Jan 27/Gold rises to 1124 in the access market after Fed may backtrack/The markets do not like Italian bank rescue package/The USA, Britain, and France ready to invade Libya as ISIS close to oil fields/Poor results today from Boeing, Apple and Caterpillar/

Gold:  $1116.10 down $5.60    (comex closing time)

Silver 14.44 down 10 cents

In the access market 5:15 pm

Gold $1125.00

Silver:  $14,49



At the gold comex today,  we had a good delivery day, registering 152 notices for 15,200 ounces. Silver saw 0 notices for nil oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 199.58 tonnes for a loss of 103 tonnes over that period.

In silver, the open interest rose by 3,295 contracts up to 154,734. In ounces, the OI is still represented by .73 billion oz or 110% of annual global silver production (ex Russia ex China).

In silver we had 0 notices served upon for nil oz.

In gold, the total comex gold OI fell by a whopping 15,598 contracts to 385,350 contracts despite the fact that gold was up $15.50  with yesterday’s trading.

Today both the gold comex and the silver comex are in severe stress with gold in backwardation up to August.

We had a huge changes in gold inventory to the tune of 5.06 tonnes into the GLD,   / thus the inventory rests tonight at 669.23 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  inventory and thus/Inventory rests at 310.653 million oz.

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

1. Today, we had the open interest in silver rise by 3295 contracts up to 154,734 as  silver was up 30 cents with respect to yesterday’s trading.   The total OI for gold fell by 15,598 contracts to 385,350 contracts despite the fact that gold was up $15.50 in price from yesterday’s level.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)


i)Late  TUESDAY night,WEDNESDAY morning: Shanghai down badly by 6.42%   / Hang Sang down. The Nikkei and the rest of Asia closed badly in the red . Chinese yuan down a touch and yet they still desire further devaluation throughout this year.   Oil gained a dollar, rising to 30.71 dollars per barrel for WTI and 30.85 for Brent.  Stocks in Europe so far are all in the red. Offshore yuan trades at 6.6098 yuan to the dollar vs 6.5801 for onshore yuan. huge volatility is the Chinese markets screams of credit problems; a leaked document suggests that China will not use the lowering of the RRR reserves but instead provide direct yuan injections into the market/POBC injects another 70 billion of liquidity into the markets (see below)

(zero hedge)




i)The jawboning of Mr Draghi is not working at the Euro briefly breaks into the 1.09 column:

( zero hedge)


ii) The Italian rescue plan of its banks  (200 billion euros of NPL) is not going well as Italian banks collapsed in price this morning.  The key here is the fees that the banks must pay sovereign Italy for guaranteeing parts of the securitization of the loans.


( zero hedge)




The USA, France and Britain are now ready for military action in Libya as ISIS is close to the country’s oil supplies:
( zero hedge)

i)Top General warns that Sweden can be a war in a couple of years due to the huge influx of Muslim migrants:

( zero hedge)


ii) Then this happened early this morning where a 22 yr Swedish girl was murdered by a Muslim refugee in a knife attack

( zero hedge)


iii) Devastation as massive job loss in Alberta, Canada!!

( zero hedge)




i)Inventories surge by 8.4 million barrels with the latest DOE report

( DOE/zero hedge)

Two commentaries:

 ii) The markets originally got a boost when news came that Russia states that it is willing to discuss with OPEC possible production cuts.  No word from Saudi Arabia

(courtesy zero hedge)

i)As I pointed out to you yesterday, the dealer gold (registered) dropped to only 2.3 tonnes of gold. Zero hedge believes that something is burning inside the gold comex( zero hedge)


ii)Turd Ferguson (Craig Hemke) is in the same camp is myself in that the 6.4 tonne removal from the dealer side to the eligible side last night was to settle upon a delivery

(courtesy Turd Ferguson)
iii) Bill Holter discusses the huge drop in dealer gold plus other goodies
(courtesy Bill Holter/Holter-Sinclair collaboration)

iv) This is not good.  We will no longer we able to obtain gold withdrawals and thus demand from China:


(Koos Jansen)


v) Kazakhstan adds .1 tonne of gold or 3,150 oz to its official reserves.  It new official reserves are 7.13 million oz.

(Ranjeethka Pakiam/Bloomberg)


vi) it looks like our figures are correct from gold leaving the FRBNY.  I believe that the entire 210 tonnes arrived from the FRBNY

( London’s Financial Times)





i) Boeing stock tumbles as does its revenue and cash flow.  The guide future earnings downward:

( zero hedge)


ii) Retail sales continue to decline for Caterpillar as this Bellwether corporation signals depression like conditions:

( zero hedge)

Two big stories on Apple Corp


iii a) Apple extends losses and guides lower for the yr:

( zero hedge)


iii b)Then we see China’s largest distributor lower the cost on Apple i 6 phones in China by 17% ahead of the new years celebration when demand is the highest
( zero hedge)


iv)Strange set of data for new homes sales:

( zero hedge)
v)The following is going to be interesting:  the Attorney General for Mass. warns Gilead to lower cost of their HEP C drug or face a lawsuit

( zero hedge)

vi)And now the FOMC meeting results from 2 weeks ago:

First:  official release
( zero hedge)

vii) Second; market reaction to the Fed’s not dovish enough statement: a huge disappointment:

( zero hedge)

viii)The mouthpiece, Jon Hilsenrath speaks:

( Jon Hilsenrath/Wall Street Journal)


Let us head over to the comex:


The total gold comex open interest fell to 385,350 for a loss of 15,598 contracts despite the fact that gold was up $15.50 in price 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, both scenarios held in spades. We are now in the non active January contract which saw it’s OI contract fall by 30 contracts down to 153.  We had 2 notices filed yesterday, so we lost 30 gold contracts that will not stand for delivery in this non active delivery month of January.   The next big active delivery month is February and here the OI fell by a monstrous 41,611 contracts down to 73,174. First day notice is Friday, Jan 29.2016. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 216,016 which is poor considering the huge number of rollovers.. The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was good at 302,774 contracts. The comex is deeply into backwardation up until August. 


Today we had 152 notices filed for 15,200 oz.
And now for the wild silver comex results. Silver OI rose by 3295 contracts from 151,439 up to 154,734 despite the fact the price of silver was up by 30 cents with respect to yesterday’s trading. We are now in the non active month of January saw it’s OI remain constant at contracts numbering 23. We had 0 notices filed yesterday so we neither lost nor gained any  silver contracts that  will stand for delivery. The next big active contract month is March and here the OI fell by 361 contracts down to 107,266. The volume on the comex today (just comex) came in at 31,157 , which is fair. The confirmed volume yesterday (comex + globex) was excellent at 68,277. Silver is not in backwardation at the comex but is in backwardation in London. 
We had 0 notices filed for nil oz.


December contract month:

INITIAL standings for January

Jan 27/2016

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 4822.50  oz


150 kilobars

Deposits to the Dealer Inventory in oz  nil
Deposits to the Customer Inventory, in oz    6751.500 oz

Scotia, 210 kilobars

No of oz served (contracts) today 152 contracts

15,200 oz

No of oz to be served (notices) 1 contracts(100 oz)
Total monthly oz gold served (contracts) so far this month 167 contracts (16,700 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 78,296.8 oz
Today, we had 0 dealer transactions
We had 1  customer withdrawals
ii) Out of Scotia: 4822.5 oz or exactly 150 kilobars
total customer withdrawals; 4822.50  oz
We had 1 customer deposits:

i) Into Scotia: another of those dubious 6751.5000 oz

210 kilobars

Total customer deposits  6751.500  oz

we had 2 adjustments.


From the Brinks vault:

21,200.69 oz was removed from the dealer and this landed into the customer account of Brinks


From the HSBC vault:

100.76 oz was removed from the dealer and this landed into the customer account of HSBC

From Scotia:

14,722.85 oz was removed from the customer account and this landed into the dealer account of Scotia.


Here are the number of oz held by JPMorgan:

 JPMorgan has a total of 7774.663 oz or 0.2418 tonnes in its dealer or registered account.
***JPMorgan now has 401,421.230 or 12.48 tonnes in its customer account.
Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 152 contract of which 1 notice was stopped (received) by JPMorgan dealer and 147 notices were stopped (received)  by JPMorgan customer account.
To calculate the final total number of gold ounces standing for the Jan contract month, we take the total number of notices filed so far for the month (167) x 100 oz  or 16,700 oz , to which we  add the difference between the open interest for the front month of January (153 contracts) minus the number of notices served upon today (152) x 100 oz   x 100 oz per contract equals the number of ounces standing.
Thus the initial standings for gold for the January. contract month:
No of notices served so far (167) x 100 oz  or ounces + {OI for the front month ( 153) minus the number of  notices served upon today (152) x 100 oz which equals 16,600 oz standing in this active delivery month of January (0.5225 TONNES)
we lost 2800 gold ounces standing in this non active delivery month of January..
We thus have 0.5225 tonnes of gold standing and 2.7558 tonnes of registered gold for sale, waiting to serve upon those standing
Last month, at the conclusion of the December contract month, we had 6.445 tonnes of gold standing and 8.57 tonnes of registered (dealer) gold for sale.
We now have evidence of movement out of the registered gold to settle upon longs.
Total dealer inventor 88,601.77  or 2.7558
Total gold inventory (dealer and customer) =6,418,717.093 or 199.64 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 199.64 tonnes for a loss of 103 tonnes over that period. 
JPMorgan has only 12.727 tonnes of gold total (both dealer and customer)
And now for silver

January INITIAL standings/

Jan 27/2016:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 133,181.92 oz

Brinks Scotia,CNT

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 592,633.648 oz


No of oz served today (contracts) 0 contracts

nil oz

No of oz to be served (notices) 23 contracts (115,000 oz)
Total monthly oz silver served (contracts) 99 contracts (495,000 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 4,887,094.3 oz

Today, we had 0 deposits into the dealer account: 

total dealer deposit;nil  oz


we had 0 dealer withdrawals:

total dealer withdrawals:  nil


we had 3 customer withdrawals:

i) Into Brinks:  1063.400 oz

ii) Into HSBC: 41,335.110 oz

iii) Into Scotia:  90,783.410

total customer withdrawals: 133,181.920 oz

We had 2 customer deposits:
i) Into Delaware: 4982.848 oz
ii) Into HSBC:  587,650.800  oz

total deposits from customer account 592,633.648   oz 

 we had 0 adjustments:


The total number of notices filed today for the January contract month is represented by 0 contracts for nil oz. To calculate the number of silver ounces that will stand for delivery in January., we take the total number of notices filed for the month so far at (99) x 5,000 oz  = 495,000 oz to which we add the difference between the open interest for the front month of January (23) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing
Thus the initial standings for silver for the December. contract month:
99 (notices served so far)x 5000 oz +(23) { OI for front month of January ) -number of notices served upon today (0)x 5000 oz or 610,000  of silver standing for the January. contract month.
We neither gained nor lost any silver ounces standing in this non active delivery month of January.
Total dealer silver:  36.133 million
Total number of dealer and customer silver:   156.876 million oz
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:i) demand from paper gold shareholders ii) demand from the bankers who then redeem for gold to send this gold onto China

And now the Gold inventory at the GLD:

jan 27/another huge addition of 5.06 tonnes of gold to GLD/Inventory rests at 669.23 tonnes /most likely the addition is a paper deposit and not real physical,especially with gold in backwardation in both London and the comex.

