March 14/Open interest rises above 500,000 in gold and thus necessitates another raid/OI for silver also remains extremely high/China has poor industrial numbers along with poor retail sales/The anti immigration party wins big in regional elections in Germany/Huge bomb blast in Ankara Turkey/

Gold:  $1,244.40 down $14.30    (comex closing time)

Silver 15.52  down 9 cents

In the access market 5:15 pm

Gold $1235.30

silver:  15.36


At closing today, we have the following observations to bring to your attention:

In silver, the OI has remained at record levels for many years despite the low price of silver.  The total OI in oz  has been above total annual global production! Silver is in backwardation at the comex until July although it is a paper backwardation. Silver is in real backwardation in London for several months

And now gold:

The total OI for gold has now surpassed 500,000 contracts or 50,000 million oz or 1,552 tonnes of gold  The world produces around 2,200 tonnes of gold (ex China ex Russia which keeps all of their gold).  The last time gold had an OI at 500,000 was in Sept/October 2012 with the gold price at $1700.00.

The high OI for both gold and silver accompanied by a low price, defy logic and thus no doubt we have massive criminal activity by our bankers in their constant raiding of gold and silver trying to extricate themselves from their massive short OI. Gold is not in backwardation at the comex and not in London England.




At the gold comex today, we had a poor delivery day, registering 0 notices for NIL ounces and for silver we had 40 notices for 200,000 oz for the active March delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 211.98 tonnes for a loss of 91 tonnes over that period.

In silver, the open interest fell by 137 contracts  to 169,127 with silver advancing by 6 cents. In ounces, the OI is still represented by .846 billion oz or 122% of annual global silver production (ex Russia ex China).

In silver we had 40 notices served upon for 200,000 oz.

In gold, the total comex gold OI rose by an enormous 2,245 contracts to 506.363 contracts despite the fact that the price of gold was DOWN $13.30 with Friday’s trading.(at comex closing). No wonder the crooks continued to raid gold today.

We had a huge change  in gold  inventory at the GLD, a withdrawal of 8.63 tonnes of gold from the GLD/ thus the inventory rests tonight at 790.14 tonnes. The appetite for gold coming from China is depleting not only gold from the LBMA and GLD but also the comex is bleeding gold. Our 670 tonnes of rock bottom inventory in GLD gold has been broken. It looks to me that China has taken the last amounts of physical gold from the GLD. I guess the only place left for China to receive physical gold, after they deplete the GLD will be the FRBNY and the comex.   In silver,/we had a huge change in inventory/this time a huge deposit of 1.903 million oz  and thus the Inventory rests at 325.868 million oz


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


1. Today, we had the open interest in silver fell by 137 contracts down to 169,127 despite the fact that the price of silver was up 6 cents with yesterday’s trading. The total OI for gold rose by 2,254 contracts to 506,363 contracts despite the fact that gold was down $13.30 in price from Friday’s level. The high OI in gold necessitated our criminal bankers to raid gold/silver today.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)



i)Late  SUNDAY night/ MONDAY morning: Shanghai closed UP BY 49.58 POINTS OR 1.74% , /  Hang Sang closed UP by 275.74 points or  1.17% . The Nikkei closed UP 294.88 or 1.74%. Australia’s all ordinaires was UP 0.37%. Chinese yuan (ONSHORE) closed UP at 6.4942.   Oil FELL  to 37.68 dollars per barrel for WTI and 39.68 for Brent. Stocks in Europe so far ALL IN THE GREEN . Offshore yuan trades  6.4976 yuan to the dollar vs 6.4960 for onshore yuan/china’s industrial production collapsed along with retail sales


ii)report on Japan



iii)report on China:

a)Poor industrial numbers plus poor retail sales

( zero hedge)

b)the following was bound to happen:  enormous crowds of unemployed Chinese coal miners take to the streets and clash with riot police:

( zero hedge)



i)Deutsche bank warns that we are one hawkish Fed statement away from a sharp USA downturn:

( zero hedge/Deutsche bank)

ii) In Germany, in regional elections the anti immigration party wins big:
( zero hedge)
iii)Interesting!! 2,000 refugees bypass the Greek/Macedon border fence and enter into Macedonia;
( zero hedge)



i)Another bomblast in Ankara, Turkey:

( zero hedge)

ii)Egypt devalues its pound to 8.85 pounds to the dollar from 7.73.  When I was in Egypt a few years ago, it was 3. pounds to the dollar.  Their problem:  they cannot get their hands of scarce dollars: this sovereign nation will default on its bonds as its credit default swaps skyrocket!

( zero hedge)

i)A huge street protest in Brazil as they demand Rousseff to leave office:

( zero hedge)

ii)And now riots on the streets in Venezuela!!

( zero hedge)

Credit Suisse explains why oil producers just do not believe the oil rally this past few weeks:

(Credit Suisse/zero hedge)

ii)The following court decision may accelerate oil and gas bankruptcies

(Dave Forest/Oil
iii)Iran will have no part in an oil production freeze

( zero hedge)
iv)Perhaps the best analyst out there on oil is Art Berman. He explains why oil prices should fall and fall hard

(courtesy Art Berman/
v) Monday:
With USA shale producers willing to stay in the game in oil at $40.00, was enough to send the entire complex down:  WTI collapses to $37.53!
( zero hedge)
vi)Now it is Morgan Stanley warning of a big drop in oil:
(Morgan Stanley/zero hedge)
i)A radical theory??? Governments scan print (create) money as much as they want and they are only restrained by the prospect of currency debasement and the market’s reaction to it.and they just figured this out just now!!

(GATA/Chris Powell/Bloomberg)

ii)You have got to be kidding?  central banks aims to beat bitcoin by doing their own rival super currency??

(Ambrose Evans Pritchard/UKTelegraph)
iii)Two more financial companies disagree that gold only collects dust

(courtesy Chris Powell/GATA)
iv)It seems that Main Street is noticing the huge buildup of gold at GLD  (and other ETF’s)

Only one problem;  the gold buildup is not physical only paper gold buildup

( zero hedge)

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

“Assets and Liabilities”



vi)What on earth is going on here?  Blackrock buys GLD and then declares they are offside?

something smells fishy here!!
(courtesy Leslie Josephs/Wall Street Journal)


i)Tax refunds tumble and this suggests the fact that the recovery in jobs is just not there:

( zero hedge)
ii)a good account as to the real story behind the USA election!!

William J. Bennett, Host of Bill Bennett’s Morning in America Show, is one of America’s most important, influential, and respected voices on cultural, political, and education issues.  He has one of the strongest Christian world views of any writer in modern times.
(courtesy William Bennett)

Let us head over to the comex:


The total gold comex open interest rose to 506,363 for a gain of 2245 contracts despite the fact that  the price of gold was down $13.30 in price with respect to Friday’s raid and thus the reason for our  bankers raiding our precious metals today. 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 or for that matter an inactive month, and 2) a continual drop in the amount of gold standing in an active month.   Today, both scenarios were in order. The front March contract month saw its OI fall by 4 contracts down to 142.We had 0 notices filed upon yesterday, and as such we lost 4 contracts or an additional 400 oz will not stand for delivery.  After March, the active delivery month of April saw it’s OI fall by 12,660 contracts down to 269,016. This high level is also scaring our crooked bankers. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was 176,239 which is fair.  The confirmed volume on Friday (which includes the volume during regular business hours + access market sales the previous day was excellent at 272,489 contracts. The comex is not in backwardation .


Today we had 0 notices filed for nil oz in gold.
And now for the wild silver comex results. Silver OI fell by 137 contracts from 169,264 down to 169,127 despite the fact that the price of silver was up by 6 cents with Friday’s trading. The next big active contract month is March and here the OI fell by 198 contracts down to 1141 contracts. We had 101 notices served upon yesterday, so we lost 97 contracts or an additional 485,000 ounces will  not stand for delivery. The next contract month after March is April and here the OI rose by 33 contracts up to 443.  The next active contract month is May and here the OI fell by 847 contracts down to 116,341. The volume on the comex today (just comex) came in at 39,450 , which is  good. The confirmed volume yesterday (comex + globex) was excellent at 51,416. Silver is now in backwardation at the comex until July in  which is unbelievable because it is a paper backwardation. In London it is in backwardation for several months.
We had 40 notices filed for 200,000 oz.

March contract month:

INITIAL standings for MARCH

March 14/2016


Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 32.15 oz(Manfra)

i kilobar

Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  nil
No of oz served (contracts) today 0 contracts
(nil oz)
No of oz to be served (notices) 142 contracts(14,200  oz)
Total monthly oz gold served (contracts) so far this month  584 contracts (58,400 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 106,046.1 oz
Today, we had 0 dealer transactions
total dealer deposit; nil oz
we had no dealer withdrawals
total dealer withdrawals nil. oz
We had 1  customer withdrawals:
ii) Out of Manfra: 32.15 oz
one kilobar
total customer withdrawal: 32.15 oz
we had 0 customer deposits:
total customer deposit: nil oz

we had 1 adjustments

i) Out of HSBC:  304.377 was adjusted out of the dealer and this landed into the customer account.  This is probably a settlement of a delivery.0094 tonnes)



 JPMorgan has a total of 45,678.794 oz or 1.4207 tonnes in its dealer or registered account.
***JPMorgan now has 634,781.512 or 19.743 tonnes in its customer account
Today, 0 notices was issued from JPMorgan dealer account and 0 notice were issued from their client or customer account. The total of all issuance by all participants equates to 0 contracts of which 0 notices 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 Mar contract month, we take the total number of notices filed so far for the month (584) x 100 oz  or 58,400 oz , to which we  add the difference between the open interest for the front month of March (142 contracts) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals the number of ounces standing.
Thus the INITIAL standings for gold for the March. contract month:
No of notices served so far (584) x 100 oz  or ounces + {OI for the front month (142) minus the number of  notices served upon today (0) x 100 oz which equals 72,600 oz standing in this non  active delivery month of March (2.258 tonnes).  This is an excellent showing for gold deliveries in this non active month of March.
we lost 400 oz of additional gold standing for March delivery.
We thus have 2.258 tonnes of gold standing and 10.449 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.
We now have partial evidence of gold settling for last months deliveries We now have 2.258 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12) = 9.2646 tonnes standing against 10.493 tonnes available.  .
Total dealer inventor 336,264.376 oz or 10.449 tonnes
Total gold inventory (dealer and customer) =6,815,312.739 or 211.98 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 211.98 tonnes for a loss of 91 tonnes over that period. 
JPMorgan has only 21.16 tonnes of gold total (both dealer and customer)
And now for silver

MARCH INITIAL standings/

March 14/2016:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  330,337.27 oz (BrinksCNT)
Deposits to the Dealer Inventory nil oz
Deposits to the Customer Inventory nil
No of oz served today (contracts) 40 contracts 200,000 oz
No of oz to be served (notices) 1101  contract (5,505,000 oz)
Total monthly oz silver served (contracts) 487 contracts (2,435,000 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 8,793,061.6 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 0 customer deposits

total customer deposits: nil oz


We had 2 customer withdrawals:

i) Out of Brinks:  198,131.280 oz

ii) Out of CNT:  132,205.990 oz


total customer withdrawals:  330,337.270 oz



 we had 2 adjustments

i) Out of CNT:

35,135.02 oz was adjusted out of the customer account and this landed into the dealer account of CNT

ii) Out of the International Depository Services of Delaware:

41,275.130 oz  was adjusted out of the customer.I.Delaware account and into the dealer  I.Delaware.


The total number of notices filed today for the March contract month is represented by 40 contracts for 200,000 oz. To calculate the number of silver ounces that will stand for delivery in March., we take the total number of notices filed for the month so far at (487) x 5,000 oz  = 2,435,000 oz to which we add the difference between the open interest for the front month of March (1141) and the number of notices served upon today (40) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the March. contract month:  487 (notices served so far)x 5000 oz +(1141{ OI for front month of March ) -number of notices served upon today (40)x 5000 oz  equals  7,740,000 oz of silver standing for the March contract month.
we lost 97  contracts or an additional 485,000 oz  that will not stand.
No doubt these were cash settled as they are running out of real silver.
Total dealer silver:  29.302 million  (near all time recorded low level)
Total number of dealer and customer silver:   155.305 million oz
Question: 1. why so much activity in the silver comex?
Question   2.  why so much deposits of silver and yet tiny delivery notices?
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:


March 14/a huge change in gold inventory at the GLD, a withdrawal of 8.63 tonnes/Inventory rests at 790.14 tonnes

March 11 /despite the high volatility of gold last night and today, somehow the GLD added 5.95 tonnes of gold without disturbing anyone./inventory rests this weekend at 798.77 tonnes

March 10/a deposit of 2.08 tonnes of gold into the GLD/Inventory rests at 702.82 tonnes

March 9/a withdrawal of 2.38 tonnes of gold from the GLD/Inventory rests at 790.74

March 8/no changes in inventory at the GLD/Inventory rests at 793.12 tonnes

MARCH 7/a tiny loss of .21 tonnes of gold probably to pay for fees/inventory 793.12 tonnes

MARCH 4/another mammoth sized deposit of 7.13 tonnes of gold into GLD/Inventory rests at 793.33 tonnes.  This is no doubt a “a paper addition” and not physical

MAR 3/another good sized deposit of 2.37 tonnes of gold into the GLD/Inventory rests at 788.57 tonnes

MAR 2/another mammoth paper gold addition of 8.93 tonnes of gold into the GLD/Inventory rests at 786.20 tonnes.

March 1/a mammoth 14.87 tonnes of gold deposit into the GLD/inventory rests at 770.27 tonnes





March 14.2016:  inventory rests at 790.14 tonnes



Now the SLV
March 14/we had another huge deposit of 1.903 million oz into the SLV/Inventory rests at 325.868 million oz.
March 11/another huge addition of 1.333 million oz of inventory entered the SLV/Inventory rests at 323.965 million oz
March 10/no change in inventory at the SLV/Inventory rests at 322.632 million oz
March 9/no change in inventory at the SLV/Inventory rests at 322.632 million oz/
March 8/no change in inventory at e SLV/Inventory rests at 322.632 million oz
MAR 7/another huge deposit of 2.856 million oz/inventory rests at 322.632 million oz/
MAR 4/another huge deposit of 5.426 million oz /inventory rests at 319.776
MAR 3/a huge deposit of 2.732 million oz/inventory rests at 314.350 million oz
MAR 2/no change in silver inventory/rests tonight at 311.618 million oz
March 1/no change in silver inventory/rests tonight at 311.618 million oz
March 14.2016: Inventory 325/868 million oz.
1. Central Fund of Canada: traded at Negative 7.2 percent to NAV usa funds and Negative 7.1% to NAV for Cdn funds!!!!
Percentage of fund in gold 64.3%
Percentage of fund in silver:35.7%
cash .0%( Mar 14.2016).
2. Sprott silver fund (PSLV): Premium to NAV falls to  2.76%!!!! NAV (Mar 14.2016) 
3. Sprott gold fund (PHYS): premium to NAV falls  to -0.58% to NAV Mar 14.2016)
Note: Sprott silver trust back  into positive territory at +2.76%/Sprott physical gold trust is back into negative territory at -0.58%/Central fund of Canada’s is still in jail.



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

Trading in gold and silver overnight in Asia and Europe
(COURTESY Mark O’Byrne)

Physical Gold Demand Strong In Emerging Markets and Limited Supply Leading To Higher Gold Prices

Consumers are lapping up physical gold at a time supply is declining, helping underpin a rally in gold prices.

Demand from emerging markets in particular is strong as currencies such as the Indonesian rupiah, the Malaysian ringgit and the Vietnamese dong has fallen sharply in the last 12 to 18 months against the U.S. dollar, prompting consumers in these markets to buy physical gold, which is seen as a haven in times of tumult according to CNBC.

Gold Bullion at London Dealers
Gold bars and coins are displayed at bullion dealers Goldcore, in London, U.K., on Thursday, March 11, 2010. Photographer: Chris Ratcliffe/Bloomberg

LBMA Gold Prices

14 Mar: USD 1,256.55, EUR 1,130.24 and GBP 875.89 per ounce
11 Mar: USD 1,262.25, EUR 1,136.50 and GBP 883.03 per ounce
10 Mar: USD 1,247.25, EUR 1,137.04 and GBP 876.67 per ounce
09 Mar: USD 1,258.25, EUR 1,146.69  and GBP 884.16 per ounce
08 Mar: USD 1,274.10, EUR 1,155.69 and GBP 894.35 per ounce

Gold News and Commentary
Strong demand from emerging markets, limited supply keeping gold prices up – CNBC

Japan’s Biggest Gold Retailer Says Negative Rates Boost Demand – Bloomberg

Stock Rally Continues in Asia as BOJ, Fed Loom While Gold Gains – Bloomberg

Gold rebounds on weak dollar, market eyes Fed meeting – Reuters

Gold Believers Scoff at Goldman Warning as Wagers on Rally Rise – Bloomberg

SILVER OUTBREAK: Investment Demand Will Totally Overwhelm The Market – Silver Seek

And then there was none: Canada sells its gold –

Ignored for Years, a Radical Economic Theory Is Gaining Converts – Bloomberg

A ‘radical economic theory’ is gaining converts, except it’s not radical at all – GATA

Central banks beat Bitcoin at own game with rival supercurrency – Telegraph

Read more here


‘7 Real Risks To Your Gold Ownership’ – New Must Read Gold Guide Here

Please share our website with friends, family and colleagues who you think may benefit from it.

