Feb 24 Gold bombed in access market/USA economic data awful but still the lunatics drive up the Dow/Nasdaq/Brazil has its official debt lowered to junk by all 3 rating agencies/

Gold:  $1,238.70 up 16.40    (comex closing time)

Silver 15.29 up 5  cents

In the access market 5:15 pm

Gold $1229.25

silver: $15.23


We are now entering the last week of the month and you all know that it means options expiry:

for the Comex:  Wednesday Feb 24   tonight

for OTC and LBMA: Monday, Feb 29.

expect that the criminal bankers to raid gold/silver again until the first day of March.


Today’s quote of the day:


“As one witty trader remarked, today’s rally is so furious, Oprah lost 10 pounds just watching it”

At the gold comex today, we had a GOOD delivery day, registering 30 notices for 3000 ounces. Silver saw 1 notice for 5,000 oz.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 207.55 tonnes for a loss of 95 tonnes over that period.

In silver, the open interest rose by 3290 contracts up to 174,697. In ounces, the OI is still represented by .874 billion oz or 125% of annual global silver production (ex Russia ex China).

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

In gold, the total comex gold OI rose by a large 8,265 contracts to 445,290 contracts as the price of gold was up $12.80 with yesterday’s trading.(at comex closing)

We had no change in gold inventory at the GLD   / thus the inventory rests tonight at 752.99 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 tune of  and thus the Inventory rests at 311.618 million oz


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

1. Today, we had the open interest in silver rose by 3290 contracts up to 174,697 as the price of silver was up 5 cents with yesterday’s trading.   The total OI for gold rose by 8265 contracts to 445,290 contracts as gold rose by $12.80 in price from yesterday’s level.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)


i)Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed UP slightly  BY 25.57 POINTS OR 0.88% ON LAST HR INTERVENTON  / Hang Sang closed DOWN by 122.33  points or 1.15% . The Nikkei closed DOWN 136.76 or 0.85%. Australia’s all ordinaires was down 2.10%. Chinese yuan (ONSHORE) closed down at 6.5360.   Oil LOST  to 30.76 dollars per barrel for WTI and 32.96 for Brent. Stocks in Europe so far deeply in the RED . Offshore yuan trades  6.5411 yuan to the dollar vs 6.5360 for onshore yuan/

ii) Just what we need: China sends fighter jets to the Spratly Islands as well as installing radar systems:

( zero hedge)



i)The Pound/USA (cable) falls below 1.40 for the first time in 7 years as a BREXIT risks soars as Farage explains that the deal with Cameron and the EU is not binding and not legal.
( zero hedge)
ii)Hungary calls a referendum on refugee quots

( zero hedge)


i) Direct evidence of transcripts proving the ISIS -Turkey link:

( zero hedge)
i) Jack Lew of the USA dashes hope of a coordinated crisis response needed at the G20 conference this weekend.  If I were to guess, it is my feeling that China and the rest of the nations will devalue their currencies against gold!

( zero hedge)
ii)Many will remember Chairman Guy Hands back in Nov 2007 warning of a looming crash and it said:  “bankers will go back to their baskets like dogs”.  Then our friendly bankers sent him some dog biscuits stating that he was dead wrong.  He wasn’t!

Today we warns again that the markets are very scary!!  Pay attention to what he says.
( zero hedge)
i)Brazil now has its official debt cut to junk by all three rating agencies:
( zero hedge)
ii)And now our basket case Venezuela which probably has two months maximum before sovereign default

( zero hedge)

i) It is so bad in the oil patch in Canada that owners of the surface rights have not been paid by the oil companies because of huge losses:

( zero hedge)

ii)Crude spikes on less of a build in inventory at the DOE. However Cushing continues to build in inventory:

( zero hedge)
i)These guys are total idiots.  They just do not read. South African mining companies Harmony and Acacia lock in profit margins as they start a hedging program( Bloomberg/GATA)

ii) The author is perfectly correct:  Technical analysis in the gold market is being used as a weapon.

( Robert Appel/GATA/Profit Confidential)

iii)Negative interest rates will hasten our commercial signal failure

( John Embry/Kingworldnews)

iv) Avery Goodman on gold

( Avery Goodman/GATA)

v)Bill Murphy of GATA interviewed by Bernie Lo of CNBC ASIA


vi) A very important commentary tonight from Bill Holter

His piece is entitled:

“Are they tired enough?”


i) Now it is Markit’s turn to report a huge crash in the services sector along with the Markit PMI;  the USA is now in contraction mode:

( Markit/zero hedge)
ii)New home sales collapse by a monstrous 9.2% in January.  It seems that the USA economy stopped on a dime from Dec 2105 onward:

( zero hedge)

Let us head over to the comex:


The total gold comex open interest rose to 445,290  for a gain of 8,265 contracts as the price of gold was up $12.80 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, only the first scenarios was in order as we actually gained in ounces standing.   In February  the OI fell by 11 contracts down to 137. We had 57 notices filed on yesterday, so we gained 46 contracts or an additional 4600 oz will stand for delivery. The next non active delivery month of March saw its OI fall by 326 contracts down to 1202. After March, the active delivery month of April saw it’s OI rise by 6167 contracts up to 308,792. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 260,388 which is good.  The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 200,877 contracts. The comex is  in backwardation until March.


Today we had 30 notices filed for 3000 oz.
And now for the wild silver comex results. Silver OI rose by 3290 contracts from 171407 up to 174,697 as the price of silver was up by 5 cents with respect to yesterday’s trading. The next non active delivery month of February saw its OI fall by 0 contracts remaining at 1. We had 0 notices filed yesterday, so we neither lost nor gained any  silver contracts that will stand in this non active month of February. The next big active contract month is March and here the OI fell by 9,600 contracts down to 33,887.  The volume on the comex today (just comex) came in at 99,014 , which is huge. The confirmed volume yesterday (comex + globex) was also huge  at 88,088. Silver is not in backwardation at the comex but is in backwardation in London. First day notice is on Monday,  the 29th of February.
We had 1 notice filed for 5,000 oz.

Feb contract month:

INITIAL standings for FEBRUARY

Feb 24/2016

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 257.200 oz brinks

8 kilobars

Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz    96,482.150 oz

Scotia: 2,000 kilobars)


No of oz served (contracts) today 30 contracts
(3000 oz)
No of oz to be served (notices) 107 contracts  (10,700 oz )
Total monthly oz gold served (contracts) so far this month  2497 contracts (249,700 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 532,238.5 oz
Today, we had 0 dealer transactions
total dealer deposit; nil oz
total dealer withdrawals nil.
We had 1  customer withdrawals:
i) Out of Brinks: 257.200 oz
total customer withdrawal: 257.200 oz
we had 2 customer deposits: and another of those phony paper kilobar deposits
i) Into Scotia:  96,450.000 oz (2,000 kilobars)
ii) Into Brinks: 323.15 oz  (1 kilobars)
total:  96,482.150 oz or 2001 kilobars

we had 1 adjustment

Out of JPMorgan

26,355.676 oz leaves the dealer and this enters the customer side of JPMorgan


 JPMorgan has a total of 46,083.778 oz or 1.4333 tonnes in its dealer or registered account.
***JPMorgan now has 660,712.204 or 20.5509 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 30 contracts of which 0 notice was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the Jan contract month, we take the total number of notices filed so far for the month (2497) x 100 oz  or 249,700 oz , to which we  add the difference between the open interest for the front month of February (137 contracts) minus the number of notices served upon today (30) x 100 oz   x 100 oz per contract equals the number of ounces standing.
Thus the initial standings for gold for the February. contract month:
No of notices served so far (2497) x 100 oz  or ounces + {OI for the front month (137) minus the number of  notices served upon today (30) x 100 oz which equals 260,400 oz standing in this active delivery month of February (8.0995 tonnes)
we gained 46 contracts  or an additional 4600 oz will stand for delivery
We thus have 8.0995 tonnes of gold standing and 8.2283 tonnes of registered gold for sale, waiting to serve upon those standing.  The bankers are still doing their best in cash settling as there is not enough registered gold to satisfy those that are standing.
Total dealer inventor 290,898.134 oz or 9.048 tonnes
Total gold inventory (dealer and customer) =6,672,850.053 or 207.55 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 207.55 tonnes for a loss of 95 tonnes over that period. 
JPMorgan has only 21.99 tonnes of gold total (both dealer and customer)
And now for silver


feb 24/2016:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  1,251,806.118 oz



Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 1,014,251.3 oz


No of oz served today (contracts) 1 contract 5,000 oz
No of oz to be served (notices) 1  contract (5,000 oz)
Total monthly oz silver served (contracts) 166 contracts (830,000 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 17,380,772.1 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  customer deposits:

i) Into HSBC: 440,050.49 oz

ii) Into JPM:  614,200.810

total customer deposits: 1,014,251.300  oz

We had 4 customer withdrawals:
i) Out of CNT: 636,574.265 oz
ii) Out of Brinks: 14,217.29 oz
iii) Out of Delaware: 1014.163 oz
iv) Out of JPMorgan; 600,000.400 oz

total withdrawals from customer account 1,251,806.118   oz


 we had 3 adjustments: and they were doozies

i) Out of CNT:

374,493.900 oz was adjusted out of the dealer and this landed into the customer account of CNT

ii) Out of Delaware:

1,492,945.955 oz was adjusted out of the dealer and this landed into the customer account of Delaware

iii) Out of JPMorgan:

1,742,050.13 oz was adjusted out of the dealer and this landed into the customer account of JPMorgan

total adjusted oz out of dealers: 3,609.489 oz



The total number of notices filed today for the February contract month is represented by 1 contracts for 5,000 oz. To calculate the number of silver ounces that will stand for delivery in February., we take the total number of notices filed for the month so far at (166) x 5,000 oz  = 830,000 oz to which we add the difference between the open interest for the front month of February (1) and the number of notices served upon today (1) x 5000 oz equals the number of ounces standing (830,000 oz)
Thus the initial standings for silver for the February. contract month:
166 (notices served so far)x 5000 oz +(1{ OI for front month of February ) -number of notices served upon today (1)x 5000 oz   equals  830,000 oz of silver standing for the February. contract month.
we neither lost nor gained any silver contracts that will  stand in this non active delivery month of February.
Total dealer silver:  25.295 million  (near all time recorded low level)
Total number of dealer and customer silver:   155.262 million oz
Question: in a non active month again why so much activity in the silver comex?
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:

FEB 24/no change in gold inventory at the GLD/Inventory rests at 752.29 tonnes

FEB 23./another huge addition of 19.3 tonnes of gold into its inventory/Inventory rests at 752.29 tonnes.  Again how could they accumulate this quantity of gold with backwardation in London/this vehicle is nothing but a fraud

Feb 22/A huge addition of 19.33 tonnes of gold to its inventory/Inventory rests at 732.96 tonnes/ How could this happen: a huge addition of gold coupled with a huge downfall of 20 dollars in gold.