Jan 26.no change in gold inventory at the GLD/Inventory rests at 664.17 tonnes

Jan 25./a huge deposit of 2.08 tonnes of gold into the GLD/inventory rests at 664.17 tonnes

most likely the addition is a paper deposit and not real physical

Jan 22/no change in gold inventory at the GLD/Inventory rests at 662.09 tonnes

Jan 21.2016: a huge deposit of 4.17 tonnes/Inventory rests at 662.09 tonnes

most likely the addition is a paper deposit and not real physical

jan 20/ no change in inventory at hte GLD/Inventory rests at 657.92 tonnes

Jan 27.2016:  inventory rests at 669.23 tonnes


Now the SLV:
Jan 27.2017: no changes to inventory/rests at 310.653 million oz
Jan 26.2016: a huge withdrawal of 953,000 oz/silver inventory rests tonight at 310.653 million oz
Jan 25.no change in inventory at the SLV/inventory rests at 311.606 million oz
jan 22/we had a 2.0 million oz withdrawal at the SLV/Inventory rests at 311.606 million oz
Jan 21/2015: no change in silver inventory at the SLV/Inventory rests at 313.606 million oz
Jan 20/no change in silver inventory at the SLV/inventory rests at 313.606 million oz
Jan 27.2016: Inventory 310.653 million oz.
1. Central Fund of Canada: traded at Negative 9.0 percent to NAV usa funds and Negative 8.6% to NAV for Cdn funds!!!!
Percentage of fund in gold 63.1%
Percentage of fund in silver:36.9%
cash .0%( Jan 27.2016).
2. Sprott silver fund (PSLV): Premium to NAV rises to  -0.38%!!!! NAV (Jan 27.2016) 
3. Sprott gold fund (PHYS): premium to NAV rises  to- 0.50% to NAV Jan 27/2016)
Note: Sprott silver trust back  into negative territory at -.38%/Sprott physical gold trust is back into negative territory at -0.50%/Central fund of Canada’s is still in jail.

And now your overnight trading in gold, WEDNESDAY MORNING and also physical stories that may interest you:

Trading in gold and silver overnight in Asia and Europe

Buy “Physical Gold” Coins and Bars – Bloomberg Interview GoldCore

  • Gold: the 3,000 year old “fashion” is back in favour
  • Rising interest rates – when happen – are positive for gold
  • This seen in data, charts – 2003 to 2006 period and 1970s
  • Given risks today – higher allocations of as much as 30% are merited
  • Important to own “physical gold” coins and bars in safest vaults in world
  • Important to own physical due to increasing likelihood of COMEX default

GoldCore discussed the outlook for gold on “Bloomberg Markets” yesterday with Matt Miller and Mark Barton and the interview can be watched here

LBMA Gold Prices

27 Jan: USD 1,116.50, EUR 1,027.14 and GBP 781.04 per ounce
26 Jan: USD 1,114.70, EUR 1,028.42 and GBP 785.80 per ounce
25 Jan: USD 1,103.70, EUR 1,020.29 and GBP 773.96 per ounce
22 Jan: USD 1,097.65, EUR 1,012.55 and GBP 769.63 per ounce
21 Jan: USD 1,096.80, EUR 1,006.98 and GBP 774.99 per ounce


Gold Is Back in Fashion, Here’s Why – GoldCore on Bloomberg TV

Gold near 12-week high as dollar slips ahead of Fed statement – Reuters

China stocks sink again; Nikkei makes strong gains – Marketwatch

Kazakhstan Lifts Gold Holdings in 2015 as Central Banks Buy – Bloomberg

China’s Gold Imports From Hong Kong Jump to Highest Since 2013 – Bloomberg


“Own Physical Gold” Coins and Bars – GoldCore on Yahoo Finance

Something Snapped At The Comex – Zero Hedge

New Record Low Comex Gold Inventory – Gold Seek

COMEX Registered Gold Inventories Plummet 73% In One Day – SRSRocco Report

Apple’s Revenue “Falls Off A Cliff” – Dollar Collapse

Breaking Gold and Silver News Today – Click here


Call Us Today To Protect and Grow Your Wealth –

(302) 635-1160

Mark O’Byrne




As I pointed out to you yesterday, the dealer gold (registered) dropped to only 2.3 tonnes of gold. Zero hedge believes that something is burning inside the gold comex

(courtesy zero hedge)


Something Snapped At The Comex

There had been an eerie silence at the Comex in recent weeks, where after registered gold tumbled to a record 120K ounces in early December nothing much had changed, an in fact the total amount of physical deliverable aka “registered” gold, had stayed practically unchanged at 275K ounces all throughout January.

Until today, when in the latest update from the Comex vault, we learn that a whopping 201,345 ounces of Registered gold had been de-warranted at the owner’s request, and shifted into the Eligible category, reducing the total mount of Comex Registered gold by 73%, from 275K to just 74K overnight.


This took place as a result of adjustments at vaults belonging to Scotia Mocatta (-95K ounces), HSBC (-85K ounces), and Brink’s (-21K ounces).

Meanwhile, the aggregate gold open interest remained largely unchanged, at just about 40 million ounces.


This means that the ratio which we have been carefully tracking since August 2015 when it first blew out, namely the “coverage ratio” that shows the total number of gold claims relative to the physical gold that “backs” such potential delivery requests, – or simply said physical-to-paper gold dilution – just exploded.

As the chart below shows – which is disturbing without any further context – the 40 millionounces of gold open interest and the record low 74 thousand ounces of registered gold imply that as of Monday’s close there was a whopping 542 ounces in potential paper claims to every ounces of physical gold. Call it a 0.2% dilution factor.


To be sure, skeptics have suggested that depending on how one reads the delivery contract, the Comex can simply yank from the pool of eligible gold and use it to satisfy delivery requests despite the explicit permission (or lack thereof) of the gold’s owner.

Still, the reality that there are just two tons of gold to satisfy delivery requsts based on accepted protocols should in itself be troubling, ignoring the latent question why so many owners of physical gold are de-warranting their holdings.

Considering there are now less than 74,000 ounces of Registered gold at the Comex, or just over 2 tonnes, we may be about to find out how right, or wrong, the skeptics are, because at this rate the combined Registered vault gold could be depleted as soon as the next delivery request is satisfied. Or isn’t.

Turd Ferguson (Craig Hemke) is in the same camp is myself in that the 6.4 tonne removal from the dealer side to the eligible side last night was to settle upon a delivery
(courtesy Turd Ferguson)

TF Metals Report: New record low Comex gold inventory


7:26p ET Tuesday, January 26, 2016

Dear Friend of GATA and Gold:

Gold ready for delivery against futures contracts on the New York Commodities Exchange is down to 74,000 ounces or a mere 2 tonnes, the TF Metals Report’s Turd Ferguson writes tonight, moving the exchange’s nominal paper-to-metal ratio up to 542 to 1. Delivery data for the bullion bank traders, Ferguson writes, suggests that they are mainly just swapping gold among each other each month to maintain the illusion of serious trading. Ferguson’s report is headlined “New Record Low Comex Gold Inventory” and it’s posted at the TF Metals Report’s Internet site here:


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




This is not good.  We will no longer we able to obtain gold withdrawals and thus demand from China:


(courtesy Koos Jansen)


Koos Jansen: China stops publishing Shanghai exchange’s gold withdrawals


3:38p ET Tuesday, January 26, 2016

Dear Friend of GATA and Gold:

Gold researcher and GATA consultant Koos Jansen today confirmed with the Shanghai Gold Exchange that it has discontinued publishing the weekly total of gold withdrawals from the exchange.

“This is a disaster for the gold community,” Jansen writes. “Shanghai Gold Exchange withdrawals provided a unique transparent metric for Chinese gold demand, and it’s gone. However, that the Chinese stopped publishing SGE withdrawals strongly confirms the importance of these numbers from the past. Until December these numbers gave us a direct measure of Chinese wholesale gold demand. The truth became a little uncomfortable for the Chinese.”

Jansen understates the situation. China’s decision to conceal the Shanghai gold withdrawal data confirms the monetary metal’s supreme significance in the world financial system as it is and as it is likely to evolve. If gold wasn’t becoming even more important and strategic, China would not start concealing its flow.

Jansen’s report is headlined “China Stops Publishing SGE Withdrawal Figures” and it’s posted at Bullion Star here:


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




Kazakhstan adds .1 tonne of gold or 3,150 oz to its official reserves.  It new official reserves are 7.13 million oz.


Ranjeethka Pakiam/Bloomberg)


Kazakhstan Lifts Gold Holdings in 2015 as Central Banks Buy

Ranjeetha Pakiam

January 26, 2016 — 9:19 PM EST Updated on January 26, 2016 — 11:31 PM EST

  • Central banks are raising holdings to diversify risk, NAB says
  • Kazakhstan makes gold purchase for 39th straight month

Kazakhstan expanded its gold reserves yet again in December to boost the country’s holdings 16 percent in 2015 from a year earlier, according to figures from the International Monetary Fund.

Kazakhstan raised its stash to 7.13 million ounces in December from 7.03 million in November and 6.17 million a year earlier, data on the IMF’s website showed. The country increased holdings for the 39th month. While Turkey’s reserves rose to 16.57 million ounces in December from 16.39 million a month earlier, holdings were lower than 17.01 million a year ago. Canada cut holdings to 54,790 ounces last month after holding 96,000 ounces since December 2013.

Central banks including China and Russia’s have been beefing up holdings of gold over 2015 and net purchases have become a “familiar theme” in the global market, according to the World Gold Council. While gold dropped 10 percent last year as the Federal Reserve started to raise interest rates, prices have rebounded in 2016 on volatility in global equity markets and concerns that China may weaken its currency further.

“We’ll still see central banks as net buyers,” said Daniel Hynes, senior commodity strategist at Australia & New Zealand Banking Group Ltd. “Markets have been so volatile over the past six months, I suspect there may be some component of safe haven-buying but essentially it’s related to diversification.”




it looks like our figures are correct from gold leaving the FRBNY.  I believe that the entire 210 tonnes arrived from the FRBNY

(courtesy London’s Financial Times)


Germany brings more gold back from NY, Paris

Germany’s Bundesbank released further detail on its gold holdings on Wednesday, saying it transferred 210 tonnes of gold back to the country last year from vaults in Paris and New York.

http://www.ft.com/fastft/files/2016/01/gergold.png http://www.ft.com/fastft/files/2016/01/gergold.png

Frankfurt is now the largest storage location for the country’s gold reserves after New York, it said in a statement, reports Henry Sanderson.

“The transfers are proceeding smoothly. We have succeeded in once again significantly increasing the transport volume compared with 2014. This means that operations are running very much according to schedule,” Carl-Ludwig Thiele, Member of the Executive Board of the Deutsche Bundesbank, said.

The statement is the latest sign of transparency by the central bank after the eurozone sovereign debt crisis in 2012 led to public questions about the safety of the country’s reserves.

Most of the country’s gold holdings were built up starting in the 1950s, when trade surpluses were exchanged for gold under the Bretton Woods system that tied the US dollar to the yellow metal. That led to a build-up of gold in vaults overseas, especially in New York under the Federal Reserve.

During the Cold War the Bundesbank wanted to keep its gold in the west in case of an invasion from the Soviet Union.

Last year the Bundesbank released a detailed 2,300- page inventory of every single bar it held stored in vaults in Frankfurt, London, Paris and New York.

The Bundesbank aims to store half of its gold reserves in Germany by 2020. Since 2013 it has brought a total of around 366 tonnes of gold to Frankfurt, roughly half of the total to be transferred, it said.




A biggy!!

(courtesy Bill Holter/Holter Sinclair collaboration)

Charts with more words than COMEX has registered ounces

Charts with more words than COMEX has registered ounces!‏ ‎


A reader recently sent me these charts.  I do not know who put this collection together to give credit to but I do want to say these charts pretty much tell the WHOLE STORY!  Please note each graph has grey shaded areas which identify recessions.  What we need to focus on is what has happened since the last “official” recession of 2008/2009.  I put the word official in quotation marks because it is clear something has gone very wrong since 2009, have we really recovered?