Thank you

Mark O’Byrne
Executive Director



A radical theory??? Governments scan print (create) money as much as they want and they are only restrained by the prospect of currency debasement and the market’s reaction to it.

and they just figured this out just now!!

(courtesy Chris Powell/GATA/Bloomberg)

A ‘radical economic theory’ is gaining converts, except it’s not radical at all

Dear Friend of GATA and Gold:

Bloomberg News tonight published a report, excerpted below, headlined “Ignored for Years, a Radical Economic Theory is Gaining Converts.” It’s called Modern Monetary Theory, but there’s nothing radical about it; to the contrary, it’s a tautology. That is, governments not only create money but can create as much as they want, restrained only by the prospect of currency debasement and the market and political reaction to it. Governments can’t “run out of money” any more than the college basketball tournament basketball games about to begin in the United States can run out of points.

That is why, 70 years ago, the president of the Federal Reserve Bank of New York, Beardsley Ruml, noted in a magazine article that in a fiat money system like the one to which the United States was transitioning, a system getting away from any convertibility to gold, taxes were no longer needed to raise revenue for the national government:

Today taxes are imposed by a national government not to raise revenue but to create demand for the government’s currency, to redistribute wealth, and to reward or penalize certain economic behavior. In his magazine article Ruml noted the latter two purposes but not the first, using taxes to create demand for a government’s currency.

In any case critics of fiat currency are wrong to charge that it has no intrinsic value, that fiat currency operates only on confidence. In fact, fiat currencies are the ransom people pay their governments through taxes to be allowed to stay out of jail. That is, currencies are the primary mechanisms by which governments control their populations.

This explains why governments are always waging war on gold, the once and possibly future world reserve currency, as gold is potentially an independent currency above all government. This also explains why governments are so desperately manipulating the gold market to conceal the debasement of their currencies.

Bloomberg says tonight that Modern Monetary Theory is only 20 years old. Insofar as MMT recognizes that government can issue non-commodity money, ancient China more or less implemented MMT a thousand years ago, there were episodes of it during the Roman empire, and the classical economist Adam Smith acknowledged it in 1776 in his famous treatise “The Wealth of Nations.”

Of course nearly all government currencies tend to be inflated away over time, but that doesn’t mean that Modern Monetary Theory is wrong. Rather it means that sustaining a purely fiat currency system requires more political virtue than any society has ever been able to sustain.

But of course current monetary systems are full of their own inflation and corruption, and government’s issuing money directly, in accordance with Modern Monetary Theory, might be a lot more efficient and fairer than the current system in the United States particularly, which subsidizes large financial institutions in the money-creation process, the issuance and monetization of government debt, and thereby diverts national wealth to a parasitic elite.

What’s wrong is government’s operating surreptitiously with money creation and markets. Since, as GATA has documented extensively, governments are already rigging markets comprehensively in support of their currencies —

— it may be hard to see how a change of policy to Modern Monetary Theory could make things much worse.

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

* * *



Ignored For Years, a Radical Economic Theory Is Gaining Converts

By Michelle Jamrisko
Bloomberg News
Sunday, March 13, 2016

In an American election season that’s turned into a bonfire of the orthodoxies, one taboo survives pretty much intact: Deficits are dangerous.

A school of dissident economists wants to toss that one onto the flames, too.

It’s a propitious time to make the case, and not just in the U.S. Whether it’s negative interest rates, or helicopter money that delivers freshly minted cash direct to consumers, central banks are peering into their toolboxes to see what’s left. Despite all their innovations, economic recovery remains below par across the industrial world.

Calls for governments to take over the relief effort are growing louder. Plenty of economists have joined in, and so have top money managers. Bridgewater’s Ray Dalio, head of the world’s biggest hedge fund, and Janus Capital’s Bill Gross say policy makers are cornered and will have to resort to bigger deficits.

“There’s an acknowledgment, even in the investor community, that monetary policy is kind of running out of ammo,” said Thomas Costerg, economist at Standard Chartered Bank in New York. “The focus is now shifting to fiscal policy.”

That’s where it should have been all along, according to Modern Money Theory. The 20-something-year-old doctrine, on the fringes of economic thought, is getting a hearing with an unconventional take on government spending in nations with their own currency.

Such countries, the MMTers argue, face no risk of fiscal crisis. They may owe debts in, say, dollars or yen — but they’re also the monopoly creators of dollars or yen, so can always meet their obligations. For the same reason, they don’t need to finance spending by collecting taxes, or even selling bonds. …

… For the remainder of the report:…

You have got to be kidding?  central banks aims to beat bitcoin by doing their own rival super currency??
(Ambrose Evans Pritchard/UKTelegraph)

Central banks aim to beat bitcoin at own game with rival supercurrency

Submitted by cpowell on Sun, 2016-03-13 15:57. Section: 

By Ambrose Evans-Pritchard
The Telegraph, London
Sunday, March 13, 2016

Computer scientists have devised a digital crypto-currency in league with the Bank of England that could pose a devastating threat to large tranches of the financial industry and profoundly change the management of monetary policy.

The proto-currency known as RSCoin has vastly greater scope than bitcoin, used for peer-to-peer transactions by libertarians across the world and beyond the control of any political authority.

The purpose would be turned upside-down. RSCoin would be a tool of state control, allowing the central bank to keep a tight grip on the money supply and respond to crises. It would erode the exorbitant privilege of commercial banks of creating money out of thin air under a fractional reserve financial system. …

… For the remainder of the report:…




Two more financial companies disagree that gold only collects dust
(courtesy Chris Powell/GATA)

Gold just collects dust? Two more financial companies disagree

Submitted by cpowell on Fri, 2016-03-11 18:00. Section: 

1:05p ET Friday, March 11, 2016

Dear Friend of GATA and Gold:

“Bullion is not liquid,” says Ian Lee, a business school professor at Carleton University in Ottawa, Ontario, Canada. “It sits down in the basement and collects dust”:…

Tell that to, among others, AuSecure —

— still another company that is mobilizing vaulted gold for trading, payment, and saving purposes all over the world. Today AuSecure became partners with Uphold, which describes itself as “the world’s fastest-growing cloud-based financial service platform.”

According to the announcement, Uphold customers now can redeem money in their accounts for gold — “coins or bars in any weight or denomination” — through AuSecure:…

“‘Gold investment is something that everyone should make — no matter your country, currency, or portfolio,’ said Hadi Saeid, founder and CEO of Ausecure. ‘Our integration with Uphold provides the opportunity for our customers to have an even more accessible, secure, and transparent experience in buying, holding, moving, and redeeming gold.'”

Of course you have to do your own due diligence with such financial companies. They are not banks with government insurance for their deposits. On the other hand, since they’re not banks, they may be less susceptible to “bail-ins” and freezing of accounts by governments. Your metal should be kept outside the government-controlled banking system.

In any case let’s get past the propaganda of college professors and financial establishment pundits who know only the past, not the present and future: Gold remains not just money but superior money, and with negative interest rates descending like vultures on the world, gold’s advantages as money increase every day.

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





It seems that Main Street is noticing the huge buildup of gold at GLD  (and other ETF’s)

Only one problem;  the gold buildup is not physical only paper gold buildup

(courtesy zero hedge)

From “Ugly-Stepchild” To “Beauty Queen” – Gold ETF Holdings Surge To 18-Month Highs

Despite Goldman Sachs “short gold” recommendation – which came within pennies of being stopped out last week – traders, investors, and safe-haven seekers continue to push into the precious metals. Gold has “seen some exceptional flows after quite a few years of being the ugly redheaded stepchild, but it’s not moved into sort of beauty-queen territory,” notes one commodity strategist as hedge fund net-long positionsare the highest since Feb 2015 and gold holdings in ETPs has soared to 18 month highs (amid the longest stretch of gains since 2012) squeezing the likes of Blackrock (in search of physical gold to meet ETF demand).

Chart: Bloomberg

As Bloomberg reports, There seems to be almost nothing that will deter this year’s newfound gold enthusiasm.

Even with a turnaround in global equities and signs of a more robust U.S. economy, investors are still piling into the metal. Money managers are holding the biggest net-wager on a rally in more than a year, and holdings in bullion-backed funds have climbed for 10 straight weeks, the longest streak since 2012. All this comes as Goldman Sachs, the bank that foresaw gold’s collapse in 2013, continues to stick by its prediction that prices will start to retreat.

The rally “has some legs, because I don’t think there’s any easy solution to this conundrum of slow growth,” said John Stephenson, the chief executive officer of Stephenson & Co. Capital Management in Toronto, which oversees C$55 million ($42 million).“What’s driving it is really just this uncertainty surrounding central-bank policy, negative interest rates, because they’re really at the heart of the whole issue right now that markets are struggling with. In that kind of environment, gold looks pretty attractive.”

Gold has “seen some exceptional flows after quite a few years of being the ugly redheaded stepchild, but it’s not moved into sort of beauty-queen territory,” said Fiona Boal, director of commodity research at Fulcrum Asset Management in London, which oversees $3.7 billion.

Gold is heading for a third straight monthly gain. While the U.S. has been resilient, there’s increasing concern that slowdowns in Europe and Asia could lead to a global recession.

What on earth is going on here?  Blackrock buys GLD and then declares they are offside?
something smells fishy here!!
(courtesy Leslie Josephs/Wall Street Journal)

How BlackRock Took a Shine to a Competitor’s Gold ETF


Mar 14, 2016 11:58 am ET

BlackRock, whose popular exchange-traded gold product briefly suspended the creation of new shares earlier this month due to an administrative error amid a surge in demand, has been making a hefty bet on a gold ETF lately.

But here’s the twist: It was a competitor’s ETF.

BlackRock revealed in a regulatory filing Thursday that it had built a 13% stake — worth about $4 billion — in the largest exchange-traded gold product, the more than $32 billion SPDR Gold Trust. BlackRock held a roughly 5% stake in the ETF–known by its ticker, “GLD”–it said in a regulatory filing with the Securities and Exchange Commission a month earlier.

In addition to holding the title of world’s biggest provider of exchange-traded funds by assets, BlackRock is the world’s biggest asset manager with $4.6 trillion under management as of the end of last year. It operates a number of mutual funds and other investment products, and several of them could have been buying shares of GLD.

BlackRock’s gold ETF bet came during a strong rally in the price of the metal.

Gold futures are up close to 19% this year as investors have flocked to an asset often considered a store of value and a safe haven. They’ve sought out the yellow metal amid negative interest rates in Europe and Japan and uncertainty about the global economy.

BlackRock declined to say why it chose a competitor’s product over its own, but several analysts said it is not unheard of for asset managers to include competitors’ products, such as ETFs, in portfolios.

While cost is often a factor in which fund to choose, the product’s size and liquidity – or the ease with which investors can buy and sell the shares are often among asset managers’ top considerations, said Ben Johnson, who heads ETF research at Morningstar Inc.

BlackRock’s iShares gold product charges a sponsor’s fee of 0.25%, while the SPDR Gold Trust’s expense ratio is 0.4%. But the SPDR gold fund, run by a unit of the World Gold Council, a gold-industry group, is about four times larger by assets. The Gold Council declined to comment.

What makes BlackRock’s stake notable is the timing.

The filing came three days after BlackRock said its $7.8 billion iShares Gold Trust had inadvertently oversold the amount of registered shares in the product, a snafu it says could open it up to SEC penalties. It registered and resumed the ability to issue new shares last Monday. Trading of the existing shares wasn’t suspended, but analysts and traders said the suspension of new shares could have caused the ETF to disconnect from the value of its underlying holdings, since it relies on traders to arbitrage any difference between the ETF shares and the product’s assets.


And now Bill Holter with a terrific commentary
(courtesy Holter/Sinclair collaboration)

Assets and Liabilities…

We live in a world where the difference between assets and liabilities has been blurred.  In the old days, an asset was something you “owned” while a liability was something you “owed”.  Over the years as everything became securitized, someone else’s liability is now routinely someone’s asset but ONLY thought of as an asset.  It has always been this way but in the past what used to be seen as “someone’s liability” is now ONLY seen as “someone’s asset”.
  In an article penned by Doug Short last week we can see how far this anomaly has gone .  Looking at the asset side of federal government “total financial assets” we can see how crazy this concept has become.  THE LARGEST financial asset held by the federal government is “student loans” making up 45% of the pie.  I am sure you see the problem with this but I think it needs to be spelled out because it is the core of how far down the rabbit hole we have gone!
  I would ask, how is this an asset?  We are talking about a $1 trillion yoke around the necks of our youth.  Can this generation pay it off?  College kids are getting out of school (with or without a degree) and entering a labor market where jobs are simply not available.  I would contend this student loan bubble is no “asset” at all, it is a liability to those who owe it and a liability to the government at the same time.  It will be seen as a liability to the government when they are forced to “foreclose”.  Written into law now is the fact that this debt cannot be discharged in bankruptcy.  The only way this can be seen as an asset is the “control” it will afford over the future lives of an entire generation!
  Stocks (equities) have always been seen as an asset.  It turns out now however that the ONLY buyer of significance recently have been the corporations themselves  .  Corporate America has gone on a borrowing binge, ruined their balance sheets (again) and used this debt to purchase their own shares.  This has been the “support”.  Once this process slows (or stops), will corporations be able to pay this debt back by selling their shares?  We already know GAAP earnings per share are shrinking even with less float outstanding combined with bloated balance sheets, will these truly  be seen an asset in a bear market?
  Real estate is another area seen as a traditional asset.  The fact that real estate is taxed each year may end up changing this view.  Many older people who bought their homes 25 years ago or more are seeing the taxes (and annual repairs) absolutely dwarf what they originally had to pay for their property.  “Expenses” to the point they may not even be able to afford a home that is “owned” free and clear of all debt!
  The classic asset is “money in the bank”.  Here we have a twofold problem.  First, legally your “deposit” is no longer a deposit, it is a “loan”.  With the new bail in legislation, when you “put” money in the bank you immediately become a “creditor” of the bank.  The bank is not “holding” your money for your benefit, you are in fact lending money to the bank and become an unsecured lender …at the VERY BOTTOM of the totem pole.  In fact, the derivatives owned/owed by your bank has leaped to the very top of the creditor list and will be paid first when the banks fail.
  The second problem is the most significant and probably least seen of all, “what” is it exactly your bank “owes you”?  They owe you a currency whether it be dollars, euros, yen, francs or pounds.  And what are these exactly?  …The liabilities of another country or another people.  For simplicity let’s just look at dollars.  What exactly is “a dollar” (federal reserve note).  The simple answer is “not what it used to be”.  A dollar today cannot actually be defined and I challenge anyone to answer with other than what the Constitutional definition is.  The only way to bring dollars into existence is via “debt”, someone must “borrow” in order to create new dollars.  It doesn’t matter whether it is you, me, a corporation or the U.S. Treasury, new dollars cannot be created unless someone “borrows” them into existence.
  All currencies today are thus, they are ALL liabilities of the issuer yet considered an asset by the holder.  In other words, the “wealth” of anyone holding a currency depends on the “performance” of the borrower (the issuing sovereign).  The problem is obvious, there are virtually NO ASSETS today where an investor/saver can place their capital that is not someone else’s liability … except physical gold or silver (or other unencumbered God created asset such as diamonds).
  This problematic situation to this point has yet to be understood because the credit Ponzi scheme has continued to work and has veiled the reality.  Globally and systemically the world has arrived at “debt saturation” which obviously spells the limit to the Ponzi scheme.  Debt growth cannot continue and thus can no longer feed the Ponzi scheme.  In other words, we are facing a credit contraction where the world will be shown their assets in reality were nothing more than someone else’s failed and devalued liabilities.
  It is this very simple core reason that gold (and silver) which are no one else’s liability will be seen for what they truly are.  Real money, the ultimate in real assets and no one else’s liability!  There is a very big difference between an asset and a liability, the world is about to “schooled” on this fact!
Standing watch,
Bill Holter
Holter-Sinclair collaboration
Comments welcome
Your early morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight


1 Chinese yuan vs USA dollar/yuan UP to 6.4976 / Shanghai bourse  IN THE GREEN, UP 49.58 OR 1.76% :  / HANG SANG CLOSED UP 235,74 POINTS OR 1.08%

2 Nikkei closed UP 86.52  OR 1.17%

3. Europe stocks ALL IN THE GREEN /USA dollar index UP to 96.46/Euro DOWN to 1.1113

3b Japan 10 year bond yield: FALLS  TO -.012%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 113.75

3c Nikkei now JUST ABOVE 17,000

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

3e WTI::  37.68  and Brent: 39.68

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 0.271%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate FALL to 7.38%/: 


3k Gold at $1256.35/silver $15.64 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble DOWN 64/100 in  roubles/dollar) 70.34

3m oil into the 37 dollar handle for WTI and 39 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 .9873 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0974 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 8year German bund now  in negative territory with the 10 year FALLS to  + .271%

/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 1.97% early this morning. Thirty year rate  at 2.75% /POLICY ERROR)

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

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

Central Bank Rally Fizzles: Equity Futures Lower As Attention Turns To “Hawkish Fed” Risk

The biggest macro development over the weekend was China’s latest “gloomy” economic update, in which industrial production, retail sales and lending figures all missed estimates, however now that we are back to central bank bailout mode, bad news is once again good news, and the Shanghai Comp soared +1.7% among the best performers in Asia on calls for further central bank stimulus while the new CSRC chief also vowed to intervene in stock markets if necessary. In other words, the worse the data in China, the better.