FEB 19/a huge deposit of 2.68 tonnes of gold into the GLD/Inventory rests at 713.63 tonnes

fEB 18/no change in gold inventory at the GLD/Inventory rests at 710.95 tonnes

fEB 17/no change in gold inventory at the GLD/Inventory rests at 710.95 tonnes

Feb 16.a huge withdrawal of 5.06 tonnes from the GLD/the loss was probably a paper loss/inventory at 710.95 tonnes

fEB 12/ a huge deposit of 11.98 tonnes/inventory rests at 716.01 tonnes.  With gold in severe backwardation in London, I really believe that the gold added was paper gold and not real physical/

Feb 11/no change in inventory/inventory rests at 702.03 tonnes


Feb 24.2016:  inventory rests at 752.29 tonnes


Now the SLV
FEB 24/no change/inventory rests at 311.618 million oz
FEB 23/no changes in inventory at the SLV/Inventory rests at 311.618 million oz
Feb 22/ we have a good addition of 666,000 oz into inventory/Inventory rests at 311.618 million oz
FEB 19/no change in inventory/inventory rests at 310.952 million oz
FEB 18/no change in inventory/inventory rests at 310.952 million oz
fEB 17/ a huge withdrawal of 1.237 million oz of silver removed from the SLV/Inventory rests at 310.952 million oz.
Feb 16.2016: a huge deposit of 3.809 million oz of silver added to the SLV/Inventory rests at 312.189
FEB 12 no change in silver inventory/inventory rests this weekend at 308.380 million oz
feb 11/ a withdrawal of 619,000 oz/inventory rests at 308.380 million oz/
Feb 10/no change in inventory at the SLV/rests at 308.999 million oz/
Feb 24.2016: Inventory 311.618 million oz.
1. Central Fund of Canada: traded at Negative 7.8 percent to NAV usa funds and Negative 7.4% to NAV for Cdn funds!!!!
Percentage of fund in gold 64.3%
Percentage of fund in silver:35.7%
cash .0%( feb 24.2016).
2. Sprott silver fund (PSLV): Premium to NAV rises to  +2.45%!!!! NAV (feb 24.2016) 
3. Sprott gold fund (PHYS): premium to NAV rises to -.18% to NAV feb 24/2016)
Note: Sprott silver trust back  into positive territory at +2.45%/Sprott physical gold trust is back into negative territory at -.18%/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

It’s Us – Not Politicians Or Rich People – Who Create Jobs And Drive Economy

When business lobbies warn that voting Left would lead to a period of political instability that would hurt the economy, it’s easy to understand cynicism from the Left-wing parties. Someone should remind business lobbies, corporations and banks that it was the people at the commanding heights of banks and business who ruined the economy last time.

GoldCore: David McWilliams

David McWilliams, a respected economist and commentator has written an interesting article ahead of the Irish election where he points out the importance of normal every day people and businesses and indeed of “animal spirits” and psychology:

Politicians should understand that they do not create jobs; nor do rich people. Jobs are created by general demand. Rich people don’t create demand. You and I create demand. Demand is what happens when the society has enough income to buy goods and services.

How does that happen? Where does income come from?

It comes from investment. It comes from people, you and me, going out and risking capital into projects today that we believe may deliver fruit in the morning. These are animal spirits unleashed. So if we are opening a shop, café or online business today, we believe that we will be able to gain enough business to make the returns to that business better in the future for us than if we did nothing today. In short, we back ourselves, our ideas and our own personal energy, drive and talent to create something out of nothing now that will be worth something far more than nothing tomorrow.

McWilliams article can be read on the Irish Independent 


David McWilliams is one of the many speakers at Cantillon 2016, ‘FINTECH – Disrupting the Landscape’, taking place this Thursday in Tralee, Co Kerry. Mark O’Byrne of GoldCore will be speaking about “Future Of Money – Savings, Payments, Asset Backed Digital Currencies & Gold.”

LBMA Gold Prices
24 Feb: USD 1,232.25, EUR 1,122.33 and GBP 885.52 per ounce
23 Feb: USD 1,218.75, EUR 1,106.62 and GBP 863.43 per ounce 
22 Feb: USD 1,203.65, EUR 1,088.17 and GBP 849.21 per ounce
19 Feb: USD 1,221.50, EUR 1,101.14 and GBP 853.35 per ounce
18 Feb: USD 1,204.40, EUR 1,082.41 and GBP 841.19 per ounce

Gold and Silver News and Commentary

Gold inches lower but stays supported on risk-off mood – Bullion Desk

Gold keeps gains above $1,200 on safe-haven bids – Reuters

Gold’s Bull-Market Flirtation Has Investors Swooning Over ETFs – Bloomberg

Consumer confidence falls to seven-month low – Marketwatch

Video: Manipulation In The Gold Market? – CNBC

Why is Gold Rising Again – Goodman

Technical analysis is just a weapon against the gold market – Profit Confidential

GLD continues to astound – Norcini – Gold Seek

Click here

Mark O’Byrne

These guys are total idiots.  They just do not read. South African mining companies Harmony and Acacia lock in profit margins as they start a hedging program

(courtesy Bloomberg/GATA)

Gold hedging returns as Harmony, Acacia lock in profit margins

Submitted by cpowell on Tue, 2016-02-23 12:57. Section: 

By Kevin Crowley
Bloomberg News
Tuesday, February 23, 2016

Harmony Gold Mining Co. and Acacia Mining Plc agreed to lock in profit margins at some of their African operations in a return to hedging strategies that undermined the industry during the metal’s bull run in the 2000s.

Harmony, which gets 95 percent of its production from South Africa, hedged its local currency at between 15.59 rand ($1.03) and 18.60 rand per dollar for a third of its annual production, it said in a statement today. Acacia took out contracts known as zero-cost collars on 136,000 ounces of gold from Buzwagi, a Tanzanian mine, at $1,150 an ounce to $1,290 an ounce, it said in a separate statement.

Harmony and Acacia, among the world’s highest-cost major gold miners a year ago, are trying to secure current profits linked to higher bullion prices and weak local currencies. Miners largely got out of hedges in bullion’s decade-long bull run to 2011 as the rising spot price made many of the contracts unprofitable. …

… For the remainder of the report:



The author is perfectly correct:  Technical analysis in the gold market is being used as a weapon.

(courtesy Robert Appel/GATA/Profit Confidential)

Robert Appel: Technical analysis is just a weapon against the gold market

Submitted by cpowell on Tue, 2016-02-23 13:28. Section: 

8:25a ET Tuesday, February 23, 2016

Dear Friend of GATA and Gold:

Profit Confidential editor Robert Appel writes this week that the manipulation of the gold market by central banks is obvious and that such rigging turns ordinary technical analysis into a weapon against that market.

The manipulation, Appel writes, “represents a coordinated series of attacks on multiple fronts over a period of years, is funded by institutions that can print money at will, incorporates a major ‘psy-op’ component designed to both capture and hold the attention of the mo-mo crowd, and is backstopped by legislation that not only exempts the chief operators from the rule of law but (typically) can actually make life unpleasant for those who question the status quo.”

He adds: “If a person or persons unknown enter the market with overpowering ‘blunt-force trades’ — backed by the ability to create infinite money at will and with immunity from prosecution — then the potential exists to deliberately move prices to ‘known’ inflection points that are religiously followed by traders around the world — traders who, for whatever reason, have yet to conclude they are being ‘gamed.’ In effect, under such a scenario, technical analysis morphs from tool to weapon, and the weapon, ironically, has the greatest impact on those who are most addicted to the tool.”

Appel’s commentary is headlined “If This Happens Gold Mining Stocks Could Skyrocket” and it’s posted at Profit Confidential here:


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


Negative interest rates will hasten our commercial signal failure

(courtesy John Embry/Kingworldnews)

Negative rates, devaluations hasten ‘commercial signal failure’ in metals, Embry says

Submitted by cpowell on Tue, 2016-02-23 19:18. Section: 

2:15p ET Tuesday, February 23, 2016

Dear Friend of GATA and Gold:

Negative interest rates and currency devaluations are hastening a “commercial signal failure” in the monetary metals metals, Sprott Asset Management’s John Embry tells King World News today. An excerpt from the interview is posted at KWN here:


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


Avery Goodman on gold

(courtesy Avery Goodman/GATA)

Avery Goodman: Why gold prices are headed up now

Submitted by cpowell on Wed, 2016-02-24 00:50. Section: 

7:50p ET Tuesday, February 23, 2016

Dear Friend of GATA and Gold:

The change in the gold market results mainly from international politics, Colorado securities lawyer and market analyst Avery Goodman writes today. Goodman cites an exasperated comment by a JPMorganChase official suggesting that the investment bank, managing the U.S. government’s gold market intervention, has concluded that it cannot break demand for the monetary metal. His commentary is headlined “Why Gold Prices Are Headed Up Now” and it’s posted at his Internet site here:


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


Bill Murphy of GATA interviewed by Bernie Lo of CNBC ASIA

(courtesy GATA/CNBC)

CNBC Asia interviews GATA chairman on the failing efforts to suppress gold

Submitted by cpowell on Wed, 2016-02-24 02:48. Section: 

9:47p ET Tuesday, February 23, 2016

Dear Friend of GATA and Gold:

GATA Chairman Bill Murphy was interviewed from Dallas tonight — Wednesday morning Hong Kong time — by Bernie Lo on CNBC Asia’s “Squawk Box” program, discussing indications that central banks and their investment bank agents are having increasing difficulty in suppressing the price of gold. Murphy added that the banks seem especially scared of silver. A seven-minute excerpt from the interview is posted at the CNBC video archive here:


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


All six of Goldman’s 2016 big trades for the year are all southbound and losing big money including gold.  No doubt that their call for the clients to sell gold was for the firm itself to pick up gold and for that matter silver as well

(courtesy Goldman Sachs/zero hedge/CNBC)

Gold Is Breaking Out; Goldman Stumped

Recently on CNBC, Goldman made its position on gold very clear:

  • CNBC: “You would fade this whole gold hike?”
  • Goldman’s Jeff Currie: “Absolutely”

h/t @RudyHavenstein

Translation: “sell your gold to us” because as usual things are not working out quite as expected for Goldman’s clients who listened:

And today BofAML’s Stephen Suttmeier confirms the bank’s constructive view on the precious metal, viewing the breakout above 1,201 as a significant reason to believe Gold may have formed a technical bottom on a longer-term basis…

Gold forms a technical bottom, breaks out of channel

The 61.8% Fibonacci measured move target and an extrapolated 200wk average align at 1,315 and is followed by a full measured move target of 1,375.

Silver makes a sputtering breakout

Silver also broke up through resistance provided by a channel and 50wk SMA, though it has since begun to reverse and did so in a less convincing way. Gold made the decisive breakout, not silver, and so we suspect gold may outperform silver overall.

And Suttemeier’s shorter-term view confirms this…

Gold & Silver: Bullish from Bearish on tactical absolute & relative bottoms

For the first time in a long time, the Philadelphia Stock Exchange Gold and Silver Index (XAU) has broken out on an absolute and relative price basis to put in what appears to be a meaning bottom that is bullish for gold and silver mining stocks.

We will maintain this bullish view as long as the absolute and relative price trends hold above the weekly moving averages, which should provide support on pullbacks. Quite a few Gold and Silver stocks have had 90-day price and volume breakouts.

(courtesy Bill Holter/Holter Sinclair collaboration)

Posted February 23rd, 2016 at 3:43 PM (CST) by & filed under Bill Holter.

Dear CIGAs,

We talked yesterday about the upcoming G-20 finance meeting, I said I believed it would not be “benign”. Many readers have questioned why and to paraphrase “rarely has the G-20 made important announcements or decisions, why would they do this now”? We’ll get to this shortly.

I believe the global finance system is coming to a very rapid head and many major participants are displeased with using the U.S. dollar. At the very top of this list is China. Quietly China has announced

http://www.bloomberg.com/news/articles/2016-01-11/pboc-s-ma-sees-stable-yuan-as-peg-shifts-to-basket-from-dollarand commented further they no longer plan on strictly pegging the yuan to the dollar. Instead they plan to peg their currency to a basket of other currencies. They have indicated they do not plan to devalue the yuan as markets worldwide were selling off on this fear.