Taking these charts and grouping by commonality we have; student loans/federal debt/money supply, food stamps/labor force participation/worker’s share of economy/median income/home ownership, I would put healthcare costs on their own.
Starting with the first grouping “debt and money supply” we can see an explosion in each chart since 2008.  This clearly depicts the efforts made at reflating the system.  Massive amounts of debt have been taken on and accompanied by a gross quadrupling or more of the money supply.  Funny how the money supply has exploded yet the dollar has strengthened versus foreign currencies since then.  I will finish with the chart which I believe is the reason for this anomaly.
The second group, let’s call this income/cost of living also shows unprecedented deterioration.  Less people working …for lower wages and thus unable to afford a home …or even the ability to feed themselves!  How is this “better”?  Clearly, the standard of living is far more stressed today than when we entered the 2007/08 beginning of the Great Financial Crisis.
Lastly we have healthcare costs as a cherry on top of this “poo pie”.  If more debt and fixed costs along with less employment and income available to service the newfound debt were not enough, healthcare costs of 10% or more of income should be enough to put a dagger in the heart of the American dream.
These charts are very easy to decipher and understand, even a 4th grader who must budget a weekly allowance can understand it!  However, apparently Wall Street cannot understand this.  I would say the same about Washington and those who “pull their strings” but I don’t believe it to be the case.  I have said for years now, policy implemented could not have been by mistake and thus must be planned because no one could be so STUPID to have done the things our “leaders” have!
As for Wall Street, I actually think CNBC has guests on who actually believe the pabulum they spew.  In fact just today I heard a guest say he was super bullish because now we have QE behind us, we can get back to normalization and sound footings …  Really?  Would we have even “arrived” here today with markets still opened were it not for the $ trillions pumped in by the various QE’s?
I promised one last chart.  “Velocity” or lack of, explains a lot of what has already happened.  When velocity returns it will also explain a lot, we’ll get to that in a moment.
<b>Velocity</b> Of <b>Money</b>: Demand In The Current Moment by Miller Howard ...

  You will notice velocity was cratering during 2008, it experienced a brief bounce and has done nothing but continue lower since then.  This is explained by the previous and subsequent buildup of debt.  People were feeling the “bite” of debt leading up to 2008.  As asset prices began to drop, people started to hold back on spending and began to hoard cash as a safety net to be able to pay on debt.  This strategy has continued.  To offset the lack of velocity, the Fed was forced to “push” more money into the system.  Which brings us to where we are now, more debt, less income and more $ trillions of money supply in the system.
  I believe the lower velocity accounts for strength in the dollar.  Richard Russell called the debt buildup in terms of dollars a “synthetic short”.  This short being covered at a time of record low velocity has caused the rise in the dollar.  This by the way has occurred while foreigners have offloaded over $1 trillion of reserves in the past year and soaked up most likely by the ESF.
  In my opinion, a defining event is just about to happen.  Because the Fed blinked and forced an unjustified rate hike, one of two things will happen.  Either they stay the course (and maybe hike again), in which case asset markets will implode to unrecognizable levels.  Or conversely the Fed blinks again and actually does further QE and pushes rates negative.  In this case I believe they will finally get a reaction from velocity.  I believe velocity will shoot straight up and probably to new high levels as “non credible” monetary policy will spook a run out of dollars!  A reversal by the Fed will begin the game of hot potato where owners will want out of dollars while they still can.
  Switching gears entirely, it looks like the COMEX finally did make delivery of most of the 6.44 tons they owed for December delivery.  I say “finally” because it makes no sense to wait so far into the month since the previous owner had to pay storage.  If it was truly available, there was every incentive to deliver on day one or two …which they did not.  Now, COMEX sits with a whopping 2.3 tons left of registered gold (73,000 ounces) coming into the February delivery month.  As of tonight, there are still 114,219 Feb. contracts open which represents 11.4 million ounces!  Yes of course, much of this open interest will either roll or evaporate as it has over the last two years …but with three trading days left there is 11.4 million ounces contractually open and only 73,000 ounces available for delivery!
  I do want to point out the highly unusual!  Today was options expiration for gold, in the past I want to say gold was ALWAYS hit and hit very hard on this day so as to make the call options either cheaper or worthless.  This did not happen today as gold is now up over $20 in the last two days.  Also, COMEX has NEVER EVER gone into an active delivery month with such a small amount of registered gold available.  In fact, I cannot remember a time when the registered category was ever more sparse than it is now.
  The amount of gold in the registered category is now roughly $80 million.    To put this in perspective for you, when I was managing a retail brokerage office with just seven brokers in a medium to small Texas town in the middle of nowhere, we had assets under management of nearly $500 million.  I personally had well over $100 million under management.  Yet COMEX, a global market and the “pricing” mechanism for the world’s gold only has $80 million worth of gold available to deliver?
  Folks, this is not only scary, I cannot believe COMEX would allow these numbers to be seen.  I will surely be trolled and told “they always come up with the metal” but to advertise your vaults are virtually empty with just three days prior to first notice day?  How confidence building is that?  We will keep you informed as to how this plays out but I believe they are playing with something far hotter than fire!
Standing watch,
Bill Holter
Holter-Sinclair collaboration
Comments welcome!  bholter@hotmail.com



And now your overnight WEDNESDAY  morning trades in bourses, currencies and interest rate from Asia and Europe:

1 Chinese yuan vs USA dollar/yuan RISES to 6.5775 / Shanghai bourse: in the RED down 0.5%/ hang sang: GREEN

2 Nikkei closed UP 455.02 or 2.72%

3. Europe stocks IN THE RED  /USA dollar index DOWN to 98.96/Euro UP to 1.0871

3b Japan 10 year bond yield: falls to .216   !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.37

3c Nikkei now well below 18,000

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

3e WTI:: 30.61  and Brent: 31.35 

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 up 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 0.438%   German bunds in negative yields from 6 years out

 Greece  sees its 2 year rate rise to 14.61%/: 

3j Greek 10 year bond yield rise to  : 9.72%  (yield curve deeply  inverted)

3k Gold at $1118.50/silver $14.43 (7:45 am est)

3l USA vs Russian rouble; (Russian rouble up 81/100 in  roubles/dollar) 78.01

3m oil into the 30 dollar handle for WTI and 31 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar.

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning 1.0172 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1057 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p Britain’s serious fraud squad investigating the Bank of England on criminal charges/arrests 10 traders for Euribor manipulation

3r the 6 year German bund now  in negative territory with the 10 year falls to  + .438%/German 6 year rate negative%!!!

3s The ELA at  75.8 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 2.00% early this morning. Thirty year rate  at 2.80% /POLICY ERROR)

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


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

Futures Slide On Apple Disappointment, Oil Slumps Ahead Of Fed Decision

While the focus in the overnight session has traditionally been about two things, namely oil and China, today one can also throw in AAPL which is down 4% in the pre-market after its disappointing earnings yesterday in which it confirmed our channel-checkedwarnings about Chinafrom last summer, and the Fed which is set to release the January FOMC statement this afternoon.

Unlike yesterday, when the National Team allowed stocks to tumble, today the Chinese Plunge Protection Team intervened, and with the Shanghai Composite down as low at 2,638, the benchmark stock index pared the loss of as much as 4.1%, spurred by rallies for PetroChina, ICBC and other shares that are long considered favorite holdings of state-linked rescue funds. The result was a -0.52% drop in the composite, preventing what could have been the latest two-day -10% correction.  Still, after today’s close the index dropped to the lowest since December 2014.

With the Fed set to take center stage today, the dollar’s prospects – which increasingly many recognize needs to somehow decline to avoid a worsening global recession – rest on the wording of the Fed’s policy statement. Since the U.S. central bank raised interest rates on Dec.16 for the first time in almost a decade, a Bloomberg gauge tracking the dollar against 10 of its leading global peers has risen 1.5 percent, touching a record high on Friday. Those gains have been fueled in part by indications from the Fed that there will be four rate hikes in 2016. Investors are watching for any deviation from that plan. Traders have been more dovish than the Fed, pricing in roughly one rate increase this year. At the end of December the odds of a March move were 51 percent. Fed fund futures now put the probability at 25 percent.

Elsewhere, Apple showed that contrary to Tim Cook’s email to Jim Cramer, the tech company isn’t immune to China’s troubles. The world’s biggest company is beginning to see “economic softness” in Greater China, which includes Taiwan and Hong Kong. Apple also projected its first quarterly sales decline since 2003

The negative sentiment weighed in on crude, and after yesterday’s gargantuan 11.4 million barrel API inventory build, oil resumed declines amid further evidence of a global glut, dragging European stocks and U.S. equity index futures lower before the Federal Reserve’s first policy statement this year. European bonds gained and the yen strengthened.

West Texas Intermediate crude fell toward $30 a barrel after U.S. industry data showed stockpiles increased. European stocks deepened a monthly rout as disappointing earnings reports reignited investor concern about global growth prospects, with Apple Inc. forecasting its first drop in sales since 2003. Yields on Treasuries due in a decade held at around 2 percent and German note yields fell to record lows, while Malaysia’s ringgit climbed to a seven-week high as Prime Minister Najib Razak was cleared in a corruption probe.

Today it wasn’t just about crude: as Bloomberg adds, Iron ore will will be the worst performing metal this year. That’s the verdict of the World Bank, which cites low-cost supply outstripping consumption. The Washington-based lender says prices will average $42 a metric ton in 2016, a drop of 25 percent from 2015. Ore with 62 percent content delivered to Qingdao, a global benchmark, sank to a record low of $38.30 in December, having lost almost half its value last year. The slowdown in China has restricted demand from the world’s biggest user. At the same time the biggest mining companies are raising production to build market share. The World Bank forecasts nickel may fall 16 percent in 2016, while copper may drop 9 percent.

“Nobody is really sure where we go from here, and nobody is brave enough to make the call,” Peter Dixon, Commerzbank AG’s global equities economist in London told Bloomberg. “Corporate earnings season won’t provide much of a support – markets may find a floor if the Fed is extremely dovish tonight. At least investors will have time to think and reassess valuations.”

Looking at markets around the globe, we start in Asia, where stocks traded mostly higher following the firm close on Wall St. where strong earnings and a rebound in the energy complex supported risk sentiment. Nikkei 225 (+2.7%) was led higher by the telecoms sector after index giant Softbank rose the most in 21 months following strong earnings report from its Sprint unit, while the ASX 200 (-1.2%) traded lower as it played catch up to yesterday’s regional losses on its return from holiday. Shanghai Comp. (-0.5%) initially underperformed after Chinese industrial profits printed its largest decline in 4 months and 4th consecutive monthly decline, however, the index was granted some reprieve heading into the EU open amid support for energy names. 10yr JGBs traded higher despite the inflows into riskier assets, while the BoJ also entered the market to purchase JPY 1.26tr1 in government bonds.

European stocks opened lower this morning despite a generally positive close from their Asian counterparts. With somewhat damp sentiment, and without large swings in Asian equities, earnings from European majors have managed to dictate price action. Heavy weight Novartis (-3.0%) missed on its headline sales and EPS figures, and as a result weighs upon the SMI (-0.8%). The fallout from Novartis’ poor fourth quarter has also been felt in other defensive sectors across Europe, who have failed to benefit from a lack of risk-on. Elsewhere, BASF (-3.0%) and RBS (-2.9%) issued warnings of upcoming EUR 600mln and GBP 500mln impairment charges respectively. To round it off the premier company of the IBEX, Santander (-1.0%), posted virtually zero Q4 net.

Apple’s (-3.2%) Frankfurt listing trades lower following fears about iPhone sales growth, despite the company posting a beat on EPS. iPhone sales grew just 1% from a year earlier, the slowest ever rate for the device, sluggishness which, according to the company’s own projections is set to continue. Furthermore, the company projected the first revenue decline in over a decade, although CEO Tim Cook said was indicative of a slowdown in global economic growth.