The same of course as true in Europe, where just as Draghi admitted that the 2016 inflation forecast plunged (as we warned in December) and the ECB would not hit its 2.0% inflation target by 2019….

 the ECB also unleashed a massive bond buying rally after Draghi said for the first time ever the ECB would monetize corporate bonds, in a move that has infuriated Germany, and confirms Europe’s economy is weaker than ever before as otherwise it wouldn’t need this unprecedented support by its central bank.

As a result, the MSCI Asia Pacific Index and the Stoxx Europe 600 Index were headed for their highest closes in two months.

As Bloomberg summarizes the global “deja vu all over again” situation, Central banks are being relied on to revive the global economy after a worsening growth outlook wiped almost $9 trillion off the value of equities worldwide this year through mid-February. The bulk of the stock-market losses have been clawed back, helped by monetary easing in China and last week’s announcement of unprecedented stimulus by the European Central Bank. The Bank of Japan, which adopted a negative interest rate in January, will conclude a policy review on Tuesday and a Federal Reserve meeting ends Wednesday.

“Central banks are going to be dominating market sentiment,” Matthew Sherwood, head of investment strategy at Perpetual Ltd. in Sydney, which manages about $21 billion, told Bloomberg Radio. “That could be enough for the risk rally to continue, but I think it is starting to run out of steam. The Fed is going to be front and center.”

And while Asia was up on China’s bad data, and Europe was higher again this morning to catch up for the Friday afternoon US surge, US equity futures may have finally topped off and are now looking at this week’s critical data, namely the BOJ’s decision tomorrow (where Kuroda is expected to do nothing), and the Fed’s decision on Wednesday where a far more “hawkish announcement” than currently priced in by the market, as Goldman warned last night, is likely, in what would put an end to the momentum and “weak balance sheet” rally. Earlier today, Deutsche Bank doubled down on that call as well.

Elsehwere, WTI started the week lower after Iran said over the weekend it plans to boost output to 4MM b/d before joining other suppliers in seeking ways to balance marke, while Saudi crude output was little changed at 10.22mln bpd in Feb vs. 10.23mln in Jan. Not even the ongoing “imminent OPEC meeting” headline farce, where according to flashing read headlines the OPEC producer meeting is now “expected” to take place in April instead of March as repeatedly reported previously, has been enough to push oil higher today.

Market Wrap

  • S&P 500 futures down 0.1% to 2008
  • Stoxx 600 up 0.8% to 345
  • FTSE 100 up 0.5% to 6173
  • DAX up 1.6% to 9990
  • German 10Yr yield down 3bps to 0.25%
  • Italian 10Yr yield down 3bps to 1.3%
  • Spanish 10Yr yield down 2bps to 1.46%
  • MSCI Asia Pacific up 1% to 128
  • Nikkei 225 up 1.7% to 17234
  • Hang Seng up 1.2% to 20435
  • Shanghai Composite up 1.8% to 2859
  • S&P/ASX 200 up 0.4% to 5185
  • US 10-yr yield down 2bps to 1.96%
  • Dollar Index up 0.17% to 96.33
  • WTI Crude futures down 2.1% to $37.68
  • Brent Futures down 1.7% to $39.72
  • Gold spot up 0.4% to $1,256
  • Silver spot up 1.1% to $15.66

Top Global News via BBG

  • Anbang Expands U.S. Hotel Foray With Record $6.5 Billion Deal: Anbang Insurance’s $6.5b agreement to buy 16 U.S. luxury resorts and hotels from Blackstone marks a record transaction for Chinese buyers of American real estate
  • Brent Swings Near $40 as Falling U.S. Rigs Counter Iran Output: U.S. rig count drops 12th week to lowest since Dec. 2009
  • Danaher, Duke Energy, NextEra Energy to Join S&P 100: S&P 500 constituents DHR, DUK, NEE to replace Devon Energy, Anadarko Petroleum, Norfolk Southern in S&P 100 index after close of trading March 18
  • LSE, Deutsche Boerse Deal Could Be Announced Monday, Times Says
  • Morgan Stanley Says Bonds Set to Surge in 2016 Year of the Bull: U.S. 10-yr yield may fall to 1.45% by Sept. 30 report says
  • Airbnb to Let Neighbors Give Feedback on Hosts, ‘Party Houses’: A new tool will let neighbors weigh in with feedback on Airbnb properties nearby, Yasuyuki Tanabe, the head of Airbnb in Japan, said at a government panel in Tokyo on Monday
  • Disney Says ‘Zootopia’ Tops Weekend Box Office on Sales of $50m
  • Trump Switches Florida Rally to Ohio as Protests Shadow Events
  • Hillary Clinton Accuses Donald Trump of Stoking Violence to Win Votes
  • Carl Icahn Said in Talks With Son Brett to Succeed Him: NYP
  • Apollo Global Said to Near Deal to Buy Fresh Market: Reuters: Nearing a deal to acquire Fresh Market for more than $1.3b, Reuters reports, citing unidentified people familiar
  • Energy Transfer Equity Held Talks on Sunoco Sale: Reuters

* * *

Looking at regional markets, we start in Asia where equities tracked Friday’s Wall St. gains where stock markets rose to the highest level since early January as they digested the ECB’s aggressive measures. Nikkei 225 (+1.7%) advanced with index-giant Fast Retailing gaining nearly 5% as JPY weakness bolstered exporter names, while the largest increase in machine orders for 13 years further added to the optimism. ASX 200 (+0.4%) was led by telecoms and energy after crude posted a 4th consecutive weekly gain. Chinese markets outperformed despite weak China data in which industrial production, retail sales and lending figures all missed estimates, with the Shanghai Comp (+1.8%) among the best performers as the data supports calls for further measures, while the new CSRC chief also vowed to intervene in stock markets if necessary. 10yr JGBs traded higher with prices back above the 151.00 level amid relatively thin trade as the BoJ kicked off its 2-day policy meeting, in which they are expected to keep policy on hold.

Top Asian News

  • China Overseas Buys Citic’s Property Assets for $4.8 Billion: To buy the Chinese residential property assets held by Citic for about 31b yuan ($4.8b); China Overseas will sell 1.1b shares at HK$27.13 each to the Citic cos. as part of deal
  • China Burns Hedge Funds as $562 Million Yuan Bet Turns Worthless: Options on weaker yuan fail to pay out as PBOC intervenes
  • Offshore Yuan Drops as Zhou Says No Need for Major Economy Steps: Investors were expecting more support for growth, analyst says
  • Thailand Passes Korea as Top Nation for Mainland Visitors: Thailand and Japan are attracting more Chinese tourists as South Korea draws fewer
  • India Said to Need an Extra $3.7 Billion in Risk to Deficit Goal: Modi administration to ask parliament for more cash
  • Alibaba Said to Set Fees for Banks on Loan of Up to $4 Billion: Co. is offering 60 bps to lenders committing $200m and above to facility

In Europe, Monday has kicked off where Friday ended, with markets still feeling the full force of Draghi’s actions last week as European equities and fixed income markets all reside in the green. Euro Stoxx (+1.2%) continue to gain today, with the ever-turbulent Italian banking sector among the best performers today, while divergence has been seen in commodities, with materials outperforming while energy remains one of the session’s laggards. Bunds remain at elevated levels this morning, trading above the 162.00 level and amid no supply today, while this week is set to see supply fall to around EUR 16bIn from the EUR 18.2bIn that hit the market last week.

Top European News

  • German Divisions on Merkel Refugee Policy Laid Bare in Votes: Anti-immigration AfD party surges to record in three elections
  • Safran Shares Fall Most Since Feb. 8 After Margin Forecast: Sees flat adjusted recurring oper. margin 2016-20
  • Aryzta Shares Retreat on Forecast for ‘Erratic’ Revenue Growth: Said revenue missed its own forecasts and growth will be erratic over the next 18 months.
  • Turkey Vows Swift Retaliation After Bomb Kills 34; Lira Weakens: Turkish warplanes struck Kurdish militants in northern Iraq hours after a suicide car bomb killed at least 37 people in the capital, Ankara
  • Swiss Seen Holding Fire as Franc Resists ECB for a Second Time: Durvey shows most economists see SNB leaving rates unchanged

In currencies, it has been a very quiet start to the week, with range bound trade seen in the majors so far. We saw some early selling of AUD/USD and Cable, while EUR/USD drifted lower again, but this flow has been turned on its head as the USD index gives up on what has been a modest recovery. USD/JPY had tested 114.00 in the Asia session, but any hopes of retesting this will perhaps have been dashed in the wake of comments from Japan PM advisor Hamada who sees further BoJ easing unlikely near term with the JPY ‘not too strong’ at current levels. USD/CAD has been edging higher as Oil has taken a dip, but the upside has been contained well ahead of 1.3300 higher up.

Australia’s dollar fell 0.5 percent, pacing declines among the currencies of resource-exporting nations, after Chinese industrial output and retail sales data over the weekend added to signs of a slowdown in the world’s second-biggest economy. Malaysia’s ringgit lost 0.4 percent as a falling oil price dimmed prospects for Asia’s only major net exporter of crude. The yuan fell 0.16 percent in Hong Kong’s offshore market and was little changed in Shanghai.

Turkey’s lira weakened 0.5 percent after a suicide car bomb in Ankara killed at least 34 people, the capital’s third attack in five months. The rand slid 0.7 percent, leading losses among major currencies. South Africa’s Directorate for Priority Crime Investigation wants information from Finance Minister Gordhan on what he knew about a so-called rogue unit in the tax agency that investigated political leaders, the Sunday Independent newspaper reported, citing a letter sent by the police unit’s head to the minister’s lawyers.

The Egyptian central bank devalued its pound by almost 13 percent at an “exceptional” sale of dollars on Monday. The central bank said it sold $198.1 million to local lenders at 8.85 pounds per dollar. That compares with a previous exchange rate of 7.73 pounds.

In commodities, Brent and WTI started the session fairly flat and then fell roughly 1.7%. This comes as Saudi crude output was little changed at 10.22mln bpd in Feb vs. 10.23mln in Jan, and also after Iran said it plans to boost output to 4 million barrels a day before it will consider joining other suppliers in seeking ways to rebalance the global crude market.

Gold and other precious metals on the other hand have risen slightly, with gold still rising toward 1260.00/oz with the next notable resistance level at 1260.50.

Copper rose 0.3 percent in London, rebounding from earlier losses. Gold gained 0.5 percent, after retreating 1.8 percent on Friday. The precious metal is far from being out of favor, with money managers holding the biggest net-long position in related futures and options in more than a year, according to Commodity Futures Trading Commission data.

There is no tier 1 economic data in the US today.

Overnight Bulletin Summary from RanSquawk and Bloomberg

  • European equities start the week on the front foot as financial names lead the way higher in the wake of last week’s ECB policy announcements
  • A very quiet start to the week, with range bound trade seen in the majors so far with the USD giving up on its initial modest recovery
  • Treasuries higher overnight, global equity markets rally; crude drops, China’s new securities regulator said it was too early for state rescue funds to leave market and vowed to step in “decisively” if needed to curb panic; this week brings FOMC rate decision on Wednesday, no hike expected.
  • Even though the short-term rates market is priced for unchanged rates at this week’s FOMC meeting, it’s still expected to react as it adjusts to the central bank’s updated Summary of Economic Projections (SEP), known as the “dots”
  • Another sign of how crucial buybacks are in propping up the bull market as it enters its eighth year — S&P’s 500 Index constituents are poised to repurchase as much as $165 billion of stock this quarter, approaching a record reached in 2007
  • Oil fell from a three-month high as Iran plans to boost output by about a third to 4 million barrels a day before joining talks to freeze production. Futures dropped as much as 2.5% in New York
  • Dilma Rousseff’s future as president of Brazil was cast into further doubt as millions of protesters, wearied by scandal and recession, demonstrated peacefully for her ouster in some of the largest rallies in the country’s modern history
  • Chancellor Merkel faces an increasingly splintered political landscape after voters punished her party and lifted the anti-immigration Alternative for Germany to its best showing yet in three state elections dominated by the refugee crisis
  • Industrial production in the euro area jumped 2.1% in January from December, its strongest monthly performance in more than six years, boosted by energy and capital goods
  • Since hitting a 3 1/2-year low just a month ago, European banks have rebounded 28%, with Greece’s Eurobank Ergasias SA, Italy’s UniCredit SpA and Deutsche Bank AG among the top performers
  • Foreign buyers boosted their holdings of Turkey’s sovereign debt by the most in 19 months in February, finding it hard to resist the highest yields in emerging Europe, encouraged by a slowdown in inflation and the ECB stimulus outlook
  • No IG corporates priced Friday; weekly volume $44.595b, March $86.42b, YTD $380.67b; $800m HY priced Friday, $3.225b last week, $14.025b MTD

Jim Reid concludes the overnight wrap

2016 for European credit investors so far reminds me of Season 9 of Dallas which was completely wiped from existence and turned into Pam Ewing’s bad dream in a plot devise to allow Bobby Ewing to return from the dead having been run down by a car at the end of Season 8. I remember crying at his death as a 10 year old just as I cried a few years earlier at JR Ewing being shot as my nickname at school was JR given my initials. I therefore felt his pain pretty hard. Anyway Draghi has put on his ten gallon hat and has helped write off a nightmare start to 2016 as a bad dream which investors have now awakened from.

To give some context to this turnaround, in the CDS world iTraxx Europe tightened -17bps on Friday (-7bps Thursday) and 58bps off the 2016 wides to now be 10bps tighter on the year. Crossover was 50bps tighter Friday (-18bps Thursday), 178bps off the 2016 wides and 6bps tighter YTD. Even iTraxx Fin Senior has edged just tighter on the year after Friday’s 17bps rally. Sub Fins are back to ‘only’ 15bps wider in 2016 after 34bps of tightening on Friday. In the more important cash market, EU iBoxx non-financial IG corporates (closest to the universe the ECB will potentially pick from) were 11bps tighter on Friday which was the best day since 2011 and in the top 10 of best days of the near 4300 business days since the Euro started in 1999. This index is now 5bps tighter on the year and 34bps off the wides in mid-February. This index is still historically quite wide and we’d still expect notable tightening as we discussed in our note published Friday morning (see the link at the bottom or in your mail boxes at around 5.30am Friday).

One of the things we discussed in our 2016 outlook was that although central banks have limited ability to influence economies in what is a near liquidity trap, we still thought they could move markets this year in spite of concerns they were running out of bullets. The rationale was that with inflation so low they had plenty of room to be aggressive. The ECB last week delivered on this and this week it’s over to the BoJ (tomorrow) and the Fed (Wednesday). While the BoJ will likely take pause for breath after the controversial decision to move into negative rate territory last meeting, Kuroda’s press conference will be widely anticipated. As will Yellen’s after the FOMC will almost certainly stay put. Financial conditions have eased since the last meeting so we would expect the Fed to retain optionality to hike in June whilst acknowledging the fragilities around. Data dependency will likely be the key theme. Overall we still think 2017 will be more of a challenge for the economy and central bankers than in 2016 where inflation is still low enough for the plates to be spun a little more.

Speaking of challenges, China data is proving difficult for analysts to get their head round following a mixed set of releases over the weekend. The negative side of things saw both retail sales (down five-tenths to 10.2% yoy; vs. 11.0% expected) and industrial production (down seven-tenths to 5.4% yoy; vs. 5.6% expected) fall in February relative to the prior month, while growth of funds available for fixed asset investment was also noted as slowing. On the flip side the big surprise was a rebound in fixed asset investment, driven by the rise of property investment. Investment grew 10.2% yoy last month (vs. 9.3% expected) which was up two-tenths from January. DB’s Zhiwei Zhang also highlighted that other indicators in the property sector rebounded as well including the value of property sales, land sales and new housing starts – all of which is suggesting that the momentum in property investment may continue at least in the next few months.

