to oppose their market rigging generally.
GATA’s work explains why fundamentals of supply and demand have not been manifesting themselves in the gold market — indeed, why neither fundamental nor technical analysis of the gold market is much use.Gilburt’s criticism is of more interest when he approaches the documentation GATA has compiled over the years. He writes: “If you read all the ‘proof’ presented by the manipulation theorists and really think about what it means, you would recognize that they have either presented statements being taken out of context (which I have shown in some of my prior published articles), or they have shown that there may be small movements in metals that may have been manipulated.”
The only defense against criticism that documents have been taken “out of context” is to review them all one by one, which GATA more than encourages — GATA pleads for this. If Gilburt has “shown” such contextual distortion in previous articles, GATA has not seen them, maybe because they have not been published in the clear. We would welcome a detailed exchange with Gilburt about particular documents.
In any case some central bankers themselves seem to have construed the documents pretty much as GATA does:
News organizations controlled by the government of China also have construed the documents as GATA does, as have officials of the gold industry in China:
Just a few weeks ago an Austrian central banker, speaking at the London Bullion Market Association conference in Vienna, cheerfully conceded surreptitious intervention in the gold market by central banks and then, when his admission made it outside the conference, locked himself in his office, or was locked up there, to avoid an attempt to question him about it:
No analysis of the gold market is worth anything if it fails to address the following questions, which GATA encourages Gilburt and all gold market analysts to address:
— Are central banks in the gold market surreptitiously or not?
— If central banks are in the gold market surreptitiously, is it just for fun — for example, to see which central bank’s trading desk can make the most money by cheating the most investors — or is it for policy purposes?
— If central banks are in the gold market for policy purposes, are these the traditional purposes of defeating a potentially competitive world reserve currency, or have these purposes expanded?
— If central banks, creators of infinite money, are surreptitiously trading a market, how can it be considered a market at all, and how can any country or the world ever enjoy a market economy again?
Documentation responsive to these questions, along with a summary attempting to put the documentation in context, can be found here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
1 Chinese yuan vs USA dollar/yuan falls in value , this time to 6.4628/ Shanghai bourse: in the red (even after last hr rescue), hang sang: red
2 Nikkei closed down 317.52 down 1.68%
3. Europe stocks all in the green /USA dollar index down to 97.55/Euro up to 1.1002
3b Japan 10 year bond yield: falls to .299% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 121.43
3c Nikkei now just above 18,000
3d USA/Yen rate now well above the important 120 barrier this morning
3e WTI: 36.60 and Brent: 38.46
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 up for WTI and up for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund rises to .58% German bunds in negative yields from 5 years out
Greece sees its 2 year rate rise to 9.32%/: still expect continual bank runs on Greek banks
3j Greek 10 year bond yield rises to : 8.51% (yield curve deeply inverted)
3k Gold at $1063.25/silver $13.71 (7:45 am est)
3l USA vs Russian rouble; (Russian rouble down 11/100 in roubles/dollar) 70.56
3m oil into the 36 dollar handle for WTI and 38 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 0.9844 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0830 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.
3p Britain’s serious fraud squad investigating the Bank of England on criminal charges/arrests 10 traders for Euribor manipulation
3r the 5 year German bund now in negative territory with the 10 year rises to + .580%/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 2.25% early this morning. Thirty year rate at 3% at 2.99% /
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
And Another: Junk Bond Fund Run By Clintons’ Close Personal Friend Slammed With Heavy Redemptions
It may not be a mutual fund like Third Avenue, but Marc Lasry’s Avenue Capital Group hedge fund is far more prominent in the investing community, and as such news that it too has been slammed with redemptions from its high yields fund in recent weeks will hardly ease fears about a capital outflow from the junk bond which has sent junk ETFs down 12% for the year and has become the main topic of discussion over the past week following a flurry of reports about panic among holders of below-investment grade bonds.
What is just as surprising is that among its investments, Lasry does have a mutual fund, in fact two of them – the Avenue Credit Strategies Funds, an open- and close-ended fund, which as we first showed last Friday, are not only among the worst performers year to date, but have tumbled by a whopping 9% in the past three months.
Fast forward to last night when according to Reuters, Avenue’s founder, billionaire Marc Lasry, was forced on Monday to back the junk bond mutual fund hemorrhaging assets at his Avenue Capital Group “as jittery investors exit high-yield bonds amid a market rout.”As a result, the size of the fund has been cut by more than half, sliding from $2 billion to just $884 million according to Lipper, roughly the same size where Third Avenue’s own high yield fund was when it announced it would liquidate and gate investors.