In FX, extremely tight trade seen in FX this morning, with the majors well contained by familiar limits. Oil/stock watching dominates, but we had some brief excitement with AUD/USD breaking higher through the .7000’s on better than expected CPI, but the move ran out of steam around .7050. This coincided with a turn in risk sentiment, though Asia was mixed. Oil lower again though, holding off the $29.0 handle, but enough to pull the CAD a cent off the 1.4040 highs vs the USD. USD/JPY confined to the 118.00 handle, finding support at the figure level in Asia and since. EUR/USD is trying to break higher, but upper 1.0900’s well offered. GBP is losing its shine.

In commodities, WTI and Brent trade lower as the supply glut continues, with yesterday’s API inventories showing a substantial build of 11.4 min bbl; if the official data out later today shows a similar rise, it would be the largest weekly gain in stocks since May 1996. With this is mind however, Brent remains above USD 31.00 level and WTI above USD 30.00, with comments yesterday from Iraq’s Oil Minister in regards to production, seemingly preventing a further slide in prices.

Spot gold ticked down from 3 months highs overnight, amid a relatively quiet session in Europe, with similar lack of price action in USD, as participants await today’s FOMC. The yellow metal hit after hit USD 1,123.06 in yesterday’s session, its highest level since November 3rd, and as of this morning remains higher by 5.3% since the start of the year, as the beneficiary of safe haven bids.

Elsewhere, copper prices have seen subdued trade, with LME copper now around the level of its Kerb close yesterday, seemingly quite comfortable above that important USD 4,500 handle. Some have speculated that this is because short positions are closing ahead of the Chinese New year, as an uptick is demand is expected after Chinese participants return from their week long-hiatus and businesses complete their first quarter copper tender in March.

Finally, Iron ore has continued its rebound with prices rallying to a 3-week high. This comes despite the World Bank forecasting iron ore to be the worst performing among metals this year, citing increasing output by the industry leaders and low cost supply continuing to overshadow demand.

Datawise in the US today the only release of note will be the December new home sales data. That’s before we turn to the main event of the day of course with the conclusion of the two-day FOMC meeting at 7.00pm GMT. Away from this we’ve got a number of ECB board members due to speak including Coeure, Mersch and Lautenschlaeger at various points this morning. Earnings season rumbles on and today sees 33 S&P 500 companies report including Facebook (after-market), eBay (after-market) and Boeing (pre-market open).


Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities trade lower amid a raft of weak earnings and impairments, Apple’s (-4.0%) Frankfurt listing trades lower following fears around i Phone sales growth
  • Extremely tight trade seen in FX this morning, with the majors well contained by familiar limits
  • Today’s highlights: US new home sales, DoE inventories, FOMC & RBNZ rate decisions, comments from BoE’s Shafik, ECB’s Lane, Mersche & Lautenschlaeger
  • Treasuries lower overnight ahead of FOMC rate decision at 2pm ET; week’s U.S. auctions continue today with $35b 5Y notes, WI yield 1.44%, compares with 1.785% awarded in Dec., highest 5Y auction stop since 1.800% in Sept. 2014.
  • When Fed Chair Yellen looks for an update on China she’ll find little reason for cheer. The Shanghai Composite Index has tumbled to a 13-month low as a rout that started in the middle of 2015 shows no signs of easing up. Capital is leaving at a record pace
  • Last year, Chinese policy makers watched $1t in capital head for the exits. Now, the question is what exactly will President Jinping’s economic team do about it. One option is capital controls
  • China’s leading state media are becoming more vociferous in their support for the yuan; short sellers “haven’t done their homework,” the state-run Xinhua News Agency said on Wednesday, while the People’s Daily declared that such trades will undoubtedly fail
  • The Italian government and the European Commission agreed on a plan to help banks offload bad debt in a deal that won’t count as state aid because Italy’s backing will be priced at market rates
  • Royal Bank of Scotland dropped after taking a £3.6b ($5.2b) hit to the value of its assets and set aside more money for past misconduct, overshadowing CEO Ross McEwan’s efforts to resume dividend payments
  • Bank of America isn’t waiting to see if trading revenue rebounds from a tough 2015. CEO Thomas Montag is increasing pressure on deputies to lower expenses across his trading and investment banking world, according to people with knowledge of the initiative
  • Canadian PM Trudeau has pledged to keep the country’s debt declining in relation to the size of the economy, even as he drives up the deficit with infrastructure spending  (Harvey ???)
  • After years of lambasting other countries for helping rich Americans hide their money offshore, the U.S. is emerging as a leading tax and secrecy haven for rich foreigners by resisting new global disclosure standards
  • Sovereign 10Y bond yields mostly steady. Asian stocks mostly higher, European stocks drop; U.S. equity-index futures drop. Crude oil falls, copper and gold drop

US Event Calendar

  • 7:00am: MBA Mortgage Applications, Jan. 22 (prior 9%)
  • 10:00am: New Home Sales, Dec., est. 500k (prior 490k)
  • New Home Sales m/m, Dec., est. 2% (prior 4.3%)
  • 1:00pm: U.S. to sell $35b 5Y notes
  • 2:00pm: FOMC rate decision, est. 0.25%-0.5% (prior 0.25%-0.5%)

DB’s Jim Reid completes the overnight wrap

Having struck an intraday low of $29.25/bbl early yesterday morning, WTI staged a comeback post the Asia close, rising steadily through much of the European and US sessions after headlines concerning potential supply cuts from OPEC and Russia gained traction. That saw Oil hit an intraday high of $32.41/bbl (an 11% swing from the day’s low) but the momentum faded slightly into the close with prices settling back down at $31.45/bbl and still nearly a dollar off where we closed Friday. As you’ll see below that fading momentum has continued into the Asia session. The earlier moves were enough to see equity markets rebound and close broadly higher yesterday with decent gains for the S&P 500 (+1.41%), Dow (+1.78%), Stoxx 600 (+0.87%) and DAX (+0.89%).

Post the US close we saw Apple report which given its size is becoming a macro event. While earnings came in slightly ahead of estimates and sales a smidgen behind, the bigger news was the guidance for the current quarter where management is forecasting the first quarterly drop in sales since 2003 (to between $50bn to $53bn). That’s also below Wall St forecasts for $55.5bn with Apple’s CFO highlighting some softness in China and Hong Kong this month in particular. The news saw shares down a couple of percent in extended trading while US equity index futures are looking up to 1% lower.

US futures are not being helped by another turnaround in Asia with the majority of bourses cooling off after opening strongly. The Nikkei (+2.24%), Kospi (+1.03%) and Hang Seng (+0.47%) appear to be following much of the lead from the US although have pared much greater gains, while there’s been another steep fall for bourses in China (Shanghai Comp -3.52%), while the ASX is also down -1.20%. Oil continues to reverse last night’s high mark with WTI down -1.00% at $31.13/bbl in trading this morning. The weakness in China this morning may also be reflecting some soft industrial profits data, with profits falling for a seventh consecutive month in December (-4.7% yoy) after being at -1.4% in November.

These moves come ahead of the main event of today – the FOMC meeting. Leading into it, futures markets are actually pricing a greater chance of a cut than a hike (4% versus 0%) from the Fed. The important takeaway however will be what hints we get from the committee about forward policy guidance. It would be no great surprise to see the FOMC leave the door for a March move open, but clearly the news since the December meeting doesn’t lend itself to a March move. As DB’s Peter Hooper points out, financial conditions have deteriorated enough to subtract as much as half a percent point from GDP growth if sustained and the committee has emphasized the importance of incoming data to their decisions going forward. As a result they will have the delicate task of acknowledging the recent deterioration in economic and financial conditions while at the same time leaving the door open for a March move if recent deterioration proves to be temporary. We continue to be of the view that the Fed should be on hold for now however and so would not be surprised to see a more dovish message out of today. Of potentially more relevance could be Fed Chair Yellen’s monetary policy testimony in a couple weeks. By then we will have had the December consumer spending and inflation data, Q4 GDP, Q4 ECI data, January employment data and the Q1 Fed Senior Loan Officer Survey.

Moving on and quickly recapping the rest of markets yesterday. As well as that bounce in Oil some better than expected corporate earnings results from Procter & Gamble, Johnson & Johnson and 3M contributed to the much better tone for risk. US consumer confidence data also attracted some attention after we saw the print unexpectedly jump 1.8pts this month to 98.1 (vs. 96.5 expected), marking a three-month high in the process. This was surprising in the context of the big slump for equities this month which has been seemingly overshadowed by the resilient labour market and consumer benefits from lower energy prices. The rest of the data yesterday offered few surprises. The flash US services PMI came in a touch below expectations at 53.7 (vs. 54.0 expected), a decline of 0.6pts from December. The Richmond Fed manufacturing index print declined 4pts to 2 as expected. Meanwhile the S&P/Case-Shiller house price was up +0.9% mom in November (vs. +0.8% expected), while the FHFA house price index rose in line with the market at +0.5% mom.

There was no data out of Europe yesterday but that didn’t stop Europe sovereign bond yields edging lower once more. 10y Bund yields finished 2.5bps lower and are now sitting around 0.445% which is the lowest since the end of October last year after starting the year closer to 0.628%. Meanwhile 2y Bunds have quietly gone about extending their move deeper into negative territory, moving another basis point lower yesterday to -0.460% and in the process setting a fresh record all time low. The latest leg lower in part helped by some more affirmative words from ECB President Draghi who reiterated the need for the ECB to achieve its inflation mandate.
Staying in Europe, the systemic euro peripherals are both in focus at the moment. In Spain the probability of a left-wing PSOE-Podemos government has increased materially according to DB’s Marco Stringa. There is a significant risk that an eventual agreement will include the reversal of the labour market reform. A left-wing government would probably be highly unstable as it will likely fall short of an absolute majority and would likely require the collaboration of more than seven parties. Overall, the three main options continue to be: (i) a left-wing government, (ii) a last-minute temporary Grand Coalition or (iii) a new election to be called probably in April. Although uncertainty is very high, options (i) and (iii) seems the more likely. Overall Marco continues to think that an early election at a national level is a question of when rather than if.

Moving to Italy, last Friday, Marco and DB bank analyst Paola Sabbione published a report on the country and its banks. There is the risk that recent events put upward pressure on bank funding costs, above all for the small credit institutions. But this will not compromise the stability of the Italian banking sector in their view. The recent ECB request for additional information on NPLs is not a sign of a new risk in asset quality. Italy could undertake a significant institutional makeover via the Senate reform. A referendum should take place in October. Were it to be rejected, it would likely trigger the fall of Renzi’s government. h

Turning over to today’s calendar now, we’re kicking off this morning in Europe with various consumer confidence readings out of Germany, France and Italy along with house price data out of the UK. Datawise in the US this afternoon the only release of note will be the December new home sales data. That’s before we turn to the main event of the day of course with the conclusion of the two-day FOMC meeting at 7.00pm GMT. Away from this we’ve got a number of ECB board members due to speak including Coeure, Mersch and Lautenschlaeger at various points this morning. Earnings season rumbles on and today sees 33 S&P 500 companies report including Facebook (after-market), eBay (after-market) and Boeing (pre-market open).



Let us begin:




Late  TUESDAY night,WEDNESDAY morning: Shanghai down badly by 6.42%   / Hang Sang down. The Nikkei and the rest of Asia closed badly in the red . Chinese yuan down a touch and yet they still desire further devaluation throughout this year.   Oil gained a dollar, rising to 30.71 dollars per barrel for WTI and 30.85 for Brent.  Stocks in Europe so far are all in the red. Offshore yuan trades at 6.6098 yuan to the dollar vs 6.5801 for onshore yuan. huge volatility is the Chinese markets screams of credit problems; a leaked document suggests that China will not use the lowering of the RRR reserves but instead provide direct yuan injections into the market/POBC injects another 70 billion of liquidity into the markets (see below)


(courtesy zero hedge)

US, China Stocks Tumble After Industrial Profits Plunge

Dow futures are down 100 points and Chinese stocks are pressing new 14-month lows, extending last night’s carnage after Chinese Industrial Profits tumbled. With a dismal 4.7% drop year-over-year, led by a near 60% collapse in the mining industry, early strength (after some jawboning from Abe) gave way to fresh lows and US equity futures are also responding. Offshore Yuan refuses to drop since Xinhua wrote a 3rd hit piece against George Soros and his “speculative snap profits.”