Taking a look at our screens this morning it’s been a strong start for much of Asia this morning with bourses following the lead from those gains in Europe and Wall Street on Friday. It’s China which is leading the way however with the Shanghai Comp (+2.58%) and Shenzhen (+4.04%) both rallying into the midday break. Elsewhere, there’s gains also for the Nikkei (+1.79%), Hang Seng (+1.32%) and ASX (+0.34%). There’s been a big rally for credit markets also. ITraxx Aus and Asia indices are currently 10bps and 5bps tighter respectively. US equity index futures are flat currently, along with Oil. Asian currencies are generally outperforming while the Turkish Lira is a touch weaker following those disturbing reports yesterday of a blast in the Turkish capital of Ankara.

Also of note from the weekend were the German regional elections,where the big news is that of some signs of diminishing support for German Chancellor Merkel’s CDU party. Instead, it’s the rightwing populist forces which appear to have come out on top, with the anti-immigration Alternative for Germany (AfD) party in particular gaining notable support. As per the FT, Merkel’s CDU party has failed in its attempt to claw back the majority in the Baden-Wurttemberg and Rhineland-Palatinate while projections are also suggesting that the party will fail to garner enough votes to create a viable coalition in Saxony-Anhalt. With the refugee crisis in full debate and clearly a major factor in the results, it’s the AfD party which has made the most headway and is projected to win 24% of the vote in Saxony-Anhalt as well as exceeding expectations in Baden-Wurttemberg (15%) and Rhineland-Palatinate (12%). The party is currently projected to be presented in eight of Germany’s 16 regional assemblies. Given similar results in other parts of Europe (most recently in France with the National Front), political risks in Europe are still very much a factor to keep an eye on.

A quick recap of the rest of Friday’s news and price action. One market worth keeping an eye in the wake of the ECB is the new issue corporate market in Europe and, while quiet from an overall volume perspective on Friday, a small deal (€600m) from French auto component manufacturer Valeo caught the eye with the order book said to have closed above €7bn. Evidence then perhaps of what the presence of a new large potential IG bond buyer (in the ECB) can do for demand in the primary market now then.

So while credit markets caught the eye with those huge moves tighter, equity markets bounced back in style with big moves of their own, in stark contrast to the price action which concluded on Thursday. With financials driving the moves, the Stoxx 600 finished with a +2.62% gain to close at its highest level since late-January, while peripheral markets were the big outperformers with the IBEX and FTSE MIB up +3.69% and +4.80% respectively. Those gains also helped the S&P 500 finish up +1.64% with the month of March proving to be a fruitful one so far for the US equities (index has now closed higher on 8 of the 9 trading days). A recovery for Oil also (WTI +1.74%) did little to dampen the mood with the IEA even going as far as saying on Friday that prices may have ‘bottomed out’ and that ‘there may be light at the end of what has been a long, dark tunnel’.

Base metals had a good day too (Copper +1.64%, Zinc +2.07%, Nickel +0.86%) while unsurprisingly it was emerging market and commodity-sensitive currencies which led the way in the FX space. European sovereign bond markets staged an impressive rally also. 10y Bunds ended the session down over 3bps in yield at 0.269% (although are still higher than where they were pre-ECB) while in the periphery we saw a massive rally for similar maturity bonds in Italy (-13.3bps), Spain (-9.9bps) and Portugal (-21.3bps). Moves in the US Treasury market were more reflective of traditional risk-on mode with the benchmark 10y finishing up over 5bps higher in yield at 1.985% and the highest now since the 27th January. Fed fund futures crept up as a result too with the probability of a hike by the end of the year now at 77% (from 74%) – a notable swing from the lowly 11% priced in during the February lows.

There was little data to conclude the week and certainly not enough to impact the price action. In the US the import price index reading for February was a tad less deflationary than expected (-0.3% mom vs. -0.7% expected). Prior to this we learned that there was no change to the final February CPI reading for Germany at +0.4% mom and so confirming a leg lower in the YoY rate to 0.0% (from +0.5% in January). Elsewhere in Italy the January industrial production reading was a lot more robust that expected at +1.9% mom (vs. +0.7% expected), which lends some support to today’s wider Euro area figure.


Let us begin;




Late  SUNDAY night/ MONDAY morning: Shanghai closed UP BY 49.58 POINTS OR 1.74% , /  Hang Sang closed UP by 275.74 points or  1.17% . The Nikkei closed UP 294.88 or 1.74%. Australia’s all ordinaires was UP 0.37%. Chinese yuan (ONSHORE) closed UP at 6.4942.   Oil FELL  to 37.68 dollars per barrel for WTI and 39.68 for Brent. Stocks in Europe so far ALL IN THE GREEN . Offshore yuan trades  6.4976 yuan to the dollar vs 6.4960 for onshore yuan/china’s industrial production collapsed along with retail sales (see below)


report on Japan





Poor industrial numbers plus poor retail sales

(courtesy zero hedge)

“Gloom” Returns To China’s Economy: Industrial Production, Retail Sales Miss Lowest Estimates

After an unprecedented surge in Chinese attempts to stimulate the economy in late 2015, mostly on the fiscal side, coupled with recent monetary easing by the PBOC which cut the banks’ reserve ratio recently and unleashed a tsunami of new loan creation in January, many expected that this unprecedented credit impulse would translate into at least a modest rebound for the economy, prompting a stable pick up in spending for the economy which many are touting is now consumer-spending driven as opposed to export and production.

However, that did not happen: according to data released overnight by the National Bureau of Statistics, Chinese factories and retailers not only missed expectations, but slowed down materially from the December prints, as anemic demand and excess capacity continued to bear down on the world’s second-largest economy.

Specifically, Jan-Feb factory output grew just 5.4% in January and February from a year earlier, data released by the National Bureau of Statistics (NBS) showed, slowing from a 5.9% rise in December to the weakest since November 2008; the print matched the lowest Wall Street estimate.

Meanwhile, retail sales rose 10.2% over the two-month period from a year ago, below the lowest Wall Street estimate of 10.5%, and far below the December’s 11.1% increase, pushing the trend growth in this series to lows not seen since early 2015.

“Overall, the picture is still quite gloomy,” said Commerzbank AG economist Zhou Hao. “Normally, because of Chinese New Year, there’s a big drop and a big jump. This year there’s only a big drop.”

The retail data was particularly disappointing because as the WSJ writes “while industries have been battered by the economic slowdown, retail sales have been relatively buoyant, so the downtick surprised some economists, especially since it occurred around the Lunar New Year holiday when consumption is usually strong.”

And to think record, if fake, box office numbers were supposed to carry China’s economy in the aftermath of the absolutely disastrous trade data released earlier in the month.

To be sure, the commentary immediately explained that the weak data will mean even more stimulus, even though it was just last week when the Congress laid out all the measures that China will adopt to assure “GDP growth” of 6.5%-7.0%.

Here’s Reuters: “China’s activity data remained weak in the first two months of 2016, with factory output growth hitting the weakest since the global financial crisis, keeping pressure on policymakers to do more to avert a sharper showdown in the world’s second-largest economy.

Unlike the recent collapse in Chinese exports and imports, the overnight data could not be “explained away” due to calendar effects as it combines the January and February timeframe: China’s government combines some economic data for January and February to minimize distortions tied to the Lunar New Year holiday, which falls during those two months.It was in early February this year.

It wasn’t all bad news: one area that did pick up was investment in factories, buildings and other fixed assets, which increased a faster-than-expected at 10.2?% year-over-year in January and February, compared with a 10% increase for all of 2015. However, economists said that boost came largely from government spending on infrastructure and from investment in parts of the overbuilt property market.

In other words, China is adding even more excess capacity to an economy already drowning in excess capacity.

Ultimately, the problem for China remains: weak demand at home and abroad is weighing on industries and many factories continue to churn out unneeded goods. “A recovery is still eluding China’s industrial sector,” Mizuho Securities Asia Ltd. said in a recent report, before the release of the data Saturday.

Worse, for all the talk about a massive stimulus, China’s economy continues to deteriorate: as quoted by the WSJ, Chen Zhenxing, sales manager with Zhejiang Lanxi Shanye Machinery Co., which produces hand carts and other logistics equipment in the eastern city of Jinhua, said his company faces ongoing problems raising capital and boosting prices: “competition is cutthroat,” he said. “Too many companies make products that are pretty much the same, so the focus turns to lowering prices.”

Ultimately many will have to go out of business, leading to millions in layoffs, and forcing the Beijing politburo to face its greatest nightmare.

The problem with China’s economy  is that the local population, having tired of the stock market bubble, has now shifted its attention back to reflating the housing bubble, where as we reported recently there has been an unprecedented 50% surge in some Tier 1 cities such as Shenzen. As such the economy is focused not on creating new goods and services, but merely facilitating financialization and extracting rents.

This is why China’s leaders have now put all their eggs in the housing market basket:  Zhang Yiping, an economist with China Merchants Securities, said property investment and domestic consumption could be China’s major growth drivers this year given sluggish global demand and Beijing’s plans to cut industrial overcapacity.

Commerzbank’s Mr. Zhou and other economists expressed concern that investment is flowing into a few real-estate markets that show signs of overheating, rather than into new ventures.“Monetary policy is relaxed, but it’s reluctant to go to the real economy, only to property assets,” he said.

The slower pace of retail sales in January and February may reflect the turbulent financial markets and weak corporate profits last year, which dampened wage hikes and bonuses, economists said.

Even accounting for data volatility around the Lunar New Year holiday, China’s economy is off to a slow start this year following economic growth in 2015 of 6.9%, the slowest pace in 25 years. A host of stimulus measures late last year and into 2016—most recently a 0.5 percentage point cut in bank reserves late last month, have yet to reverse the slide in momentum.

The biggest problem, one which we have warned about since 2010, is that China remains mired under an unprecedented debt load, one which makes any forecast for 6.5% growth on the back of credit which is growing at double this pace, laughable.




the following was bound to happen:  enormous crowds of unemployed Chinese coal miners take to the streets and clash with riot police:

(courtesy zero hedge)

Caught On Tape: “Enormous Crowds” Of Unemployed Chinese Miners Take To The Streets, Clash With Riot Police

In early November, we said that far from the traditional risk factors affecting China’s economy, including the slowing economy, the stock market (and now housing 2.0) bubble, the soaring NPLs, and record debt,the most under-reported risk facing China is the “breakdown in recent “agreeable” labor conditions, wage cuts and rising unemployment, leading to labor strikes and in some cases, violence.”

Some recent articles probing the severity of China’s collapsing labor market were the following:

A clear indication of this was the exponential rise in labor strikes on the mainland as tracked by the China Labor Bulletin:

While so far most Chinese worker strikes had been largely peaceful, two weeks ago we said it was only a matter of time before these turned violent after Reuters reported that “China aims to lay off 5-6 million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution.”

All this changed overnight when as AFP reports, thousands of miners in China’s coal-rich (or poor depending on one’s perspective) north have gone on strike over months of unpaid wages and fears that government calls to restructure their state-owned employer will lead to mass layoffs.

Citing the video shown below, AFP reported that thousands of protesters were marching through the streets of Shuangyashan city in Heilongjiang province, venting their frustration at Longmay Mining Holding Group, the biggest coal firm in northeast China. Pictures showed enormous crowds filling the streets.

And here is why we said this is the biggest threat facing China:

I’m on my knees, my family can’t eat,” an elderly woman pleaded with a man who appeared to be a government official. “Tell me, how can we live?” she shouted, before collapsing and being rushed away by fellow protesters.

In the video footage from Heilongjiang, dozens of police cars, lights flashing, lined the streets, and protesters complained of violence by authorities as tensions mounted. “Traffic in the centre of Shuangyashan city was halted,” a witness told AFP, adding “some people were hurt”.

Pictures from the scene showed what appeared to be police tussling with protesters, with one woman apparently thrown to the ground.

Striking miners held large banners demanding back pay. “Their main request is to get the delayed incomes from the past several months,” the witness said.

The catalyst for the miners’ anger spilling over into street was Heilongjiang’s governor Lu Hao saying that the company owed employees no back pay. Over the weekend the provincial government admitted that workers’ compensation was in “arrears” following “many years of accumulated problems”. As a result, “not a few workers have encountered difficulties in their lives”, it said.

The implication was clear: either the government gives another bailout, or no wages will be paid. The statement blamed the company’s financial woes on inefficiency, saying that it “uses three times as much labour as the national average to produce 10,000 tonnes of coal”, resulting in “heavy losses and diminished cash flow”.

Incidentally, this is the same coal Longmay Group mining company we profiled back in September when we wrote “The “Hard-Landing” Has Arrived: Chinese Coal Company Fires 100,000.” The firm said it was “resolutely battling” to implement reforms, it said. China’s coal industry has been particularly hard hit as the country’s growth slows. Consumption of the heavily polluting fuel fell 3.7 percent last year, according to China’s National Bureau of Statistics (NBS), after a 2.9 percent decrease in 2014.

As the FT adds, there are no easy fixes to this problem:

Longmay also serves as a caution to those in Beijing who want to force state-owned firms to merge, create a bigger balance sheet and generate new loans to pay off old debt. It is the largest miner in its province only because it was formed from four state-owned miners 10 years ago, in the last round of restructuring whose bill is only now coming due.

AFP adds what we have been warning about for months: “the situation in Heilongjiang exemplifies the dilemma faced by Chinese authorities, who say they want to reform the world’s second-largest economy and at the same time seek to avoid unrest.”

China’s state-owned enterprises (SOEs) are plagued by overcapacity and many are unviable, but the government has been loathe to kill off such “zombie” companies, fearing unemployment could lead to instability.

Instability such as the one described above, and shown in the video below.

* * *

This is just the beginning: China plans to lay off about 1.8 million workers in the steel and coal industries, a human resources and social security ministry official said last month, and millions more across all state-owned “zombie firms.”

Earlier this month Premier Li Keqiang again pledged to encourage “structural adjustments” in his opening speech to the annual session of China’s Communist-controlled parliament. Judging by the predicted confirmation violenece, the only adjustments China has in place is a massive police force trained to break up precisely such protests, something we further showed back in May 2014 when we demonstrated how “Chinese riot police train for a “working class insurrection.”

And, as can be seen in the video below, that preparation is finally being put to “good” use.

Inline image 1






Deutsche bank warns that we are one hawkish Fed statement away from a sharp USA downturn:

(courtesy zero hedge/Deutsche bank)

“We’re One Hawkish Fed Statement Away” From A “Sharp Re-Pricing,” Deutsche Bank Warns

On Sunday evening we brought you the latest from Goldman’s chief equity strategist David Kostin who explained that sharp swings in crude prices have created pronounced (and in fact historic) momentum swings, catching those who had piled into “popular investment themes” to be caught flat-footed. Here’s what Kostin said:

The correlation between major macro trends has caught many popular investment themes in the momentum spin cycle. In 2015 and the first weeks of this year, lower oil prices were accompanied by lower Treasury yields and downward revisions to US growth expectations, boosting the performance of popular growth stocks and defensive equities while weighing on banks. At the same time, the US dollar, which carries a strong negative correlation with oil, strengthened by nearly 15% and presented another headwind to the US economy. The combination of growth concerns and low oil prices widened credit spreads to recessionary levels and benefitted the performance of stocks with strong balance sheets. All of these trends have reversed sharply in recent weeks.

But as we wrote, Kostin is far from bullish. Instead, he says the market may be underestimating (or else just plain ignoring) the “largest current macro risk”: a hawkish Fed and consequently, a stronger USD. The result, another sharp reversal as stocks with strong balance sheets are once again in vogue versus momo plays, energy, and anything with nosebleed leverage.

Well now Deutsche Bank is falling in line, suggesting that European equity investors are missing the very same risks (i.e. a hawkish Fed, resultant strong USD, and weaker commodities).

“Our European credit strategists estimate that the ECB could buy €5bn – €10bn a month in IG corporate bonds starting at the end of Q2, out of an eligible universe of €400bn – €500bn,” the bank’s European equity strategists write, in note out Monday. “If ECB easing in combination with stronger oil prices pushes up Euro-area inflation expectations, while increased asset purchases reduce peripheral bond spreads, GDP-weighted Euro-area real bond yields have further downside, which should boost European P/Es.”

But, you should be cautious. Why? Because “we are just one hawkish Fed statement away,” from a series of events that will end in investors returning to their “clearly depressed” positioning in February. To wit:

However, we maintain our cautious stance on equities, given that: (a) we think we are just one hawkish Fed statement away from a potentially sharp re-pricing of Fed tightening expectations, which would push up real bond yields (as happened after the start of the ECB’s QE program in Mar 2015) as well as the dollar; (b) the surge in Chinese credit growth in January, a key driver of the recent commodity rally, looks unsustainable (and, in fact, credit figures show lending slowed sharply in February). Any drop in commodity prices would risk putting renewed upside pressure on credit spreads (despite ECB buying); (c) investor positioning is now at neutral levels, while it was clearly depressed in mid-February.