Despite his defensive posture, Lasry hardly sounded too enthusiastic about the pace of outflows: “I think overall redemptions at some point are going to slow down across the market,” Lasry said. “I’m not sure if that will be tomorrow or next week, but people are going to start putting money back into the market at some point.”
The reason for the sudden redemption wave is not only the overall weakness among junk bonds, but as Reuters notes, investors have taken note that Lasry’s $884 million Avenue Credit Strategies Fund is run by the same portfolio manager who in 2009 helped launch the Third Avenue Focused Credit Fund, which abruptly shut down last week and blocked investor redemptions, fund disclosures show.
In January 2012, Jeff Gary joined Lasry from Third Avenue, where he once ran the now defunct fund. Gary left Third Avenue in December 2010.
Cornered, Lasry had to show the “distinctions” between the two junk bonds in a telephone interview with Reuters, saying that Third Avenue’s fund had an estimated 20 percent of its assets in illiquid, hard-to-trade securities.
“We have a diversified and well-positioned portfolio and our illiquid assets are in the single digits,” Lasry said about his fund. Lasry’s Avenue Capital, has about $12 billion in assets, compared with less than $10 billion at Third Avenue Capital.
The Avenue Credit Strategies Fund’s total return is minus 10 percent this year, underperforming the 3.83 percent average decline in the junk bond category, according to Morningstar Inc. And investor withdrawals have accelerated since March, cutting the size of the fund from $2 billion to $884 million, according to Lipper Inc.
By contrast, Third Avenue’s junk fund was down nearly 30 percent before it closed with about $800 million in assets. Both funds bet on debt issued by companies in stressed situations. Third Avenue, though, focused some of its investing on bankruptcy-related claims, which are considered extremely hard to trade even during good times.
Despite his spirited defense, Lasry’s work may be cut out for him: Brad Alford, chief investment officer of Alpha Capital Management in Atlanta, who had invested in both the Avenue Capital and Third Avenue funds, said Third Avenue’s liquidation shocked the mutual fund industry. Alford sold out of both the Third Avenue and the Avenue Capital funds earlier this year.
“It has shaken to me to the core. Who else can do this?” he said.
We may soon find out, because even with his attempt to sound optimistic, when redemption waves come, they rarely stops on a dime if at all, and there is only so much capital outflows a fund, mutual or hedge, can take before it is forced to take a time out, either temporary or permanent. Avenue will be no different.
The only question is whether Lasry, who is a close personal friend of the Clintons – recall Chelsea Clintonlaunched her “career’ by working as an “analyst” at the very same Avenue Capital in the mid-2000s – and who was slated to become US ambassador to France until his ties to a shady poker ring were exposed in 2013, will use his executive privilege and request special treatment by the former, and soon future, first family.
If so, that will be the first case of a hedge fund bailout by the presidential family in history, and will make the political farce that are US capital markets even more comical.
Empire Manufacturing Contracts For 5th Month As Workweek Crashes Near Record Lows
While Empire Fed Manufacturing survey modestly beat expectations (-4.6 vs -7 exp), it has been in contraction for 5 straght months. The biggest driver of the ‘beat’ was a massive surge in ‘hope’ (six month outlook surged from 20 to 38.5 – its biggest percentage gain since Nov 2011). At the same time as hope soars, employment tumbles to 6 year lows and average workweek collapses to its lowest since the peak of the crisis in 2009.
5th straight month of contraction…
As Hope surges and Average workweek collapses…
And Employment hits 6 year lows…
Time to raise rates!!
Core CPI Rises 2.0% Driven By Surging Rents, Giving Fed Green Light To Hike Rate
Just hours before the FOMC sits down in the Marriner Eccles to discuss just how it will announce the first rate hike in 9 years, 7 years to the day after it cut rates to zero, it got the best gift from the BLS it could have asked for: core inflation rose precisely the amount the Fed wanted from a year ago, ot 2.0% on the dot, the highest annual core CPI increase in the past year. Why the jump? “About two-thirds of this increase is accounted for by the shelter index, which rose 3.2 percent over the span.“
This took place even as the CPI for energy Fell 14.7% Y/y; while fuel oil plunged 31.4% from a year ago, which meant that the headline CPI increase from a year ago was a far more modest 0.5%, which still was the largest 12 month increase since the 12-month period ending December 2014.