This year is just getting uglier…


Offshore Yuan has been interfered with twice now in the last 24 hours as Xinhua unleahes its 3rd hit piece against George Soros and his speculative ilk…

So why do speculators make claims that run counter to reality? Analysts said it is because either the short-sellers haven’t done their homework or that they are intentionally trying to create panic to snap profits.

However, it seems the selling pressure is persisting no matter how hard they try to hold it…

US equity futures are also under pressure as early oil weakness coupled with AAPL’s plunge after hours was not helped by China weakness…





The jawboning of Mr Draghi is not working at the Euro briefly breaks into the 1.09 column:


(courtesy zero hedge)


EUR Jumps Above 1.09 – We’re Gonna Need More Draghi

The entire Draghi jawbone tumble in EURUSD has now been erased…




The Italian rescue plan of its banks  (200 billion euros of NPL) is not going well as Italian banks collapsed in price this morning.  The key here is the fees that the banks must pay sovereign Italy for guaranteeing parts of the securitization of the loans.


(courtesy zero hedge)

Italian Banks Sink As “Bad Bank” Plan Underwhelms

Last week, we noted that Italy is rushing to defuse a €200 billion time bomb in the country’s banking sector as investors fret over banks’ exposure to souring loans.

“Italian banks’ share prices have been volatile YTD, given the market’s renewed fears over asset quality and potential developments on a possible bad bank creation,” Citi wrote, in a note analyzing which Italian banks are most exposed. “Total gross NPLs in Italy have increased by c160% since 2009 and now represents c18% of loans (vs c8% in 2009).”

Essentially, Italy was slow to tackle its NPL problem relative to other countries and the chickens have now come home to roost.

The idea was to create a “bad bank” for the “assets” (because that’s worked so well in other countries), but the plan was stalled by the European Commission due to concerns about whether Italy was set to run afoul of restrictions around when countries can provide state aid to the financial sector.

In short, creditors at Italy’s banks would need to take a hit before PM Matteo Renzi’s government would be allowed to extend state aid. That is unless Italy could devise some kind of end-around, which is precisely what Renzi was attempting to do last week.

As a reminder, this would have been easier had it been negotiated last year before new rules on bank resolutions came into effect in 2016. That’s why Portugal pushed through the Novo Banco bail-in and the Banif rescue in December.

In any event, Italy has indeed managed to strike a deal with Brussels to help alleviate banks’ NPL burden.

Essentially, Italian banks will securitize their souring loans, sell them to investors, and the government will guarantee the senior tranches of the new paper.

“The price of the guarantee [will] be set based on the price of credit default swaps on Italian issuers with similar risk profiles to the loans in question,” FT writes, adding that “ the price would gradually increase, to reflect the growing risk of holding bad loans over time, and to incentivise buyers of the non-performing loans.”

Now obviously, that’s not as comprehensive a “solution” as a traditional bad bank scheme, which is presumably why some Italian banks have plunged and were halted limit down.


Beleaguered Monte Pashci – whose shares are worth a tiny fraction of their 2007 highs – managed to rally on the news but the FTSE Italia All-Share Banks Index traded down as much as 2.6%.

“The new scheme aims at helping banks free up capital and liquidity to increase lending and support the recovery [but] its effectiveness remains to be ascertained,” Citi wrote this morning. “The details of the new framework are still lacking, in particular the price banks will have to pay for the state guarantees, which will be crucial to assess the effectiveness of the whole scheme.”

In other words, Italy’s hands were tied here thanks to restrictions around state aid and the market isn’t happy with what’s being viewed as a watered down version of a traditional bank rescue. Here’s more from Citi:

“A too high price [for the fees banks pay to the government for the guarantees] would make the transfer of the NPLs to the bad bank not convenient for the banks and it would potentially open up new capital shortfalls. A too-low price would violate the state-aid rules and involve losses for banks’ investors (and potentially for depositors). It is important to note that the Italian version of the “bad bank” is very different from those set up in other EU countries since 2008 (e.g., in Spain, Ireland) where banks were forced to sell part of (or all) their bad loans at a set price to the government-backed bad bank vehicle. The Italian scheme is a much lighter version and as such it is likely to have a more muted impact on banks’ balance sheets, in our view.”

Right. Of course it also remains to be seen if this scheme actually ends up being riskless for the Italian public. “This intervention will not create any burdens for our public finances,” the Italian finance ministry said on Wednesday.

Maybe, but that depends on whether losses – and make no mistake, there will be losses – reach the senior tranches of these deals. Italy is confident that won’t happen. In fact, the finance ministry thinks they’re going to turn a profit off of this. “We predict that the commissions paid to us will exceed the costs, and therefore there will be positive net revenues,” a spokesperson says.

Make a mental note of that assertion because it could end up being comedy gold at some point in the not-so-distant future.

A year from now, when the cost of insuring these securitizations ends up adding a few percentage points to Italy’s budget deficit, we’ll be interested to see if the European Commission will be in a forgiving mood given that they approved this new scheme.

The USA, France and Britain are now ready for military action in Libya as ISIS is close to the country’s oil supplies:
(courtesy zero hedge)

US, Britain, France Ready Military Action In Libya As ISIS Closes In On Country’s Oil

On January 19, representatives from Libya’s rival factions negotiating in Tunis announced they had formed a unity government comprised of a new 32-member cabinet.


Six days later, lawmakers for the country’s internationally-recognized Parliament in Tobruk rejected the proposal.


“The Parliament rejected the 32-member cabinet out of concern that it was too large, and that its members had been chosen not for their competency but to satisfy various regional factions,” The New York Times said on Monday.

As a reminder, there are two governments in Libya, an internationally recognized body operating out of Tobruk in the country’s east (where the House of Representatives was exiled in 2014 after elections produced an outcome that wasn’t agreeable to Islamist elements in the west) and another group in Tripoli which claims to be the only legitimate authority.

The country’s inability to come to some manner of political consensus has opened the door for ISIS which recently mounted a series of assaults on the country’s oil infrastructure. Earlier this month, Libya’s National Oil Corp issued a “cry for help” in the midst of the fighting. “Pray for us,” a spokesman for Ibrahim Jadhran (the militia leader who controls the forces tasked with guarding the nation’s oil) said.

“[Islamic State’s] objective is to prevent the new government from stabilizing the economy, and unless they are stopped, they might succeed in their aims,” Mustafa Sanalla, the head of Libya’s state oil company warned on Sunday.

Even if officials in Tobruk manage to float a proposal that’s agreeable to their rivals in Tripoli, there’s little chance the fledgling government will be able to consolidate in time to halt the ISIS advance which means it’s time once again for the Western powers to get involved. Here’sThe New York Times:

The Pentagon is ramping up intelligence-gathering in Libya as the Obama administration draws up plans to open a third front in the war against the Islamic State. This significant escalation is being planned without a meaningful debate in Congress about the merits and risks of a military campaign that is expected to include airstrikes and raids by elite American troops.

That is deeply troubling. A new military intervention in Libya would represent a significant progression of a war that could easily spread to other countries on the continent. It is being planned as the American military burrows more deeply into battlegrounds in Syria and Iraq, where American ground troops are being asked to play an increasingly hands-on role in the fight.


Gen. Joseph Dunford Jr., the chairman of the Joint Chiefs of Staff, told reporters on Friday that military officials were “looking to take decisive military action” against the Islamic State, or ISIS, in Libya, where Western officials estimate the terrorist group has roughly 3,000 fighters.

Administration officials say the campaign in Libya could begin in a matter of weeks.


They anticipate it would be conducted with the help of a handful of European allies, including Britain, France and Italy. The planning is unfolding amid political chaos in Libya, which continues to reel from the aftermath of the 2011 civil war that ended with the killing of the country’s longtime dictator, Col. Muammar el-Qaddafi.

“Unchecked, I am concerned about the spread of ISIL in Libya,” Dunford told reporters on Friday, before saying that “military leaders owe [Defense Secretary Ash Carter and President Barack Obama] a way ahead for dealing with the expansion of ISIL in Libya.”

And so, the US now finds itself in a familiar situation.

Washington toppled a dictator leaving a power vacuum that still has not been filled five years later and now, with the country in chaos, the US is headed right back to Libya to fight off ISIS which, in an irony of ironies, was a tool Washington and its regional allies used to toppleanother dictator in Syria.

In other words, the US-backed effort to bring about regime change in Syria has now spilled over into Libya, a failed state that had already descended into lawlessness thanks to a previous regime change effort by America.

Washington’s individual efforts to meddle in Mid-East affairs have now seemingly all melded into one giant, bloody melee and incredibly, America’s solution is to go right back in and meddle some more.

What could possibly go wrong?





Top General warns that Sweden can be a war in a couple of years due to the huge influx of Muslim migrants:


(courtesy zero hedge)

“Sweden Could Be At War Within A Few Years”, Top General Warns

On Monday we brought you the latest from the main train station in Stockholm, where “gangs” of Moroccan migrant children have “taken over” the terminal.

If you believe The Daily Mail, dozens of children, ages nine to 18, are dug in at the station where they wonder about in a drunken stupor attacking security guards, “groping” girls, and “slapping women in the face.”

This rather surreal development comes as Europeans struggle to cope with what they view as the disintegration of polite, Christian society in the face of a deluge of Arab asylum seekers fleeing the war-torn Mid-East.

Many Europeans feel as though their countries have been invaded, for lack of a better word.

Well according to Sweden’s Major General Anders Brännström, being overrun by refugees isn’t the only invasion Swedes need to concern themselves with.

“The global situation we are experiencing and which is also made clear by the strategic decision leads to the conclusion that we could be at war within a few years,” Brännström is quoted as saying in a brochure for representatives attending an annual Armed Forces conference in Boden next week.


“Since the end of the Cold War the Swedish Armed Forces have focused mainly on providing assistance to international missions abroad, but according to Brännström the strategy has now changed to ‘capability of armed battle against a qualified opponent’”, The Local reports, adding that “Sweden has made moves towards stepping up its military capability in the past year, with Defence Minister Peter Hultqvist extending cooperation with other neighbouring countries as well as Nato allies in the face of rising tensions in the Baltic region.”

Of course by “rising tensions in the Baltic region,” The Local means rising tensions between Russia and the West. “Sweden’s Security Service Säpo said last year that the biggest intelligence threat against Sweden in 2014 came from Russia [and] its stern words are largely credited with sparking increased Nato support in the traditionally non-aligned Nordic country.”

Defence Committee chairman Allan Widman echoed Brännström’s sentiments. “My take is that the situation is now so serious that even Sweden, with more than 200 years of peace, must prepare themselves mentally that we can get violent conflicts in our neighborhood and conflicts involving us,” he tells Expressen before delivering the following assessment of Vladimir Putin and Russian “aggression”:

It will come sooner or later a time when Putin becomes pressured politically. The question is what he does in that state – if he apologizes and runs from the Crimea, or if he takes other measures. We’ll have to prepare ourselves for him to take different actions he has shown himself capable of before.

Earlier this month, a poll in Dagens Nyheter showed nearly three quarters of Swedes support reintroducing compulsory military service. “The Swedish Armed Forces are currently short of around 7,500 soldiers, sailors and officers – around half of the total organization – despite running large recruitment campaigns with television ads and billboards in the past few years,”The Local said.