Are the Chinese being truthful? I believe they are speaking out of both sides of their mouth but can support either case, let me explain. If you will notice, many foreign currencies are trading near lows versus gold (the equivalent of being devalued). Another way to say this is gold is trading close to all time highs in many various currencies. For the yuan to be pegged to these depreciating currencies would mean the yuan will simply go with the flow so to speak and trade down against gold. On the other hand, we have the trade versus the dollar. In this case the yuan has stalled its gradual strengthening and has instead weakened. This move to change the peg by the Chinese has giant implications but very little has been said in the press to this point.

Another piece of news, the Chinese are buying U.S. companies at a record pace recently China is buying up American companies fast, and it’s freaking people out. These deals are all reported in dollars and I would assume dollars are being used for purchase. This would amount to what we have talked about for a long time, “selling dollars for stuff”! It is said this action is scaring people, maybe so but can you imagine what would happen should the Chinese be told “no, you cannot use your dollars to buy U.S. companies”?

Tying this together, I just wanted to point out China is the clear leader in the G-20, they are now admitted as part of the SDR basket, their forex reserves have been dropping (they are said to be defending the yuan, are they?), they are spending dollars on “stuff” and foreign companies …and they no longer want to peg the yuan directly to the dollar? (Just as a reminder, they are also the largest buyer of gold on the planet).

Now, let’s fast forward to next Monday and the aftermath of the G-20. It is obvious there are huge stresses both economically and financially on a globe wide basis. Has the rest of the world “had enough”? Are they tired of being forced to settle in a currency that is now artificially strong due to synthetics yet freely printed by a nation increasingly viewed as the world’s bully? I would definitely say the answer is yes they are. The next question is; “ARE THEY TIRED ENOUGH”?

To put it bluntly, the world has been watching “us”. They understand we are too broke to pay attention and adding new balances to the credit card every day. Do you think they might be asking the question, “why does the U.S. get to issue the world’s reserve currency if they are broke”? They also see us moving further and further down the “socialist” (fascist) road Venezuela already has … and hitting a wall at the end. Does the world see the U.S. running into this same wall? Yes, they probably do. Do they want to be a passenger in the back seat of this ride? Probably not which leads us back to the question, is the world tired enough?

I don’t know the answer to this but I do know this upcoming G-20 meeting is a potential platform for massive change. Were the world to turn their backs collectively on the dollar, what would it accomplish? First, we would see a massive devaluation in the dollar and an easing of the current synthetic dollar short squeeze. It would also serve to “defund” the bully’s military ability …at exactly the same time it looks like U.S. so called allies Turkey and Saudi Arabia are set to invade Syria. Please remember this, “de funding” your enemy has always been a standard operating procedure in “war”.

If you recall last fall, I think we were even given a tip off to something like this happening. A meeting between President Xi, the Pope and president Obama ended with sound bites of “wealth equality” around the world. What do you suppose they meant by this? They told us the financial and economic world would reset, they just didn’t tell us when. This upcoming G-20 finance meeting may be nothing at all or it may be the big one! Either way, it is certainly a convenient and may I say “likely” stage as it will be held in China!

To finish, whether it is this weekend or not, a reset is coming and this will mean a redistribution of wealth. The world has moved down the rabbit hole of Alice in Wonderland, a reset will bring us back to reality and standards of living will be grossly changed. What is viewed as “wealth” currently will drastically change for generations to come!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome! bholter@hotmail.com


And now your overnight TUESDAY NIGHT/ WEDNESDAY MORNING trades in bourses, currencies and interest rate from Asia and Europe


1 Chinese yuan vs USA dollar/yuan DOWN to 6.5360 / Shanghai bourse IN THE GREEN ON LAST HR RESCUE:  / HANG SANG CLOSED DOWN 222.33 POINTS OR 1.15%

2 Nikkei closed DOWN 136.76 OR 0.85%

3. Europe stocks all in the RED /USA dollar index UP to 97.89/Euro DOWN to 1.0961

3b Japan 10 year bond yield: FALLS  TO -.034%    !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 111.77

3c Nikkei now well below 17,000

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

3e WTI::  30.70  and Brent: 32.43

3f Gold UP  /Yen UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS  to 0.171%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 12.38%/: 

3j Greek 10 year bond yield FALL to  : 10.54%  (yield curve deeply  inverted)

3k Gold at $1235.20/silver $15.33 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble DOWN  85/100 in  roubles/dollar) 77.13

3m oil into the 30 dollar handle for WTI and 32 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/expect a huge devaluation imminently from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning 0.9941 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0898 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.


3r the 8 year German bund now  in negative territory with the 10 year FALLS to  + .171%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

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

4. USA 10 year treasury bond at 1.69% early this morning. Thirty year rate  at 2.55% /POLICY ERROR)

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

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

The Selling Is Back: S&P Futures Tumble Below 1,900; Sterling Crashes, Gold Soars

While the prevailing dour (or perhaps sour) overnight mood was a continuation of the weak oil theme which started yesterday after Iran said the production freeze proposed by Saudi and Russia as “ridiculous”, and Saudi oil minister Al-Naimi said that Saudi won’t cut supply and that high-cost producers need to either “lower costs, borrow cash or liquidate” (ideally the latter), risk sentiment was further dented when BOJ Governor Kuroda says he won’t target FX rates or stocks, which is clearly nonsense, and further spooked Japanese asset prices (Nikkei -0.85), while sending JGB yields to fresh record lows as follows: 10-year at -0.055%, 20-year at 0.600%, 30-year at 0.915% and 40-year at 1.035%.

As Bloomberg adds, with the introduction of negative-rate policy, investors particularly banks are investing excess cash in govt bonds yielding more than zero, says Hideo Suzuki, chief manager, forex and financial products trading at Mitsubishi UFJ Trust & Banking, in an interview; says there’s a sense among investors that unless they buy positive-yielding debt now, they won’t be able to purchase them. Well there are always positive yielding US Treasurys, though maybe not for much longer.

Going back to oil, it seems that finally the headline chasing algos have run out of steam: “the Saudi comments stating the obvious that the output deal was really not a deal” is weighing on prices, says Global Risk Management oil risk manager Michael Poulsen, with API also pulling prices lower. It’s “maybe an overreaction to things that were clear days ago, so might be some bargain hunters cashing in their chips.”

“Once again we are seeing lower oil prices halting the emerging confidence in global markets,” added Ole Hansen, head of commodity strategy at Saxo Bank A/S. “Lower oil prices continue to raise concerns about EM growth, a credit event among weak oil producers and selling from sovereign wealth funds.”

So with the marketwide short squeeze now officially over, global selling of stocks has resumed, dragging down everything from banks to commodity producers as well as emerging markets, while in the US S&P futures have tumbled back down to, or rather just below, the psychological support level of 1900 (and below DeMark’s breach level) driven by another day of tumbling USDJPY, but also by the latest surge higher in gold – something which according to Goldman which has by now been stopped out of its gold “short” means systemic risk is once again rising.

Indeed, the bullish euphoria that had gripped markets as recently as Monday is all gone: “It will take some time before market sentiment does turn,” Kerry Craig, global market strategist at JPMorgan Asset Management, told Bloomberg TV in Melbourne. “It’s still very pessimistic. Most investors are very risk averse. You need catalysts or triggers such as an oil price stabilization, clarity about what the Fed is actually going to do and what we see happening with the Chinese currency and economic data.”

How much changes in just 48 hours based on nothing but HFT algo stop hunting price action and a confirmation of what everyone already knew: that there will be no oil production cuts.

While the rest of the risk moves have seen the now all too familiar correlations (Treasuries in Europe and US surging as stocks tumble), another notable plunge has taken place in cable which continues to sell on Brexit fears and overnight dropped below 1.3900. Effectively Boris Johnson has had a more favorable impact on the British currency than a few hundred billion in BOE QE – the local stock market should be cheering on Brexit.

Oh, we almost forgot the key event of the night: Trump’s juggernaut in Nevada virtually assures him the GOP presidential nomination barring some calamity. The market is desperately trying to explain to itself if this is bullish or bearish for risk.

In summary: European shares dropped the most in two weeks and U.S. stock-index futures also sank. Crude fell through $31 a barrel in New York, after sliding last session, when Iran’s oil minister derided a plan forged by Saudi Arabia and Russia to lock production at January levels. The Russian ruble retreated with Malaysia’s ringgit and the pound weakened below $1.40 for the first time since 2009 on concern the U.K. may exit the European Union. The cost of insuring investment-grade corporate debt rose for the first time in three days, while Treasuries and the yen advanced.

Where markets stand now:

  • S&P 500 futures down 0.8% to 1900
  • Stoxx 600 down 2.2% to 320
  • FTSE 100 down 1.6% to 5867
  • DAX down 2.5% to 9182
  • German 10Yr yield down 4bps to 0.14%
  • Italian 10Yr yield down less than 1bp to 1.53%
  • MSCI Asia Pacific down 0.9% to 119
  • Nikkei 225 down 0.8% to 15916
  • Hang Seng down 1.1% to 19192
  • Shanghai Composite up 0.9% to 2929
  • US 10-yr yield down 3bps to 1.69%
  • Dollar Index up 0.22% to 97.7
  • WTI Crude futures down 3.1% to $30.89
  • Brent Futures down 2.2% to $32.55
  • Gold spot up 0.6% to $1,233
  • Silver spot down less than 0.1% to $15.29

Global Top News

  • Hong Kong Forecasts Slowing Economic Growth as Tourism Slumps: Economy may expand by 1% to 2% in 2016, slower than 2.4% gain last year
  • This Is Why Kyle Bass Is Wrong on China Collapse, Says CICC: China International Capital questions parallels between Japan in 1990, China now
  • Goldman’s Ex-Southeast Asia Chairman Leissner Leaves Firm: Tim Leissner helped build the investment bank’s Malaysia business
  • Asia Hedge Funds Top Rankings as Jiang Pounces in Panicky Market: Performance by Segantii, Sylebra, Greenwoods, Tybourne shows industry matured in Asia
  • Steven Cohen’s Point72 Said to Add Ai Yoshino as Trader in Asia: Yoshino most recently worked for Mitsubishi UFJ Securities as equity sales trader
  • Wanda to Announce ‘Major Deal’ This Week, Chairman Wang Says: Chinese conglomerate has been on an acquisition spree this year
  • Fortescue CFO Sees $1 Billion Firepower to Further Reduce Debt: Cutting debt remains company’s strategic focus, CFO Stephen Pearce says
  • Chinese Coal Miners Said to Lobby Government for Price Floor: A request to Premier Li Keqiang was made in January in Shanxi

Looking at regional markets, Asian equities traded lower following the negative close on Wall St. driven by the decline in oil prices after the Saudi Oil Minister dismissed a production cut, while the latest API figures showed a significant build of 7.1mIn bbls. ASX 200 (-2.16%) and Nikkei 225 (-0.85%) were pressured from the open with the latter back below 16000, while sentiment in Australia was further dampened by several poor earnings results from the likes of Fortescue, BHP and Wesfarmers. Chinese markets also conformed to the negative tone, with casino losses leading the declines in Hong Kong, while the Shanghai Comp (+0.88%) saw relatively subdued price action amid a lack of any significant catalyst and the PBoC remaining relatively neutral on the CNY reference rate. 10yr JGBs traded higher (10yr yield reached record low of -0.04%) amid weakness in riskier assets while the BoJ also entered the market for JPY 1.26tr1 of government debt.

In Europe, equities can be seen suffering once again this morning, with Euro Stoxx drifting lower throughout the morning (-1.9%), taking the impetus from a lacklustre Asian session and with the usual suspects of energy, materials and financial sectors weighing on the indices. Given the aforementioned underperformance, high profile material names BHP Billiton (-7.2%), Glencore (-5.8%) and Anglo American (-6.1%) are all among the worst performers in Europe, while Standard Chartered (-5.2%) have also seen a continuation of weakness after yesterday’s earnings.