Here is that progression in chart form:

And here’s the collapse in TSF growth which suggests January was a blip, along with DB’s positioning proxy which certainly suggests that something has to give:

In other words, it’s the ECB versus the Fed for the hearts and minds of investors as the policy divergence tug-of-war just got more intense with Draghi’s move into corporate credit. As we wrote on Sunday, “the European central bank is backstopping bond issuers, it will almost certainly lead to even more outperformance by weak balance sheet companies as yet another central bank intervention unleashes another divergence between fundamentals and central planning.” Unless Yellen accidentally tanks the whole effort.

As for Deutsche’s bull case, you’ll note that quite a lot has to go right for European equities to realize their supposed 10%-13% upside. In fact, it would appear that nearly everythingwould have to go right. We’ll leave you with the bull case description and let readers judge how likely it is to unfold:

What is the bull case? Anticipation of the ECB corporate bond buying program (CSPP) leads credit spreads to tighten across markets, while real bond yields drop in response to ECB easing and a dovish Fed in March. European macro data stabilizes and commodity prices rise further, as Chinese growth surprises on the upside in H1, in line with our Chinese economists’ projection. Under this scenario, European equities have around 10% upside: if the ECB’s CSPP and stronger commodity prices push US HY credit spreads back to 2015 trough levels (down another 230bps), this points to 13% upside for European equities. Similarly, a drop in Euro-area real bond yields to the Dec trough of minus 55bps (down another 20bps) would mean 6% upside to European P/Es (15.5x, versus 14.6x now). For investors wanting to position for this scenario, banks, autos and insurance benefit the most from a combination of lower credit spreads, lower real bond yields and improved macro momentum.


In Germany, in regional elections the anti immigration party wins big:
(courtesy zero hedge)

In Germany, The Far-Right Promises To Chase Merkel “To Hell” After Stunning Victories

On Sunday, Angela Merkel suffered a bitter defeat at the ballot box in state elections that effectively served as a referendum on Berlin’s open-door migrant policy.

Exit polls showed support for the Chancellor’s CDU falling in Baden-Wuerttemberg, in Saxony-Anhalt, andin Rhineland-Palatinate versus 2011. Those results were validated as CDU lost ground versus the last election across the board.

The big winner on the day: Alternative for Germany or, AfD. The anti-immigration, nationalists didn’t manage to win the most votes in any of the three states in contention, but their strong showing – especially in Saxony-Anhalt, where they managed to win 24.2% of the vote represented a resounding rebuke of Germany’s official stance on Mid-East asylum seekers.

“The CDU finished several percentage points behind the popular incumbents’ parties in both states and dropped 12 percentage points to a record-low result in Baden-Wuerttemberg, with 27 percent support,” The Washington post writes. “Its performance in Rhineland-Palatinate, with 31.8 percent, was also a record low.”

So far, the AfD has won seats in half of Germany’s regional assemblies and that, Blooomberg says, “shows that Germany is no longer immune to the allure of right-wing populism.”

AfD leader Frauke Petry doesn’t necessarily agree with that assessment. “We are seeing above all in these elections that voters are turning away in large numbers from the big established parties and voting for our party,” she said, adding that “they expect us finally to be the opposition that there hasn’t been in the German parliament and some state parliaments.” Here’s a tweet from Petry:

“We have fundamental problems in Germany that led to this outcome,” she insisted on ARD television. “Now we want to force the other parties into a substantive debate.”

For her part, Merkel attempted to address the obvious implications of the outcome with regard to public sentiment without fully admitting that perhaps her approach will need to be reimagined before the right becomes further ascendant. “The dominant issue was the refugee crisis and refugee policy,” the Chancellor told reporters in Berlin. “Voters determined that there has been no satisfying resolution.”

Actually that’s not true. Voters seem to have determined that her particular resoution has not been satisfying.

For his part, Vice Chancellor Sigmar Gabriel is concerned about the rise of AfD, much as the American political establishment is concerned about Trump. “The democratic center in our country has not become stronger, but smaller, and I think we must all take that seriously,” he said on Sunday.

“The rise of the AfD in Germany mirrors growing support for populist politicians such as National Front leader Marine Le Pen in France and Trump, who has called for banning Muslims from emigrating to the U.S.,” Bloomberg writes, echoing Gabriel’s sentiments in a piece called “Germans Turn To Trump-Style Politics In Challenge To Merkel“. “Like Trump,” they continue, “Petry regularly gets the media to hang on her every word a tongue-lashing [and] has urged Germans to have three children to reduce the need for immigration and suggested German policy is driven by Holocaust guilt.”

Of course the success of AfD isn’t the only sign that the right-wing is resurgent. There’s also PEGIDA, whose rallies we have covered extensively and whose former leader posted a picture of himself on Facebook dressed as Hitler.

Just last week, the group marched in Leipzig to celebrate AfD’s success. Lutz Bachmann – and this would be the very same Lutz Bachmann who appeared on Facebook as The Führer last year – spoke at the rally and suggestedhe would try to ally with AfD. Perhaps seeking to retain some semblance of political correctness, Petry respectfully refused. Here’s a bit more color from The Guardian on Sunday’s historic ballots:

“Germany’s rightwing upstarts appeared to have benefited from an increased voter turnout across the country. In all three states, the AfD gained most of its votes from people who had not voted before, rather than disillusioned CDU voters. In Saxony-Anhalt, as many as 40% of AfD voters were previously non-voters, while 56% of AfD voters in the state said they had opted for the party because of the refugee crisis, according to one poll.

Andre Poggenburg, the AfD’s lead candidate in Saxony-Anhalt, said: “We have achieved something very important: we have mobilised many non-voters to take part in the election, something the established parties have failed to do.” The party’s deputy leader, Alexander Gauland, supporters at a rally on Sunday night that his party would “chase the old parties to hell”.

Merkel doesn’t agree. Last week, she called AfD a “temporary phenomenon.”

Trust us, Petry will only prove “temporary” to the extent that Merkel’s refugee policy proves transitory as well.



Interesting!! 2,000 refugees bypass the Greek/Macedon border fence and enter into Macedonia;
(courtesy zero hedge)

2,000 Refugees Bypass Greek Border Fence, Stream Into Macedonia – Live Feed

Hundreds of refugees from a camp in northern Greece have managed to get around a border fence and cross into Macedonia, according to a Macedonian police spokeswoman. However, a Reuters photographer estimated the number to be closer to 2,000. As the following live feed shows, the flood of refugees continues…

Live Feed:

Inline image 2

As RT reports, after walking for several hours, the refugees crossed a river while forming a “human chain” and found a way around the fence, which was put up by Macedonian authorities,photographer Stoyan Nenov said.

Many of the refugees, who came from a camp near Idomeni, carried children on their shoulders as they crossed the river.

Some of the asylum seekers were picked up and put in army trucks by Macedonian soldiers, though it was unclear where they would be taken.

A spokeswoman for Macedonian police said: “We are taking measures to return the group to Greece…police and army have heightened security on the border at critical points.”

The spokeswoman said she believed the number of refugees who crossed the border totaled “several hundred,” a significantly lower estimate than the number given by Nenov.

Macedonia completely closed its border on March 9, leaving some 13,000 refugees stranded.The move came after Slovenia blocked access to refugees aiming to pass through the country on their way to Western Europe.





Another bomblast in Ankara, Turkey:

(courtesy zero hedge)

Dramatic Footage Shows Moment Deadly Blast Hits Turkish Capital On Sunday

It was just a month ago when Ankara was rocked by a blast triggered when a military vehicle passed a car laden with explosives. Dozens of people were killed.

That, in turn, came shortly after a January attack in Istanbul, where a suicide bomber detonated in a public square, killing several German tourists.

Sadly, Turkey has become a haven for violence, as the war of attrition between the Erdogan regime and the PKK claims more lives each and every month, while ISIS is occasionally scapegoated to remind everyone that this isn’t about Ankara versus the Kurds, it’s about the government versus “terrorists.” Of course that’s a farce designed solely to allow what amounts to a dictator to save face with the international community.

On Sunday we got more violence out of Ankara, where yet another bomb has exploded causing multiple casualities.

An explosion has ripped through a park in Ankara, killing and wounding an unknown number of people,” The Telegraph writes, citing a senior security official.

According to Reuters, gunfire was heard after the explosion, which hit a transit hub in the Kizilay neighborhood.

Here is the CCTV footage that purportedly shows the blast as well as some stills from the scene:

Inline image 1

After much confusion, this CCTV footage does appear to be from today’s #Ankarablast. via @KayaHeyse

— Has Avrat (@hasavrat) March 13, 2016

Inline image 2Inline image 3Inline image 4Predictably, Ankara has now banned media coverage of the aftermath. You can bet the PKK will be blamed in a matter of hours.

Just another day in Erdogan’s democratic utopia.

Egypt devalues its pound to 8.85 pounds to the dollar from 7.73.  When I was in Egypt a few years ago, it was 3. pounds to the dollar.  Their problem:  they cannot get their hands of scarce dollars: this sovereign nation will default on its bonds as its credit default swaps skyrocket!
(courtesy zero hedge)

Egypt Devalues Pound In Bid To Ease Acute Dollar Shortage

Facing a severe shortage of dollars and dwindling (if momentarily stable) FX reserves, Egypt moved to devalue the pound by around 13% on Monday in a move the central bank says will help attain “exchange-rate levels that reflect the strength and real value of the local currency in a short period of time.”

The central bank sold $198.1 million at auction at 8.85 versus 7.73 previously. Here’s a look at the EGP versus Egypt CDS which had recently diverged quite markedly relative to recent history:

FX reserves now stand at just $16 billion after sliding sharply in the turmoil that followed the Arab Spring revolution against strongman Hosni Mubarak.

On Monday the central bank said they hope that figure will rise to $25 billion by the end of this year.

Last week, governor Tarek Amer again eased banking restrictions, doing away with withdrawal and deposit caps for importers of “basic commodities” in an effort to ease the dollar squeeze that’s holding back the economy. That move came just one day after the central bank did away with similar caps for individuals and despite the fact that just 24 hours earlier, Amer said that although “it has been decided to cancel limits for individuals, the limits in force for corporates,” would remain in place.

As Reuters noted, the restrictions were “an effort to fight a black market for dollars, [as] the central bank had capped the amount that could be deposited in banks at $50,000 a month [while] setting a $10,000 a day limit on withdrawals for individuals and a $30,000 a day limit for corporate withdrawals.”

But those caps hurt the economy, and importers and exporters were essentially unable to conduct business.

Here’s how one banker explained the situation: “If they withdraw (dollars) from the banks and sell in the black market, the price in the black market will drop, and if they did it the other way round then liquidity in banks will increase, so it’s a good decision either way.” And here’s some color from BofAML on the overall situation:

Egypt’s Net International Reserves (NIRs) have stabilized recently but are close to the levels of late 2012 (US$15bn- US$13.5bn), which the CBE judged at the time as the minimum necessary to safeguard the country’s external payment capacity.

CBE continues to resist weakening EGP given the increased focus on import restrictions (with a potential for a 10-15% cut in the import bill) and moves to curb FX export proceeds smuggling. The partial and conditional removal of FX deposit caps in the banking sector on importers and exporters effectively allows a two-tiered FX market, one at the official rate and another at the now “tolerated” black market rate with CBE moral suasion attempts to cap it at 9.25. Still, CBE is likely to have to hike its policy rates going forward to keep EGP deposits attractive to depositors after the recent relaxation of deposit and withdrawal constraints on FX deposits for households and importers of essential goods, in our view.

The only question is whether, given inflation, the central bank will be willing to let the EGP adjust further. “The question now is will they follow through – if the Egyptian pound needs to weaken further, will they let it?” Simon Williams, chief economist for central and eastern Europe, the Middle East and North Africa at HSBC asked. “Are the authorities really ready to tolerate the rise in inflation this will inevitably bring?” As you can see, inflation has come down from recent highs but is still higher than authorities would like and certainly higher than Egyptians would like:

The central bank, Bloomberg wrote last week, “has resisted calls from local investors to devalue the currency out of concern that would stoke inflation in a country where half of the population lives near or below the United Nations poverty line.”

“The pound has bit further to fall; level closer to 9.5/$ would help to restore external competitiveness,” Capital Economics – where analysts say the central bank is likely to hike rates by 100bps this week – said today, in a note.

Meanwhile, there are rumors that Egypt will soon request an IMF loan, although the central bank has denied the claims.

Watch closely for whether the move has the intended effect on Egypt’s economy going forward because the country desperately needs stability following years of social unrest and a looming ISIS presence in Sinai.

Meanwhile, Egyptian stocks are of course ripping and have entered a bull market




A huge street protest in Brazil as they demand Rousseff to leave office:

(courtesy zero hedge)

Hundreds Of Thousands Stage Massive Street Protests In Brazil, In Loud Call For Rousseff’s Ouster

Back in August, we said that while there are all kinds of charts one could look at on the way to judging just how bad things have truly gotten in Brazil, the most important graphic of all may indeed be this one, which depicts the scope of the various street protests that took place in the country last year.

Popular discontent with President Dilma Rousseff has waxed and waned over the last six months along with the prospects for the opposition’s impeachment bid. At times, it looked like Rousseff might be on her way out, but political wrangling and questions about whether House Speaker Eduardo Cunha – the lawmaker pushing hardest for the President’s ouster-  accepted bribes complicated the process.

As Bloomberg wrote earlier this week, a string of recent events tied to the seemingly never-ending Carwash Probe – the 2-year long investigation into corruption involving Petrobras – have brought prosecutors ever closer to Rousseff. That, combined with the fact that the country is mired in a deep economic downturn characterized by double-digit inflation and soaring unemployment has the public at wit’s end.

“On Feb. 22, Rousseff’s top campaign strategist, João Santana, was arrested for allegedly receiving $7.5 million, [then] the magazine IstoE reported that the government’s former leader in the senate, Delcídio do Amaral, had alleged that Rousseff had pushed judges to release political allies imprisoned on charges of graft,” Bloomberg recounted. Finally, former President Luiz Inácio Lula da Silva was held for questioning and five days later, he was charged with money laundering.

The BRL soared on the news as the market apparently believed the chances that Rousseff would be impeached were meaningfully higher after Lula’s detention.

On Sunday, protesters have once again taken to the streets by the “hundreds of thousands” to call for Rousseff’s departure. “As of about 10 a.m. local time (9 a.m. ET), demonstrators in green and yellow, the colors of the Brazilian flag, had begun to amass in locations including Rio de Janeiro’s Copacabana beach and at the National Museum in Brasilia, the nation’s capital,” Bloomberg reports. “Nearly 400,000 people had signed up on a Facebook pagepledging to take part in opposition marches.”

“The Sunday protests, if they are nationwide, will in many ways put spine in the opposition or take the spine out of the opposition,” Matthew Taylor, an associate professor at American University, told WSJ.

“You can see that I don’t look like one who is about to resign,” Rousseff, speaking at the presidential palace on Friday. “I won’t leave this post without reason.”

We’re not sure what would count as a “good reason” in Rousseff’s mind, but if “massive public outcry” qualifies, then she pretty clearly has cause to consider bowing out.

As WSJ goes on to note, “four street marches between March and December drew ever-dwindling numbers of supporters [as] critics said the protests were devolving into carnivalesque parties.”

“If you have few people on the streets, fewer people than in previous protests, it will be a bucket of cold water on the opposition,” Mendonça Filho, a federal legislator and coordinator of a pro-impeachment group said.

As in Venezuela – where street protests also broke out in recent days – patience has simply run out with the rather unpalatable combination of perceived corruption, incompetence, and an increasingly acute economic downturn. Stay tuned to see what the verdict is for today’s demonstrations – if there’s broad support here it could very well determine how the BRL behaves this week.

As for Rousseff, for now she’s simply appealing to detractors and supporters alike not to hurt each other. “I am appealing for there not to be violence,” she said late last night. “I think all people have a right to be on the streets. However, no one has a right to be violent. No one.”

We shall see if her pleas are heeded.

And now riots on the streets in Venezuela!!
(courtesy zero hedge)

“Let Them Come For Me!” Maduro Defiant As Thousands Protest In Venezuela

Some Venezuelans aren’t happy with Nicolas Maduro, and it’s easy to see why.

Inflation in the socialist paradise is projected to run at a mind boggling 720% this year after topping 200% in 2015. Long queues are common at grocery stores, where the country’s beleaguered citizens wait in hopes of grabbing the last of increasingly scarce basic staples like rice and, famously, toilet paper. According to a trade group of drug stores, 90% of medicines are now scarce.

As we documented last month, the acute economic crisis – Venezuela is the worst performing economy in the world – is the result of years of disastrous policies pursued by the socialist government which has pushed out private industry and badly mismanaged the country’s oil wealth. Default is now virtually assured, as 90% of crude revenue needs to be diverted to debt payments. Thanks to rising imports and falling oil sales, the CA deficit has worsened, forcing Caracas to liquidate assets to fund a budget deficit that’s projected to hover near 20% of GDP for the foreseeable future.