If Brännström is to be believed, Sweden may need the soldiers.”One can draw parallels to the 1930s,” he later told Aftonbladet, before adding that although Sweden “managed to stay out” of World War II, “it is not at all certain that the country would succeed this time.”



Then this happened early this morning where a 22 yr Swedish girl was murdered by a Muslim refugee in a knife attack

(courtesy zero hedge)


Refugee Murders 22-Year-Old Swedish Woman In Knife Attack

As you might have heard, the European Union is on the brink of collapse.

The bloc has been inundated with asylum seekers from the war-torn Mid-East and the influx of refugees now threatens to shatter the Schengen dream. Some European officials (most notably Angela Merkel) are fighting to preserve Europe’s open borders but others have reached their breaking point with what they see as a hostile foreign invasion.

Far-right Dutch politician Geert Wilders even went so far as to call Arab migrants “Islamic testosterone bombs” who need to be “locked” in asylum centers to prevent them from waging a “sexual jihad” on Dutch women.

Wilders was referencing widespread reports of sexual assaults allegedly perpetrated by men and male teenagers “of Arab origin.” These attacks began to make international headlines after eyewitnesses in Cologne, Germany went public with accounts of an apparent sexual melee that unfolded in the city center on New Year’s Eve. Women, the reports indicated, were assaulted by “gangs” of refugees who groped them and in some cases robbed them.

Once the Cologne attacks became big news, Nyheter Idag released an investigative reportalleging prominent Swedish daily Dagens Nyheter sought to conceal from the public a wave of sexual assaults at a youth festival and concert in central Stockholm’s Kungsträdgården last August. Dagens Nyheter denied the allegations, saying it was in fact Swedish police that were responsible for the coverup.

Swedish politicians promised a thorough investigation into the matter and voiced their disgust for the alleged attacks.

“This is a very big problem for those affected and for the whole of our country,” Prime Minister Stefan Löfven said. “We will not budge an inch, and we should not look away.”

Well if Löfven thought roving gangs of teenage refugees groping girls at concerts was a “big problem,” he has an even bigger issue now because on Monday, 22-year-old Alexandra Mezher was stabbed to death by a 15-year-old migrant at an asylum center.

“Mezher began working at an asylum center in the city of Molndal, helping unaccompanied minor migrants adapt to life in their adopted home,” The Washington Post writes. “She was killed by one of those young migrants.”

“It is so terrible. She was a person who wanted to do good,” Mezher’s cousin said “And thenhe murdered her when she was doing her job.

She had only worked at the center for “a few months” according to Expressen, who adds that “the company that runs [the Molndal house] has many similar places throughout western Sweden.” Here’s more the Daily Mail:

Alexandra, of Lebanese Christian origin, lived with her parents Boutros, 46, and Chiméne Mezher, and her two younger brothers in Borås, some 40 miles from Molndal. 


Her father came to Sweden from Beirut, Lebanon, in 1989 and her mother moved there three years later. 


It has now emerged that Miss Mezher had been working alone at the housing in Mölndal, which is home to ten unaccompanied minors.


Despite rules that the staff should work in pairs, Miss Mezher had been working a night shift all by herself and was attacked just half an hour before daytime staff were due to take over, it is claimed. 



A colleague speaking on condition of anonymity said that staff had previously complained about having to work alone overnight.


‘Everyone cried and someone said that this was something we had brought up before, that no one should work alone.’


The teenage migrant accused of murdering a young Swedish social worker at a refugee centre will stand trial as an adult, MailOnline has learnt.


Authorities in Sweden have taken the unusual step of keeping the 15-year-old suspect in police custody due to the serious nature of the crime. 


Youngsters are normally sent to a secure children’s home following arrest, but the teenager is being held behind bars due to public outrage follow the brutal knife killing of Alexandra Mezher.


And he will be held in an adult prison until he goes on trial.


‘A person is criminally responsible when they reach 15-years-old in Sweden,’ a Gothanburg Police spokesman told MailOnline.


‘The boy is being held at the police station.


‘But it is very unusual that children to be kept in custody by the police.


‘However the public prosecutor has deemed this as a special case due to the nature of the crime and will ask for the boy to be held in prison until he goes to trial.’

This is a “terrible crime” PM Löfven said, after visiting the scene. “It was messy, of course, a crime scene with blood,” police spokesman Thomas Fuxborg recalled.

“The symbolism of Mezher’s slaying was not lost on the country’s politicians,” WaPo continues, noting that Löfven took to the air waves following the young woman’s death to acknowledge the country’s growing disaffection with the refugee situation. “I believe that there are quite many people in Sweden who feel a lot of concern that there can be more cases of this kind,” he told Radio Sweden.

Yes Mr. Löfven, we “believe” that you are correct and make no mistake, if European politicans do not find an effective way to get the situation under control, the public will remove them – either with the ballot or with the torches and pitchforks.

On that note we close with one more quote from Mezher’s relatives:

“It is the Swedish politicians’ fault that she is dead.”

Devastation in Alberta, Canada!!
(courtesy zero hedge)


Alberta Loses Most Jobs In 34 Years As Oil Crunch Cripples Labor Market

Times are tough in Alberta and to be sure, we’ve piled it on heavy when it comes to cataloguing the long list of pitiable outcomes that have accompanied crude’s steep slide.

The province is at the center of Canada’s dying oil patch and as crude extended its seemingly endless decline last year, Alberta saw oil and gas investment plunge by a third. That’s bad news for authorities who count on resources for 30% of provincial revenues.

Rig activity fell by half in the first seven months of 2015 and as the job losses mounted, the sorrow deepened – literally. Suicide rates jumped by 30% and in Calgary commercial break-ins almost doubled from a year earlier, while bank robberies were up 65% and home invasions increased 52% (read more here).

Meanwhile, food bank usage spiked as those who used to be donors found themselves depending on the free meals for subsistence.

And speaking of food, prices for fresh fruit and vegetables are seeing double-digit inflationthanks to the plunging loonie.

All in all, a very bad situation indeed and on Tuesday we learned that the picture was actually materially worse than an initial round of statistics led us to believe.

“Statscan’s annual revisions of its national Labour Force Survey data ratcheted up Alberta’s net job losses last year to 19,600, from the 14,600 the statistical agency originally reported in its final 2015 survey released in early January,” The Globe And Mail reports, adding that the losses “exceed the 17,000 jobs Alberta shed in the Great Recession in 2009.”

In fact, 2015 was the worst year for job losses in the province since 1982.

By the end of last year, Alberta’s unemployment rate had risen to 7.1% from just 4.8% at the end of 2014. As The Globe And Mail goes on to note, that’s the highest level in two decades. And it’s projected to get worse. Alberta could see unemployment rise to 7.5% in H1.

Most of the positions lost were breadwinner jobs. The province shed 51,000 full-time positions for the year, up notably from Statcan’s initial read of 44,000.

“The latest figures are also in stark contrast to 2014, when Alberta added 63,7000 positions, more than half of all jobs created in Canada that year,” The Calgary Sun adds, underscore just how sharp the reversal of fortunes has been.

“Alberta is, in effect, ground zero when it comes to absorbing a commodity price shock,” National Bank said last week. “More than any province, it will take the brunt of the expected drop-off in business investment.”

Right. And that means more hardship ahead for O&G sector employees like Sean O’Reilly, 46, who, until last November, was a senior manager at Enbridge Inc.

O’Reilly, who spoke to The Globe And Mail, says he’s “embarrased and ashamed”, but with a wife and two small children he may be forced to change career paths and move out of the province.

“Southern Ontario manufacturing looks pretty good right now,” he says. “I just need one job.”

*  *  *

For those who missed it, below are a few excerpts from “The Death Of The Alberta Dream,” by Jason Markusoff as originally published at Macleans

Late last year, Brandon MacKay listed his Kawasaki dirt bike for sale on Kijiji, the online classifieds site. It was the only treat the 25-year-old had given himself in three years living in Fort McMurray. The rest he’d spent on supporting and visiting his wife and kids in Pictou County, N.S. But in crafting the ad for the bike—$4,400 or best offer—MacKay did what any sales agent would advise against: he revealed his desperation to sell. “I lost my job and am in need of money for my wife and kids for Christmas.”

Energy companies are preparing for a grim 2016. Analysts predict budgets will get slashed further, and that more energy firms may have to cut staff, having already laid off thousands. Ongoing oil sands construction projects will continue to wind down with little to replace them, hitting both the residential and commercial real estate sectors hard. For instance, in nearly one-sixth of all the office space in downtown Calgary, the fluorescent lights now shine on empty cubicles, and it’s forecast to get worse. Reports of the symptoms pop up almost daily: more insolvencies, more business for moving trucks and repo crews, even a noticeable uptick in suicides. The Calgary Stampede itself has been forced to lay off staff, as its offseason event bookings dried up. In November, the Alberta unemployment rate came within one-tenth of a percentage point of the national average, the closest it’s been since 1989. Those trend lines are expected to cross over next year, making it more clear to Canadian job-seekers that the Alberta dream is in decline.

The rest of the country isn’t immune from those ominous grinding sounds coming from Canada’s longtime economic engine. Canadian GDP dipped into recession territory in the first half of 2015 on the oil shock, and though the country managed a rebound in the third quarter, Alberta’s troubles—as well as slumps in other oil-rich provinces like Saskatchewan and Newfoundland—have left a gaping wound. The energy sector had long driven Canada’s trade surplus, papering over weakness elsewhere while soaking up large numbers of unemployed and underemployed people from regions like the Maritimes and hard-hit southwestern Ontario.

But even average growth seems a ways off, as troubles keep filtering through the province. In Alberta’s southeast, Medicine Hat drew international acclaim in the spring of 2015 after it became the first city in Canada to eliminate homelessness, having pursued an ambitious five-year agenda to put people into subsidized housing within 10 days of them landing in emergency shelters. After so much progress, Medicine Hat’s Salvation Army shelter is back to averaging 17 clients a night, up about one-third since 2014—too many to promptly find them all affordable housing. Local demand for donated clothing and household items also rose by more than a quarter over the last year, says manager Murray Jaster. But donations slumped too, and he had to reduce staff.

To Jaster’s point, there is much his province used to have that now seems gone. Most noticeable is Alberta’s eroding status as the Promised Land for so many Canadians from other parts of the country. Over the last decade, net interprovincial migration by 18- to 44-year-olds, the key working demographic, swelled Alberta’s population by 200,000, according to a report by a rather envious Business Council of British Columbia. (That province netted fewer than 40,000 over that stretch, while all other provinces were net losers.) The momentum has shifted. While 1,200 more Canadians still moved to the province than left it during the third quarter of 2015, that was the smallest gain since 2010—when the province was recovering from the 2009 oil price collapse—and less than half the average of the last 50 years.

“Seeing that there’s no real light at the end of the tunnel right now, more [companies] are turning to job cuts,” says Wendy Giuffre, the president of Wendy Ellen, a human resources consultancy. “It seems that there’s another wave right now. I think people were kind of hopeful things were going to pick up sooner, but it’s not looking too promising.”

Statistics Canada’s payroll survey shows Alberta shed 63,500 jobs over the year leading up to October. That doesn’t account for lost potential—the Canadian Association of Petroleum Producers estimates 40,000 jobs that were expected to be created never materialized.

It’s no secret that Alberta’s economy is closely linked to the peaks and craters of oil prices—nominal GDP (not adjusted for inflation) swings in tandem with crude prices. It’s why Fort McMurray is like a wounded beast these days. MacKay’s neighbour got laid off this fall. “I watched the bank come and take his truck,” he recalls—it was that or not feed the kids. Home prices in November were 20 per cent below last year’s average, with even townhouses and duplexes losing $100,000 in value. According to reports, a number of people who used to regularly donate to the city’s food bank have become clients.