European Top News

  • Draghi Has Two Weeks to Map ECB Plan That Won’t Let You Down: When ECB policy makers meet from March 9-10, they’ll consider whether negative interest rates and EU60b a month of debt purchases is enough to revive consumer prices
  • Bayer Names Werner Baumann to Succeed Marijn Dekkers as CEO: Named chief strategy and portfolio officer Werner Baumann to succeed CEO Marijn Dekkers after April shareholders meeting
  • Airbus Profit Gains 1.6% on A350 Ramp-Up, Break-Even on A380: 2015 Ebit before one-offs EU4.1b, est. EU4.38b; figures held back by higher development spending; cranks up production after order rush for new jets; says 2016 earnings set to be stable
  • Peugeot Promises New Profit Plan With Restructuring Complete: To resume paying a dividend, 1st since 2011, from this year’s earnings, 5% oper. margin was more than double 2018 target
  • Delta Lloyd Shares Surge After Rights Offer Cut to $715m: Bowed to investor pressure and cut the size of a rights offer to EU650m; said in Nov. aimed to raise as much as EU1b
  • Man Group Declines After Profits Fall on Performance Fees Drop: FY adj. pretax fell to $400m vs $481m y/y, est. $455m
  • How Low Could Pound Go in a ‘Brexit’? Economists See 1985 Levels: 29 of 34 economists see drop to $1.35 or below on leave vote; GBP already at seven-year low as EU campaign heats up

In FX, it has been a busy morning and certainly so if you are GBP trader with a brief respite in Cable through 1.4000 quickly followed up by heavy selling, talking the pair down below 1.3900, the lowest level since the 2009 crisis. The focus is already on the 2009 lows just under 1.3500. EUR/GBP has been pushed higher, and we are nearing the .7900 level here despite moderate losses in EUR/USD, which has traded below the previous session lows — to just under 1.0975. More bids seen to 1.0950. USD/JPY is lower, but cross/JPY likely to be seeing more of the flow — the spot rate holding off the Tuesday base as yet. GBP/JPY is through 156.00, EUR/JPY 123.00. The oil related currencies are all softer along with WTI and Brent, but no panic moves like we saw earlier in the year. Even, so USD/CAD is back through 1.3800.

Lower crude prices dragged on the currencies of oil exporters Russia and Malaysia. The ruble dropped 2.5 percent and the ringgit fell 0.6 percent.  The Bloomberg Dollar Spot Index added 0.2 percent. Japan’s yen climbed versus all of its major counterparts, strengthening 0.3 percent to 111.81 per dollar.

China’s yuan fell for a fourth day as the People’s Bank of China set its reference rate at the lowest level in almost three weeks. Figures from the nation’s foreign-exchange regulator released Tuesday afternoon showed banks net sold overseas currencies to their clients for a seventh straight month in January. The yuan weakened 0.13 percent to 6.5359 against dollar, according to China Foreign Exchange Trade System prices. The central bank cut the reference rate by 0.04 percent to 6.5302 following a 0.17 percent reduction on Tuesday.

In commodities, it remains all about oil, as WTI futures slid as much as 3.3 percent in New York, below $31 once again this time on the April contract. Saudi Arabia’s proposal to cap output at January levels puts “unrealistic demands” on Iran, Oil Minister Bijan Namdar Zanganeh said Tuesday, according to the ministry’s news agency Shana. Ali Al-Naimi, his counterpart from Saudi Arabia, said at a conference in Houston that high-cost producers should bear the burden of reducing the current surplus and reaffirmed the kingdom’s commitment to last week’s accord.

Crude is down 17 percent this year on speculation a global glut will persist amid the outlook for increased shipments from Iran and brimming U.S. supplies, which are at the highest level in more than eight decades. The nation’s stockpiles expanded by 7.1 million barrels last week, the industry-funded American Petroleum Institute was said to report Tuesday.

Copper led losses in industrial metals on concerns that rising stockpiles in China signal continued weak demand in the world’s biggest consumer. Inventories in warehouses tracked by the Shanghai Futures Exchange have more than doubled to a record since the end of August, bourse data show. Copper for delivery in three months slid 1 percent in London.

On the US calendar there will be some focus on the flash services (expected to nudge up 0.3pts to 53.5) and composite PMI’s for February, while January new home sales data is also due out. The latest Fedspeakers due up will be Lacker who is set to talk on monetary policy and growth, as well as Kaplan later this evening who is due to talk on current economic conditions and monetary policy.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities take the impetus from the weak Asia lead with the usual suspects (Financial, Material and Energy) leading the region lower.
  • GBP yet again underperforms amid the continuous concerns surrounding a potential Brexit with GBP/USD printing fresh 7-yr lows.
  • Looking ahead highlights include US services PMI, DoE crude inventories reports as well as comments from Fed’s Lacker, Bullard, Kaplan and BoE’s Cunliffe
  • Treasuries higher overnight as global equity markets and commodities, ex-precious metals, resume selloff; U.S. auctions continue today with $34b 5Y notes, WI yield 1.17%, compares with 1.496% awarded in January.
  • A British exit from the European Union would be so devastating for the pound that 29 out of 34 economists in a Bloomberg survey see it sinking to $1.35 or below within a week of a vote to leave — levels last seen in 1985.
  • China scrapped limits on the amount of funds that foreign institutional investors can put into its interbank bond market, the latest step to lure capital from abroad as outflows weigh on the yuan
  • China International Capital Corp’s economists published a rebuttal of hedge-fund manager Bass’s assessment where he stated that China’s banking system may see losses of more than four times those suffered by U.S. lenders during the 2008 credit crisis
  • U.S. Treasury Secretary Jacob J. Lew downplayed expectations for an emergency response to global market turbulence when Group of 20 finance chiefs and central bankers meet this week in China
  • JPMorgan’s investment bank said revenue from sales and trading has tumbled about 20% this year, providing an early gauge of the pain inflicted on Wall Street’s biggest firms by the global market rout battering investors
  • Donald Trump’s dominating victory in the Nevada caucuses pushes him further out ahead of his nearest competitors for the Republican presidential nomination, giving his unorthodox candidacy a major boost heading into Super Tuesday contests next week
  • $11.15b IG corporates priced yesterday (YTD volume $255.4b) and $250m HY priced (YTD volume $11.375b)
  • Sovereign 10Y bond yields mostly steady; European, Asian markets drop; U.S. equity- index futures lower. Crude oil and copper fall, gold rises

DB’s Jim Reid concludes the overnight wrap

Markets have been soft over the last 24 hours not helped by China’s weaker Yuan fix yesterday and a 4.5% drop in oil. While the fix was little changed this morning (set 0.04% weaker) a further tumble for Oil overnight (now approaching $31/bbl) has kept risk assets firmly on the back foot in Asia this morning. The Nikkei (-1.36%), Hang Seng (-1.60%), ASX (-2.26%) and Shanghai Comp (-0.62%) in particular are all in the red, while credit indices are also a tad weaker. Not helping sentiment is the latest MNI consumer sentiment reading out of China, with the February reading declining 3.6pts to 111.3 and to a four-month low.

The latest twist in the Oil saga yesterday came about as headlines out of both Saudi Arabia and Iran hit the wires. The former’s Oil Minister, Ali al-Naimi, did initially say that freezing output at current levels is the beginning of a process and that high inventory levels will probably decline in due time if we can get all the major producers to agree to not add additional barrels. It was a follow up to this comment which appeared to spook the market however, with al-Naimi warning that ‘this is not the same as cutting production’ and that ‘that’s not going to happen’, while also suggesting that ‘there is less trust then normal’ between nations. Chatter from Iran’s Oil Minister Zanganeh didn’t help, saying that the Saudi-Russia freeze plan is ‘ridiculous’ and that the proposal puts ‘unrealistic demands’ on Iran. ConocoPhillips CEO seemingly summed up the confidence at a corporate level, saying that Oil companies ‘have to prepare for the worst case’ and that you ‘can’t count on a Saudi freeze working’.

Combined with the already dampened sentiment after the CNY fix, it was a broadly weaker day across equity markets yesterday. In Europe we saw the Stoxx 600 close -1.22%, DAX -1.64% and FTSE MIB -1.95%. A softish German IFO survey did little to help with the expectations component in particular down 3.5pts to 98.8 and the lowest since late 2012.

Across the pond the S&P 500 (-1.25%) finished near enough at its lows for the day with a rough session for financials following some bleak but perhaps unsurprising comments about difficult trading conditions so far this year from JP Morgan not helping. Credit markets appeared to largely ignore the intraday volatility in Oil with Main finishing half a basis point tighter and sub-fins also outperforming (5bps tighter). US credit did weaken slightly into the close with CDX IG finishing 2bps wider although a second consecutive high volume session in the primary market kept sentiment relatively upbeat.

Elsewhere, Treasury yields tracked the move lower with Oil with the closing level of 1.723% for the 10y (-3bps) masking what was a pretty big high-to-low swing after yields had crept up over 1.812% prior to the latest headlines. Gold (+1.51%) and the Yen (+0.73%) were the beneficiaries from the broader risk selloff, while Sterling was another sharp leg lower against both the Dollar (-0.90% to $1.402) and Euro (-0.82% to €1.273) and has in fact dipped below $1.40 during the Asia session this morning. Moves have also come following comments from the BoE’s Carney yesterday who said that the BoE has ‘considerable room’ should additional stimulus be required.

Away from the focus on Oil markets yesterday, the US data was something of a sideshow although the fall in consumer confidence did turn a few heads. The February print declined a fairly sharp 5.6pts to 92.2 (vs. 97.2 expected) which was the lowest since July last year with the expectations component down 6.4pts and to the lowest since February 2014. Elsewhere the Richmond Fed manufacturing index reading unexpectedly declined 6pts this month to -4 after the consensus had been for no change. Existing home sales were up in January by +0.4% mom (vs. -2.5% expected) while the S&P/Case-Shiller home price index was a smidgen behind market at +0.80% mom for December (vs. +0.85% expected).

Yesterday’s Fedspeak offered some interesting contrasting comments. Kansas City Fed President George argued that a potential March move ‘absolutely should be on the table’ and that ‘at this point I would not say that the data have suggested there has been a fundamental shift in the outlook’. Dallas Fed President Kaplan was a lot more dovish in his comments to the FT saying that ‘in order to reach our inflation objective we may need to be more patient than we previously might have thought’ and that ‘if that means we take an extended period of time where we stop and don’t move, that may also be necessary’. Speaking overnight meanwhile, Fed Vice-Chair Fischer probably sat somewhere in the middle of his colleague’s comments, saying that ‘if the recent financial market developments lead to a sustained tightening of financial conditions, they could signal a slowing in the global economy that could affect growth and inflation in the US’. At the same time however, Fischer also opined that ‘we have seen similar periods of volatility in recent years…that have left little visible imprint on the economy, and it is still early to judge the ramifications’.

Running over today’s calendar, this morning in Europe the only data of note is out of France where we’ll receive the latest consumer confidence print and the UK where CBI reported sales data is due. In the US this afternoon there will be some focus on the flash services (expected to nudge up 0.3pts to 53.5) and composite PMI’s for February, while January new home sales data is also due out. The latest Fedspeakers due up will be Lacker (at 1pm GMT) who is set to talk on monetary policy and growth, as well as Kaplan later this evening (at 6.15pm GMT) who is due to talk on current economic conditions and monetary policy. Away from this the EC’s Tusk and Juncker are due to speak in EU Parliament this afternoon on the outcome of the EU summit with Brexit expected to be a hot topic. The BoE’s Cunliffe is also due to speak tonight.