The economic malaise has fueled a political crisis. Last month, Maduro used a Supreme Court stacked with allies to push through a decree granting the presidency “emergency powers.” Opposition lawmakers – who, you’re reminded, in December won 99 of 167 seats that were up for grabs in what amounted to the worst defeat in history for Hugo Chavez’s leftist movement – were livid and decided to accelerate plans to remove to the hapless leader.

Those plans will include a recall referendum and an amendment aimed at reducing the length of the President’s term. Oh, and those plans also include inciting mass protests.

“Venezuela’s opposition held a national day of protest Saturday, the opening salvo in its new strategy to oust President Nicolas Maduro, who responded with a rally of his own,” AFP reports. “With shouts of ‘Resign now!’ thousands of Venezuelans demonstrated against Maduro in northeast Caracas, as the socialist president gathered thousands of his own red-clad supporters in the center of the capital to chants of ‘Maduro won’t go!’”

As AFP goes on to note, it’s a small miracle no one was killed considering the tension and what happened in 2014 when anti-government protests left dozens dead. Here are the visuals from the capital:

Inline image 5

“Venezuela is in chaos … more misery, more crime and more destruction,” one law student among opposition supporters told Reuters. “I came because what we want is change, because we cannot continue standing in line to buy medicine, food, for everything, for car parts, for everything,” another demonstrator said.

Maduro was predictably defiant, giving a “thundering” speech to supporters at what he called an “anti-imperialist rally.” “Let them come for me. Nobody’s giving up here!” he said. “I imagine him in Miraflores (presidential palace.) My God, save us from that! There’d be a national insurrection a week later,” he added, referencing opposition leader Henry Ramos.

Of course there’s already a “national insurrection” – and he’s the target.

“My opponents,” Maduro boomed, “have gone crazy [and I will] hang on to power until the final day.” Here’s an amusing picture from the speech:

Although some in the opposition crowds said they were “expecting more people,” you can bet the groundswell of support for the anti-Maduro movement will only grow – especially now that a majority of lawmakers want to President gone.

There’s only so long the populace is going to tolerate inflation that appears as though it may eventually top 1,000% and without higher oil prices, the country’s reserves (along with its gold) will be gone in a matter of months. A desperate attempt on Energy Minister Eulogio Del Pino’s part to convince fellow OPEC members to come to an agreement on lifting prices was a miserable failure last month and as documented earlier today, Iran isn’t about to budge.

Perhaps it will take a sovereign default for the parts of the population who still buy Maduro’s “blame the imperialists” rhetoric to finally wake up, but make no mistake, Maduro’s pledge to “hang to power until the final day” will be put to the test in relatively short order. Whether or not that test comes from lawmakers or angry, torch-waving Venezuelans demanding toilet paper remains to be seen.



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

Euro/USA 1.1113 down .0032

USA/JAPAN YEN 113.69 DOWN .106 (Abe’s new negative interest rate (NIRP)a total bust

GBP/USA 1.4352 DOWN .0014 (threat of Brexit)

USA/CAN 1.3246 UP.0043

Early THIS MONDAY morning in Europe, the Euro FELL by 32 basis points, trading now WELL above the important 1.08 level RISING to 1.1102; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and the threat of continuing USA tightening by raising their interest rate / Last night the Chinese yuan was UP in value (onshore) The USA/CNY DOWN in rate at closing last night: 6.4942 / (yuan UP 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 SOUTHBOUND trajectory RAMP as IT settled DOWN in Japan by 11 basis points and trading now well BELOW that all important 120 level to 113.04 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 14 basis points as it now trades WELL ABOVE the 1.40 level at 1.4352.

The Canadian dollar is now trading DOWN 43 in basis points to 1.3246 to the dollar.

Last night, Chinese bourses AND jAPAN were ALL UP/Japan NIKKEI CLOSED UP 294.88 POINTS OR1.74%, HANG SANG UP 235.74 OR 1.17% SHANGHAI UP 49.58 OR 1.76%   / AUSTRALIA IS HIGHER / ALL EUROPEAN BOURSES ARE IN THE GREEN, 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 MONDAY morning: closed UP 294.88 OR 1.74%

Trading from Europe and Asia:
1. Europe stocks ALL IN THE GREEN

2/ CHINESE BOURSES ALL IN THE GREEN/ : Hang Sang CLOSED IN THE GREEN. ,Shanghai IN THE GREEN/ Australia BOURSE IN THE GREEN: /Nikkei (Japan)GREEN/India’s Sensex in the GREEN /

Gold very early morning trading: $1256.60


Early MONDAY morning USA 10 year bond yield: 1.975% !!! DOWN 1/5 in basis points from FRIDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield falls to 2.75 UP 1/2 in basis points from FRIDAY night.

USA dollar index early MONDAY morning: 96.46 UP 29 cents from FRIDAY’s close.(Now below resistance at a DXY of 100)

This ends early morning numbers MONDAY MORNING

And now your closing MONDAY numbers
Portuguese 10 year bond yield: 2.93% DOWN 1 in basis points from FRIDAY

Japanese 10 year bond yield: -.039% !! DOWN 2 basis points from FRIDAY which was lowest on record!!
Your closing Spanish 10 year government bond, MONDAY DOWN  12 in basis points
Spanish 10 year bond yield: 1.47% !!!!!!/
Your MONDAY closing Italian 10 year bond yield: 1.30% down 3 in basis points on the day:
Italian 10 year bond trading 17 points lower than Spain/
German 10 yr bond yield closed at .279/

Closing currency crosses for MONDAY night/USA dollar index/USA 10 yr bond: 2:30 pm
Euro/USA: 1.1081 down .0065 (Euro DOWN 65 basis points AND FOR DRAGHI A COMPLETE POLICY FAILURE)
USA/Japan: 113.81 UP 0,016 (Yen DOWN 2 basis points) and still a major disappointment to our yen carry traders and Kuroda’s NIRP
Great Britain/USA: 1.4298 DOWN 0.0068 (Pound DOWN 68 basis points
USA/Canada: 1.3266 UP .0064 (Canadian dollar DOWN 64 basis points as oil was LOWER in price/wti = $37.76)


This afternoon, the Euro was DOWN by 65 basis points to trade at 1.1081 AS THE MARKETS CONTINUE TO HAVE SECOND THOUGHTS  WITH DRAGHI’S BAZOOKA
The Yen FELL to 113.81 for a LOSS of 2 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 68 basis points, trading at 1.4298.( LESS BREXIT concerns)
The Canadian dollar FELL by 64 basis points to 1.3266 as the price of oil was DOWN today as WTI finished at $37.76 per barrel,)
The USA/Yuan closed at 6.4945
the 10 yr Japanese bond yield closed at -.0390% UP 2 basis point in yield
Your closing 10 yr USA bond yield: DOWN 2 basis points from THURSDAY at 1.96%//(trading well below the resistance level of 2.27-2.32%) policy error
USA 30 yr bond yield: 2.72 DOWN 3 in basis points on the day and will be worrisome as China/Emerging countries continues to liquidate USA treasuries (policy error)

Your closing USA dollar index: 96.57 UP 52 cents on the day at 2:30 pm
Your closing bourses for Europe and the Dow along with the USA dollar index closings and interest rates for MONDAY

London: UP 34.78 points or 0.57%
German Dax :UP 159.13 points or 1.62%
Paris Cac UP 13.80 points or 0,31%
Spain IBEX UP 52.10 or 0.57%
Italian MIB: DOWN 5.98 points or 0.03%
The Dow up 15.82 or 0.09%
Nasdaq:up 1.82 or 0.04%
WTI Oil price; 37.26 at 2:30 pm;
Brent OIl: 39.60
USA dollar vs Russian Rouble dollar index: 69.76 (Rouble is DOWN 5 /100 roubles per dollar from yesterday) as the price of Brent and WTI OIL FELL





Credit Suisse explains why oil producers just do not believe the oil rally this past few weeks:

(Credit Suisse/zero hedge)

Why Oil Producers Don’t Believe The Oil Rally: Credit Suisse Explains

For the past month, the price of oil has soared by a 50% on no fundamental catalyst; in fact, the “fundamental” situation has gotten progressively worse with the record oil inventory glut increasing by the day even as US crude oil production posted a modest rebound in the past week after two months of declines, while the much touted OPEC/non-OPEC oil production freeze has yet to be discussed, let alone implemented.

With or without a valid catalyst, however, the short squeeze price action has drastically changed not only investor psychology, but that of the IEA as well, which on Friday announced that oil may have bottomed (if the agency’s predictive track record is any indication, oil is about to crash).

But while traders, algos and CNBC guest “commodity experts” may be certain that oil will never drop to $27 again, someone else is not at all convinced that oil prices will not drop again: oil producers themselves.

We first noted this earlier this week,since January, the spread between Brent for delivery on the 2020 end of the curve and crude for prompt supply has dropped by nearly $8 to around $10.71 a barrel. “Brent’s flattening contango since January comes as many producers want to cash in immediately on recent price rises. They’ve been heavily selling 2017/2018 and beyond, and it shows that they don’t quite trust the higher spot prices yet,” said one crude futures trader.

“This means that even the producers don’t really expect a strong price rally until well into 2017 or later,” he said. The companies that explore for oil and pump it out of the ground have been locking in price gains by selling off future output as a financial hedge, pulling down prices for those contracts, said sources with some of the producers and traders who had been counterparty to deals.

And now, courtesy of Credit Suisse James Wicklund’s wonderful “Things We’ve Learned This Week” summary of key events in the oil space in the last 7 days, is an explanation of just this:

Locking It In. Since January, the spread between spot Brent prices and 2020 Brent prices has dropped nearly $8.00 to $10.71 per barrel, indicating selling in 2017, 2018, and 2019 futures contracts. According to Reuters, the majority of selling has come from E&Ps looking to lock in prices to hedge against a repeat of last year’s second half commodity price route. At the same time, the hedges indicate a lack of confidence that the current commodity rally will continue.

However, as long as the momentum-cashing algos are bidding oil up, the majors will be delighted to hedge at ever higher prices; which incidentally means that Saudi Arabia’s plan to put as many marginal producers out of business in the fastest possible time, has just been delayed by another 9-12 months. Whether this means that Saudi plans for a production “freeze” have also just been swept away, remains to be seen as soon as that so overhyped OPEC meeting takes place, if ever.

* * *

As a bonus, here are several of Wicklund’s other key event highlights from the past week:

  • Near Record. Despite significantly reduced activity in North America, 2015 was the second-largest year in terms of total proppant volumes supplied as frac sand, ceramic proppant, and resin-coated proppant producers supplied 55mm tons to the oil and gas industry. Frac sand accounted for over 92% of the 2015 market, whereas ceramic proppant and resin-coated proppant volumes fell to their lowest levels since 2010. The resilience of proppant volumes was the result of increased proppant intensity per well. Unfortunately for proppant producers, prices fell off a cliff in 2015 due to excess market supply.
  • Talking Politics. During Sunday’s Democratic Presidential debate, fracking was a hot topic between Sen. Bernie Sanders and Sec. Hillary Clinton. Clinton has, in general, historically supported fracking. Clinton changed her stance noting, “[b]y the time we get through all of my conditions, I do not think there will be many places in America where fracking will continue to take place.” Sanders took a more adamant stance, calling for an all-out ban against fracking on federal lands.
  • North Sea Production Holding Firm. North Sea crude supply is expected to average 2.22mm boe/d during April, up from March’s 2.17 mm boe/d and its highest level in four years. If April’s estimate is met, crude oil supply out of the North Sea will have exceeded 2 mm boe/d for 8 consecutive months.
  • Flood Gates Opening? In late 2015, the National Iranian Oil Company (NIOC) unveiled 49 development projects to be offered to local and foreign investors under the new Iran Petroleum Contract (IPC). The 29 oil and 20 gas projects offer a wide array of development opportunities, ranging from brownfield projects on mature onshore and offshore fields, recently developed fields, to very large greenfield projects. Government officials project that the removal of sanctions on Iran may trigger at least $50B a year in foreign investment to finance a rebound in an economy hit by the oil slump.
  • Infusion. We have been paying close attention to E&P equity raises over the past few weeks, looking specifically at the size and proceeds of the deals. So far in 2016, NAM E&Ps have raised $9.3B in equity, down from $16.0B for full-year 2015. Proceeds are similar to 2015 as E&Ps proceeds are going to pay down debt and, in some cases, fund capex.
The following court decision may accelerate oil and gas bankruptcies
(Dave Forest/Oil

Court Decision Could Accelerate Oil And Gas Bankruptcies

Submitted by Dave Forest via,

Oil and gas data experts Evaluate Energy showed yesterday that U.S. E&Ps took a huge hit in 2015. With the value of total proved reserves in the sector declining by an astounding $515 billion dollars. 

The chart below shows just how great the damage is, compared to reserves valuations the last few years.

Factors like that have caused an increasing number of high-profile E&Ps to file for bankruptcy in America. And a critical court decision this week could mean even more coming.

That ruling came Tuesday in the bankruptcy proceedings of Sabine Oil & Gas, detailed byEnergy Law360. Where a New York judge ruled that bankruptcy allows Sabine to cancel contracts it holds with midstream firms on the company’s petroleum licenses in Texas.

Here’s why this is a sea change for oil and gas law.

Sabine held three separate contracts with pipeline firms in Texas, for the transport and sale of oil and gas that the company produced. These contracts came with clauses like “deliver or pay” features — where Sabine was obligated to send minimum volumes of production through the pipeline, or pay financial penalties to the pipeline operators.

Such contracts could have been a stumbling block in bankruptcy — requiring the company to deliver production or cash at a time when its operations have slowed or stopped. And so Sabine had challenged in bankruptcy court to have the agreements nixed.

And the judge in the case agreed. Ruling that the midstream contracts are not “running with the land” — in essence, saying that the contracts are not inextricably tied to the land assets that underlie Sabine.

The decision opens the door for Sabine to sever the contracts as it restructures in bankruptcy. A strategy that other E&Ps immediately jumped on — with bankrupt producer Magnum Hunter Resources yesterday striking a deal to cancel four midstream contracts as it restructures.

With the case giving producers a greater financial incentive to declare bankruptcy, we could see such filings increase. Obviously posing a risk for equity holders — and also for midstream companies, which could see a rising amount of contract business disappear in the bankruptcy courts.

Watch for more cases of canceled contracts emerging. And possible write-downs and loss of income at midstream firms as a result.

Iran will have no part in an oil production freeze
(courtesy zero hedge)

“They Should Leave Us Alone”: Iran Wants No Part Of Oil Freeze Until Output Higher

On Tuesday, Kuwait’s oil minister Anas al-Saleh delivered a rather stark warning to the rest of OPEC when he said the following about the much ballyhooed crude output freeze: “I’ll go full power if there’s no agreement. Every barrel I produce I’ll sell.”

That was a response to a question about what Kuwait would do if all major producers failed to agree to the freeze. Of course “all major producers” includes Iran and having just now begun to enjoy the financial benefits of being free to sell its oil without the overhang of crippling international sanctions, Tehran isn’t exactly thrilled about the idea of capping production at the current run rate of around 3 million b/d.

As soon as sanctions were lifted, Iran immediately committed to boosting production by 500,000 b/d and said that by the end of the year, it would bring an additional 500,000 b/d of supply online. That would put Iranian production at around 4 million b/d total and, as we noted back in January, would mean the country will be raking in between $3 and $5 billion every month by the end of 2016.

Whether or not those numbers are ultimately achievable is debatable, but the point is, Iran came back to market at a rather inauspicious time. President Hassan Rouhani is attempting to rebuild his country’s economy and Tehran is attempting to attract tens of billions in investments. Taking the foot off the pedal now would be a bitter pill to swallow.

On Sunday, we got the latest from Iranian Oil Minister Bijan Zanganeh and the message was unequivocal: “They should leave us alone as long as Iran’s crude oil has not reached 4 million. We will accompany them afterwards.”

So based on January’s ouput of 2.93 barrels, we’ve got a ways to go here. One can hardly blame Tehran. After all, the Saudis are producing at a record pace. So are the Russians. And so are the Iraqis. As Reuters writes, “sanctions had cut crude exports from a peak of 2.5 million bpd before 2011 to just over 1 million bpd in recent years.” There’s a lot of lost time (and money) to recover here and if everyone else gets to “go full power” – to quote Anas al-Saleh – then Tehran thinks they should as well.

Zanganeh went on to say that $70 was a “suitable” price for oil. He’ll meet Russian Energy Minister Alexander Novak on Monday. No details about the meeting were available.

So, as we said on Tuesday, “one can forget about a production freeze well into 2017 if not forever since by then at least one if not more OPEC members will be bankrupt.”

This comes as analysts are increasingly split over the prospects for prices. For their part, Goldman called any sustained bounce “self-defeating” as “energy needs lower prices to maintain financial stress to finish the rebalancing process.”