On a monthly basis, headline CPI came in unchanged, declining from the 0.2% increase a month ago, as the indexes for energy and food declined in November, offsetting an increase in the index for all items less food and energy. The energy index fell 1.3 percent, with all of the major component indexes declining except electricity. The food index fell 0.1 percent, as the index for food at home fell 0.3 percent, with five of the six major grocery store food group indexes declining.
The full breakdown by components is shown below:
But, as noted above, the one key index that mattered was the core annual change, which was driven almost entirely by rents. Here are the details:
The index for all items less food and energy increased 2.0 percent over the past 12 months.About two-thirds of this increase is accounted for by the shelter index, which rose 3.2 percent over the span. The medical care index increased 2.9 percent over the past 12 months, and the indexes for education, motor vehicle insurance, tobacco, alcoholic beverages, personal care, recreation, and new vehicles also increased. The indexes for apparel, airline fares, communication, household furnishings and operations, and used cars and trucks are among the indexes that declined over the past 12 months.
Here is the one chart, which according to the BLS, mattered most for determining rising prices:
One can only hope that the Fed, in its attempt to stabilize core inflation, manages to tame surging rents with its 25 bps rate hike, otherwise it may find itself in a very unpleasant situation of chasing record asking rents across the nation and pushing rate hikes far more often than those hoping for a dovish rate hike would like.
The Fixed Income Bloodbath Continues: Wall Street Harbinger Jefferies Reports Another Terrible Bond Trading Quarter
On numerous prior occasions (here, here and here) we have explained why Jefferies, as the last “pure-play” investment bank left standing and thus with a legacy one-month offset year-end calendar (Nov 30 fiscal year-end) is the best harbinger of Wall Street’s reporting season: “it provides an invaluable glimpse into the fortunes of its Wall Street peers with a 4 week advance notice.”
Then one quarter ago, things for Jefferies imploded when the firm which is now a part of Leucadia confirmed the bond trading bloodbath that its bigger peers would soon confirm when it for the first time in its merged history reported negative fixed income revenue. Back then CEO Dick Handler tried to put a favorable spin on the terrible result, as follows:
“We believe most of the issues we faced this past quarter in Fixed Income were due to distinct factors that began about a year ago and the largest portion of which relates to the turmoil in the oil and gas industry. For the first nine months of 2015, we have provided liquidity and traded approximately $5 billion in distressed energy securities for our clients. Our exposures in our distressed energy trading business decreased approximately 50% during the quarter and are currently down to $70 million in total net market value. We believe that, with our exposures in distressed securities reduced to current levels, there should be no similar impact on our future results.”
Alas, Handler was completely wrong, and the very next quarter there was a very “similar impact” on results, when earlier this morning Jefferies reported another quarter in which its Fixed Income revenue could best be described as dismal. Instead of rebounding solidly from the negative $18 million in revenue, Fixed Income posted a nominal $8.4 million in revenue: a whopping 83% collapse from the already subdued $48.6 million a year ago.
Follow’s today’s mea culpa:
“Fixed Income, which has been a solid to excellent business for Jefferies in prior years, did not perform well in 2015. Almost all our Fixed Income credit businesses were impacted by the prolonged anticipation of the lift-off in Federal Reserve rate-setting, the collapse in the global energy markets (where we have long been an active adviser, capital raiser and trader), reduced originations in leveraged finance and meaningfully reduced liquidity. There were a number of periods of extreme volatility, which were followed by periods of low trading volume.”
In other words, everything that could have gone wrong did go wrong.
However, as we suggested last quarter, the real reason for the fixed income implosion had mostly to do with Jefferies prop trading decisions, and the fact that it kept so many bonds mismarked on its books. As a result, the bank had no choice but to finally engage in a long-overdue deleveraging of its balance sheet, read remarking to market.
This is how the WSJ summarized today’s latest stunner from Jefferies: “Much of the trading shortfall was attributed to decisions to reduce Jefferies’s balance sheet “due to the challenge of liquidating positions in a volatile and less liquid environment,” Mr. Handler said in the release. Adjusted leverage at the end of November stood at its lowest level in about seven years, and securities inventory fell to $16.5 billion, down 13% from the third quarter.”
And back to the press release:
“Our balance sheet at November 30, 2015 was $38.5 billion, down $4.2 billion from three months prior and $6.0 billion from the end of fiscal 2014. Leverage (excluding the impact of the Leucadia transaction, which added significant goodwill and a corresponding increase in equity from the transaction’s consideration) was less than nine times, its lowest level in about seven years. In addition to the absolute reduction in our balance sheet, our long securities inventory was $16.5 billion at November 30, 2015, down $2.4 billion from August 31, 2015, and down $2.1 billion from November 30, 2014. These reductions were substantially effected during our fourth quarter and, while the impact was to reduce our quarterly Fixed Income Net Revenues and profitability due to the challenge of liquidating positions in a volatile and less liquid environment, we believe this will best position Jefferies to succeed in 2016 and beyond. In this connection, we note that our net distressed trading energy exposure was $39 million at year-end.”
As the WSJ further adds, “Jefferies has counted riskier debt trading as a core business since well before the financial crisis, putting it in the cross hairs during a tumultuous period in the market for junk bonds. What’s more, a focus on both the energy industry and midsize companies has compounded Jefferies’s issues.”
It wasn’t just bond trading however, with equity trading also posting a substantial 28% drop year over year, with the declines offset by a 18% pick up in the company’s investment banking business.
“A perfect storm” is how Sandler O’Neill analyst Jeff Harte summarized the results.
“They do more high-yield, and more distressed debt, and more to the middle market, and they have a big energy banking franchise,” Sandler O’Neill + Partners analyst Jeff Harte said. “I hate to say it’s been the perfect storm, but from a credit perspective it’s been the perfect storm—in a bad way.”
So after slashing its balance sheet exposure, will Jefferies also take the axe to payrolls? “Mr. Harte said he would expect Jefferies to slash expenses though job cuts, as other larger firms announced in the wake of another downturn in debt trading on Wall Street. “You’ve had Morgan Stanley make some cuts, and three of the big European competitors talking about making cuts,” he said. “The environment has gotten tough enough in” fixed income.”
However, the biggest question for a company that at its core is a legacy fixed income trading house is whether it can survive in a world in which it has now dramatically restructured its business model from one meant to facilitate prop trading into a “flow-focused” one. For now, what Jefferies has to deal with is a more than 50% collapse in fixed income revenues in 2015 compared to the prior year.
The biggest irony is that while other banks are clamoring to be allowed to “prop trade” again, Jefferies which has had the green light to do just that as it never got an FDIC bailout and remains the only sizable pure-play investment bank, just got crushed precisely due to its junk bond prop trading.
And with a one month head start on all the other banks the next question is just what prop trading skeletons are hiding in everyone else’s closets and will Jefferies again be a harbinger of the mauling Fixed Income trading will suffer across all of Wall Street when banks report their Q4 earnings some time in mid-January.
Warning #3: If you are hesitant to sell your bond funds, use any bounce in the junk bond market to get out of all fixed income funds. Someone asked me the other day about Treasury funds. Go read the fine print in the prospectus. You can find it online. If the fund permits the use of derivatives, get out of it. 100’s of thousands of investment advisors and retail investors loaded up on Pimco’s Total Rate of Return fund having no idea that it is riddled with derivatives. If you own Black Rock funds, don’t wait for a bounce. Just get out. Black Rock is the financial market version of Fukushima.
I heard a rumor today that the Fed is trying to solicit “fire sale” liquidity bids from private equity funds for big chunks of the bonds held by high yield mutual funds and ETFs. I want to emphasize that this is an unsubstantiated rumor but it comes from a good source.
At this stage in the game, I believe the Fed will do anything possible to keep the system from collapsing. On the assumption that the rumor is valid – which I would suggest has a 95% level of probability – I would also expect to see the Fed, in conjunction with the Treasury, offer private equity firms zero-percent credit lines in order incentivize and facilitate an attempted bailout of the junk market by private equity funds. After all, this would be a no-risk opportunity for the managers of these funds to throw their growing cash piles at something besides Silicon Valley unicorns in order to put the cash to work and skim fees off the invested capital.
Of course at the end of the day, if this scenario plays out, it will be just another attempt to kick the proverbial can down the road and forestall the inevitable collapse of the financial system. Unfortunately the fundamentals which support the idea that there’s any intrinsic value in the majority of the junk paper that has been issued over the past five years continue to deteriorate.
The primary reason for the Fed to prop up the junk bond market is to prevent the stock market from collapsing. The graph on the right shows what’s at stake (click to enlarge). At some point the performance of the S&P 500 and the high yield bond market will be forced by the market to re-correlate. I highly doubt that high yield bonds will converge up to the stock market.
The graph below on the left shows that leveraged loans, which sit on top of junk bonds in the capital structure, are chasing junk bonds in a race to the bottom now. Theoretically, to the extent the the top of the