Let us begin



Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed UP slightly  BY 25.57 POINTS OR 0.88% ON LAST HR INTERVENTON  / Hang Sang closed DOWN by 122.33  points or 1.15% . The Nikkei closed DOWN 136.76 or 0.85%. Australia’s all ordinaires was down 2.10%. Chinese yuan (ONSHORE) closed down at 6.5360.   Oil LOST  to 30.76 dollars per barrel for WTI and 32.96 for Brent. Stocks in Europe so far deeply in the RED . Offshore yuan trades  6.5411 yuan to the dollar vs 6.5360 for onshore yuan/


Just what we need: China sends fighter jets to the Spratly Islands as well as installing radar systems:

(courtesy zero hedge)

In “Dramatic Escalation,” China Sends Fighter Jets To Disputed Islands

On Tuesday, multiple media outlets jumped at the opportunity to report that China has built radar facilities at Cuarteron Reef, Beijing’s southern-most South Pacific sandcastle.

New radar facilities being developed in the Spratlys, on the other hand, could significantly change the operational landscape,”  Gregory Poling of CSIS’s Asia Maritime Transparency Initiative said, explaining why the radar installations are actually a bigger deal than the deployment of HQ-9 surface-to-air missiles on Woody Island.

Here’s a bit more from Poling:

Construction of facilities at Cuarteron seems nearly complete and the artificial island now covers about 52 acres (211,500 square meters). Two probable radar towers have been built on the northern portion of the feature, and a number of 65-foot (20-meter) poles have been erected across a large section of the southern portion. These poles appear to be a high-frequency radar installation, as was first speculated on The Diplomat, which would significantly bolster China’s ability to monitor surface and air traffic across the southern portion of the South China Sea. In addition to these radar facilities, China has constructed a buried bunker and lighthouse on the northern portion of the feature, a number of buildings and a helipad in its center, communications equipment to the south, and a quay with a loading crane on the western end of the outpost.

Poling goes on to say that Beijing has likely also put radar installations on other islands in the Spratlys, but that, as it turns out, isn’t the big story.

Just moments ago, GOP mouthpiece Fox News said China has now deployed fighter jets to Woody Island, where imagery from ImageSat International (ISI) showed two batteries of eight surface-to-air missile launchers in place earlier this month.

Chinese Shenyang J-11s (“Flanker”) and  Xian JH-7s (“Flounder”) have been seen by U.S. intelligence on Woody Island in the past few days, the same island where Fox News reported exclusively last week that China had sent two batteries of HQ-9 surface-to-air missiles while President Obama was hosting 10 Southeast Asian leaders in Palm Springs,” Fox reports, gleefully. “The dramatic escalation cames minutes before Secretary of State John Kerry was to host his Chinese counterpart, Foreign Minister Wang Yi, at the State Department.”

“There is no difference between China’s deployment of necessary national defense facilities on its own territory and the defense installation by the U.S. in Hawaii,” Foreign Ministry spokeswoman Hua Chunying said Monday, in an effort to play down the buildup on Woody.

China raised eyebrows earlier this year when Beijing landed civilian aircraft on a 10,000 foot airstrip constructed atop Fiery Cross Reef.

We’d love to be a fly on the wall for Kerry’s imminent meeting with Wang, who we’re sure will tell America’s top diplomat what he told the Western media last week: Don’t mind the missiles and the warplanes, focus on the lighthouses.

*  *  *

For those who missed it, here are the images from Woody which depict the SAM deployment:

The Pound/USA (cable) falls below 1.40 for the first time in 7 years as a BREXIT risks soars as Farage explains that the deal with Cameron and the EU is not binding and not legal.
(courtesy zero hedge)

Cable Crashes Below 1.40 For First Time In 7 Years, Brexit Risks Soar As Farage Crushes Cameron

For the first time since March 2009, GBPUSD is back below 1.40. Despite Camron’s “Project Fear” and desperate attempts to spin British opinion (2 different polls yesterday showed 37% want to leave and 51% want to leave), investors are growing increasingly concerned as Nigel Farage exposes the ugly truths about Cameron’s so-called “deal and FX and credit markets spike to extreme relative risk levels.

From hope to nope…

Plunging cable to 7 year lows…

And FX volatility markets are increasingly priced for significant pain…

As are British credit markets…

As Citi explained, Brexit risk is rising…

So far, polls still suggest that the UK is more likely to vote to stay in the EU than to leave, and indeed “Remain” is still our base case scenario. We expect the campaign between now and June to shift the debate from the nature of the UK’s relationship with the EU to the economic and political risks of Brexit.

Having said that, following the decision of credible and popular leaders like Johnson and Gove to back the Out campaign, we now increase the probability that the UK votes for Brexit to 30-40%. Markets are likely to become increasingly nervous on the issue, and lack confidence in polling data following the margin of failure to predict the UK GE 2015 outcome by a wide margin.

The risk of UK breakup was also underscored by comments by Scottish First Minister Nicola Sturgeon, who stated over the weekend that a vote for Brexit would “almost certainly” be followed by a second independence referendum for Scotland.

Furthermore, Cameron’s deal with Brussels has sparked wider concerns that other governments will seek similar re-negotiation, with political parties in France and the Netherlands raising fears of campaigns for “Frexit” and “Nexit”. With this in mind, the UK referendum will have wider implications for the EU beyond the UK.

Perhaps this is also why risk is rising, as none other than Nigel Farage explains the reality behind Cameron’s so-called “deal”…

Inline image 1

Charts: Bloomberg

Hungary calls a referendum on refugee quots
(courtesy zero hedge)

Hungary Calls Referendum On Refugee Quotas: “Can Anyone Else Decide For Hungarians Who We Live With?”

Donald Trump says he’s “tough on immigration,” and maybe he is.

But not like Hungarian PM Viktor Orban.

Last September, when things began to get out of hand on the Balkan route north to Germany, Orban decided to build a 100 mile long, 12-foot high razor wire migrant-be-gone fence on his country’s border with Serbia. Some refugees didn’t like that and decided to test Orban’s resolve. Here’s what happened next:

And here’s a chart which shows the rather dramatic effect Orban’s crackdown had on migrant flows into Hungary:

Orban was widely criticized for his approach to the refugee flows but his stance has been unwavering. “We hope that the messages we have been sending migrants for a long time have reached them.” Gyorgy Bakondi, an aide to the Prime Minister said. “Don’t come.”

Hungary was also a sharp critic of Brussels’ attempt to impose bloc-wide migrant quotas, a system that has infuriated a number of member states who see the move as bullying by Jean Claude-Juncker and Angela Merkel who is of course hell bent on sticking to the “yes we can” migrant narrative despite the fact that, much like the reality another famous politician faced after spouting the same vacuous rhetoric, “no we can’t” looks like a more accurate assessment.

On Wednesday, Orban took it up a notch. Hungary, he says, will call a referendum on migrant quotas.

“He said the plebiscite, the first of its kind in Europe, would be a major test of European democracy,”Reuters reports, adding that “Orban has said the migrant quotas would redraw the ethnic, cultural and religious map of Hungary and Europe.”

Nobody has asked the European people so far whether they support, accept, or reject the mandatory migrant quotas,” Orban proclaimed, at a press conference. “”The government is responding to public sentiment now: we Hungarians think introducing resettlement quotas for migrants without the backing of the people equals an abuse of power.”

He’s right. Regardless of whether taking in asylum seekers from war-torn countries is the “right” thing to do (and it very well may be from a humanitarian perspective), it’s not up to Angela Merkel and a bunch of eurocrats who pander to her purse strings to decide how sovereign countries choose to deal with the crisis.

“To us this is a fundamental, unavoidable, essential question of Hungarian politics: can anyone else decide for Hungarians who we Hungarians should or should not live with?” the PM asked.

Meanwhile, Belgium is setting up border checks with France for fear that the clearing of the infamous Calais migrant camp (otherwise known as “the jungle” and profiled here) could precipitate refugee flows into the country.

“We already see movement of migrants from Calais toward our country,” Interior Minister Jan Jambon told a press conference in Brussels. “Once the camps in France are cleared we could potentially see thousands.”

“Belgium is not closing its borders, that’s not what this is about, we are making targeted checks against a specific phenomenon,” Jambon insisted. Of course he also said anyone caught would be instructed to immediately leave the country. After all, there were numerous reports to suggest that ISIS sympathizers were present at Calaise and we wouldn’t want any more Abdelhamid Abaaouds running around in Brussels.

More and more, it’s looking like Orbans approach – the fences and the “don’t come” message – are being adopted even by the states who initially criticized him as being a kind of xenophobic maniac. The question now is how long it will be before other countries call referendums.

R.I.P. Europe.

Direct evidence of transcripts proving the ISIS -Turkey link:
(courtesy zero hedge)

“I’ll Be Right There Big Brother”: Leaked Transcripts Prove ISIS-Turkey Link

In the lead up to elections last June that saw Turkish President Recep Tayyip Erdogan and the ruling AKP lose their absolute majority in Parliament, Turkey had long been criticized for not doing enough to assist in the fight against ISIS.

In fact, there was quite a bit of evidence to suggest that Ankara was cooperating with the group. For instance, an official familiar with a large cache of intelligence seized in a raid last summer told the Guardian that “direct dealings between Turkish officials and ranking ISIS members was now ‘undeniable.’” Similarly, a former ISIS fighter once told Newsweek that Turkey was allowing ISIS trucks from Raqqa to cross the “border, through Turkey and then back across the border to attack Syrian Kurds in the city of Serekaniye in northern Syria in February.” ISIS members, the source said, would “freely travel through Turkey in a convoy of trucks,” and stop “at safehouses along the way.”

But after last summer’s elections in Turkey, everyone seemingly forgot about Ankara’s apparent complicity when Erdogan granted the US access to Incirlik from which Washington was henceforth allowed to fly combat missions. That, combined with Erdogan’s promise to step up the war on “terror,” was supposed to be “proof” of Turkey’s commitment.

Despite numerous reports to suggest that Turkey wasn’t striking ISIS at all, but rather simply targeting the PKK (Kurdish insurgents with whom Turkey has been at war for years), the mainstream media generally stuck to the script that said Ankara had officially joined the war on Islamic State.

And then, in November, Vladimir Putin put Turkey’s cozy relationship with ISIS back to the spotlight following Ankara’s move to down a Russian warplane near the Syrian border. Since then, the world has begun to question whose side the Turks are really on, especially in light of the evidence Moscow has presented linking Erdogan to Islamic State’s illicit oil trade.

Eyebrows were also raised when Erdogan jailed several generals who dared to inspect a weapons-laden MiT trucks crossing the border with Syria.

This week, we get the latest evidence that Turkey is Islamic State’s number one state sponsor asCumhuriyet released transcripts of phone calls that allegedly took place between Turkish military officers and Mustafa Demir, the ISIS commander in charge of the Syria-Turkey border.

The transcripts are part of a court case on ISIS at the Ankara 3rd High Criminal Court. “The issues alleged in the case came to light because of an investigation launched following information given by six Turkish citizens whose relatives joined ISIL,” Today’s Zaman reports. “Upon the application by the relatives, monitoring of the communications of 19 people started, and a prosecutor named Derda Gökmen reportedly filed a claim against 27 suspects.”

Below, find the transcripts.

*  *  *

Date: Nov. 25, 2014; 8:26 p.m.

A.A.: Was that you, the ones with a torch?

Mustafa: Well, with a little torch, where are you big brother? At the place where I told you to be?