What happens in the oil fields directly affects one of Canada’s largest business cores. Elevator trips to Beaver’s small ninth-floor Calgary office have gotten lonelier. Nearly one-third of the office space in the 32-storey highrise is listed for lease or sublease. The asking rate to rent downtown Calgary’s “Class A” office space is down nearly 42 per cent from last year, the result of “a complete lack of demand,” according to a report by real estate advisers Jones Lang Lasalle.

The hollowing out of Calgary offices has decimated the corporate lunch crowd. Regulars who would come to Jalapeno’s Mexican Grill three times a week now visit once, or not at all, owner Doug Hernandez says. “We’re not making any money; we’re just floating right now,” he says. “The problem would be when I’m not wearing my lifejacket anymore. Then I’d drown.”

Much more in the full article here


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


Euro/USA 1.0871 up .0010

USA/JAPAN YEN 118.37 down .017

GBP/USA 1.4304 down .0038

USA/CAN 1.4062 down .0068

Early this WEDNESDAY morning in Europe, the Euro rose by 10 basis points, trading now just above the important 1.08 level rising to 1.0871; 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 further stimulation as the EU is moving more into NIRP and the threat of continuing USA tightening by raising their interest rate / Last  night the Chinese yuan was up in value (onshore). The USA/CNY down in rate at closing last night: 6.5775 / (yuan up  but will still undergo massive devaluation/ which will cause deflation to spread throughout the globe)

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 2 basis points and trading now well below  that all important 120 level to 118.37 yen to the dollar.

The pound was down this morning by 38 basis point as it now trades just above the 1.43 level at 1.4304.

The Canadian dollar is now trading up 68 in basis points to 1.4062 to the dollar.

Last night, Asian bourses were up mostly except Shanghai down .5%, however European bourses  were all down

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 and the yen carry trade also blowing up)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

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 WEDNESDAY morning: closed down 402.01 or 2.35%

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

2/ Asian bourses mixed/ Chinese bourses: Hang Sang green (massive bubble forming) ,Shanghai in the red by .5%  (massive bubble bursting), Australia in the red: /Nikkei (Japan)green/India’s Sensex in the green /

Gold very early morning trading: $1117.30


Early WEDNESDAY morning USA 10 year bond yield: 2.00% !!! paer in basis points from last night  in basis points from TUESDAY night and it is trading BELOW resistance at 2.27-2.32%. The 30 yr bond yield rises to 2.80 par in basis points from last night.  ( still policy error)

USA dollar index early WEDNESDAY morning: 98.96 down 6 cents from TUESDAY’s close.(Now below resistance at a DXY of 100)

This ends early morning numbers WEDNESDAY MORNING





Inventories surge by 8.4 million barrels with the latest DOE report

(courtesy DOE/zero hedge)


Two commentaries:  (courtesy zero hedge)


Oil Oscillates As Inventories Surge Most In 9 Months And Demand Plunges

Following last night’s huge 11.4mm barrel inventory build forecast from API (the largest since 1996), DOE reports an 8.4mm build (against analysts estimates of +4mm). It seems the blowback from the huge gasoline and inventory builds is flowing back upstream to crude but there is some good news as Cushing saw a 771k draw after 11 weeks of builds (and production dropped very modestly). On the demand side, it’s just as ugly with Gasoline demand -2.5% YoY and Distillate demand down a stunning 14.8% YoY. Having tested the API ledge in prices twice this morning, WTI is hovering between $30.50 and $31.



And demand is dropping…

WTI Crude’s trading machines has twice run stops back to the API ledge before this morning’s inventory data…


Charts: Bloomberg


US Crude Inventories Are The Highest Since The Great Depression

In case you were under the impression that oil was stabilizing, we thought this chart might help clarify just how “different” it is this time in the energy complex…

U.S. crude inventories are at levels last seen when President Herbert Hoover was battling the Great Depression.


After this week’s build – Crude stockpiles climbed 8.38 million barrels to 494.9 million in the week ended Jan. 22, the highest since November 1930, according to weekly and monthly data from the Energy Information Administration.

It did not end well last time…


Charts: Bloomberg

The markets originally got a boost when news came that Russia states that it is willing to discuss with OPEC possible production cuts.  No word from Saudi Arabia
(courtesy zero hedge)

Stocks Storm Green, Oil Surges After Russia Says Will Discuss “Possible Production Cuts With OPEC”

Those wondering what matters in this market, here is the answer: moments ago US stocks stormed into the green…


… following oil which after some confusion after today’s massive DOE inventory build, has surged back over $32…


… one just one piece of news: moments ago both Reuters and Bloomberg cited the CEO of Russia’s Transneft, who said that Russia and OPEC will discuss possible output cuts:

  • BREAKING: Russia’s Transneft says Russia and OPEC will discuss possible output cuts -TASS

It appears that Russian oil chiefs discussed coordination w/ OPEC at meeting with Energy Minister Alexander Novak, Bashneft head Alexander Korsik, a participant, tells reporters after event. Bloomberg notes that discussions will continue, no decision yet.

Russia needs to discuss cuts, coordination with OPEC, Transneft CEO Nikolay Tokarev, another participant at meeting said cited by Bloomberg.

The response: every risk asset is now soaring, tracking the bounce in oil tick for tick. At least until Saudi Arabia issues a statement denying that it has any intention of cooperating with Russia on production cuts.

Spot The Difference…

For now, however, those record WTI and Brent shorts are feeling the heat.

Because as Martha Stewart tweeted it best…


Finally, just to make sure stocks really surge, there was this:


Portuguese 10 year bond yield:  2.95% down 4 in basis points from TUESDAY

Japanese 10 year bond yield: .214% !! down 1 in basis points from TUESDAY and extremely low ****unbelievable
Your closing Spanish 10 year government bond,WEDNESDAY down 2 in basis points
Spanish 10 year bond yield: 1.62%  !!!!!!
Your WEDNESDAY closing Italian 10 year bond yield: 1.50% down 1 in basis points on the day:
Italian 10 year bond trading 12 points lower than Spain.
Closing currency crosses for WEDNESDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
Euro/USA: 1.0905 up .0045(Euro up 45 basis points)
USA/Japan: 118.65 up .271(Yen down 27 basis points)
Great Britain/USA: 1.4251 up .0091 (Pound down 91 basis points)
USA/Canada: 1.4114 down 0.0006 (Canadian dollar up 6 basis points as oil price is higher)
This afternoon, the Euro rose by 45 basis points to trade at 1.0905.
The Yen fell to 118.65 for a loss of 27 basis points.
The pound was down 91 basis points, trading at 1.4251.
The Canadian dollar rose by 6 basis points to 1.4114  as the price of oil price rose  to around $31.88 per barrel/WTI).
The USA/Yuan closed at 6.5775
Your closing 10 yr USA bond yield: par in basis points from TUESDAY at 2.00%// (trading well below the resistance level of 2.27-2.32%) policy error
USA 30 yr bond yield: 2.80 up 1 in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries  (policy error)
 Your closing USA dollar index: 98.91 down 45 in cents on the day  at 2:30 pm

(courtesy zero hedge)


(courtesy zero hedge)




The following is going to be interesting:  the Attorney General for Mass. warns Gilead to lower cost of their HEP C drug or face a lawsuit

(courtesy zero hedge)

In Historic First, Massachusetts Attorney General Warns Gilead To Lower Cost Of Hep C Drug Or Face Lawsuit

Late in the summer of 2015, it was one solitary tweet by Hillary Clinton which, in retaliation to Martin Shkreli’s infamous “price gouging”, warned biotech and pharma companies to lower prices for their drugs, that was the catalyst which not only burst the biotech bubble but unleashed a chain of events that culminated with the worst year on record for momentum-gathering investors in alpha clothing such as Bill Ackman. It may have also top-ticked the overall market as it forced the best performing “momo” strategy of recent years to finally fizzle.

However, despite ever louder jawboning up to and including Congressional hearings on the topic of “fair drug prices”, nobody had gone so far as to threaten a healthcare company with legal action unless it cuts drug prices.

Until new, when moments ago Mass. State Attorney General Maura Healey warned Gilead Sciences it faces possible legal action unless it lowers the price of two popular hepatitis C medicines.

As the Boston Globe reports, in a Jan. 22 letter to Gilead chief executive John C. Martin, made public Wednesday, the attorney general wrote that the high price of the company’s Sovaldi drug, which cost $84,000 for a full course of treatment, and its Harvoni drug regimen, which cost $94,500, “may constitute an unfair trade practice in violation of Massachusetts law.”

The newspaper adds that Healey’s letter said her office was looking into bringing an unfair commercial conduct complaint against the company. It is rare, if not unprecedented, for a state attorney general to confront a drug maker on the cost of a therapy.

The antiretroviral treatments sold by Gilead, based in Foster City, Calif., have cured more than 95 percent of hepatitis C patients who have taken them. But their high pricetags have placed a disproportionate burden on state Medicaid programs and corrections agencies nationally, which pay for care of a large share of the patients suffering from the liver-ravaging virus.


“Because Gilead’s drugs offer a cure for the serious and life-threatening infectious disease, pricing the treatment in a manner that effectively allow [hepatitis C] to continue spreading through vulnerable populations, as opposed to eradicating the disease altogether, results in massive public harm,” Healey wrote.

To be sure, Gilead executives have responded to criticism by consumers, insurers, and lawmakers in Washington by arguing its prices are justified. They say the treatments save the health care system money in the long run by preventing patients from developing liver scarring or cancer. Ultimately they may be right, however it is undisputed that the flawed and unsustainable US healthcare system, discussed extensively in the past, is enabling companies like Gilead to charge virtually any price with little pushback, at least until the events from last summer which have now culminated with this letrer.

Furthermore, Gilead is only the first: Healey’s letter targets only Gilead, because its drugs treat a population that is heavily insured by state programs. But the attorney general’s office is also using the letter – and the threat of a commercial conduct complaint – to open up a broader discussion of the impact of rising prescription drug prices on health care spending.

As the Globe also notes, “a recently published investigation by the US Senate Finance Committee found that Gilead “pursued an aggressive pricing strategy aimed at maximizing revenue — not fostering access” to all people needing the drug, Healey’s letter said. It said Gilead had revenue of $20.6 billion from the drugs, after rebates to insurers, in the first 21 months after they went on the market.”

Well, that’s what capitalism is: maximizing revenue. The problem arises when capitalism generates outsized returns by benefiting from a fatally constructed welfare platform, such as the various US healthcare systems which have lead to the current predicament.

“The purpose of this letter is to urge Gilead to adjust its pricing strategy in a way that continues to generate substantial profits for the company, while also providing a clear pathway to the eradication of this life-threatening disease in the United States,” Healey wrote.

Should Healey’s overture against Gilead escalate and ultimately be successful in court, it is only a matter of time before the rest of the pharma world is pursued just as aggressively for comaprable “revenue maximizing” strategies, leading to sharp drops in stock prices for what until recently was the best performing sector.


Apple extends losses and guides lower for the yr:
(courtesy zero hedge)

“No Brainer” Apple Extends Losses Despite Analyst Pleas That Guidance “Better Than Feared”

Apple’s guidance was considerably worse than expected, but always spinning positively, analysts proclaim somehows that it was “better than feared.” It appears not as AAPL is now down almost 4% despite every sell-side analyst’s pleas that “the bottom is in.” The ultimate “no brainer” stock is now down over 28% from its highs last year and analyst targets are still at $137 on average – a nearly 50% gain from here. And finally, as if a crashing stock was not enough, Apple’s Safari browser is reportedly crashing if users attempt to search – not a great day for Tim Cook.