The IEA on Friday called Iran’s return to market “less dramatic” than anticipated and suggested prices may have bottomed. “For prices there may be a light at the end of what has been a long, dark tunnel, but we cannot be precisely sure when in 2017 the oil market will achieve the much-desired balance,” the agency said.

We can’t either. But what we can be sure of is that even if one wants to characterize Iran’s move to ramp production as “less dramatic” than Tehran might have anticipated, their refusal to cap that “less dramatic” production hike at 3 million b/d will cause the likes of Kuwait – which itself churns out 3 million b/d – to refuse to support what is already an exceptionally tenuous proposal to freeze output. And the cumulative effect of the enitre effort breaking down could prove to be quite “dramatic” indeed.

Perhaps the best analyst out there on oil is Art Berman. He explains why oil prices should fall and fall hard
(courtesy Art Berman/

Oil Prices Should Fall, Possibly Hard

Submitted by Art Berman via,

Oil prices should fall, possibly hard, in coming weeks. That is because fundamentals do not support the present price.

Prices should fall to around $30 once the empty nature of an OPEC-plus-Russia production freeze is understood. A return to the grim reality of over-supply and the weakness of the world economy could push prices well into the $20s.

Saudi Arabia's Minister of Petroleum & Mineral Resources Ali Al-Naimi speaks at the annual IHS CERAWeek global energy conference Tuesday, Feb. 23, 2016, in Houston. (AP Photo/Pat Sullivan)
Saudi Arabia’s Minister of Petroleum & Mineral Resources Ali Al-Naimi speaks at the annual IHS CERAWeek global energy conference Tuesday, Feb. 23, 2016, in Houston.

A Production Freeze Will Not Reduce The Supply Surplus

An OPEC-plus-Russia production cut would be a great step toward re-establishing oil-market balance. I believe that will happen later in 2016 but is not on the table today.

In late February, Saudi oil minister Ali Al-Naimi stated categorically, “There is no sense in wasting our time in seeking production cuts. That will not happen.”

Instead, Russia and Saudi Arabia have apparently agreed to a production freeze. This is meaningless theater but it helped lift oil prices 37% from just more than $26 in mid-February to almost $36 per barrel last week. That is a lot of added revenue for Saudi Arabia and Russia but it will do nothing to balance the over-supplied world oil market.

The problem is that neither Saudi Arabia nor Russia has greatly increased production since the oil-price collapse began in 2014 (Figure 1). A freeze by those countries, therefore, will only ensure that the supply surplus will not get worse because of them. It is, moreover, doubtful that Saudi Arabia or Russia have the spare capacity to increase production much beyond present levels making the proposal of a freeze cynical rather than helpful.

Chart-US-RUSSIA-SAUDI Incremental Prod MAR 2016
Figure 1. Incremental liquids production since January 2014 by the United States plus Canada, Iraq, Saudi Arabia and Russia. Source: EIA & Labyrinth Consulting Services, Inc. (click image to enlarge)

Saudi Arabia and Russia are two of the world’s largest oil-producing countries. Yet in January 2016, Saudi liquids output was only ~110,000 bpd more than in January 2014 and Russia was actually producing ~50,000 bpd less than in January 2014. The present world production surplus is more than 2 mmbpd.

By contrast, the U.S. plus Canada are producing ~1.9 mmbpd more than in January 2014 and Iraq’s crude oil production has increased ~1.7 mmbpd. Also, Iran has potential to increase its production by as much as ~1 mmbpd during 2016. Yet, none of these countries have agreed to the production freeze. Iran, in fact, called the idea “ridiculous.”

Growing Storage Means Lower Oil Prices

U.S. crude oil stocks increased by a remarkable 10.4 mmb in the week ending February 26, the largest addition since early April 2015. That brought inventories to an astonishing 162 mmb more than the 2010-2014 average and 74 mmb above the bloated levels of 2015 (Figure 2).

Crude Oil Stocks_5-Year AVG MIN MAX 6 FEB 2016
Figure 2. U.S. crude oil stocks. Source: EIA and Labyrinth Consulting Services, Inc. (click image to enlarge)

The correlation between U.S. crude oil stocks and world oil prices is strong. Tank farms at Cushing, Oklahoma (PADD 2) and storage facilities in the Gulf Coast region (PADD 3) account for almost 70% of total U.S. storage and are critical in WTI price formation. When storage exceeds about 80% of capacity, oil prices generally fall hard. Current Cushing storage is at 91% of capacity, the Gulf Coast is at 87% and combined, they are at a whopping 88% of capacity (Figure 3).

Cushing & Gulf Coast Inventory & Utilization 6 Feb 2016
Figure 3. Cushing and Gulf Coast crude oil storage. Source: EIA and Labyrinth Consulting Services, Inc. (click image to enlarge)

Prices have fallen hard in step with growing storage throughout 2015 and early 2016. Since talk of a production freeze first surfaced, however, intoxicated investors have ignored storage builds and traders are testing new thresholds before they fall again.

The truth is that prices will not increase sustainably until storage volumes fall, and that cannot happen until U.S. production declines by about 1 mmbpd.

Despite extreme reductions in rig count and catastrophic financial losses by E&P companies, production decline has been painfully slow. The latest data from EIA indicates that February 2016 production will fall approximately 100,000 bpd compared to January (Figure 4).

U.S. Production Forecast MAR 2016
Figure 4. U.S. crude oil production and forecast. Source: EIA STEO, EIA This Week In Petroleum, and Labyrinth Consulting Services, Inc. (click image to enlarge)

That is an improvement over the average 60,000 bpd monthly decline since the April 2015 peak.  It is not enough, however, to make a difference in storage and storage controls price.

EIA and IEA will publish updates this week on the world oil market balance and I doubt that the news will be very good. IEA indicated last month that the world over-supply had increased almost 750,000 bpd in the 4th quarter of 2015 compared with the previous quarter. EIA data corroborated those findings and showed that the surplus in January 2016 had increased650,000 bpd from December 2015.

Oil Prices and The Value of the Dollar

Why, then, have oil prices increased? Partly, it is because of hope for an OPEC production freeze and that sentiment is expressed in the OVX crude oil-price volatility index (Figure 5).

VIX & WTI 5 MARCH 2016
Figure 5. Crude oil volatility index (OVX) and WTI price. Source: EIA, CBOE and Labyrinth Consulting Services, Inc. (click image to enlarge)

The OVX reflects how investors feel about where oil prices are going. It is sometimes called the “fear index.” That suggests that investors are feeling pretty good and less fearful about the oil markets than in the last quarter of 2015 when oil prices fell 47%. Since mid-February, prices have increased 37%.

But there is more to it than just hope and that may be found in the strength of the U.S. dollar. The negative correlation between the value of the dollar and world oil prices is well-established. The oil-price increase in February was accompanied by a decrease in the trade-weighted value of the dollar (Figure 6).

Figure 6. U.S. Dollar value vs. WTI NYMEX futures price. Source: EIA, U.S. Federal Reserve Bank and Labyrinth Consulting Services, Inc. (click to enlarge)

Now, that trend has reversed. The U.S. jobs report last week was positive so continued strength of the dollar is reasonable for awhile. Assuming the usual correlation, that means that oil prices should fall.

 Oil Prices Should Fall Hard

It is a sign of how bad things have gotten in oil markets that we feel optimistic about $35 oil prices. It should also be a warning that the over-supply that got us here has not gone away.

Oil storage volumes continue to grow and that is the surest indication that production has not declined enough yet to make a difference. It is impossible to imagine oil prices rising much beyond present levels until storage starts to fall. In fact, it is difficult to understand $35 per barrel prices based on any measure of oil-market fundamentals.

The OPEC-plus-Russia production freeze is a cynical joke designed to increase their short-term revenues without doing anything about production levels. An output cut would make a difference but a freeze on current Saudi and Russian production levels means nothing.  It apparently made some investors feel better but it didn’t do anything for me. Iran got this one right by calling it ridiculous.

No terrible economic news has surfaced in recent weeks but that does not change the profound weakness of a global economy that is burdened with debt and weak demand. The announcement last week by the People’s Bank of China that it sees room for more quantitative easing may have comforted stock markets but it only added to my anxiety about reduced oil consumption and future downward shocks in oil prices.

I hope that oil prices increase but cannot find any substantive reason why they should do anything but fall. As market balance reality re-emerges in investor consciousness and the false euphoria of a production freeze recedes, prices should correct to around $30. A little bad economic or political news could send prices much lower.

With USA shale producers willing to stay in the game in oil at $40.00, was enough to send the entire complex down:  WTI collapses to $37.53!
(courtesy zero hedge)

Oil Plunges Back To Draghi Lows

Just as we saw with the stock market following Draghi’s December disappointment dead-cat-bounce, WTI Crude has collapsed back topost-Draghi lows, erasing all the WTF bounce from Friday. The driver – aside from the fact that there was no driver of the ramp – appears to be comments from Emirates Bank on the resilience of US shale (and the surprising lack of production drops for now).

US shale-oil producers could decide to stay in the game with prices currently hovering around $40/barrel, according to Edward Bell at Dubai-based bank Emirates NBD.

Market participants expected some shale producers to be pushed out as they struggled to compete in the low-price environment, and while US production is falling, it’s not been happening at a rapid rate. With prices well off their recent lows, shale producers could decide to weather the storm and try to keep output high. US production has dropped around 120K/day so far this year, but still remains above 9M barrels.

Well that didn’t last long…

Finally, given the total lies that were spewed about a March meeting of OPEC/NOPEC, it appears April is the new March…

OPEC and non-OPEC producers are likely to hold their next meeting on a plan to freeze output levels in a bid to support prices in mid-April in Doha, three OPEC sources said on Monday.

An earlier plan was to meet on March 20 in Russia, but sources familiar with the matter said last week this was unlikely to take place.

Now what will see from stocks…

It’s different this time though right?

Now it is Morgan Stanley warning of a big drop in oil:
(courtesy Morgan Stanley/zero hedge)

“2Q 15 Rally All Over Again” – Morgan Stanley Warns Big Oil Drop Imminent Due To “Rampant Hedging”

One week ago, the market was disappointed when Goldman’s head commodity strategist, Jeffrey Currie poined out the obvious, namely that the higher the price of oil rises, the greater the probability it will tumble shortly, as a result of recently shut off production going back online. To wit:

Last year commodity prices were driven lower by deflation, divergence and deleveraging which were reinforcing through a negative feedback loop. Deflationary pressures from excess commodity supply reinforced divergence in US growth and a stronger US dollar which in turn exacerbated EM funding costs and the need for EMs to de-lever though lower investment and hence commodity demand. While we believe that these dynamics likely ran their course last year resulting in signs of rebalancing, the force of their reversal has created a new trend in market positioning that could run further. However, the longer they run, the more destabilizing they become to the nascent rebalancing they are trying to price.

This follows our extended discussion of record storage not only in Cushing but PADD2 in general, as well as PADD3 and now, PADD1: it is now only a matter of time before US storage is operationally full and no more oil can be accepted for storage leading to a dramatic plunge in its price.

Then over the weekend, we showed why according to Credit Suisse, among the many skeptics of this furious oil short squeeze rally, the most notable sellers into strength were the entities that know the oil market better than anyone: producers themselves, who are rapidly selling the long-end to hedge prices around $40/barrel.

Since January, the spread between spot Brent prices and 2020 Brent prices has dropped nearly $8.00 to $10.71 per barrel, indicating selling in 2017, 2018, and 2019 futures contracts. According to Reuters, the majority of selling has come from E&Ps looking to lock in prices to hedge against a repeat of last year’s second half commodity price-routeAt the same time, the hedges indicate a lack of confidence that the current commodity rally will continue.

And now, here is Morgan Stanley’s Adam Longson with an overnight note which puts all this together, in which he essentially repeats what Goldman and Credit Suisse have said by saying that “Higher Prices and Rampant Hedging Can Extend the Cycle.” To wit:

2Q15 rally all over again? The 47% rally in WTI over the last month started with short covering on OPEC/Non-OPEC headlines. However, the carry through has mostly been driven by macro/CTA funds following better macro data points, a weaker USD, trend reversal and buying on hopes of recovery. Most of these factors are technical and appear temporary. But such false rallies can actually be harmful for the recovery.

Producer hedging is rampant in the $40s. Both anecdotal evidence from our trading desk and CFTC data support this. The CFTC producer short position reached new highs after the Jan lows, partly from distressed producers being forced to hedge. However, this latest uptick has not been confined to distressed producers. In our conversations, we are seeing healthy appetite from mid and large cap Permian producers as well. These producers are happy to hedge $45-50 in calendar 2017 and even high 30s/low 40s in 2016 given light hedge positions. Much of this hedging is just current production for now.

Basically, what this means is that as a result of the 50% spike in oil, producers have just succeeded in extending their $40/bbl hedges through to 2018, and no matter what happens to the price of spot, they will now resume pumping at prices that are supposedly profitable. This means that Saudi Arabia will have no choice but to retaliate; it also means that any speculation about a production cut by OPEC, or even freeze, will be promptly forgotten. More details from MS:

  • Higher crude prices and hedging can ultimately slow the US production decline.
  • Producers can hedge current production and shore up balance sheets. Hedging could keep supply more stable and less responsive to prices, just as excitement about declines was building. It also improves balance sheets and allows more equity issuance.
  • At worst, producers could bring on more supply by completing DUCs. WLL recently cited the $40-$45/bbl range as the price necessary to incentivize DUC completions (well below the price to add rigs). Prices are nearly there in the front and are already there a few months out, which could support rapid rigless production.
  • In the medium term, producers can use elevated prices to hedge future production. Most producers hedge at least 12 months out. Many entered 2016 in an under-hedged position and want to avoid that for 2017. Furthermore, credit stress has led to a decline in the hedging thresholds. Hedging 2017 at these elevated prices (currently Dec-17 WTI trading at $46/bbl) could help companies lock in returns, and/or support higher rig counts than recent flat price would have suggested

Putting all this together, here is MS on where oil will go next:

The front should be capped by the back. Risk-on can push the rally further, but upside is likely capped near $45 even with a weaker USD. Although macro funds and short covering are lifting the front, producer hedging is limiting the rally in deferred prices. Moreover, US inventories are bloated and will continue to rise, which suggests a contango must remain in the curve. Hence, the back will cap the front. When we put it all together, it suggests WTI will struggle to break $45 in the front, even if the USD continues to pullback.

Bloated inventories will keep the curve from flipping into backwardation, particularly for WTI. We have shown many times that storage utilization drives structure in the front of the curve, particularly during periods of inventory builds. With Cushing already nearing full storage, and US inventories set to build into April or May, we don’t see how time spreads will not trade at some level of distress. As a result, WTI will need to support some level of deep contango over the first 3-6 months. Therefore, producer hedging and buying from macro funds and CTAs can flatten the curve, but we don’t see a world where the front trades in line with (let alone above) the back.

We struggle to see Dec-17 WTI breaking $50 based on producer hedging. Many producers are willing to hedge calendar-2017 WTI at $45 or higher. Much of the buying we have seen from speculators and macro funds has been closer to the front where there is liquidity. Call skew has improved in the back with a few investors and consumers buying out-of-the-money call options, but these are typically small in scale relative to the potential producer selling. As a result, we see a hard cap on 2017 prices.

Finally, if all of this resembles the strong rally of Q2 2015 when oil likewise soared, only to tumble shortly after, it is because that’s exactly what it is.

The current setup is similar to 2Q15. Back in 2015, a rally in prices driven primarily by a USD pullback led to producer hedging and capped deferred prices at $65/bbl.This resulted in a flatter curve, but it also limited the rally in the front to $60 given the state of US inventories. The current rally mirrors this period in 2015 in many ways, only that producers are willing to hedge at much lower levels. As the USD and producer hedging reasserted themselves, that rally proved to be short lived.

And with that, the ball is again in Saudi Arabia’s court, whose task of putting the “marginal producers” out of business was just delayed by at least one year.

Russian supports Iran’s case to increase it’s oil production.  That sends WTI price below $37.00 dollars;
(courtesy zero hedge)

Russian Support For Iranian Oil Output Increase Sends Crude Crashing Below $37

Remember last week when oil prices spiked despite a rise in crude production, inventory builds, continuing storage concerns at Cushing, and the admission that there is no March OPEC/NOPEC “freeze” meeting. Well that’s all over as Russia’s Oil Minister Novak conmfirms Russia’s acceptance of Iranian rights to increase oil output post-sanctions, thus blowing away any ideas of a “freeze” or hopes for a cut in global production. April WTI just broke back to a $36 handle – erasing all of those algo gains…

Strong USD, weak Oil… Rinse. Repeat.

None of this should come as any surprise since, as we detailed recently, on Sunday, we got the latest fromIranian Oil Minister Bijan Zanganeh and the message was unequivocal: “They should leave us alone as long as Iran’s crude oil has not reached 4 million. We will accompany them afterwards.”

As soon as sanctions were lifted, Iran immediately committed to boosting production by 500,000 b/d and said that by the end of the year, it would bring an additional 500,000 b/d of supply online. That would put Iranian production at around 4 million b/d total and, aswe noted back in January, would mean the country will be raking in between $3 and $5 billion every month by the end of 2016.

Which followed (from Tuesday), Kuwait‘s oil minister Anas al-Saleh delivered a rather stark warning to the rest of OPEC when he said the following about the much ballyhooed crude output freeze: “I’ll go full power if there’s no agreement. Every barrel I produce I’ll sell.”

As we noted previously, catching a falling knife is hard, especially when it’s covered in oil. The International Energy Agency today said oil prices may have bottomed out. Several people have tried to call the oil’s floor since prices started falling in the summer of 2014. So far nobody has been right.

Of course it’s different this time, this really is the bottom. Except, with ETF shorts having collapsed to “norms” the buyers of last resort will have their work cut out maintaining the dream with no one left to squeeze…

Charts: Bloomberg


WTI crude price at 5. 00 pm:  $37.29
Brent: 39.53
This ends the stock indices, oil price, currency crosses and interest rate closes for
And now USA stories

S&P Clings To Technical Support Despite Oil & Gold Dump

What could go wrong?


Today was all about the 200-day moving average for the S&P 500…2019.40 was all that mattered…


Oil roundtripped to EURUSD’s Drgahi lows but stocks ignored it on super low volumes…


On the day, The Dow and Nasdaq clung to gains but the rest got hammered into the close – note the algo confusion around the European close (US on DST, EU not)


Energy and Financials lagged on the day…


This is what the end of a short-squeeze looks like (Peabody Energy crashed 36% at its lows – the biggest drop ever for the stock)…


Treasury yields fell on the day (apart from 2Y which was very modestly higher)…the day was divide by the EU close once again


Notably, as CS notes, Treasury options skew shifted back into positive territory for the first time this year (i.e no longer positioning for falling rates)


The USD Index ended the day higher but had a volatile day of building strength and sudden weakness…


The Brazialian Real dumped after news that Rousseff will seek to name Lula as a minister in her new cabinet…


Copper and Silver managed to end unchanged as oil and crude slipped…all slammed at the US equity open


Crude’s biggest 1 day drop in a month…


Gold’s biggest 2-day drop since July 2015…


What happened the last 2 times it was hit like this…


Charts: Bloomberg

Tax refunds tumble and this suggests the fact that the recovery in jobs is just not there:
(courtesy zero hedge)

Tax Refund Tumble Tells Tale Of Tumultuous Recovery

As we detailed previously, the growth of federal income and employment tax withholdings, the broadest and most timely read on the health of the job market “has been sinking at an alarming rate.”What is worse, as ConvergEx’s Nick Colas notes, IRS and Treasury data show refunds tracking 2-3% below last year’s levels – not good news for companies that focus on the low-end consumer, the cohort that tends to spend (rather than save) their refunds.

The Daily Treasury Statement is essentially America’s checkbook, and offers a read on two important issues: the pace of tax refunds and growth in wages. 

We’re right in the middle of the January – May refund season, when the U.S. Treasury pays +$270 billion in lump sum payments to +100 million American households. Those remittances, which this year average $3,164, are an underappreciated fillip to Q1 consumer spending and household debt reduction. Through the end of February, both IRS and Treasury data show refunds tracking 2-3% below last year’s levels – not good news for companies that focus on the low-end consumer, the cohort that tends to spend (rather than save) their refunds.

On the wage growth side, it’s the proverbial half empty/full glass.  Income tax/withholding payments to Treasury are up an average 3.6% over the last three months (half full), but thatrun rate is noticeably lower than the 6.0% growth at the same time last year (half empty).

Death and taxes may be inevitable, but they also seem to inspire great art.  Pondering one’s own mortality inspires the creative mind to produce something that outlasts the mortal coil, of course. And, oddly enough, the need to “Render unto Caesar” his provides a similar impetus.

Take, for example, The Rolling Stones circa 1971.  Then at the height of their fame, they also happened to be at the nadir of their financial success.  Thanks to a series of unscrupulous managers and advisers, they were not just near broke but they also owed Her Majesty’s government a million dollars.  Marginal tax rates in the UK were +80% at the time.  They simply couldn’t pay their tax bill if they recorded their next album in the United Kingdom.

So, they did what real rockers do – they fled to the French Riviera, where Keith Richards rented a large villa and the band recorded in the basement and partied everywhere else.  The place is called Nellcote, and there is a link at the end of this note to +40 pictures of the Stones in residence there.  The double album they created during this time: “Exile on Main Street”, as in “tax exile”.  Most Rolling Stones fans put it at or near the top of their list, and as with all great 1970s albums (think Fleetwood Mac’s “Rumours”) the story behind its creation is part of the magic.

Taxes – tax data, really – can also tell important economic stories and although this is an under-used vector in macro analysis, it is worth a look.  Take, for example, the income tax and withholding payments made to the U.S. Treasury.  Most working Americans have their taxes and social program contributions taken out of their paychecks, and those in the “gig economy” (real estate agents, Uber drivers, and other contractors) make separate remittances to the government from their earnings. The U.S. Treasury posts a daily report that outlines these payments, along with everything else the Federal government both receives and pays for.  Links to this report – the Daily Treasury Statement – are available at the end of this note.

From 2010 – 2015, growth in withheld individual income taxes/other payments averaged 5.1%. That’s far better than the GDP growth, for example, which has not breached 5% in any quarter since the Great Recession. The repeal of the Bush tax cuts on higher income households didn’t have much of an effect, with 2010-2015 withheld income tax/other payments running a very consistent 5% year over year growth.

This means that the part of the U.S. labor force that pays Federal income tax – those who make roughly $50,000/year and higher – has seen steady wage gains for the last half decade.  Keep in mind this doesn’t include capital gains or small business taxes – those appear in other entries on the Daily Treasury Statement and are not included here. This is simply the growth in the withholdings that go to Uncle Sam every paycheck from those workers who receive a paycheck.

In a troublesome development, the growth rate of individual tax receipts/withholdings is now showing signs of a slowdown.  Adjusting for the effect of a leap day, average 3 month growth ending February 2016 is now 3.6%.  Taking into account those in the growing “Gig economy”, it is still just 3.7%.  That is well below the 5 year run rate of 5.1%.  The slowdown started in late 2015 and reflects the slowest growth in withholding (using 3 month rolling average because the data is choppy) since 2012.

Why is this happening?  I can think of three reasons.

First, the types of jobs the U.S. economy has been creating over the last few years may be lower paying than average. Lower marginal incomes lead to lower tax remittances, and eventually this trend finds its way into the tax data.

Second, the “True” pace of job growth may have been slowing before the official Employment Situation report picked up on the trend in Q1 2016. The Friday jobs number is, after all, just a survey. Tax data reflects the actual truth.

Lastly, companies may be starting the process of controlling direct employee costs wherever possible. No matter what the answer, the tax data we’re discussing is clear: total wages are not growing as quickly as they have been.

The other tax story worth a look relates to individual tax refunds.  Both the Daily Treasury Statement and the Internal Revenue Service report on the size and pace of these payments, which occur annually between January and May as filers get their returns to the government.  Last year these payments totaled just over $274 billion, with average refund payments of $3,048 at this point in 2015. While many refund recipients report using these monies to pay down debt (usually prior Holiday credit card balances) or for savings, lower income households do spend their refunds. If you want to read more, Jessica found a great paper from the Harvard Business School on where this cohort spends the cash (link at the end of the note, naturally).

Year to date, refunds are running slightly behind last year’s levels:

Through the 8th week of the year, DTS data shows refunds paid are running a total of $3.7 billion behind last year’s payments, or 2.9% lower than 2015.

IRS reporting tells some of the reasons why. Total returns processed are down 1%, and total returns received are 0.4% lower through February 26.  More individual filers seem to be going it alone this year – self-prepared filings are up 3.8% while those prepared by tax professionals are down 3.6% year to date.

The number of returns that merit a refund are, however, down more than the 1% drop in returns processed. Year to date, the number of refunds paid (46.5 million) are down 2.1%. Average refunds are basically flat at $3,053 versus $3,048.

Now, we’re only about halfway through refund season, so there is still time to see some growth in the numbers.  There have been numerous reports of slower return processing as the IRS combats cyber criminals who try to file fake returns and hijack a taxpayer’s refund.  But the early data is a touch weak, and that is worth noting as we consider the pace of U.S. economic growth in the quarter.  As the old saying goes, “A billion here and a billion there and pretty soon you’re talking about real money.”

Special thanks to Robert H for sending this for us:
a good account as to the real story behind the USA election!!
William J. Bennett, Host of Bill Bennett’s Morning in America Show, is one of America’s most important, influential, and respected voices on cultural, political, and education issues.  He has one of the strongest Christian world views of any writer in modern times.
PHD – Secretary of Education under Ronald Reagan
> Cultural studies at the distinguished and renown Heritage Foundation

What I See Happening In a Trump Presidency

> By Bill Bennett
> “They will kill him before they let him be president.  It could be a Republican or a Democrat that instigates the shutting up of Trump.
> Don’t be surprised if Trump has an accident.  Some people are getting very nervous:  Barack Obama, Valerie Jarrett, Eric Holder, Hillary Clinton and Jon Corzine, to name just a few.
> It’s about the unholy dynamics between big government, big business, and big media.  They all benefit by the billions of dollars from this partnership, and it’s in all of their interests to protect one another. It’s one for all and all for one.  It’s a heck of a filthy relationship that makes everyone filthy rich, everyone except the American people.  We get ripped off.  We’re the patsies.  But for once, the powerful socialist cabal and the corrupt crony capitalists are scared.  The over-the-top reaction to Trump by politicians of both parties, the media, and the biggest corporations of America has been so swift and insanely angry that it suggests they are all threatened and frightened.
> Donald Trump can self-fund.  No matter how much they say to the contrary, the media, business, and political elite understand that Trump is no joke.  He could actually win and upset their nice cozy apple cart.
> It’s no coincidence that everyone has gotten together to destroy The Donald.  It’s because most of the other politicians are part of the a good old boys club.  They talk big, but they won’t change a thing.  They are all beholden to big-money donors.  They are all owned by lobbyists, unions, lawyers, gigantic environmental organizations, and multinational corporations – like Big Pharmacy or Big Oil.  Or they are owned lock, stock, and barrel by foreigners like George Soros owns Obama or foreign governments own Hillary and their Clinton Foundation donations.
> These run-of-the-mill establishment politicians are all puppets owned by big money.  But there’s one man who isn’t beholden to anyone.  There’s one man who doesn’t need foreigners, or foreign governments, or George Soros, or the United Auto Workers, or the teacher’s union, or the Service Employees International Union, or the Bar Association to fund his campaign.
> Billionaire tycoon and maverick Donald Trump doesn’t need anyone’s help.  That means he doesn’t care what the media says.  He doesn’t care what the corporate elites think.  That makes him very dangerous to the entrenched interests.  That makes Trump a huge threat to those people.  Trump can ruin everything for the bribed politicians and their spoiled slave masters.
> Don’t you ever wonder why the GOP has never tried to impeach Obama?  Don’t you wonder why John Boehner and Mitch McConnell talk a big game, but never actually try to stop Obama?  Don’t you wonder why Congress holds the purse strings, yet has never tried to de-fund Obamacare or Obama’s clearly illegal executive action on amnesty for illegal aliens?  Bizarre, right?  It defies logic, right?
> First, I’d guess many key Republicans are being bribed.  Secondly, I believe many key Republicans are being blackmailed.  Whether they are having affairs, or secretly gay, or stealing taxpayer money, the National Security Agency knows everything.
> Ask former House Speaker Dennis Hastert about that.  The government even knew he was withdrawing large sums of his own money from his own bank account.  The NSA, the SEC, the IRS, and all the other three-letter government agencies are watching every Republican political leader.  They surveil everything.  Thirdly, many Republicans are petrified of being called racists, so they are scared to ever criticize Obama or call out his crimes, let alone demand his impeachment.  Fourth , why rock the boat?  After defeat or retirement, if you’re a good old boy, you’ve got a $5 million-per-year lobbying job waiting.  The big-money interests have the system gamed.  Win or lose, they win.
> But Trump doesn’t play by any of these rules.  Trump breaks up this nice, cozy relationship between big government, big media, and big business.  All the rules are out the window if Trump wins the Presidency.  The other politicians will protect Obama and his aides but not Trump.  Remember:  Trump is the guy who publicly questioned Obama’s birth certificate.  He questioned Obama’s college records and how a mediocre student got into an Ivy League university.  Now, he’s doing something no Republican has the chutzpah to do.  He’s questioning our relationship with Mexico; he’s questioning why the border is wide open; he’s questioning why no wall has been built across the border; he’s questioning if allowing millions of illegal aliens into America is in our best interests; he’s questioning why so many illegal aliens commit violent crimes, yet are not deported; and he’s questioning why our trade deals with Mexico, Russia and China are so bad.
> Trump has the audacity to ask out loud why American workers always get the short end of the stick.  Good question!  I’m certain Trump will question what happened to the almost billion dollars given in a rigged no-bid contract to college friends of Michelle Obama at foreign companies to build the defective Obamacare website.  By the way, that tab is now up to $5 billion.  Trump will ask if Obamacare’s architects can be charged with fraud for selling it by lying.  Trump will investigate Obama’s widespread IRS conspiracy, not to mention Obama’s college records.  Trump will prosecute Clinton and Obama for fraud committed to cover up Benghazi before the election.  How about the fraud committed by employees of the Labor Department when they made up dramatic job numbers in the last jobs report before the 2012 election?
> Obama, the multinational corporations and the media need to stop Trump.  They recognize this could get out of control.  If left unchecked, telling the raw truth and asking questions everyone else is afraid to ask, Trump could wake a sleeping giant.  Trump’s election would be a nightmare.  Obama has committed many crimes.  No one else but Trump would dare to prosecute.  He will not hesitate.  Once Trump gets in and gets a look at the cooked books and Obama’s records, the game is over.  The goose is cooked.  Holder could wind up in prison.  Jarrett could wind up in prison.  Obama bundler Corzine could wind up in prison for losing $1.5 billion of customer money.  Clinton could wind up in jail for deleting 32,000 emails or for accepting bribes from foreign governments while Secretary of State, or for misplacing $6 billion as the head of the State Department, or for lying about Benghazi.  The entire upper level management of the IRS could wind up in prison.
> Obamacare will be de-funded and dismantled.  Obama himself could wind up ruined, his legacy in tatters.  Trump will investigate.  Trump will prosecute.  Trump will go after everyone involved.  That’s why the dogs of hell have been unleashed on Donald Trump


Nassim Taleb sums up the USA election in 17 words:

(courtesy Nassim Taleb/zero hedge)

Nassim Taleb Sums Up America’s Election In 17 “Black Swan” Words

Sometimes, less is more, and in infamous “Black Swan” philosopher Nassim Taleb’s case, summing up the chaos that is enveloping America, and its forthcoming election was as simple as the following:

The *establishment* composed of journos, BS-Vending talking heads with well-formulated verbs, bureaucrato-cronies, lobbyists-in training, New Yorker-reading semi-intellectuals, image-conscious empty suits, Washington rent-seekers and other “well thinking” members of the vocal elites are not getting the point about what is happening and the sterility of their arguments.”

To which he appended the following 17 perfectly succinct words:

“People are not voting for Trump (or Sanders). People are just voting, finally, to destroy the establishment.”

Your humour story of the day:
Due to a mixup, they will not be serving apple juice at the Kellogg’s cafeteria today:

Man Urinates On Cornflakes Conveyor Belt; FDA Launches Criminal Probe

“Products that could have been potentially affected were Rice Krispies Treats, Rice Krispies Treats cereal and puffed rice cake products, all of which would be past expiration date.”

That rather disconcerting bit comes from Kellogg’s and references an incident that apparently occurred in 2014 at a plant in Memphis, Tennessee.

In a video – originally uploaded to World Star Hip Hop on Friday – a worker appears to urinate on the assembly line. As The Daily Mail dryly notes, “At first it is not clear what he is urinating on, but as the self-shot cell phone video pans upwards, a conveyor belt leading to thousands of corn flakes can be seen.

“[We] immediately alerted law enforcement authorities and regulators”, a company spokesperson said.

The FDA is conducting a criminal investigation into the matter but you shouldn’t worry too much, because if you had any of the “potentially affected” products you apparently survived. They would all be past their expiration date at this juncture.

Here’s the video for those who are inclined to view it:

We suppose the question here is this: how often does this happen to your food? We’d imagine most people don’t film their exploits and when they do, they don’t upload them to the internet. We’re reminded of another rather unfortunate incident that unfolded at Subway two years ago involving some bread.

Additionally, you might have heard the saying “who peed in your Corn Flakes?

Now we know the answer: this guy did.



I will see you tomorrow night


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