A.A.: Yeah. We also saw you, your men…

Mustafa: Is it possible for you to arrange that I talk with the commander here, regarding the business here? What if we could establish a contact here as we helped you…

A.A.: Okay. If there are any needs [as far as your request is concerned], [tell them] to inform me here.

Mustafa: If it will be enough to contact you [to settle the issue], no problem.

A.A.: I’ll pass this now. I have two military posts [at the border] there. If worse comes to worst, I’ll tell that to the commander of the station and have him take a look…

**** ****

Time: 7:12 p.m.

Communication made by the telephone registered in the name of A.B.

A.B.: We’re where you gave [him] the vehicle, we are in the mine [field]. We’ve put on a light. We have stuff; come here from that side, the men are here…

Mustafa: Okay, big brother, [I’m] coming.

A.B.: Come urgently; I’m in the mine [field] with a torch. Come running.

Mustafa: Well, big brother, is it the place where I gave First Lieutenant Burak a car?

A.B.: Yeah, just a little further down from that place. Our two vehicles are on the Turkish side [of the border].

Mustafa: Okay.

A.B.: We are also in the mine.

Mustafa: I’ll right be there, big brother.

*  *  *

As a reminder, Erdogan recently threw Can Dundar, editor in chief of Cumhuriyet, and Erdem Gul, the newspaper’s capital correspondent in Ankara, in prison for a controversial story about an alleged arms shipment from Turkish intelligence to Syrian rebels.

We shudder to think what fate awaits the Cumhuriyet employee responsible for leaking these transcripts.

Jack Lew of the USA dashes hope of a coordinated crisis response needed at the G20 conference this weekend.  If I were to guess, it is my feeling that China and the rest of the nations will devalue their currencies against gold!
(courtesy zero hedge)

G-20 Stimulus Hopes Crushed After Jack Lew Says “Don’t Expect A Crisis Response”, Rally In Jeopardy

Over the weekend, we presented what according to Bank of America was perhaps the last remaining bullish catalyst for a big market move higher when Bank of America’s Michael Hartnett said that “we remain sellers into strength in coming weeks/months of risk assets at least until a coordinated and aggressive global policy response (e.g. Shanghai Accord) begins to reverse the deterioration in global profit expectations and credit conditions.”

More importantly, Hartnett warned that a “weak policy stimulus in coming weeks could end rally/risk fresh declines to induce growth-boosting policy accord.” He was envisioning the various key meetings in the coming weeks such as the G20 Shanghai (February 26-27); ECB (March 10), BoJ (March 15) & FOMC (March 16), with an emphasis on the first one as the clearest possible source of “surprise” risk upside.

The BofA strategist laid out a chart showing the relative performance of financial stocks to Treasurys, which has dropped to levels which in the past has always been accompanied by major policy interventions, implying that “the time has come” for another coordinated risk bailout:

As we explained, “Hartnett expects a “Shanghai Accord” to be unveiled next weekend, one where like the Plaza Accord three decades earlier, the Yuan will be massively depreciated, which ironically would halt all piecemeal Yuan devaluation on expectation of future devaluation (as it will have already happened), and reset global monetary policy stability if only for a few more months.”

We concluded that “if next weekend the G-20 disappoints and unveils nothing, the next big leg down in the selloff will have arrived” and as BofA implied, the market could then sell off to the next support level, below the 1,812 which has proven so stable since August.

The only question left was whether or not the G-20 would actually go ahead and satisfy this expectation, or said otherwise, whether the market drop was sufficiently big to force the G-20’s hand.

This morning we got the answer from Jack Lew who in an interview with Bloomberg “downplayed expectations for an emergency response to global market turbulence when Group of 20 finance chiefs and central bankers meet this week in China, calling on nations to do more to boost demand without pursuing unfair currency policies.”

“Don’t expect a crisis response in a non-crisis environment,” Lew said in an interview broadcast Wednesday with David Westin of Bloomberg Television. “This is a moment where you’ve got real economies doing better than markets think in some cases.”

Policy makers from the world’s biggest economies are unlikely to make the kind of detailed national commitments to restore growth they did to at the height of the global financial crisis, Lew said. Instead, the group, which meets in Shanghai Feb. 26-27, may put more “meat on the bones” of the principles it has advocated in recent years, such as by strengthening the pledge that nations will refrain from competitive currency devaluations, he said.

In other words, instead of another monetary policy sugar fix, the US Treasury Secretary is demand that world governments focus on a fiscal boost, one which may have already taken place in China courtesy of the unprecedented surge in loan issuance, which the rest of the world remains deeply mired in political contention which would make a coordinate response highly unlikely.

Lew went on: “While the world economy isn’t in a moment of crisis”, Lew said that “I don’t think it’s unreasonable to have the expectation that coming out of this will be a more stable understanding of what the future may look like.” But don’t expect too much.

Lew’s comments discount the prospect of a coordinated agreement to boost lackluster global growth and restore confidence after a selloff in world stocks to start the year. Some analysts and investors have called for a modern-day Plaza Accord, the 1985 deal among major economies to weaken the dollar and stabilize currency markets.

The world’s cloudy growth outlook and policy makers’ potential response will dominate the agenda in Shanghai, according to people familiar with the talks. It’s unlikely to produce the kind of action that came out of the G-20 meeting in London in April 2009, when countries collectively pledged more than $1.1 trillion in stimulus to rejuvenate a then-hobbled global economy.

Instead of a coordinate response, Lew will instead push for a more serious commitment from other G-20 countries to use monetary policy, fiscal measures and structural reforms to stoke demand.

“You can’t count on the United States providing all the demand for the world. You can’t be the consumer of first and last resort,” he said, adding that China can do more to stimulate consumer demand and Europe and Japan can use fiscal policy to boost growth.

In other words, it’s fingerpointing time, with the US now clearly demaning more from China. However, “more” does not mean a devaluation as that would unleash another round of major instability if the recent past is any indication. Lew made that quite explicit:

He said the U.S. will be pushing for a firmer commitment by nations not to try to boost their economies by depreciating their currencies.

“If the conversation were to go the other way, and you were to see some reticence to make the commitment to refrain from competitive devaluation and not take it a little bit of a step further, that would be a cause of real concern,” Lew said.

Once again, all attention on China. “While the challenges facing China’s economy are “really quite significant,” Lew said, “they’re being interpreted in a way that is unduly negative.”

Still, he said a lack of communication about the country’s currency policy has “made it very hard for anyone to really understand what they were trying to accomplish.”

Lew reiterated the U.S. position that China needs to let the yuan go both “up and down with markets.”

Yes, down, but not too much down as that would be seen as “competitive devaluation.” Perhaps the irony was lost on the Treasury secretary: “When there is pressure to appreciate, it has to be appreciating,” he said. “When there’s pressure to depreciation, we can’t complain if it depreciates.”

As a result, with the G-20 deus ex machina taken away, risk assets will scramble to find what the next major catalyst will be in the coming month, especially if the US has made it clear it will frown on more aggressive action by either the ECB or the BOJ in the next 30 days.

Clip below:

Inline image 2

Many will remember Chairman Guy Hands back in Nov 2007 warning of a looming crash and it said:  “bankers will go back to their baskets like dogs”.  Then our friendly bankers sent him some dog biscuits stating that he was dead wrong.  He wasn’t!
Today we warns again that the markets are very scary!!  Pay attention to what he says.
(courtesy zero hedge)

Guy ‘Bankers-Will-Go-Back-To-Their-Baskets-Like-Dogs’ Hands Warns Of “Very, Very Scary Market”

In November 2007, PE firm Terra Firma Chairman Guy Hands warned of a looming crash, after forecasting“bankers will go back to their baskets like dogs,” he was sent dog biscuits by friendly bankers. As he explains in this brief Bloomberg TV interview, he expects more dog biscuits, as the market is “not really underpinned by any real fundamentals.” The extreme volatility is not good for any business, and investors are scared on not investing (negative rates or no return) and scared of investing (and “looking stupid in a year’s time”) concluding “it’s a very very scary market.”

Excellent reality check from someone who lived through the last crisis having seen it coming…

Inline image 3

In the event that Sweden “breaks down” Norway will secure her borders and not let in refugees in total defiance of the Geneva Convention:
(courtesy zero hedge)

Norway Warns Sweden Will Collapse, PM Will Defy Geneva Convention To Protect Border

As you might have heard, Sweden has a refugee problem.

We’ve spent quite a bit of time documenting the country’s trials and travails over the course of the last 12 months during which time Sweden has taken on more than 160,000 asylum seekers.

Last month, on the heels of reports from Germany that men of “Arab and North African” origin assaulted women in central Cologne during New Year’s Eve celebrations, Swedish media alleged that police orchestrated a massive coverup designed to keep a string of similar attacks that allegedly occurred at a youth festival in Stockholm’s Kungsträdgården last August from seeing the light of day.

Meanwhile, a 22-year-old refugee center worker was stabbed to death by a Somali migrant at a shelter for asylum seekers and at the Stockholm train station, “gangs” of Moroccan migrant children reportedly spend their days attacking security personnel and accosting women.

Sweden plans to deport some 80,000 of the refugees this year but according to Norwegian PMErna Solberg, it may be too little too late to keep the country from collapsing. So concerned is Solberg that she’s now crafted an emergency law that will allow Norway to refuse asylum seekers at the border in the event “it all breaks down” in Sweden.

It is a force majeure proposals which we will have in the event that it all breaks down, the power just comes, and all end in Norway because we are at the top and most of Europe. Norway is the end point, is not it,” Solberg said, in an interview with Berlingskewhose Tinne Knudsen adds that “the legislation will soon be presented to the Parliament and is expected to meet broad support.”

Here’s how the proposal is being presented by the anti-immigration Swedish online magazine Fria Tider: “Norway is now preparing to denounce the Geneva Convention and to secure the border with Sweden by force – without letting people apply for asylum.”

Norway’s Bar Association says the move would violate the country’s international obligations as well as basic human rights. But Solberg isn’t backing down. “When we make such a proposal, we know that it is quite a big break with how things have been, but we must have some measures that are preparing for the worst case scenarios,” she insists.

Yes, “worst case scenarios,” like what Sweden’s Foreign Minister Margot Wallström described last October when she said “most people feel that we cannot maintain a system where perhaps 190,000 people will arrive every year – in the long run, our system will collapse.”

Expect other countries to make similar threats as the international order breaks down amid the cascade of Mid-East refugees. Once everyone’s borders are closed the question becomes this: will animosity push member states in Merkel’s “harmonious” union to the brink of war with one another?



Brazil now has its official debt cut to junk by all three rating agencies:
(courtesy zero hedge)

Brazil Cut To Junk By All Three Ratings Agencies After Moody’s Joins The Fray

Back in December we warned that Brazil faced a “disastrous downgrade debacle” that would eventually see the beleaguered South American nation cut to junk by all three major ratings agencies.

S&P had already thrown the country into the junk bin and just six days after our warning,Fitch followed suit.

Between the country’s seemingly intractable political crisis and worsening public finances, the outlook is exceptionally dire and just moments ago, Moody’s cut Brazil to junk as well.


Watch the BRL and the Bovespa. Things likely won’t be pretty.

Below, find the rationale.

*  *  *

From Moody’s

Moody’s downgrades Brazil’s issuer and bond ratings to Ba2 with a negative outlook

The downgrade was driven by

  • The prospect of further deterioration in Brazil’s debt metrics in a low growth environment, with the government’s debt likely to exceed 80% of GDP within three years; and
  • The challenging political dynamics, which will continue to complicate the authorities’ fiscal consolidation efforts and delay structural reforms.

The negative outlook reflects the view that risks are skewed toward an even slower consolidation and recovery, or further shocks emerging, which creates uncertainty over the magnitude of deterioration of Brazil’s debt profile over the rating horizon.


Brazil’s credit metrics have deteriorated materially since the Baa3 rating with a stable outlook was assigned in August 2015. That deterioration is expected to continue over the coming three years, given the scale of the shock to the Brazilian economy, the lack of progress made by the government in achieving its fiscal and economic reform objectives and the political dynamics expected to persist over that period. The downgrade to Ba2 is intended to captures that ongoing deterioration, while the negative outlook contemplates the risks of further deterioration to Brazil’s credit profile emanating from macroeconomic shocks, deeper political dysfunction or the need to support government-related entities.


Macroeconomic and fiscal developments over the next two to three years are expected to produce a materially weaker credit profile. The government debt burden will continue to increase during 2016-18 and will likely exceed 80% of GDP before stabilizing. Growth dynamics will remain weak in the coming years increasing the pressure on fiscal policy. We expect GDP growth to average a negative 0.5% over the period 2016-18. Additionally, we expect interest rates to remain elevated in real terms, which will contribute to low debt affordability with interest payments accounting for more than 20% of government revenues.


The rise in government debt will partly reflect the slow progress expected in achieving meaningful fiscal consolidation. Addressing Brazil’s fiscal challenges will require significant political will and consensus to reverse the upward trend in public spending and stabilize the debt trajectory. The government is working to garner support in Congress for key reform bills, including to raise the minimum retirement age, improve fiscal flexibility, and reduce revenue earmarking. However, while discussion of structural reforms is a positive development, their approval by Congress will be difficult given the government’s limited support in Congress and ongoing political challenges facing the President. And weak political support for the President and her administration offers little prospect of more far-reaching reforms over the rating horizon.


In Moody’s view, progress in fiscal consolidation will be slow, and economic growth anemic, for the next two to three years. The Ba2 rating level builds in the assumption that the credit profile will deteriorate over that period. However, the negative outlook reflects the uncertainty surrounding the interaction between political, economic and financial dynamics in Brazil and in consequence the potential for additional shocks materializing, which would put further downward pressure on the sovereign credit profile. Additional shocks might relate to the impact of investor sentiment on the recovery in growth; to political events which lower still further the government’s capacity to make progress on structural reforms; and/or to the crystallization of contingent liabilities on the government’s balance sheet.

And now our basket case Venezuela which probably has two months maximum before sovereign default
(courtesy zero hedge)

Bring On “The Toilet Paper Rebellion”: “Public Patience” With Venezuela’s Socialist Paradise Wears Dangerously Thin

Late last month, we brought you the latest from Barclays on Venezuela, where Nicolas Maduro’s socialist paradise is rapidly collapsing in the face of falling oil prices.

“The economic emergency decree and any measures that the government could take at this point may be too late,” the bank declared. “After two years of inaction and the recent decline in oil prices, a credit event in 2016 is becoming increasingly difficult to avoid.”

In other words, Venezuela is careening towards the second-largest sovereign default in history (behind Greece) because even if Maduro manages to pay back what comes due this month,the real test comes this autumn when Caracas will need to come up with more than $5 billion in principal and interest.

As Bloomberg notes, “Venezuela has $35.6 billion of dollar bonds outstanding and owes $67 billion once interest payments are included. State-owned oil company Petroleos de Venezuela SA, known as PDVSA, has $33.5 billion of bonds, and $52.6 billion counting interest.” Incidentally, Reuters reported this afternoon that PDVSA is now in talks with foreign banks on a proposed restructuring.

“Venezuela will not go into default, and the fact that we are talking with banks shows that there is interest in investing in Venezuela,” PDVSA president Eulogio Del Pino told reporters outside of national assembly this afternoon.

“At the oil price that the futures curve is pricing in (USD/b32), the government would need to use more than 90% of the oil exports to make debt payments if we include market, bilateral, commercial, and Chinese Fund obligations,” Barclays said in January.

In short, it seems unlikely that even with the “measures” announced by Maduro this month, the country will be able to service its debt and import a sufficient amount of food to keep the shelves stocked. By nationalizing pretty much everything, Hugo Chavez managed to leave the country entirely dependent on imports, paid for with oil revenue. That oil revenue is now crimped and Venezuela is rapidly running out of reserves (oh, and the gold is leaving):

Although Maduro may be able to scrape together enough cash to carry on for a few months, this is going to end in tears one way or another.

As we documented in “In Venezuela, ‘Savage Suffering’ Takes Hold Amid Frightening ‘Food Emergency,'” the country’s beleaguered masses are struggling to survive amid empty grocery store shelves and inflation that the IMF says will hit 720% this year.

As we put it, “the public may have been unwilling to stage an outright rebellion with inflation at 200%, but at 720% it’s difficult to see how things won’t careen into outright social upheaval in the not so distant future. Especially once the country defaults and the public comes to realize just how wasteful the government is with what should be a vast store of national oil wealth.”

Echoing that sentiment is Barclays whose latest missive on Venezuela suggest that although it’s not entirely out of the realm of possibility that the country could manage to avoid a default in 2016, the public’s patience may be about to run out. Here’s more:

The key variable over the coming months will be public patience. In the attempt to meet debt payments, the government will likely need to impose an additional severe import cut, which, combined with the relative price distortions, will likely lead to a deepening of the scarcity problems and the economic and social crisis in general. The private sector reports inventories at levels that in some cases could be barely enough to satisfy a few days of demand. Some food companies have had up to 80% of their production capacity shut down because of a lack of inputs. The financial system is seeing FX allocations to its clients at levels close to zero, which could imply a sharp decline of imports over the coming months.

So far the government has been successful in containing social pressures with a combination of military presence, fear and media control. Nonetheless, isolated events of looting and violence have been reported (El Nacional, January 31, 2016). In the absence of a catalyst, this might not escalate, but it is a very fragile situation. So far, Venezuelan society has been patient, but will this continue to be the case? The society, in some ways, has arguably opted for economic regression by adapting its consumption to the goods available and accessing them via channels other than the traditional distribution channels, such as barter and unofficial markets. Moreover, BCV data for the balance of payments for 2015 suggest that a large portion of imports could have been financed with private sector savings or sources other than government FX allocations. Therefore, there is a possibility that the government could further cut FX import allocations, limiting them to just essential goods. It is difficult to measure the level of social unrest, but the least that can be said is that this is a risky strategy for government that could increase the possibility of an escalation.

In other words, a revolution may be imminent and you might want to fade this rather remarkable tightening in the country’s CDS spreads:

As a reminder, 5-year CDS spreads recently blew out to levels Greek spreads hit in 2011 – right before the country defaulted.

It seems unlikely that the opposition – which won a major victory at the polls in December – will be able to drive Maduro out in time for the country to avert a further economic collapse or a sovereign default.

Indeed, the fact that Maduro was able to win the Supreme Court’s backing for his “emergency” economic measures would appear to suggest that the political dynamics in Venezuela aren’t materially different. It’s one thing for the populace to feel as though their government has let them down, but it’s entirely another for the electorate to discover that they are essentially powerless to change things even when their vote clearly demonstrates a desire for something different.

Bring on “the toilet paper rebellion” (trademark, Tyler Durden):




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

Euro/USA 1.0961 down .0063

USA/JAPAN YEN 111.77  DOWN .135 (Abe’s new negative interest rate (NIRP)a total bust

GBP/USA 1.3896 down .0109 (threat of Brexit)

USA/CAN 1.3839 UP .0043

Early THIS WEDNESDAY morning in Europe, the Euro fell by 63 basis points, trading now well above the important 1.08 level falling to 1.1034; 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 down in value (onshore)  The USA/CNY up in rate at closing last night: 6.5360 / (yuan down but will still undergo massive devaluation/ which will cause deflation to spread throughout the globe)

In Japan Abe went BESERK  with NEW ARROWS FOR HIS Abenomics WITH THIS TIME INITIATING NIRP   . The yen now trades in a  NORTHBOUND trajectory as IT settled UP in Japan by 14 basis points and trading now well BELOW  that all important 120 level to 112.06 yen to the dollar.  NIRP POLICY IS A COMPLETE FAILURE  AND ALL OF OUR YEN CARRY TRADERS HAVE BEEN BLOWN UP

The pound was down this morning by 109 basis points as it now trades just below the 1.40 level at 1.3896 on fears of a BREXIT.

The Canadian dollar is now trading DOWN 43 in basis points to 1.3839 to the dollar.

Last night, Chinese bourses were mainly in the RED/Japan NIKKEI  CLOSED DOWN 136.26 POINTS OR 0.85%, ALL ASIAN BOURSES LOWER EXCEPT SHANGHAI/ AUSTRALIA IS LOWER / ALL EUROPEAN BOURSES ARE  IN THE RED   as they start their morning.

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 HAS BLOWN up/and now NIRP)

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 136.76 OR  0.85%

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

2/ Asian bourses IN THE RED/ Chinese bourses: Hang Sang closed DOWN 222.33. POINTS OR  1.15% ,Shanghai in the GREEN (ONLY ON LAST HR RESCUE BY POBC)  Australia BOURSE IN THE RED: /Nikkei (Japan)RED/India’s Sensex in the RED /

Gold very early morning trading: $1236.20


Early WEDNESDAY morning USA 10 year bond yield: 1.69% !!! DOWN 5 in basis points from last night  in basis points from TUESDAY night and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield falls to 2.55 DOWN 4  in basis points from TUESDAY night.  

USA dollar index early WEDNESDAY morning: 97.89 UP 45 cents from TUESDAY’s close.(Now below resistance at a DXY of 100)

This ends early morning numbers WEDNESDAY MORNING




It is so bad in the oil patch in Canada that owners of the surface rights have not been paid by the oil companies because of huge losses:

(courtesy zero hedge)

Canadian Oil Companies Have Stopped Paying The Rent

Where possible, we try not to beat dead horses but when it comes to the death of the so called “Alberta dream,” it’s rather difficult to ignore the pace at which conditions continue to deteriorate in Canada’s beleaguered oil patch.

We’ve covered Alberta’s demise extensively over the past twelve months, documenting everything from soaring food bank usage to the alarming spike in property crime in Calgary where vacant office space sits collecting dust and condos go unsold even as housing prices soar in British Columbia and Ontario.

Last year, Alberta logged the most job losses the province has seen in 34 years, as the unemployment rate spiked to 7.1% from just 4.8% at the end of 2014. 2015 turned out to be worse for provincial job losses than 2009.

Now, in the latest sign that the seemingly inexorable decline in crude will continue to weigh on Alberta’s flagging economy, we learn that O&G companies have simply stopped paying rent for surface access to private property.

“For the past five years, regular as clockwork, an oil and gas company’s cheque for $4,097 has arrived in Allison Shelstad’s mailbox sometime in January, rent paid for surface access to a natural gas well on the farmland southeast of Calgary her family has owned for more than 50 years,” The Calgary Herald reports.

This year, the check didn’t show up. And neither did checks for 765 landowners who have now appealed to the Alberta Surface Rights Board for relief. That’s the highest number of appellees in at least 12 years.

In total, the board is demanding that O&G producers fork over $1.7 million in lease payments,more than double 2014’s court-ordered back payments. As The Herald goes on to note, this dwarfs the figures from 2008-09: “During the downturn of 2008-09, only 268 and 241 landowners, owed $490,000 and $730,000, respectively, took their complaints to the board.”

“I think (the oil industry) thought the big revenues were going to go on forever. They gave a lot of money away to the shareholders, and they kept quite a bit for themselves, probably the biggest part,” says 69-year-old Perry Nelson, who has 30 well leases and who has made his first ever application to the Surface Rights Board. “I don’t know how they went from windfall profits to where they are today.”

Well, they went from windfall profits to “where they are today” because crude prices collapsed by 60%. We’re not defending the industry but it’s not exactly like this is a mystery. North American production threatened Riyadh’s market share and the Saudis simply bankrupted the space. That’s all there is to it.

The problem for the Perry Nelsons and Allison Shelstads of the world is that while the government can demand that the companies pay, it cannot extract money that isn’t there to extract. In other words, if companies simply don’t have the money, provincial authorities are forced to foot the bill. And yes, that means landowners are effectively paying themselves for the rights to use the land they themselves own.

Welcome to “lower for longer” Alberta. Blame Ali Al-Naimi.


Crude spikes on less of a build in inventory at the DOE. However Cushing continues to build in inventory:
(courtesy zero hedge)

Crude Spikes On Gasoline Draw & Production Cut (Despite Another Cushing Build)

Following last night’s major build (from API), DOE reported a bigger than expected Crude build (3.5mm vs 3.25 exp). Crude prices jerked higher on this news as it was less than the API print of +7.1mm build and Gasoline and Distillates inventories dropped. However, Cushing inventories rose 333k barrels (the 15th build in the last 16 weeks. Perhaps more importantly, The Lower 48 saw a 196k bbl/day YoY drop in production (the 5th weekly drop in a row) and oil prices are surging.


  • Crude +7.1mm (3mm exp)
  • Cushing +307k (300k exp)
  • Gasoline +569k (-1mm exp)
  • Distillates -267k (-700k exp)



The all important commercial stocks rose by 3.5 million to another record high of 507.6MM, 73.5MM barrels, or 16.9%, higher than a year ago.

The full breakdown: first drop in gasoline inventories in 15 weeks

So overall crude inevntory was less than API (but API just caught up t last week’s miss) and was more than expected. Cushing saw another build – which is a major problem as we already noted that it is denying storage requests.

But the 5th weekly drop in production has encouraged some more buying… with production down 196k bbl/day YoY

Some good news: gasoline demand rose 5.2% compared to the past 4 weeks a year ago…

… however this was at the expense of distillates, where demand tumbled 16% from the same 4 week period in 2015, and is now the lowest ever for this time of the year.

Finally, refineries are cranking at a record seasonal pace in hopes of filling every open spot in the supply chain:

The reaction is a knee-jerk spike (for now)

Didn’t last long…

And now your closing WEDNESDAY numbers

Portuguese 10 year bond yield:  3.47% up 6 in basis points from TUESDAY

Japanese 10 year bond yield: -.005% !! down 1 full  basis points from TUESDAY which was lowest on record!!
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: 1.53% par in basis points on the day:
Italian 10 year bond trading 11 points lower than Spain
Closing currency crosses for WEDNESDAY night/USA dollar index/USA 10 yr bond:  2:30 pm
Euro/USA: 1.1010 down .0012 (Euro down 12 basis points)
USA/Japan: 111.74 down 0.156 (Yen up 16 basis points) and still a major disappointment to our yen carry traders and Kuroda’s NIRP
Great Britain/USA: 1.3908 down .0096 (Pound down 96 basis points on Brexit concerns)
USA/Canada: 1.3719 down.0078 (Canadian dollar up 78 basis points with oil being higher in price/wti = $32.18)
This afternoon, the Euro fell by 12 basis points to trade at 1.1010/(with Draghi’s jawboning having no effect)
The Yen rose to 111.74 for a gain of 16 basis points as NIRP is still a big failure for the Japanese central bank/also all our yen carry traders are being fried
The pound was down 96 basis points, trading at 1.3908.(BREXIT concerns)
The Canadian dollar rose by 78 basis points to 1.3719 as the price of oil was up today as WTI finished at $32.18 per barrel,)
The USA/Yuan closed at 6.5354
the 10 yr Japanese bond yield closed at +.004% up 1  full basis points.
Your closing 10 yr USA bond yield: down 2 basis points from TUESDAY at 1.72%//(trading well below the resistance level of 2.27-2.32%) policy error
and the Dow falls as well as bond yields???
USA 30 yr bond yield: 2.57 down 2 in basis points on the day and will be worrisome as China/Emerging countries  continues to liquidate USA treasuries  (policy error)
and the Dow falls as well as bond yields???
 Your closing USA dollar index: 97.50 up 5 in cents on the day  at 2:30 pm
Due to huge volatility: here are currency crosses at 4 pm:
Gr Britain/USA: 13928
usa 10 yr bond yield;1.7501
usa: 30 yr bond 2.605
wti: 32.23 per barrel
Your closing bourses for Europe and the Dow along with the USA dollar index closings and interest rates for WEDNESDAY
London: down 95.13 points or 1.60%
German Dax: down 248.97 points or 2.66%
Paris Cac down 83.08 points or 1.96%
Spain IBEX down 253.90 or 3.07%
Italian MIB: down 444.10 points or 2.59%
The Dow up 53.21  or 0.32%
Nasdaq:up 39.02  or 0.87%
WTI Oil price; 32.18  at 3:30 pm;
Brent OIl:  34.47
USA dollar vs Russian rouble dollar index:  76.04   (rouble is up 24 /100 roubles per dollar from yesterday) as the price of oil fell
This ends the stock indices, oil price, currency crosses and interest rate closes for today.
And now USA stories
First USA trading in chart form:
 (courtesy zero hedge)

Worst US Economy Since Government Shutdown Sparks Panic-Buying In Stocks

Well, we’ve seen some ridiculous moves in markets before but today’s cross asset-class malarkey takes the proverbial biscuit…


Or put another way…


Worst home sales data in 2 years, worst Servcies economy in 3 years, and an ongoing build in crude… and that happened.

Which left a lot of traders proclaiming…


Stocks V-shaped Recovery today… We note that Russell 200 (small caps) were the best performers and desk chatter was ongoing about the soaring cost of borrow for many small cap names.


The ignition for the idiocy was at 1115ET when The NY Fed cancelled POMO – that lifted everything for an hour – then when The NY Fed finally did its POMO at 1400ET USDJPY took over from crude to lift stocks…


As one witty trader remarked, today’s rally is so furious, Oprah lost 10 pounds just watching it


As we note that Tom DeMark’s level for trouble today was a close below 1917… And we noted The Dow soared 350 points off the lows


As an over-exuberant shorting of the shittiest stocks at the open seemed to spark panic squeeze during the day… up 4% off the opening lows…


Futures show the excitement best on the week…


Financials gapped lower then ripped but ended red…


But credit is still not buying it…


Treasury yields also V-shaped on the day as the POMO cancellation started the ramp and then a renewed POMO extended it…


Cable kept slumping (under 1.40) but the USD Index had another day of relative calm as commdoity currencies rallied this afternoon on oil’s gains…


Commodities were where all the action was today…



Crude was idiotic… big build in inventories, drop in demand, and small drop in production…(which was all roundtripped by the market before it just exploded) – some claim this was related to China fiscal stimulus headlines…


Gold (and Silver) Roundtripped…


Charts: Bloomberg


Now it is Markit’s turn to report a huge crash in the services sector along with the Markit PMI;  the USA is now in contraction mode:
(courtesy Markit/zero hedge)

And Now We Have A Services Recession: Markit Services PMI Crashes Into Contraction

Following this week’s ongoing demise of the US manufacturing sector, tumbling to its weakest since October 2012, Markit US Services PMI collapsed into contraction at 49.8, massively below expectations of 53.5. This is the weakest level for the last pillar standing in the US recovery since thegovernment shutdown in 2013, and as Markit even admits, “slumping business confidence and an increased downturn in order book backlogs suggest there’s worse to come.”

  • Service providers report least favourable business outlook since August 2010
  • The latest upturn in new work was one of the slowest since the survey began in late-2009.

The last leg of the US recovery stool just broke…

As Markit admits:

The index – which is based on approximately 85% of usual monthly replies – signalled the weakest service sector performance since the government shutdown temporarily disrupted business activity in October 2013. Reports from survey respondents suggested that softer underlying new order growth and uncertainty about the economic outlook had weighed on business activity in February.

“The PMI survey data show a significant risk of the US economy falling into contraction in the first quarter. The flash PMI for February shows business activity stagnating as growth slowed for a third successive month. Slumping business confidence and an increased downturn in order book backlogs suggest there’s worse to come.

As they warns, the data show a significant risk of the US economy falling into contraction in the first quarter

“Optimism about the outlook has been on a downward trend over the past two years, with worries about the global economic outlook, financial market volatility, the presidential election and interest rate policy all taking a further toll on business morale in February

Charts: Bloomberg

New home sales collapse by a monstrous 9.2% in January.  It seems that the USA economy stopped on a dime from Dec 2105 onward:
(courtesy zero hedge)

January New Home Sales Collapse Most Since 2009 As Prices Plunge To 2-Year Lows

Against expectations of a 4.4% drop, New home sales collapse by 9.2% in January. This is the biggest January drop since 2009 as dragging the SAAR to 494k (back at December 2014 levels). Worse still, home prices tumbled – from $295,800 to $278,000 (lowest since April 2014), and down 4.5% year-over-year as it appears the inventory fears have disappeared with months-supply surging from 5.1 to 5.8.

If this converges, we have a major problem…

Yet another leg of the “recovery” collapses.

another store front operation in trouble:
(courtesy zero hedge)

Restoration Hardware Stock Crashes After Terrible Earnings; Company Blames Crashing Stock Price

Despite the unequivocally good economic news of low oil prices, Restoration Hardware’s CEO just pre-warned of a massive miss in top- and bottom-line for Q4 thanks to “energy, oil, and currency fluctuations.” This has sent the stock down over 20% after hours to its lowest since early 2013.

Here is why the headline scanning algos are puking:


The firm’s CEO explains the reasons for the collapse:

There are three key factors that had a negative effect on our fourth quarter results, along with several positive developments that give us tremendous confidence in our long-term growth strategy.


First, our demand sales/written orders were up a strong 21% in the fourth quarter on top of up 26% last year. Our delivered revenue, however, was up only 11% in the quarter on top of up 24% last year, representing a shortfall to our plan. While the initial response to RH Modern has been outstanding, we are experiencing shipping delays as certain vendors are struggling to ramp up production of this new product line. We expect the majority of the demand/written orders to turn into revenues in the first and second quarter, and anticipate our vendors will be substantially caught up by the end of the first half. Additionally, we believe the poor in-stocks also suppressed orders, and we expect demand to build as our in-stocks improve.


Second, we continue to see underperformance in markets affected by energy, oil, or currency fluctuations. The Canada, Texas and Miami markets were a drag of 2 points to total Company revenues in the first half, then accelerated to a 4 point drag in the third quarter, and continued as a 4 point drag in the fourth quarter despite increased promotional efforts, including reduced shipping charges to incentivize our Canadian customers. These results tell us the conditions remain weak in these markets and in aggregate they are trending 20 points below the rest of the Company. Looking forward, we will begin to cycle the underperformance, and the negative drag should be mitigated.


Third, our attempt to drive incremental revenue through increased promotional activity in the fourth quarter was less successful than in prior periods, signaling a further pullback by the high-end consumer. Our sense is the increased volatility in the US stock markets, especially the extreme conditions in January, which is historically our biggest month of the quarter for furniture sales, contributed to our performance.

But the punchline was this:

Historically, our business has a correlation to large movements in stock prices as we believe asset valuations influence our customers’ buying patterns.

In other words, the stock price is crashing, because earnings are terrible, because…  the stock price is crashing.

Well, at the rate the stock is crashing after hours, RH may just forget any earnings in the coming quarter, which will in turn send the price crashing even further until ultimately there is nothing left of either the business or its market cap.


We will see you tomorrow night

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