It appears Tim Cook forgot to email Jim Cramer about how bad China had become…

We know the conditions in China have been a source of concern for many investors. Last summer, while many companies were experiencing weakness in their China-based results, we were seeing just the opposite with incredible momentum for iPhone, Mac, and the App Store in particular. In the December quarter, despite the turbulent environment, we produced our best results ever in Greater China with revenue growing 14% over last year, 47% sequentially and 17% year-over-year in constant currency. These great results were fueled by our highest-ever quarterly iPhone sales and record App Store performance.Notwithstanding these record results, we began to see some signs of economic softness in Greater China earlier this month, most notably in Hong Kong.

Here’s Goldman…

AAPL reported 1Q earnings post close. The bottom line from our trading desk (not GS research): “Results are pretty much smack in line with how most of the street previewed the stock. Our sense is the reaction to the print will be somewhat muted.”

Hhhmmm no…


Here is Wall Street’s best and brightest herders…


A smattering of Wall Street “Bullish” advice since the earnings hit…

FBR (Daniel H. Ives)

AAPL’s March guidance “better than feared”; co. likely has ‘‘tough’’ qtrs ahead of iPhone 7 introduction later this yr
Co.’s software ecosystem, services segment remains ‘‘core advantage”; likely to help gross margins, profitability in next 12-18 months
Rates outperform, cuts PT to $130 from $150

PACIFIC CREST (Andy Hargreaves)

Sustained pricing power, recovering iPhone unit growth in FY17 likely to result in margin expansion, increased profit
Strong iPhone prices show consumers likely not ‘‘trading down’’ to cheaper models as smartphone market matures
Customers still ‘‘extremely loyal”
Rates overweight, PT $132

BARCLAYS (Mark Moskowitz)

1Q results, 2Q outlook “not as bad as investors feared”
Stock likely attractive to L-T investors in case of any near-term weakness; sees iPhone 7 prototypes in 2Q, expanded capital allocation in 3Q as potential catalysts
Rates overweight, cuts PT to $142 from $150

MACQUARIE (Ben Schachter)

Sees March qtr as “bottom” for iPhone unit growth; iPhone 7 likely to return AAPL to growth
Co. likely to continue to gain share, especially if it introduces products that create new “use cases” for iPhone, other devices
Rates outperform, PT $117

RAYMOND JAMES (Tavis C. McCourt)

Weaker 2Q guidance reflects maturing smartphone mkt, forex concerns
Shares likely to stay within “recent range” until growth trends stabilize
Rates market perform

And finally, if it weas not enbough that the stock was crashing, now the browser is too…

Apple’s Safari search browser is crashing for some users when they run a search from the address bar in both iOS and OS X devices, the Verge reported.


The problem appears to be affecting iOS and OS X devices worldwide, the Verge reported on Wednesday.


Apple’s iPhones and iPads run on iOS, while its Mac computers operate on OS X.


The problem, which is related to Safari’s search suggestions feature, can be rectified temporarily by disabling the feature or using the private mode option in the browser, the Verge reported, citing an iOS developer Steven Troughton-Smith.

Meanwhile, this is what really happened:

iPhone units were < 75M, but that included 3.3M of incremental units into channel inventory (a year ago, Channel Inventory came down) – so, sell through was down 4% Y/Y on reported Flat Sell-In.   Apparently, the email to Cramer alerting him to the slowing in China over the last few weeks, which Cook copped to on the call, got caught in the spam folder.

iPads were pretty bad too,  with units at least 2M below the consensus, and Y/Y declined worsened to ~ 25% from ~ 20% last quarter. This is with something like 3M iPad Pro’s shipped, quasi-new product to the category.

Apple’s Mac figure was down like 4% Y/Y, IDC had Mac’s up like 4% Y/Y. This is 2nd straight quarter of relevant delta between these figures, again no idea why.


The sellside had been cutting like crazy over the last month, and yet nobody got down < $53B in Sales vs. the guided mid-point of ~ $51.5B. Guide implies < 50M iPhone Units, which is where people were starting to model, although not clear what Apple plans for Channel Inventory.


Then we see China’s largest distributor lower the cost on Apple i 6 phones in China by 17% ahead of the new years celebration when demand is the highest
(courtesy zero hedge)

Cupertino, We Have A Problem: China’s JD.Com Just Cut Prices On Apple Products By 17%

As readers will recall, one of the bullish catalysts that pushed the market off its August 24 ETFlash Crash lows was an email sent by Tim Cook to Jim Cramer of all people (one which still hasn’t been 8-K’ed), in which AAPL’s CEO said the following:

“I get updates on our performance in China every day, including this morning, and I can tell you that we have continued to experience strong growth for our business in China through July and August. Growth in iPhone activations has actually accelerated over the past few weeks, and we have had the best performance of the year for the App Store in China during the last 2 weeks.”

As we subsequently showed using channel check data from GfK looking at AAPL Chinese sell-throughs, the realty was vastly different.

Five months later, Tim Cook was forced to finally admit the truth when on last night’s conference call he said that “we began to see some signs of economic softness in Greater China earlier this month, most notably in Hong Kong.”

Alas, Cook was once again disingenuous by saying that softness appears only “earlier this month” because as we again showed in early in November, AAPL had cut component orders with its core suppliers by as much as 10%, a clear indication it was well aware of Chinese weakness ahead of time.

But all that is in the past, and what AAPL longs want now is some clarity that the future is not only stable but improving. Alas, they won’t get it.

According to Brightwire, one of China’s top online vendors, JD.com, has just cut the prices of Apple products by “as much as 17% in sale ahead of Chinese New Year” or precisely the time when there should be no need for heavy discounting.

As Brightwire adds, “JD.com cut prices of Apple products on the internet marketplace by as much as 17%, according to information on the JD website. Customers can also purchase Apple products in 12 monthly installments with no interest charges and no downpayment.”

Among the discounts, iPad Air tablet with 16GB memory is priced at CNY 2,399 (USD 365), compared with CNY 2,888 on the Apple online store in China. The iPhone 6s Plus handset with 64GB memory is priced at CNY 6,288, compared with the official price of CNY 6,888.


The special sale ahead of the Chinese New Year holiday will span from Jan. 27 to Feb. 5, according to JD.com. The internet company also gives out cash coupons for purchases of a certain amount.

The question is whether once the discount period runs out and the much neded demand fails to materialize, how much greater will AAPL’s margin-crushing discounts have to get for already waning top-line momentum to persist.

For many former AAPL bulls, the answer is irrelevant and with the stock now 30% from its all time highs, they have decided to pack up and leave.

And now the FOMC meeting results from 2 weeks ago:
First:  official release
(courtesy zero hedge)

Fed Back-Pedals Hawkishness, Hints At Policy Error: “Monitoring Global Developments”, Admits “Growth Slowed Last Year”

Surging bonds and bullion and slumping stocks was not what Janet had in mind so she had some ‘splaining to do. Hopes for a “passive hawkish” note appear to be met as confirmation of dismal data dependence offers just enough dovishness for the stock bulls and just enough hawkishness for economy bulls.


Treading a fine line between losing all credibility and exposing their total devotion to the stock market, it appears The Fed is maintaining its delusion that everything will be fine as they unwind the largest and most experimental monetary policy of all time, and yet for the first time we get proof that the Fed admits it made an error by hiking into a slowing economy: “labor market conditions improved further even as economic growth slowed late last year.

Pre-Fed: S&P Futs 1901.75, 10Y 2.04%, Gold $1115, WTI $31.95, EUR1.0875

Before the statement hit, rate odds this year were as follows:


Since the last meeting – and the historic rate hike – things have not panned out for The Fed…


Nanex explains the liquidity situation right before the statement:


Further headlines:


Except that is a total lie..



Here’s why!!

*  *  *

Full Redline Statement below:

There was some verbal “normalization” in the statement, which at 558 words had the fewest words since the July statement:

*  *  *

Even Steve Liesman knows it’s over…


… Bringing us to the many faces of Yellen:


Second; market reaction to the Fed’s not dovish enough statement: a huge disappointment:
(courtesy zero hedge)

Market Reaction To “Not Dovish Enough Statement” – Disappointment

Fed Funds futures now imply the next rate hike will not occur until at least H2 2016 and this level of fear about the economy appears to have spooked stocks and crude and put a bid under bonds and bullionVIX is chaos as the machines try desperately to get stocks higher…


Not Dovish Enough…


Bonds & Bullion bid…


And VIX is going crazy…


Someone do something!!


The mouthpiece, Jon Hilsenrath speaks:

(courtesy Jon Hilsenrath/Wall Street Journal)_

Fed Mouthpiece Parses Back-Pedaling Fed Statement

Well here we are, a month after liftoff and the world’s on fire again, just as it was in late August.

So far in 2016 we’ve seen continued pressure on crude and just as we saw late last summer, there’s big trouble in little China.

Meanwhile, US markets got off to an inauspicious start in 2016 logging what for a time was the worst start to a year in market history.

The last times things were this uncertain, Janet Yellen eschewed a planned September rate hike in favor of the ultra-dovish “clean relent” as the Fed admitted that its reaction function did indeed include not just financial markets, but foreign financial markets.

On Wednesday, the FOMC stayed put at its no presser meeting (we know, we know, they’re all “live” meetings now days) and here to decipher the statement is Yellen mouthpiece and seer of seers, Jon Hilsenrath.

From WSJ

The Federal Reserve signaled renewed worry about financial market turbulence and slow overseas economic growth, but didn’t rule out raising short-term interest rates in March.


The central bank said in a statement released Wednesday it would hold its benchmark rate steady for now, between 0.25% and 0.5%, and is “closely monitoring” developments in global economies and markets.


The Fed said officials still believed the economy is on track to grow, produce jobs and gradually lift inflation to their 2% target, despite worries about falling stock and oil prices and uncertainty about overseas growth. However officials were agnostic on whether the outlook has fundamentally shifted in light of developments since the last meeting, a sign of some lack of conviction about their economic forecasts.


“The (Fed) is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook,” the Fed said in a statement released after the two-day meeting.


The statement amounted to an acknowledgment the Fed could alter its plans for more rate increases this year if market turbulence and slowing global growth continue or worsen. But officials aren’t ready to commit to holding off on rate rises.


The Fed in December penciled in four quarter-percentage-point interest-rate increases this year. Investors and traders believe it will be less. If the Fed follows through on its plan, rates would rise to 1.375% by year-end; futures markets put the expected rate at 0.605% in December, meaning just one more rate increase, and even that isn’t a sure thing.


Fed Chairwoman Janet Yellen now faces a busy calendar. She is slated to testify before Congress in February. And there is a policy meeting scheduled for March 15-16, when officials will weigh whether to raise the benchmark rate again.


The Fed’s policy statement pointed to the mixed economic backdrop that officials see now.


“Labor market conditions improved further even as economic growth slowed late last year,” the Fed said. While job gains were strong, it said, consumer spending and business investment were just moderate, inventory drawdowns a drag and net exports soft.


The Fed is also trying to assess a shifting inflation outlook. Officials said they expected it to remain low in the near term, thanks to declines in energy and import prices, but to gradually rise. One worry is market expectations for future inflation are shifting down, a development officials acknowledged in their statement.


Ms. Yellen won a unanimous vote, her second straight meeting at which nobody dissented.


One challenge for officials at their meeting was deciding how to signal their degree of concern about stock-market and oil-price declines and uncertainty about a shifting growth outlook in China, the world’s second-largest economy.

After concerns about China roiled markets in late summer and early fall, Fed officials said in September that the developments could restrain economic activity and push down inflation.


On Wednesday, they stopped short of repeating that language, which would have suggested their economic forecasts were souring in light of the latest market developments.


Instead they said they were watching events closely, an echo of language they used in October. This effectively keeps their options open for the


March meeting. In declining to say whether risks to the outlook had shifted in light of market and overseas developments, officials made clear that they are struggling to assess a shifting landscape.


The Fed will update its forecasts for growth, inflation, unemployment and interest rates in March, and officials likely want to assess the tone of economic data and market developments between now and then before deciding what signal to send about the path of rates.

I will see you tomorrow night

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: