March 15/Gold and silver whacked again as open interest did not decline as much as bankers desired/China signals that it may introduce a tax on foreign exchange transactions as they try and repel shorters like Kyle Bass and George Soros/Japan signals that it may end NIRP as it is damaging to its banks/Russia does a partial withdrawal from Syria/Retail sales suffers a big 2 month fall/Inventory to sales at record 1.4 indicating a recession/Valeant shares collapse on poorer outlook/Brazilian real tumbles as Rousseff puts indicted LULA in cabinet/

Gold:  $1,230.40 down $14.00    (comex closing time)

Silver 15.26  down 26 cents

In the access market 5:15 pm

Gold $1232.50

silver:  15.27


At the gold comex today, we had a poor delivery day, registering 1 notice for 100 ounces and for silver we had 8 notices for 40,000 oz for the active March delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 211.83 tonnes for a loss of 91 tonnes over that period.

In silver, the open interest fell by only 892 contracts down  to 168,235  with silver down by 9 cents yesterday. In ounces, the OI is still represented by .841 billion oz or 120% 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 fell by 6,653  contracts to 499,710 contracts as the price of gold was DOWN $14.30 with yesterday’s trading.(at comex closing).With the OI in gold remaining quite high, it is no wonder that the bankers are relentless in their attack on gold and silver.

We had no changes in gold inventory at 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 no changes in inventory/ 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 892 contracts down to 168,235 as the price of silver was down 9 cents with yesterday’s trading. The total OI for gold fell by 6,653 contracts to 499,710 contracts as gold was down $14.30 in price from yesterday’s level.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)




i)Late  MONDAY night/ TUESDAY morning: Shanghai closed UP BY 4.87 POINTS OR 0.17% , /  Hang Sang closed DOWN by 146.57 points or  0.72% . The Nikkei closed DOWN 116.68 or 0.68%. Australia’s all ordinaires was DOWN 1.43%. Chinese yuan (ONSHORE) closed DOWN at 6.5134.   Oil FELL  to 36.25 dollars per barrel for WTI and 38.55 for Brent. Stocks in Europe so far ALL IN THE RED . Offshore yuan trades  6.5078 yuan to the dollar vs 6.5134 for onshore yuan/china’s industrial production collapsed along with retail sales. jAPAN  signals that they may end NIRP which sends the USA/Yen spiraling southbound/markets in Japan tumble (see below).  China signals that they are going to tax financial transactions and that sends its stock exchange southbound.  Only last hr rescue keeps Shanghai in the green.


ii)report on Japan

Japan signals a possible end to their NIRP as it is causing damage to their banking system:

(courtesy zero hedge)

iii)report on China:

China signals that they may introduce a tax on all financial transactions.  Volumes on the exchanges just shut down completely:

( zero hedge)


i)With the rebels totally decimated, Russia orders a partial retreat.  This will show the world that Putin is a true statesman.  He now waits for the peace talks to resume.  The opposition is very weak and can not begin any resistance.
( zero hedge)
ii)A good explanation as to why Putin did a partial retreat from Syria:

( zero hedge/Mark Galeotti)

China ocean freight indices plunge to record lows indicating that the global economy is in turmoil:

( Wolf Richter/WolfStreet)


The Brazilian real tumbles as does their stock market as former President Lula accepts a cabinet position after he has been charged with graft.

(courtesy zero hedge)


i)It looks like many of the shale boys will be in trouble as banks cut revolving credit.Today Whiting Petroleum saw its revolving credit cut by 1.2 billion USA

( zero hedge)

ii)Our resident expert on oil explains why oil prices may not move higher

( Art Berman/Oil


iii)Lower than expected crude build

( zero hedge)



i)Demand for gold from Turkish citizens extremely high:

( Cetingulec/Al-Monitor.Washington DC)
ii) I do not know what to make of this.  I reported on this yesterday but it is worth repeating.  You will recall that Blackrock went offside on its issuance of shares/  The reason they gave was due to the high demand for gold!

( Leslie Josephs/Wall Street Journal/GATA)
iii)How does the CFTC explain the following?;

silver longs near record highs in the ETF’s  (SLV etc) combined with record high OI at the comex for several years:

( zero hedge)

iv) Chris Powell addresses gold manipulation to a German conference:

(Chris Powell/GATA)

v)Iron Ore down 6.5% this week/Short Squeeze just ended!

(courtesy zero hedge)
vi)This week, China became an official member of the silver fix team.

It should now be extremely difficult for the bankers to fool around with price fixing
(courtesy Dave Forrest/ETF NEWS)


i) Retail suffers the biggest 2 month drop of .54%/the biggest sequential drop in over a year.


ii) the all important business inventory to sales ratio jumps to 1.40 and a 7 yr high. It certainly shows that the USA economy is in the doldrums:

(courtesy zero hedge)
iii) Jefferies reports a huge 166 million dollar loss in the latest quarter.
The loss was in two areas:
i) equity
ii) bond trading
these guys always report one month ahead of everybody due to Nov 30 year end
This kind of forecasts what the rest of the banks will report next month:
( Jefferies/zero hedge)

iv) Bank of America clients do not believe in the rally and they massively sell.

The buyers:  corporations buying their own stock with debt
(courtesy zero hedge)
v   a)The once darling of Wall Street, Valeant falls 45% on poor guidance. Looks like Bill Ackman, of  Pershing Square, Valeant’s largest shareholder will get a massive margin call:

( zero hedge)
v   b)Ackman loses 1 billion USA/Pershing Square fund is halted:

( zero hedge)
v  c) Ackman is frantic
(zero hedge)

Let us head over to the comex:


The total gold comex open interest fell to 499,710 for a loss of 6,653 contracts as the price of gold was down $14.30 in price with respect to yesterday’s raid and thus the reason for our bankers relentless attacks on our two 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 12 contracts down to 130.We had 0 notices filed upon yesterday, and as such we lost 12 contracts or an additional 1200 oz will not stand for delivery.  After March, the active delivery month of April saw it’s OI fall by 15,691 contracts down to 253,325. 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 242,277 which is good.  The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was also good at 251,521 contracts. The comex is not in backwardation .


Today we had 1 notice filed for 100 oz in gold.
And now for the wild silver comex results. Silver OI fell by 892 contracts from 169,127 down to 168,235 as  the price of silver was down by 9 cents with yesterday’s trading. The next big active contract month is March and here the OI fell by 96 contracts down to 1045 contracts. We had 40 notices served upon yesterday, so we lost 56 contracts or an additional 280,000 ounces will  not stand for delivery. The next contract month after March is April and here the OI fell by 48 contracts down to 395.  The next active contract month is May and here the OI fell by 459 contracts down to 115,882. The volume on the comex today (just comex) came in at 40,900 , which is  good. The confirmed volume yesterday (comex + globex) was excellent at 64,200. Silver is now in backwardation at the comex until May in  which is unbelievable because it is a paper backwardation. In London it is in backwardation for several months.
We had 8 notices filed for 40,000 oz.

March contract month:

INITIAL standings for MARCH

March 15/2016

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 4822.500 oz (Scotia)

150 kilobars

Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  nil
No of oz served (contracts) today 1 contract
(100 oz)
No of oz to be served (notices) 129 contracts(12,900  oz)
Total monthly oz gold served (contracts) so far this month  585 contracts (58,500 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 110,868.6 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 Scotia: 4822.50 oz
150 kilobars
total customer withdrawal: 4822.50 oz
we had 0 customer deposits:
total customer deposit: nil oz

we had 0 adjustments


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 (585) x 100 oz  or 58,500 oz , to which we  add the difference between the open interest for the front month of March (130 contracts) minus the number of notices served upon today (1) 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 (585) x 100 oz  or ounces + {OI for the front month (130) minus the number of  notices served upon today (1) x 100 oz which equals 71,400 oz standing in this non  active delivery month of March (2.221 tonnes).  This is an excellent showing for gold deliveries in this non active month of March.
we lost 1200 oz of additional gold standing for March delivery.
We thus have 2.221 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 2.221 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12) = 9.2276 tonnes standing against 10.493 tonnes available.  .
Total dealer inventor 336,264.376 oz or 10.449 tonnes
Total gold inventory (dealer and customer) =6,810,458.089 or 211.83 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 211.83 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 15/2016:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  261,091.500 oz (Scotia)
Deposits to the Dealer Inventory 523,596.000 oz???


Deposits to the Customer Inventory nil
No of oz served today (contracts) 8 contracts 40,000 oz
No of oz to be served (notices) 1037  contract (5,185,000 oz)
Total monthly oz silver served (contracts) 495 contracts (2,475,000 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 9,054,153.1 oz

Today, we had 1 deposits into the dealer account: 

i) Into brinks:  523,596.000 oz ???  (how could this be?)

total dealer deposit; 523,596.000  oz


we had 0 dealer withdrawals:

total dealer withdrawals:  nil


we had 0 customer deposits

total customer deposits: nil oz


We had 1 customer withdrawal:

i) Out of Scotia: 261,091.500 oz


total customer withdrawals:  261,091.500 oz



 we had 2 adjustments

i) Out of DELAWARE:

39,857.600 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:

10,121.440 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 8 contracts for 40,000 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 (495) x 5,000 oz  = 2,475,000 oz to which we add the difference between the open interest for the front month of March (1045) and the number of notices served upon today (8) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the March. contract month:  495 (notices served so far)x 5000 oz +(1045{ OI for front month of March ) -number of notices served upon today (8)x 5000 oz  equals  7,660,000 oz of silver standing for the March contract month.
we lost 56  contracts or an additional 280,000 oz  that will not stand.
No doubt these were cash settled as they are running out of real silver.
Total dealer silver:  29.875 million
Total number of dealer and customer silver:   155.568 million oz
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:i) demand from paper gold shareholders ii) demand from the bankers who then redeem for gold to send this gold onto China

And now the Gold inventory at the GLD:


March 15/ no changes in gold inventory at the GLD/Inventory rests at 790.14 tonnes

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 15.2016:  inventory rests at 790.14 tonnes


Now the SLV
March 15/ no changes in silver inventory at the SLV/Inventory rests at 325.868 million oz/
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 15.2016: Inventory 325/868 million oz.
1. Central Fund of Canada: traded at Negative 8.2 percent to NAV usa funds and Negative 8.2% to NAV for Cdn funds!!!!
Percentage of fund in gold 64.0%
Percentage of fund in silver:36.0%
cash .0%( Mar 15.2016).
2. Sprott silver fund (PSLV): Premium to NAV rises to  3.39%!!!! NAV (Mar 15.2016) 
3. Sprott gold fund (PHYS): premium to NAV rises  to -0.35% to NAV Mar 15.2016)
Note: Sprott silver trust back  into positive territory at +3.39%/Sprott physical gold trust is back into negative territory at -0.35%/Central fund of Canada’s is still in jail.



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

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

Gold and Silver Rally “Could Have Durability” – SWOT Analysis

Gold and silver’s fundamentals look good and the rally in bullion and gold stocks may have durability points out Frank Holmes of U.S. Funds writing in Gold Seek today.

In his weekly SWOT analysis – strengths, weaknesses, opportunities and threats – of the precious metal markets, Holmes notes that:

Gold investors are on the longest buying spree in five years, reports Bloomberg, with holdings of the precious metal in exchange-traded funds expanding for 18 days in a row. BCA Research agrees that now is the time to buy gold stocks too, stating in a recent report that while gold has had several false starts in recent years, a number of factors suggest that the latest rally will have durability.

Gold Silver Ratio – Jan 2006 to Today – GoldCore

Silver may be ready to come out of gold’s shadow, reports Bloomberg, with mine supplies forecast to contract this year. According to Standard Chartered Plc., mine production of silver will probably drop in 2016 for the first time in over a decade and demand is set to outstrip supple for a fourth straight year. Assets in ETFs backed by silver also climbed to the highest since September.

The full article can be read here

Gold Prices (LBMA)

15 Mar: USD 1,233.60, EUR 1,112.56 and GBP 870.71 per ounce
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

Silver Prices (LBMA)

15 Mar: USD 15.32, EUR 13.81 and GBP 10.82 per ounce
14 Mar: USD 15.60, EUR 14.04 and GBP 10.87 per ounce
11 Mar: USD 15.50, EUR 13.96 and GBP 10.84 per ounce
10 Mar: USD 15.27, EUR 13.92 and GBP 10.75 per ounce
09 Mar: USD 15.27, EUR 13.92 and GBP 10.74 per ounce

Gold News and Commentary

Gold hits near two-week low; focus on BOJ, Fed meetings – Reuters

Asian Stocks Fall, Yen Gains Before BOJ Meeting; Aussie Weakens – Bloomberg

Fed to sit tight on rates at March meet, hint at hikes to come – Reuters

Gold Futures Drop as Dollar Gains Amid Improving U.S. Outlook -Bloomberg

Hiker finds rare 2000 year old gold coin in Israel – Telegraph

Why Turks are skipping banks and keeping their gold at home – Al-Monitor

Gold not “overbought” but rather oversold says Turk – KWN

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

SWOT Analysis: Gold’s Latest Rally Could Have Durability – Gold Seek

Silver price follows the lead set by gold – CNBC

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
I do not know what to make of this.  I reported on this yesterday but it is worth repeating.  You will recall that Blackrock went offside on its issuance of shares/  The reason they gave was due to the high demand for gold!
(courtesy Leslie Josephs/Wall Street Journal/GATA)

BlackRock was buying lots of GLD while fumbling its own gold fund

Submitted by cpowell on Mon, 2016-03-14 17:44. Section: 

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

By Leslie Josephs
The Wall Street Journal
Monday, March 14, 2016

BlackRock, whose popular exchange-traded gold product briefly suspended the creation of new shares 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. …

… For the remainder of the report:…

Demand for gold from Turkish citizens extremely high:
(courtesy Cetingulec/Al-Monitor.Washington DC)

Damned Turks! Who the hell do they think they are — Indians?

Submitted by cpowell on Mon, 2016-03-14 23:54. Section: 

Why Turks Are Skipping Banks and Keeping Their Gold at Home

By Mehmet Cetingulec
Al-Monitor, Washington, D.C.
Monday, March 13, 2016

Gold jewelry that adorns the arms and necks of many Turkish women is actually a traditional instrument of savings. Newlyweds put together their initial capital with gold coins, trinkets, and jewelry pinned on them at weddings. But this gold, once hidden at home, has absolutely no benefit to the economy.

These gold hoards are estimated to have reached 5,000 tons. The value of gold has been on an upward trend: On March 14 it reached 3,582.85 Turkish lira ($1,249.22) per ounce. That means the under-the-mattress overall value of gold is now almost 580 billion Turkish lira ($201 billion).

The Istanbul Gold Refinery has been striving for five years in cooperation with banks to draw this gold back into the economy. In a project involving 11 banks, refinery experts inspect and assess the gold brought in by bank clients. When the amount is logged into the clients’ accounts, the physical gold becomes registered gold.

The refinery explains the benefit of the system: “Gold will be safe. There will be no risk of theft or loss. The state guarantee for the gold deposit accounts is 150,000 Turkish lira. They are available 24 hours for transactions. Clients can cash any amount they want from their gold accounts.” …

… For the remainder of the report:…

James Turk: where is all that imaginary gold coming from? and why?
(courtesy James Turk/Kingworldnews)

So where’s all that imaginary gold coming from and why?

Submitted by cpowell on Tue, 2016-03-15 00:22. Section: 

8:23p ET Monday, March 14, 2016

Dear Friend of GATA and Gold:

Gold futures were sold short heavily last week by bullion banks on behalf of central banks, GoldMoney founder and GATA consultant James Turk tells King World News today. That’s why, Turk says, gold is not really “overbought” but rather oversold by the most powerful financial institutions in the world. Turk notes “widespread pessimism” about gold, while adding that the huge short position inspired by central banks makes a “moonshot” at least possible someday. An excerpt from his interview is posted at KWN here:…

Meanwhile financial letter writer Clive Maund contends that the gold sector is actually insanely optimistic, and he pounds his chest about how right he will be proven when the bullion banks smash gold back down again, as if this isn’t just the “wash, rinse, repeat” cycle central banks have been running with their bullion bank agents in the gold market for many years. Maund doesn’t seem curious about where the bullion banks obtain huge amounts of metal credits like this and what this implies for a supposedly free-market economy — and, indeed, what it implies for the “technical analysis” offered by financial letter writers. His commentary is posted at his Internet site,, here:

GATA makes no price predictions. It simply presses the question: Where is all that imaginary gold coming from and why? Evidence bearing on the question can be found here:

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


How does the CFTC explain the following?;

silver longs near record highs in the ETF’s  (SLV etc) combined with record high OI at the comex for several years:

(courtesy zero hedge)

Silver “Longs” Near Record Highs As ETF Holdings Surge

It’s not just gold that has been in great demand. As Bloomberg notes, investors own the most silver in exchange-traded products in seven months, boosting holdings from a three-year low. The rebound comes as hedge funds and other money managers hold a near-record bet on further price gains.

Source: Bloomberg

The precious metal, which also has wide industrial uses, is up 11% this year.

Iron Ore down 6.5% this week:
(courtesy zero hedge)

This Is What Happens When A Short Squeeze Ends

Remember last week, when China was “fixed” because after the National People’s Congress a record-smashing short-squeeze hyped on the back of stimulus hope sent Iron Ore prices soaring 20% in a day?Well that’s all over…

Last week, analysts and traders alike were stunned by “the departure from fundamentals” as “the iron ore and steel markets have gone berserk.”

As we noted last week, while at the annual National People’s Congress at the weekend, the authorities said they’d allow a record high deficit and higher money-supply target to support growth of 6.5 percent to 7 percent; they also vowed to help cut overcapacity in steel, potentially curbing demand for iron ore.

“We expect the current rally to be short-lived,” analysts Christian Lelong and Amber Cai said in a note predicting further growth in iron ore supply in the quarters ahead.

“The causality will revert sooner rather than later, and steel raw materials will one again drive steel prices rather than the other way around.”

Recent gains in iron ore probably won’t last, Goldman Sachs Group Inc. said in a report received on Monday, forecasting a drop back to $35 a ton in the final quarter. This year’s rally has been driven by rising steel prices in China, a reversal of the normal relationship seen between the raw material and the manufactured product, Goldman said.

Just as Goldman warned – the commodity rally was unsustainable..

With Iron Ore prices down 6 days in a row, the entire hope-strewn short-squeeze has been erased.

ETF Daily News
This week, China became an official member of the silver fix team.
It should now be extremely difficult for the bankers to fool around with price fixing
(courtesy Dave Forrest)

China Is Now In Control Of Global Silver Prices

March 14th, 2016


silver pricesDave Forrest: China has been an unofficial price-setter for most metals over the past decade.

And this week, the country became an official participant in setting prices for one of the world’s most important precious metals markets.

That’s the London Bullion Market silver price.
Where one of China’s largest banks just became a member of an elite group of players that controls fluctuations in this key metal.

CME Group, which runs the process for price setting of silver in London, said Sunday that China Construction Bank will officially join as a member of the silver price process.

Putting it alongside existing participants HSBC, JPMorgan Chase, The Bank of Nova Scotia, Toronto Dominion Bank, and UBS.

These groups will now participate in price bids that go into setting the official London silver price.

The first time that China will have direct influence on this process.

The expansion into China in itself is significant.

And the entry of China Construction Bank into the market could also have some other important consequences for precious metals.

Especially when it comes to currencies.

With the Chinese bank having said it will support the development of renminbi-denominated futures contracts for physical delivery in London.

Such products would represent the first time that physical silver can be bought and sold here in China’s home currency.

A move that could reduce the longstanding relationship between the U.S. dollar and precious metals prices.

This is also a sign that precious metals markets are increasingly going international.

Which makes sense, given that the world’s top consumers are places like China, India, Russia and Turkey




Chris Powell speaks in Germany on gold manipulation.  How long will this last, how it is occurring and why it is happening:
(courtesy Chris Powell/GATA)

Chris Powell: Gold market manipulation: Why, how, and how long?

Submitted by cpowell on Tue, 2014-12-09 22:22. Section:  | 

Remarks by Chris Powell, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.

German Precious Metal Society and the Foundation for Liberty and Ratio

Hotel Bayerischer Hof, Munich, Germany
Tuesday, December 9, 2014

Thank you for coming here tonight even though I can speak only English. I’m afraid that when it comes to German I don’t know scheisse.

Maybe I have an excuse. Mark Twain tried very hard to learn German and wrote afterward that German should be classified with the dead languages because only the dead had the time to learn it.

Still, I’m really glad to be here, since at least many of you speak English as well as German and since I’ve just come from London, wherehardly anyone speaks English.

For the first 48 hours I was in London the only person I heard speaking English was the hotel desk clerk, and she didn’t seem too happy about it. The first time I heard English on the street it was from a guy who recognized me as an American rube and asked me for money.

Yes, in London only the panhandlers speak English.

But seriously, folks — You didn’t come here for my travelogue. So here goes.* * *

Most financial journalism and most academic teaching maintain that gold is at best a quaint antique. But gold not only remains money but may again become the best and most important money. Even more than this, gold is in fact the secret knowledge of the financial universe, a secret desperately concealed by central banks.

Gold already is so important that Western central banks — particularly the U.S. Treasury and its Exchange Stabilization Fund, the Federal Reserve, and allied central banks — rig the gold market every day, even hour by hour, to control and usually suppress gold’s price.

Why do Western central banks rig the gold market?

It’s because gold is a powerful competitive international currency that, if allowed to function in a free market, will determine the value of other currencies, the level of interest rates, and the value of government bonds. Gold’s performance is usually the opposite of the performance of government currencies and bonds. So central banks fight gold to defend their currencies and bonds.

The problem is that the tactics of central banks in their war against gold affect far more than gold; they affect markets generally and eventually destroy markets generally. This destruction of markets now has a name, a name used even by former members of the U.S. Federal Reserve Board. That name is “financial repression.”

There is much academic literature confirming gold’s influence on currencies, interest rates, and government bonds throughout history. Prominent in this literature is the study written by Harvard University economics professor Lawrence Summers and University of Michigan economics professor Robert Barsky and published in August 1985 by the National Bureau of Economic Research, a study titled “Gibson’s Paradox and the Gold Standard.” As with all the documents I’ll cite today, the Summers and Barsky study is posted at my organization’s Internet site,

Summers went on to become deputy treasury secretary and then treasury secretary of the United States and president of Harvard University and recently almost became chairman of the Federal Reserve Board, so his study with Barsky about gold’s influence on currencies, interest rates, and bond prices may be good authority. The Summers and Barsky study implied that governments could achieve their ideal of low interest rates and strong government bond prices by controlling the price of gold.

As it turns out, controlling the currency markets long has been the most efficient mechanism of imperialism. There is much history of this as well.

Rigging the currency markets was the primary mechanism by which Nazi Germany expropriated occupied Europe during World War II. Expropriation by force of arms was actually only a small part of the Nazi conquest.

The rigging of the currency markets — that is, the gross distortion of exchange rates in Nazi Germany’s favor — turned every citizen of an occupied country into an agent of the occupation every time he used money. This currency market rigging directed all production in the occupied countries into Nazi Germany and blocked any return flow of production. It enabled Nazi Germany to run without consequence the same sort of fantastic trade deficit run in recent years by the United States.

The United States learned all about the Nazi expropriation of Europe through currency market rigging because it was documented by the November 1943 edition of the U.S. War Department’s monthly intelligence letter, Tactical and Technical Trends:

Nazi Germany’s manipulation of currency markets is also described in detail in the 2005 history “Hitler’s Beneficiaries” by Gotz Aly:

How do Western central banks and particularly the U.S. government rig the gold market?

They used to do it conventionally and in the open by dishoarding their gold reserves at strategic moments, and then by dishoarding their gold reserves regularly, more often, even every day, as the United States, United Kingdom, and seven of their Western European allies did during the 1960s through a public operation called the London Gold Pool. The London Gold Pool held the gold price at $35 per ounce until it collapsed in March 1968 under rising demand that drained the U.S. gold reserve from 25,000 tonnes down closer to the 8,133 tonnes officially reported today:

After the collapse of the London Gold Pool the United States and its allies regrouped to decide how to rig the gold market surreptitiously — not just with dishoarding but also with the so-called leasing of gold; with the purchase and sale of gold derivatives, including futures and options; and, more recently, with high-frequency trading undertaken through investment houses that are happy to serve as government’s intermediaries in the gold market, since they can front-run government trades. When the rigging is done surreptitiously like this, much less central bank gold has to be dishoarded and the dishoarding that is done has far more suppressive influence on the price.

But Western central bank market rigging goes far beyond gold.

In an essay published in 2001 and titled “The Debasement of World Currency — It Is Inflation, But Not as We Know It” —

— the British economist Peter Warburton discerned that central banks were using investment banks to issue derivatives throughout the commodity futures markets to siphon away money that was seeking a hedge against inflation. That is, derivatives divert money from the hoarding of real goods, hoarding that would drive up consumer price indexes and make inflation even more obvious to the markets and the public. Most of these derivatives are essentially naked short positions that cannot be covered.

Warburton concluded that the prerequisite of a hedge against monetary debasement would have to be some asset that was not attached to a futures market, since anyone with access to enough money can control any futures market, and central banks have access to infinite money. Inflation hedges Warburton suggested included farmland and clean water supplies. For as the saying goes: “The futures markets are not manipulated; the futures markets are the manipulation.”

This market rigging by central banks and their agents explains the great disparagement of gold today: that, despite its tremendous price increase over the last 15 years, gold has not kept up with inflation since the metal’s last great rise around 1980. Somehow no one who disparages gold asks why it has not kept up with inflation. The answer is that gold derivatives have created a vast imaginary supply of gold for which delivery has not been demanded, since most gold investors choose to leave their gold purchases on deposit with the bullion banks that sold them the imaginary gold.

As a result the world now has a fractional-reserve gold banking system that is leveraged in the extreme.

Yes, all commodity futures markets have created paper promises of supply that could not be covered by real product and have been settled in cash. But most commodity markets are for goods that eventually are delivered and consumed to a great extent.

Gold is different, for gold is not consumed but rather hoarded, as a means of exchange, as money, even as most gold purchased in the futures markets is never delivered at all but rather left on deposit with those financial institutions that purport to sell it.

This system has produced a very disproportionate amount of imaginary, elastic, but undeliverable supply, even as people buy gold precisely because they assume that its supply is not elastic, that its supply is limited to total past production plus annual mine production.

That assumption is a terrible mistake.

While the principle of most gold investment analysis is “You can’t print gold,” “paper gold” can be printed to infinity just like regular government currency — and indeed it has been printed practically to infinity.

You can get an idea of the vast imaginary supply of gold by reviewing the incomprehensibly huge gold and interest rate derivative positions attributed to the U.S. investment bank JPMorganChase in the reports of the U.S. Comptroller of the Currency.

These derivative positions are almost certainly not JPMorganChase’s own positions at all but, as GATA consultant Rob Kirby of Kirby Analytics in Toronto has written, rather U.S. government positions arranged through MorganChase:

As John Hathaway, manager of the Tocqueville Gold Fund, wrote last month:

“The modern-day central banker trades with counterparties that are giant commercial banks with derivative books of disturbing scale and complexity. It seems impossible that these commercial exposures could be constructed and maintained without the knowledge and complicity of the official sector. For example, Deutsche Bank, already a defendant in a thousand lawsuits, claims derivative exposure that is 20 times the gross domestic product of Germany and five times that of the entire Eurozone. It is not a great leap to suggest that central bank traders and their megabank opposites — spawn of the same gene pool, schooled in the same institutions, career paths intertwined, frequenters of the same conferences, and just a speed-dial away — are ideologically indistinguishable and intellectually and morally corrupt in equal proportion.”

After all, the U.S. Treasury Department’s Exchange Stabilization Fund is expressly authorized by law, the Gold Reserve Act of 1934, as amended, to trade secretly in all markets, including the gold market, on the U.S. government’s behalf. And the law expressly exempts the ESF from answering to anyone but the treasury secretary and the president:…

Gold market expert Jeffrey Christian of CPM Group testified to a hearing of the U.S. Commodity Futures Trading Commission on March 25, 2010, that the ratio of “paper gold” to real metal in the so-called London physical market may be as high as 100 to 1:

In January 2013 a report by the Reserve Bank of India estimated the ratio of paper gold to real gold at 92 to 1:

CPM Group’s Christian described the manufacture of “paper gold” in his essay “Bullion Banking Explained” published in 2000:

Some international investment houses are on the short end of this enormous leverage and are existentially vulnerable to a short squeeze. It is not likely that they would put themselves in such a position without assurances of emergency support from central banks — and indeed the investment houses have received such assurances many times in public statements by central bankers.

For there are many official admissions of gold market rigging.

These include statements by four former chairmen of the U.S. Federal Reserve Board (Alan Greenspan, Paul Volcker, Arthur Burns, and William McChesney Martin); the minutes of the Federal Open Market Committee; declassified U.S. Central Intelligence Agency and State Department records, including one that cites the necessity for the U.S. government to remain “the masters of gold” —…

— statements by central bankers from other countries, including three officials of the Bank for International Settlements; and documents from the BIS and the International Monetary Fund.

For example:

— In testimony to Congress in July 1998, Federal Reserve Chairman Alan Greenspan declared that “central banks stand ready to lease gold in increasing quantities should the price rise.” Thus Greenspan confirmed that the purpose of gold leasing was not what was usually claimed — to earn central banks a little money on their supposedly dead asset in their vaults — but rather to suppress the monetary metal’s price:

— In January 2012 former Federal Reserve Chairman Paul Volcker admitted to the German financial journalist Lars Schall, who is here tonight, that central banks need to suppress the gold price to stabilize exchange rates at what he called a “critical point”:

Volcker already had written in his memoirs that in 1973 as a U.S. Treasury Department official he advocated gold price suppression:

— In 2009 a remarkable 16-page memorandum was discovered in the archive of the late Federal Reserve Chairman William McChesney Martin. The memorandum is dated April 5, 1961, and is titled “U.S. Foreign Exchange Operations: Needs and Methods.” The memo is a detailed plan of surreptitious intervention by the U.S. government to rig the currency and gold markets to support the U.S. dollar and to conceal, obscure, or even falsify U.S. government records and reports so that the rigging might not be discovered. This document remains on the Internet site of the Federal Reserve Bank of St. Louis:

For safety’s sake it is also posted at GATA’s Internet site:….

— In a letter to President Gerald Ford in June 1975, Federal Reserve Chairman Arthur Burns reported a secret agreement with the German Bundesbank to obstruct market pricing for gold. Burns wrote to the president: “I have a secret understanding in writing with the Bundesbank, concurred in by Mr. Schmidt” — Helmut Schmidt, West Germany’s chancellor at the time — “that Germany will not buy gold, either from the market or from another government, at a price above the official price of $42.22 per ounce.”

Burns added, “I am convinced that by far the best position for us to take at this time is to resist arrangements that provide wide latitude for central banks and governments to purchase gold at a market-related price.”

The Burns letter is posted at GATA’s Internet site here:

— In June 2004 the deputy chairman of the Bank of Russia, Oleg Mozhaiskov, told a conference of the London Bullion Market Association in Moscow that he suspected the United States of suppressing the gold price. Mozhaiskov mentioned the Gold Anti-Trust Action Committee, the only words he spoke in English, though at that time GATA had never knowingly had any contact with anyone in Russia:

— A president of the Netherlands Central Bank who was also president of the Bank for International Settlements, Jelle Zijlstra, wrote in his memoirs in 1992 that the gold price was suppressed at the behest of the United States:

— William R. White, the director of the monetary and economic department of the Bank for International Settlements, the central bank of the central banks, told a BIS conference in Basel, Switzerland, in June 2005 that a primary purpose of international central bank cooperation is “the provision of international credits and joint efforts to influence asset prices (especially gold and foreign exchange) in circumstances where this might be thought useful”:

— The Bank for International Settlements actually advertises to potential central bank members that its services include secret interventions in the gold market. Here’s a slide from a PowerPoint presentation the bank made to prospective central bank members in at BIS headquarters in Basel in June 2008:

— Indeed, according to its annual report last year, the BIS functions largely as a gold banking and gold market intervention service for its member central banks. On Page 110 of the report the BIS says: “The bank transacts foreign exchange and gold on behalf of its customers, thereby providing access to a large liquidity base in the context of, for example, regular rebalancing of reserve portfolios or major changes in reserve currency allocations. The foreign exchange services of the bank encompass spot transactions in major currencies and Special Drawing Rights (SDR) as well as swaps, outright forwards, options, and dual currency deposits (DCDs). In addition, the bank provides gold services such as buying and selling, sight accounts, fixed-term deposits, earmarked accounts, upgrading and refining, and location exchanges.”

The only point of central banks trading in gold derivatives is to affect the price. See:

— Secret gold market interventions by the BIS have been going on for a long time. A long article in Harper’s magazine in 1983, based on a seemingly unprecedented interview with BIS officials, disclosed that the BIS was constantly intervening in the gold market in secret:

— Perhaps most incriminating is the secret March 1999 staff report of the International Monetary Fund that GATA obtained in December 2012. The secret IMF report says Western central banks conceal their gold swaps and loans to facilitate their secret interventions in the gold and currency markets:–3-10-1999.pdf

Some records of surreptitious intervention in the gold market by Western central banks are quite current. The director of market operations for the Banque de France, Alexandre Gautier, told the London Bullion Market Association’s meeting in Rome in September 2013 that the French central bank trades gold for its own account “nearly on a daily basis” and is “active in the gold market for other central banks and official institutions.”

Speaking again to the LBMA, meeting last month in Lima, Peru, Gautier said central banks lately have been managing their gold reserves “more actively,” and the slides he presented indicated that this more active management is undertaken mainly through gold swaps, a mechanism of surreptitious market intervention. In what appeared to be a reference to the recent clamor for gold repatriation in Germany and Switzerland, Gautier cautioned his co-conspirators at the LBMA that what he called “auditability” is “becoming a crucial issue” for central bank gold reserves.

— The recent participation of the United States in gold market manipulation was confirmed by a member of the Board of Governors of the Federal Reserve System, Kevin M. Warsh, in a letter written in September 2009 denying GATA’s request for access to the Fed’s gold records. Warsh wrote that among the records the Fed was refusing to show GATA were records of gold swap arrangements between the Fed and foreign banks:

In commentary published in The Wall Street Journal in December 2011 Warsh wrote about what he called “financial repression” by governments. “Policy makers,” Warsh wrote, “are finding it tempting to pursue ‘financial repression’ — suppressing market prices that they don’t like.” Warsh added, “Efforts to manage and manipulate asset prices are not new.”

I later reached Warsh by e-mail and asked him if he had learned about “financial repression” through his service on the Federal Reserve Board. I also asked him if he would identify the asset prices under manipulation by policy makers. He cordially wished me a nice day.

The government of China knows all about the gold price suppression scheme and isn’t afraid to talk about it.

The U.S. State Department diplomatic cables obtained by the Wikileaks organization and published in 2011 included cables from the U.S. embassy in Beijing to the State Department in Washington that were translations of reports from the Chinese government-controlled news media. These translations included stories and commentaries about gold price suppression by the United States.

For example, the Chinese newspaper World News Journal wrote: “The United States and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing the price of gold is very beneficial for the United States in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries toward reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the renminbi.”

So not only does the Chinese government know all about the gold price suppression scheme — the U.S. government knows that China knows:

Many people in the gold business in China also know about gold price suppression by the U.S. government and its allies.

For example, thanks to GATA consultant Koos Jansen, now market analyst for Bullion Star in Singapore, last January GATA published the remarks of the president of China’s gold mining association, Sun Zhaoxue, to a financial conference in Shanghai, in which he said gold price suppression is U.S. government policy to maintain the dominance of the U.S. dollar in the ongoing international currency war:

And last December GATA distributed commentary by Zhang Jie, deputy editor of the Chinese publication Global Finance and a consultant to the China Gold Association, who said the U.S. Federal Reserve manipulates the gold market to protect the U.S. dollar’s standing as the world reserve currency. Zhang said:

“Through continuous gold leasing the gold in the market can be circulated and produce derivatives, creating more and more paper gold. This is very significant for the United States. Gold leasing is a major tool for the Federal Reserve and other central banks in the West to secretly control and regulate the gold market, creating gold credit derivatives and global credit conflict”:

The U.S. government’s public archives are actually full of records documenting the government’s longstanding objective of removing gold from the world financial system to maintain the dominance of the U.S. dollar as the world reserve currency.

Perhaps most descriptive are the minutes of a meeting at the U.S. State Department in April 1974 between Secretary of State Henry Kissinger and his assistant undersecretary of state for economic and business affairs, Thomas O. Enders.

The meeting addresses the growing desire among Western European countries to revalue their gold reserves upward, thereby increasing gold’s role in the international financial system and threatening the dollar’s status:

Secretary Kissinger asks: “Why is it against our interest to have gold in the system?”

Assistant Undersecretary Enders answers him.

Mr. Enders: It’s against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings — about $11 billion — a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We’ve been trying to get away from that into a system in which we can control. …

Secretary Kissinger: But that’s a balance-of-payments problem.

Mr. Enders: Yes, but it’s a question of who has the most leverage internationally. If they have the reserve-creating instrument, by having the largest amount of gold and the ability to change its price periodically, they have a position relative to ours of considerable power. For a long time we had a position relative to theirs of considerable power because we could change gold almost at will. This is no longer possible — no longer acceptable. Therefore, we have gone to Special Drawing Rights, which is also equitable and could take account of some of the less-developed-country interests and which spreads the power away from Europe. And it’s more rational in …

Secretary Kissinger: “More rational” being defined as being more in our interests or what?

Mr. Enders: More rational in the sense of more responsive to worldwide needs — but also more in our interest. …

So there you have it. Whoever has the most gold can control its valuation — and implicitly the valuation of every currency — and thereby create the most “reserves,” the most money.

Of course money is power and infinite money is infinite power. The interest of the United States, at least as it was perceived at that meeting at the State Department in April 1974, was to dominate the world through the power over money creation and currency valuation.

Documentation continues to be discovered. A few weeks ago the founder of the market research company Nanex in Illinois, Eric Scott Hunsader, called attention to documents filed with the U.S. Commodity Futures Trading Commission and the U.S. Securities and Exchange Commission by CME Group, operator of the major futures exchanges in the United States.

In its filing with the CFTC, the CME Group reports that it is giving volume trading discounts to central banks for trading all major futures contracts in the United States — financial futures, metal futures, and agricultural futures:

In its filing with the SEC the CME Group reports that its customers include “governments and central banks”:

The CME Group letter to the CFTC justifies secret futures trading by central banks throughout the currency and commodity markets as a matter of adding “liquidity” that will benefit all traders. But “liquidity” here is actually an ocean, for central banks can create infinite money, and no ordinary investor can trade against a central bank.

That central banks and governments are secretly trading all major futures markets in the United States signifies that central bank intervention in markets is now likely comprehensive — that there really are no markets anymore, just interventions, that the main objective of central banking now is to prevent markets from happening at all,and that the market economy that has been the engine of progress and democracy has been destroyed.

This is the financial news story of the century.

GATA has sent all these documents to major financial news organizations throughout the world. But no mainstream financial news organization has yet reported about them and what they mean.

There are many, many more records about the Western government policy of gold price suppression. They are posted in the “Documentation” section of GATA’s Internet site —

— but the records located by GATA are almost certainly only a small fraction of the documents that exist.

These records are not mere speculation and “conspiracy theory.” They are the records of decades-long Western government policy conducted almost entirely in secret.

But there is nothing wrong with the word “conspiracy” here.

Conspiracy occurs when people meet in secret to decide and pursue a course of action.

For example, it was conspiracy when the central bank members of the European Central Bank met secretly over the last 15 years to formulate all four editions of their Central Bank Gold Agreement and said they would continue to meet secretly to plot their policy toward gold:

It also was conspiracy when the G-10 Gold and Foreign Exchange Committee, consisting of representatives of the central banks and treasury departments of the major industrial nations, met secretly in April 1997 at the BIS in Switzerland to coordinate their secret policies toward the gold market:

Indeed, even in nominally democratic countries, government itself is often conspiracy. Government is conspiracy whenever it functions in secret. How can any serious market analyst or journalist disparage the term?

Then there is the evidence of market action itself.

GATA also has exposed gold market manipulation by examining trading data, most notably in a study by our late board member and market analyst Adrian Douglas showing that the gold price during trading in the London market went down steadily for 10 years even as the world gold price went up steadily in that time. Anyone buying gold on the opening of the London market and selling it on the close every day over the last decade would have lost a huge amount of money even as the gold price rose steadily:

GATA consultant Dimitri Speck, who is here tonight, has written a whole book compiling the data of gold market manipulation, “Secret Gold Policy”:

That is, the London Gold Pool of the 1960s suppressing the price continues to operate today, only with different mechanisms.

In the last several years attacks on the gold price have become frequent and obvious, like the strange dumping of paper gold in the futures markets on April 12 and 15, 2013, where the nominal equivalent of maybe a quarter of annual gold mine production was sold in two days even though there was no special gold-related news. Many similar dumps are undertaken at particularly illiquid times as some entity with access to seemingly infinite money tries to pound the gold price down for psychological effect.

Even on October 1, 2013, as the U.S. dollar index broke below 80 and the government of the world’s only superpower, the issuer of the world reserve currency, was incapacitated and half shut down by political turmoil, the gold price suddenly fell by 5 percent under an avalanche of futures selling, sometimes at a rate of many thousands of contracts per second.

These overwhelming attacks on the gold market out of the blue are almost certainly incidents of government intervention. Nothing else can plausibly explain them.

Indeed, central banks refuse to explain their involvement in the gold market.

In 2009 GATA sued the Federal Reserve in U.S. District Court for the District of Columbia seeking access to the Fed’s gold records. Technically we won the case in 2011, as the court ordered the Fed to disclose one record, the minutes of that G-10 Gold and Foreign Exchange Committee meeting in April 1997.

The Fed was ordered to pay GATA court costs, which it did.

But the court allowed the Fed to conceal all its other gold records:

Since that time GATA has peppered Western central banks with specific questions about their gold activities, which is something financial journalism, mining companies, or any ordinary investor could do. The central banks largely maintain a guilty silence.

For example, in July 2013 the Bank of England reported on its Internet site that it was vaulting about 1,200 tonnes of gold less than it had listed in the bank’s annual report in February. GoldMoney research director Alasdair Macleod called attention to this. It raised suspicion that the departed gold had been used in the smashing of the gold price three months earlier. So GATA asked the Bank of England to explain the discrepancy.

The Bank of England replied only that the data posted on its Internet site for the public was “deliberately non-specific.” But that data hadbeen fairly specific, and had given a number vastly different from the number published in the bank’s annual report. Sensing its vulnerability, the Bank of England concluded its brief statement arrogantly and defensively: “The bank will not be offering any further comment on this matter.” See:

The specific questions that GATA has put to central banks without receiving answers are posted at our Internet site and remain available to any serious financial journalist or gold investor:

As long as central banks refuse to answer some basic questions about their involvement in the gold market, it must be concluded that they have much to hide.

Why does all this matter? How might it end?

It matters because the rigging of the gold market is the rigging that facilitates the rigging of all markets — part of a much broader scheme by which a secretive and unelected elite in the United States and Western Europe controls the value of all capital, labor, goods, and services in the world — controls the value of everything and thereby impairs or destroys all markets and democracy itself everywhere and obstructs humanity’s progress.

This is an utterly totalitarian and parasitic system. It is also just the latest manifestation of the everlasting war of the financial class against the producing class, only it is hidden well enough that the producing class hasn’t yet figured it out.

This system might end in various ways.

First it’s a question of world politics at the highest levels.

The system may end at the insistence of the developing world with an official worldwide revaluation of gold and gold’s formal restoration to the international monetary system and the demotion of the U.S. dollar.

The system may end when one country pulls the plug on it, exchanging U.S. dollars and government bonds for more gold — real metal — than is available, or when ordinary investor demand exhausts supply, which is more or less how the London Gold Pool ended in 1968.

Or the system may end as part of a plan by the major central banks to avert the catastrophic debt deflation that now threatens the world.

For example, a study in 2006 by the Scottish economist Peter Millar concluded that to avert such a catastrophic debt deflation, central banks would need to raise the gold price by a factor of seven to 20 times in order to reliquefy themselves and devalue their currencies and society’s debts generally:

In May 2012 the U.S. economists and investment fund managers Lee Quaintance and Paul Brodsky published a report speculating that central banks likely are already redistributing gold reserves among themselves in preparation for just such an upward revaluation of gold and gold’s return as formal backing for currencies:

The current system’s end is an arithmetical question, a question of how much real gold is retained by the central banks participating in the price suppression scheme. Some metal is always draining away to support the gold derivatives system, and it seems lately that more is draining away every year than is being mined. How much do the gold-suppressing central banks really still have left? How much gold has been put into the market through swaps and leases?

Central banks refuse to say. For since the control of gold is the control of markets and the control of the valuation of everything, the amount, location, and disposition of central bank gold reserves are state secrets far more sensitive than the amount, location, and disposition of nuclear weapons.

The end of central bank market rigging is a question of education and publicity, a question of whether central banks that are not part of the gold price suppression scheme and investors alike will ever realize that as much as 90 percent of the world’s investment gold, supposedly being held in trust for its owners, has been, to put it politely, oversubscribed. That is, the gold may not exist. If there is ever such a realization and delivery is demanded, gold will rise to multiples of its current price.

While that prospect excites gold investors, will governments let them keep the resulting extraordinary gains, or will governments impose windfall profits taxes or even try to confiscate gold?

If the gold price soars, will governments let mining companies keep taking metal out of the ground at current royalty rates? Will governments even let private companies keep mining gold at all?

On the other hand, if there is no general realization of the fraud of “paper gold” and central bank intervention in markets, gold price suppression and the destruction of markets generally may go on forever.

Central banks are formidable enemies because of their power to create infinite money and debt. But that power is not their biggest advantage in the gold suppression scheme and the scheme to defeat markets and democracy generally.

For the scheme cannot work without deception, surreptitiousness, and misunderstanding.

And therefore to be overthrown the scheme needs only to be exposed, since when people realize that a market is rigged, they will not take the losing side of the trade.

That’s why the biggest advantage of central banks here is not their power of money and debt creation but rather the complicity of the financial news media and the gold mining industry itself.

Mainstream financial journalists will not press the vital questions. Indeed, the first rule of mainstream financial journalism is: Never put a critical question to a central bank and report the inadequate answer. The second rule of mainstream financial journalism is that the first rule goes double in regard to gold.

The journalistic questions for central banks could begin very simply:

1) Are central banks trading secretly in the gold market and other markets, directly or through intermediaries, or not?

2) If central banks are secretly trading in the gold market and other markets, directly or through intermediaries, does this trading have policy purposes or is it just for fun?

3) And if this secret trading does have policy purposes, what are they and why are they too being kept secret?

Then the answers from central banks could be compared with the documentation GATA has compiled.

As for the gold mining industry, it seems unaware of the monetary nature of its product and the way the price of its product is suppressed. Further, the gold mining industry has been intimidated by its governments and its bankers, all agents of central banks, and has consented to die quietly.

Will any of this ever really change?

I think it will eventually. Some central banks are growing suspicious of what presents itself as the gold market and are steadily accumulating gold reserves. And of course here in Germany your citizens campaign has induced the Bundesbank at least to claim that it is gradually repatriating your national gold reserves. Your citizens campaign has caused enormous trouble and embarrassment for the bad guys and has inspired similar movements in other countries. I salute you.

But will any of us live to see the defeat of totalitarian central banking as it is now practiced? I don’t know. Sometimes I can only get apocalyptic about it, with a little help from the American abolitionist poet James Russell Lowell:

Truth forever on the scaffold,
Wrong forever on the throne,
Yet that scaffold sways the future,
And, behind the dim unknown,
Standeth God within the shadow
Keeping watch above His own.

In this struggle we are up against nearly all the money and power in the world. But the Ascent of Man should continue, and if we’re doing the right thing we can hasten that ascent a little. We are all working to advance the ideals of democratic, transparent, and limited government, of fair dealing among nations and people, and, really, to advance individual liberty and the brotherhood of man, which, in the end, are what the monetary metals are about.

If you’d like more information about this issue or help in locating any of the documents I’ve mentioned, please e-mail me

Thanks for your kind attention.


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 6.5134 / Shanghai bourse  IN THE GREEN, UP 4.87 OR 0.17% :(last hr rescue)  / HANG SANG CLOSED DOWN 146.57 POINTS OR 0.72%

2 Nikkei closed DOWN 116.68  OR 0.68%

3. Europe stocks ALL IN THE RED /USA dollar index UP to 96.79/Euro DOWN to 1.1087

3b Japan 10 year bond yield: FALLS  TO -.0115%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 113.13

3c Nikkei now JUST ABOVE 17,000

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

3e WTI::  36.26  and Brent: 38.55

3f Gold DOWN  /Yen UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES  to 0.279%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 7.87%/: 

3j Greek 10 year bond yield FALL to  : 8.84%   (YIELD CURVE NOW NORMAL)

3k Gold at $1235.80/silver $15.35 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble DOWN 91/100 in  roubles/dollar) 70.94

3m oil into the 36 dollar handle for WTI and 38 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 .9884 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0959 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 RISES to  + .279%

/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 1.93% early this morning. Thirty year rate  at 2.70% /POLICY ERROR)

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

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

Bear Market Rally Fizzles: Global Stocks Down On BOJ Disappointment; Oil Slides For 2nd Day

Was that it for the great February/March bear market rally?

After soaring by 200 S&P point from the February 11 lows, the S&P 500 appears to have finally hit a resistance at a point where GAAP P/E is now a frothy 23x, and where even Goldman says the S&P500 is overvalued based on conventional market valuation metrics. Perhaps it was the fundamentals finally catching up, or perhaps it was disappointment that the BOJ added nothing new to the stimulus menu, after last week’s Draghi’s bazooka, and coupled with the stunning announcement by China it was willing to launch a Tobin Tax, a move that confirms that under the surface China’s capital flight is accelerating, overnight global markets and US equity futures have dropped while the yen jumped the most in a week.

What is surprising, is that not even a week after Draghi’s bazooka, some are already concerned it won’t be enough: “Monetary policy does not work without fiscal reform,” Brett McGonegal, chief executive officer of Capital Link International, told Bloomberg TV. “You can keep the monetary stimulus going, but if you’re not changing anything and there’s no reform going on, you’re at this point where it’s not going to work.”

Also notable is that oil has continued its decline for the second day, and at last check WTI was down $1, or over 2% – the lowest price in a week – as focus returns to the market oversupply, Russia signalling Iran won’t join a production freeze (which means neither will Kuwait, and likely most other OPEC members) and today’s API inventory data today which will forecasts another big inventory build at Cushing. As a result, there has been notable weakness among commodities, with currencies of resource-exporting nations sliding as copper and gold prices fell, while iron ore, last week’s record highlight short squeeze, plunged the most in eight months.

“Market participants now appear to be paying greater attention to the current oversupply again,” Commerzbank analyst Eugen Weinberg says in a note. “The primary focus is on Iran, which for understandable reasons is refusing at the current time to sign up to any agreement to cap production.”

Adding more pressure on the rally, Bloomberg explains that while world equities have staged a comeback since reaching a two and a half-year low in mid-February, “so far there are few signs that monetary easing in China, Europe and Japan is pulling the global economy out of a slump. The BOJ’s decision to maintain policy was forecast by most economists and the authority said it’s prepared to ease further if needed to revive inflation expectations. The European Central Bank announced unprecedented stimulus last week, while the Federal Reserve will conclude a review on Wednesday and the Bank of England a day later.”

“Monetary policy does not work without fiscal reform,” Brett McGonegal, chief executive officer of Capital Link International, told Bloomberg TV. “You can keep the monetary stimulus going, but if you’re not changing anything and there’s no reform going on, you’re at this point where it’s not going to work.”

But as we wrote yesterday, the one event that will truly make or break the market is tomorrow’s FOMC announcement: if Yellen turns overly hawkish and there is no major revision to the dots, or – don’t even think it – the Fed shocks the market and hikes another 25 bps, then we go right back to square one, where the market was in December of 2015, terrified every time China sneezes.

Market snapshot:

  • S&P 500 futures down 0.6% to 1998
  • Stoxx 600 down 0.9% to 342
  • FTSE 100 down 0.6% to 6137
  • DAX down 0.3% to 9956
  • German 10Yr yield up 1bp to 0.29%
  • Italian 10Yr yield up 2bps to 1.32%
  • Spanish 10Yr yield up 3bps to 1.49%
  • S&P GSCI Index down 1.3% to 322.9
  • MSCI Asia Pacific down 0.9% to 127
  • Nikkei 225 down 0.7% to 17117
  • Hang Seng down 0.7% to 20289
  • Shanghai Composite up 0.2% to 2864
  • S&P/ASX 200 down 1.4% to 5111
  • US 10-yr yield down 2bps to 1.93%
  • Dollar Index up 0.1% to 96.72
  • WTI Crude futures down 2.7% to $36.18
  • Brent Futures down 2.9% to $38.38
  • Gold spot down 0.1% to $1,234
  • Silver spot up less than 0.1% to $15.35

Global Top News

  • Avon Plans to Move Headquarters to U.K. and Cut 2,500 Jobs: Will generate one-time expenses of ~$60m in 1Q, expects to generate savings of as much as $70m from the cuts by 2017
  • Kuroda Holds Fire on Stimulus as Japan Digests Negative Rate: BOJ kept the target for increasing the monetary base unchanged, and left benchmark rate at minus 0.1%
  • Apollo Said to Seek $700 Million for CLO Firm as New Rules Loom: New firm will issue collateralized loan obligations, as part of its effort to comply with rules designed to curb excessive risk-taking by managers of the vehicles, according to 2 people with knowledge
  • Sony Buys Jackson Stake in Music Venture for $750 Million: Co. exercised right to acquire partner’s stake
  • Brookfield, Qube Join Forces in A$9.1 Billion Asciano Bid: Former rival groups led by Brookfield Asset and Qube joined forces to buy Asciano in a A$9.05b ($6.8b) bid
  • U.S. Steel Vows to Escalate War on Imports If Duties Fall Short: CEO Longhi vows to file 201 case if final penalties fall short
  • Cliffs Natural Investors Sue for Being Shut Out of Debt Swap: Investors say Cliffs Natural has two classes of bondholders
  • U.S. Ethanol Glut Begins to Test Limits of Storage Capacity: Kinder Morgan rerouted deliveries away from Illinois terminal
  • Herbalife Spent $700,000 Protecting Its CEO From Threats in 2015: CEO faced threats to his well-being after Bill Ackman began accusing the company of being an illegal pyramid scheme
  • Outerwall Rises 9% Post-Mkt on Strategic Alternatives, Div Boost: Hires Morgan Stanley for strategic and financial alternatives
  • Question Looming Over Aubrey McClendon Crash May Go Unanswered
  • GM Offers Rentals to Lyft Drivers Accelerating Challenge to Uber
  • Trump Victories in Key Races Could Vanquish Kasich, Rubio
  • JPMorgan Said to Prepare to Sell $1.9b RMBS: WSJ: Expected to price residential mortgage-backed deal over next 2 weeks; would hold 90% of the deal, WSJ reports
  • Amazon Set to Launch Cloud Migration Service: WSJ: Thomas Publishing to transport data from own servers to Amazon’s data centers, WSJ reports
  • U.S Govt May Withdraw Plan for SE Atlantic Coast Drilling: NYT

Looking at regional markets, Asian stocks traded negative following Wall St.’s lacklustre lead amid weakness in commodities, while Japan reacted to the BoJ decision to keep the policy unchanged. Nikkei 225 (-0.7%) was pressured as JPY strengthened following the BoJ decision to leave policy unchanged while also dropping its reference regarding deeper cuts into negative territory. Energy and basic materials underperformed in the ASX 200 (-1.4%) after commodity prices declined. Shanghai Comp (+0.2%) completed the somber tone with materials underperforming, while the PBoC kept its liquidity injections reserved and weakened the reference rate. 10yr JGBs traded lower and fell below 151.00 amid a lack of demand and disappointment from a lack of BoJ action.

BoJ kept policy steady with the annual rise in monetary base at JPY 80trl and interest rates held at -0.10% as expected.

  • BoJ voted 8-1 to maintain monetary base and voted 7-2 to maintain its negative rate.
  • BoJ said that additional easing will happen if required but removed phrase regarding cutting interest rates deeper into negative territory if deemed necessary.

PBoC sets CNY mid-point at 6.5079 vs. close. 6.5015 (Prey. mid-point 6.4913), injects CNY 20bIn via 7-day reverse repo.

Top Asian News

  • Foxconn Said to Delay Sharp Deal for Clarity on Quarterly Result: Delaying finalization of its deal for Sharp to get a clear understanding of Sharp’s performance in the current qtr, increasing the chances an agreement won’t be reached this month, according to people familiar with the matter
  • China Said to Draft Currency Transaction Tax to Damp Speculation: Initial rate of levy may be kept at zero, people familiar said
  • Bangladesh Central Bank Chief Ready to Quit Over Cyber Heist: Atiur Rahman offers to resign
  • Singapore Developers Post Lowest New Home Sales in 14 Months: Builders sold 301 units in Feb., -7% m/m
  • Day of Reckoning Coming for India’s ‘Pigs With Lipstick’ Lenders: Central bank audit ending March 31 to uncover more bad debt

European markets follow on from Asia to see equities trade in the red this morning, with dampened sentiment apparent across asset classes. In terms of the session’s laggard’s, financials, material and energy names underperform , as the likes of Anglo American (-9.6%) and BHP Billiton (-5.8%) are among the worst performers in Europe. Despite the edginess in equities, fixed income have done their own thing for much of the morning, trading lower by around 20 ticks and around 161.50. Ultimately, price action could remain relatively rangebound as participants look ahead to today’s tier 1 data releases which include US Retail Sales, PPI Final Demand, Empire Manufacturing and Business Inventories.

Top European News

  • Legal & General Full-Year Profit Rises on Retirement Revenue: 2015 oper. profit GBP1.46b vs est. GBP1.47b; Solvency II ratio was 169%, based on a surplus of GBP5.5b
  • Antofagasta Scraps Dividend as Metal Rout Erases Most Profit: Net income ex-some items fell to $5.5m from $422.4m yr earlier, dividend scrapped as interim payment exceeds 35% payout ratio
  • Sainsbury Joins Listed Supermarket Rivals Back in Growth Mode: For the first time since 2011, LFL sales are rising at Sainsbury, Tesco and Morrison; Sainsbury 4Q LFL sales rose 0.1%
  • Russia Begins Syria Withdrawal as Putin Puts Onus on Assad: Jets have started to return to Russia, Defense Ministry says
  • Traders Missing Rebound Yank Billions From European Stocks: U.S. traders withdraw money from euro-area ETF for fifth week
  • U.K. Bond Sales Seen Jumping Most Since 2009 as Osborne Thwarted: Median forecast from dealers is for GBP139b issuance
  • Italy Recovery From Recession Seen Continuing Slowly but Surely: Will extend the expansion that started last year, said 19 of 25 respondents in a Bloomberg survey published Tuesday
  • Campari Agrees to Acquire Grand Marnier for $760 Million: Bid of EU8,050/shr is 60% premium to closing price

In FX, the big move this morning was expected to have been USD/JPY, but the modest dip below 113.00 was modest given the BoJ’s no change policy decision. 112.90 is the low seen here so far, and little aggressive interest to push lower from these levels seen in London. However, no such respite for GBP, which has been under the cosh since yesterday, after both NY and Tokyo sold moderate pullbacks but London more aggressively so . The latest Telegraph/ORB poll on the EU vote puts the leave camp in the lead at 49% vs 47%, but the selling began ahead of this. Cable is now in the mid 1.4100’s, while EUR/GBP is eyeing a test of the double top at .7847. Elsewhere, the USD index has ripped higher, adding momentum to Cable losses, but EUR, AUD, NZD and CAD all losing out to a more modest degree. AUD support seen in the mid .7400’s — now being tested, while USD/CAD is now close to 1.3400.

In commodities, WTI and Brent continue to slide during European trade as concerns of a global glut take hold of markets due to Iran not budging on the production freeze. Gold has rallied in the last couple of hours but it is yet to reach the highs at the beginning of the Asian sessions of 1238.13/oz. Base metals are retracing some of the moves seen yesterday after China hinted it will invest further in property sector with copper futures down nearly 1%.

After several days of quiet on the US macro front today we have a spike in data updates and the February retail sales report looks set to be the highlight where market expectations are for a -0.2% mom decline in the headline and +0.2% mom gain in the core and control group components. Also out today will be the NY Fed empire survey which is expected to remain consistent with the weakness in the manufacturing sector. The February PPI report will also be important and it’s worth keeping an eye on the healthcare subcomponent given it is used in the core PCE deflator. Also due out will be January business inventories and the March NAHB housing market index print. Away from this, tonight will see five more primaries in the US President race

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities trade lower across the board after taking the lead from Asia which saw the BoJ refrain from carrying out any additional easing
  • As such, the JPY remains firmer against its major counterparts, while GBP remains out of favour as London continues aggressive selling of the currency
  • Looking ahead, highlights include US Retail Sales, PPI Final Demand, Empire Manufacturing and Business Inventories
  • Treasuries rise in overnight trading while global equity markets, oil sell off after BOJ refrained from additional monetary easing as they await impact of the negative rate strategy adopted in January; FOMC begins two-day meeting today.
  • Deutsche Bank, whose debt plunged last month, is offering three-year notes in euros. The sale will test investor appetite for the bank’s debt following management efforts to allay concerns about capital levels
  • Britain is set to increase government-bond sales by the most since the financial crisis as a cooling economy and asset- sale delays hinder plans to balance the books. Gross issuance may jump 17% in the next fiscal year
  • The chances of a U.K. interest-rate cut are rising, the big risk on the horizon is June’s European Union referendum. A vote to leave the bloc could push Britain toward a recession and force the BOE to respond
  • Lenders are getting stingier when it comes to funding risky U.S. real estate developments, putting pressure on landlords in need of fresh funding to keep their projects afloat
  • German Chancellor Angela Merkel got her marching orders from voters to cut the flow of refugees. Now she needs Turkish President Recep Tayyip Erdogan to play along and help lift her out of a career-threatening jam
  • Russia said its forces have started leaving Syria after President Vladimir Putin ordered the military withdrawal in a surprise move that puts pressure on the regime of Bashar al-Assad and opposition groups to reach a peace deal
  • $8.3b IG corporates priced yesterday; MTD $94.72b, YTD $388.97b; $1.1b HY priced yesterday, $15.125b MTD
  • Sovereign 10Y bond yields mostly steady; European, Asian equity markets lower; U.S. equity- index futures drop. WTI crude oil, copper, gold fall

DB’s Jim Reid concludes the overnight wrap

So with the ECB ticked off, next on the central bank conveyor belt line was the BoJ this morning. Unlike what we saw from its European counterpart on Thursday, the BoJ has refrained from adding further stimulus this month. That means Japan’s new benchmark interest rate has been held at -0.1% and the annual purchases also maintained at ¥80tn a year. The decisions to hold fire on both were met with fairly convincing 7-2 and 8-1 respective majorities by BoJ board members. The bigger event now will be what Governor Kuroda chooses to say in his statement, the outcome of which we should know shortly.

Taking a look at the price action, an initial modest weakening in the Yen (touching 114.1) has given way to a decent bounce now, with the currency now +0.30% stronger on the day at 113.5. JGB yields are little changed relative to the moments prior to the decision, with the 10y currently up 2bps at -0.026%. The Nikkei is -0.89% and near its lows.

At this stage its worth putting some colour around the moves in Japanese assets since the BoJ cut rates into negative territory on January 29th. In that time (based on the intraday level just prior to the announcement and the current level this morning) the Nikkei is flat, while the Yen has strengthened over 4.5%, and 10y JGB’s are 24bps lower in yield (although have been more). In contrast, the S&P 500 and Stoxx 600 are +6.7% and +2.9% respectively, the USD index is -2%, the Euro -1.7% and 10y Treasury and Bund yields are unchanged and 12bps lower respectively. So clearly the effect has had a far greater impact on bond yields as opposed to Japanese equities, while the move for the Yen is perhaps the most curious of all.

Before we move on, a quick look at the rest of Asia this morning where it’s been a broadly weaker start on the whole. Along with those declines in Japan, the Hang Seng (-0.72%), Shanghai Comp (-1.13%), Kospi (-0.21%) and ASX (-1.30%) are all lower, while Aus and Asia credit indices are 5bps and 2bps wider respectively. Oil markets are off another percent or so which has helped US equity market futures turn negative this morning. Also of note this morning is news out of China where Bloomberg reports are suggesting that PBoC is in the process of drafting rules for a form of tax on FX transactions, in what’s said to be aimed at curbing currency speculation.

Moving on. Consolidation was the name of the game for markets yesterday and one which certainly reflected a ‘wait and see’ mode between the ECB and BoJ/Fed meetings. This was reflected by what was a fairly mundane session for US equity markets in particular where we saw the S&P 500 eventually close -0.13% (a rare decline this month) with the intraday high-to-low range a lowly 0.62% which is the smallest in 2016 so far. It’s amazing to see that the average range of the 49 trading days so far this year has been 1.73% and that 39 of those sessions have seen ranges of greater than 1%. Prior to this, European equities extended their gains with the Stoxx 600 closing +0.71%, although the post-ECB mammoth rally for European credit markets finally halted with iTraxx Main and Crossover closing 5bps and 9bps wider respectively. That said the indices are still 15bps and 47bps tighter than their pre-ECB levels. US credit also succumbed, with CDX IG over 2bps wider by the close of play.

With newsflow very light, it was Oil (a not too uncommon theme this year) which attracted the bulk of the headlines and ultimately dictated the price action for risk assets with WTI back below $38/bbl following a -3.43% decline yesterday. Much of this reflected stories emerging out of Iran with the country’s oil minister warning that the nation would not participate in an output freeze with other producers until they reached their production target of c.4m barrels a day, or roughly a third higher than current production levels. This follows the sanctions which were lifted on the country in January with the nation looking to ramp up output again to regain lost sales. Oil has risen nearly 50% from the intraday lows back in mid-February with the prospect of production freezes being a contributor in that rally. The WSJ touched on the possibility of these latest comments raising the risks that other countries involved in these talks (namely Saudi Arabia, Venezuela and Russia) may not follow through given the participation is contingent on Iran cooperating, however comments from Russia’s oil minister last night suggesting that Iran ‘may join us in the freeze with time’ and that ‘this is a normal, constructive position’ for them should abate major concerns for now.

One of the other interesting snippets from yesterday came from the European financials market and specifically UBS with the news that the Bank has issued Europe’s first coco bond since the huge sell-off which swept through the asset class in January. According to Bloomberg, the $1.5bn AT1 deal was said to have attracted $8bn of orders, with pricing also coming in tighter than the initial talk. Further evidence of the remarkable swing in sentiment that we’ve seen in the last six weeks or so.

Away from this there was little else to report yesterday. The only data of note was a robust industrial production print for the Euro area which bettered expectations at +2.1% mom (vs. +1.7% expected) in January which was the best monthly performance since 2009, with the data also helping support growth expectations for Europe. Meanwhile the ECB’s Villeroy spoke mid-morning and made mention to the need for the ECB to continue to adhere to its inflation mandate, highlighting the need for the target being essential for the ‘credibility of monetary policy’. Villeroy also noted that expanding purchases to corporate bonds is ‘a very significant signal for the real economy’.

Looking at the day ahead now, kicking off proceedings this morning will be France where we’ll receive the final revision to the February inflation report, followed later on by the Q4 employment report for the Euro area. This afternoon in the US is set to be a bumper session. The February retail sales report looks set to be the highlight where market expectations are for a -0.2% mom decline in the headline and +0.2% mom gain in the core and control group components. Also out today will be the NY Fed empire survey which is expected to remain consistent with the weakness in the manufacturing sector. The February PPI report will also be important and it’s worth keeping an eye on the healthcare subcomponent given it is used in the core PCE deflator. Also due out will be January business inventories and the March NAHB housing market index print. Away from this, tonight will see five more primaries in the US President race


Let us begin;






Late  MONDAY night/ TUESDAY morning: Shanghai closed UP BY 4.87 POINTS OR 0.17% , /  Hang Sang closed DOWN by 146.57 points or  0.72% . The Nikkei closed DOWN 116.68 or 0.68%. Australia’s all ordinaires was DOWN 1.43%. Chinese yuan (ONSHORE) closed DOWN at 6.5134.   Oil FELL  to 36.25 dollars per barrel for WTI and 38.55 for Brent. Stocks in Europe so far ALL IN THE RED . Offshore yuan trades  6.5078 yuan to the dollar vs 6.5134 for onshore yuan/china’s industrial production collapsed along with retail sales. jAPAN  signals that they may end NIRP which sends the USA/Yen spiraling southbound/markets in Japan tumble (see below).  China signals that they are going to tax financial transactions and that sends its stock exchange southbound.  Only last hr rescue keeps Shanghai in the green.


report on Japan


Japan signals a possible end to their NIRP as it is causing damage to their banking system:

(courtesy zero hedge)

Peter Pan(demonium) Erupts As BoJ “Disappoints”, Signals Early End Of NIRP

USDJPY was in full chaos mode ahead of tonight’s BOJ statement. With only 5 of 40 economists expecting further actions by Kuroda (and close Abe advisor Hamada suggesting “I think the BOJ wouldn’t take further action right now… probably it will be a wise decision,” The BoJ decide to stay put – holding rates flat at -10bps, holding QQE buying flat, and maintaining its ETF buying program at expected levels. The biggest surprise though was a language change suggesting the end of NIRP. After ‘mixed’ results following its NIRP bomb in January, perhaps it is wise to give the ‘economy’ time to absorb the craziness asJapan’s Peter-Pan-ic continuesThe initial reaction was weaker Nikkei and stronger JPY.

USDJPY algos were utterly confused by every headline before the release:

And then the chaos erupted:


So nothing for now – more is always possible – and the board is split. Of course while expectations were for no change (from economists) the market seems disappointed…

The bigggest surprise, however, was:


which sparked more chaos…

*  *  *

Since Kuroda unleashed NIRP, things have been mixed…

Stocks are ‘just’ unchanged, JPY is stronger…

But the good news is yields have collapsed…

Bear in mind, this is the central bank that conjured the concept of Peter Pan to represent its efforts:

I trust that many of you are familiar with the story of Peter Pan, in which it says, “the moment you doubt whether you can fly, you cease forever to be able to do it.” Yes, what we need is a positive attitude and conviction.

In other words – you have to believe to receive – or the entire ponzi collapses.

Perhaps alternative forms of stimulation are required:

Charts: Bloomberg






China signals that they may introduce a tax on all financial transactions.  Volumes on the exchanges just shut down completely:

(courtesy zero hedge)

Having Killed Their Equity Market, China Unleashes “Tobin Tax” For FX Market

In September last year, Chinese regulators stepped on the throat of a ‘fair’ market in equity futures trading and for all intent and purpose killed the Chinese equity market. Tonight – after 2 days of Yuan weakness – having warned everyon from Soros to Kyle Bass that “betting against the Yuan can’t possibly work,” The PBOC just unleashed plans for so-called “Tobin Tax” on FX transactions (which implicitly taxes each transaction, reducing liquidity, raising margins and reducing leverage).

Deputy central bank governor Yi Gang raised the possibility of implementing a Tobin tax late last year in an article written for China Finance magazine, and now, as Bloomberg reports, it is on!

China’s central bank has drafted rules for a Tobin tax on currency trading, according to people with knowledge of the matter.

Rules are aimed at curbing speculative trading, say the people, who asked not to be identified as the discussions are private

An initial tax rate may be set at zero so as to allow authorities time to set up rules without immediately implementing the levy, people say

Tax is not designed to disrupt hedging and other FX transactions undertaken by companies, people say

Rules still need final approval by central government and it’s not clear how quickly they may be implemented, people say

People’s Bank of China doesn’t immediately respond to faxed request seeking comment

What happens next? Well that’s easy… This!~

NOTE: Yes that is real… and Yes there is ‘some’ volume there

Good luck unwinding those levered shorts… and even if the hedgies are profitable, we suspect the tax will be tiered to enable the maximum pain to be extracted from so-called speculators.

Simply put this imposition of a Tobin Tax suggests PBOC is expecting a lot of volatility and is trying to minimize any possibility of momentum ignition and speculation as much as possible.

Charts: Bloomberg


and the markets reaction: not good!

This Is What Wall Street Thinks Of China’s FX Trading Tax

Last night we reported that the PBoC is now considering a Tobin tax on FX transactions.

The follows reports that a series of big name money managers – or, as China calls them, “speculators,” “predators,” and “crocodiles” – have placed outsized bets against the yuan.

In January, at Davos, George Soros predicted a Chinese hard landing and said he was betting against Asian currencies. That prompted a series of “Op-Eds” from the Politburo’s various media mouthpieces including a hilarious post that ran the People’s Daily entitled, “Declaring war on China’s currency? Ha, ha

Subsequently, Kyle Bass laid out his thesis for betting on further RMB depreciation. China’s banks, Bass says, are going to need to be recapitalized and in a very big way. That recap will eat up what remains of China’s FX reserves and force the PBoC to effectively print money to shore things up.

These attempts, China said in the Op-Ed mentioned above, “cannot possibly succeed.” “About this,” the piece continues, “there can be no doubt.”

But in case there was any “doubt,” the PBoC is now looking to erase it by effectively hiking margins on FX trading (that’s what this amounts to). It’s similar to what Beijing did last autumn when, in another effort to combat “speculation,” the PBoC raised the reserve requirement on forwards trading. That move was greeted with skepticism. “They were moving towards market-oriented reforms. This is 10 steps back,” a currency trader in Hong Kong said, at the time. Last night, we got nearly identical comments from an FX strategist at CBA in Singapore. “Now is not a good time to roll out Tobin tax as the market is already concerned about whether China will be able to increase capital account convertibility in the coming years, and this is another step backward to achieve that goal,” he said, adding that “The Tobin tax can be considered as a form of capital control.”

Right. That’s because China is panicking and just about the last thing anyone in the PBoC wants is to have the likes of Kyle Bass make Xi look like an imbecile.

And so, a tax it will be because no matter how (realtively) stable the RMB is now, it won’t stay that way going forward. Especially not with expected USD strength from Fed policy divergence and the focus on keeping the yuan at least stable against the trade-weighted basket adopted in December. And of course there’s the whole collapsing exports problem.

Here are some analyst reactions that should give you some insight into what the Street thinks about China’s latest move to crush “speculators”:

  • ANZ (Khoon Goh, FX strategist)
    • Imposition of a Tobin tax may curb trading liquidity in the yuan market
    • Unnecessary at this point to introduce tax considering that the yuan has stabilized after being volatile at the start of the year
  • SEB (Sean Yokota, head of Asia strategy)
    • A Tobin tax in China may backfire and weaken CNY
    • Moving completely in the opposite direction of letting markets set prices rather than the govt
    • Country still wants to increase volatility over time; Tobin tax goes against this
  • China Merchants Bank ( Liu Dongliang, senior analyst)
    • Short-term capital outflows from China may accelerate if Tobin tax is imposed on FX transactions
    • May trim trading volumes over the medium term
  • Mizuho Bank (Ken Cheung, currency strategist)
    • Any introduction of Tobin Tax will raise the costs of trading yuan in the short term
    • Measure will impose adverse impact on market liquidity and development
    • Even though long-term investment may be excepted from Tobin tax, this rule will make investors more cautious to enter the yuan market
  • CBA (Andy Ji, FX strategist)
    • Tobin tax can be considered as a form of capital control
    • Levy will hurt market sentiment and cause investors more panic, as this shows existing capital controls are not enough to curb outflows
    • Not a good time to roll this out now, as market is already concerned about whether China will be able to increase capital account convertibility in the coming years
  • Bocom International (Hao Hong, chief China strategist)
    • If the tax is widened to CDS, swaps, traders cannot express their views on the currency
    • Impossible trinity is the macro constraints that decision makers have to work with, between an independent monetary policy, stable currency and free capital flows
  • DBS (Tommy Ong, managing director for treasury and markets)
    • Possibility of this being implemented is not very high
    • Can’t guarantee volatility will come down since it’s difficult to identify if currency trading is down to speculation or genuine need
  • Templeton Emerging Markets Group (Mark Mobius, executive chairman)
    • It’s part of plan to make sure FX reserves are not exiting at a rapid rate
    • It’s positive they don’t want to see a big decrease in foreign reserves

Will a Tobin tax stop the outflows? Probably not and in fact, it could backfire and cause the market to panic further.

But it may still make life a bit more painful for those who think they can play the PBoC like Soros played the BOE.

So go on speculators, “make Xi’s day”…

With the rebels totally decimated, Russia orders a partial retreat.  This will show the world that Putin is a true statesman.  He now waits for the peace talks to resume.  The opposition is very weak and can not begin any resistance.
(courtesy zero hedge)

“We Can Always Come Back”: Video Shows Beginning Of Russia’s Withdrawal From Syria

“Putin is a wily guy. He is showing he’s a statesman. Russia is also sending a message to Assad who has been sounding too confident.”

That’s from Joshua Landis, director of the Center for Middle East studies at the University of Oklahoma, and a frequent commentator on Syria’s five-year conflict.

On Monday, Putin surprised the world by announcing a partial withdrawal of the Russian military presence from Syria. Moscow’s warplanes, backed by Hezbollah ground troops, had effectively encircled Aleppo where rebels were preparing to make what amounted to a last stand just prior to the ceasefire that took effect late last month.

I think that the tasks set to the defense ministry are generally fulfilled,” Putin said. “That is why I order to begin withdrawal of most of our military group from Syria starting from tomorrow,” he added.

Indeed. Despite President Obama’s early contention that Russia would end up in a “quagmire” in Syria, The Kremlin instead showed what happens when a mishmash of loosely aligned rebels squares off against a modern air force.

Five months and thousands upon thousands of sorties later, the rebel cause has become virtually hopeless. It’s much easier to broker a ceasefire when the enemy has been, for all intents and purposes, decimated.

Now, all eyes are on peace talks in Geneva where there is “no Plan B,” according to United Nations special envoy for Syria Staffan de Mistura.

De Mistura has called a political transition the “mother of all issues,” with the only alternative being a return to war. But Syrian Foreign Minister Walid Muallem has shown little willingness to negotiate for the future of President Assad while the main Syrian opposition umbrella group, the High Negotiations Committee looks determined to demand the installation of some manner of interim government devoid of Assad and his top brass.

“[We don’t know] who we are negotiating with and what the issues are,” Syria’s UN representative, Bashar Jaafari complains. All sides probably feel the same way.

The media is generally pitching Putin’s pullback as a move designed to put pressure on Assad to negotiate. That may be partially true, but make no mistake, it also puts pressure on the rebels. They are not, after all, negotiating from a position of strength. Moscow will keep a presence at its airbase in Latakia and it’s no longer clear that the anti-Assad elements which are party to the ceasefire are in any kind of shape to mount a counteroffensive. In other words: they probably aren’t optimistic about their chances if the war resumes.

“For Putin, who’s worked with the U.S. to promote diplomacy in Syria even though the two powers backed opposite sides in the war, it’s an opportunity to display peacemaking credentials while preserving the gains Assad’s army made under Russian air cover,”Bloomberg writes, in what’s probably a reasonably accurate assessment of Moscow’s gambit.

If both sides come to some kind of tenuous agreement, Putin will get to claim that Russia came, saw, and conquered, then brokered a peace settlement – two things no country had been able to do in Syria since the beginning of the war in 2011.

“[It’s] a symbolic gesture to sweeten the opposition’s pill, because Assad is clearly not going to go away even if Russia slightly reduces its operations,” Anton Lavrov, an independent Russian military analyst told Bloomberg, adding that “this is clearly linked to the start of negotiations in Geneva [and] it’s a signal to the opposition and an attempt to influence their agreeability.” That underscores our assessment above: the opposition has now seen what can happen when there’s a lack of “agreeability,” so now Putin will play good cop to his own original bad cop and see if that works to bring the rebels to the table.

Meanwhile, Russian state television has begun to air the first footage of Russian warplanes triumphantly departing from Hmeymim air base in Latakia.

“The personnel are loading equipment, logistics items and stock onto transport aircraft,” the Russian Defense Ministry said.

“Aircraft from the Hmeymim base will fly back to the airfields where they are permanently based on Russian territory accompanied by military transport aircraft.”

Meanwhile, on the ground, al-Nusra is stirring up trouble in Idlib. As we wrote yesterday evening, the al-Qaeda affiliate overran Division 13 at Marat al-Numan on Sunday, seizing US-made weapons including TOWs and armored vehicles. “On Monday, there were reports of demonstrations against the Nusra Front in territory it holds in Idlib province in north-western Syria,” BBC reports. “Photos and videos circulated on social media by an analyst with the Brookings Institution think-tank showed supporters of Western-backed rebels marching in the town of Marat al-Numan [and] there were also reports the protestors had stormed a Nusra Front prison, freeing detainees.”

As for ISIS, the SAA is reportedly advancing on Palmyra, the UNESCO heritage site seized by the militants last year in what commentators decried as a major blow to the effort to preserve antiquity.

Russia has indicated it will still support Syria in the fight against “the terrorists.”

And what, you might ask, happens if the SAA and the US-led coalition still can’t manage to finish off ISIS and al-Nusra? Here’s Viktor Ozerov, head of the defense committee in the upper house of Russia’s parliament with the answer: “We can come back.”

A good explanation as to why Putin left Syria abruptly:  (i.e. partly)
(courtesy zero hedge/Mark Galeotti and Stratfor)

Why Russia Is Leaving Syria: Putin Achieved Everything He Wanted

Earlier today, we took a closer look at Vladimir Putin’s seemingly abrupt decision to partially withdraw the Russian military from Syria.

The prevailing view seems to be that Moscow somehow intended to put more pressure on Assad to be amenable to a negotiated, political solution and indeed that may be a part of the plan. However, as we noted, it’s not exactly as if The Kremlin is leaving the Syrian leader high and dry.

Aleppo proper was surrounded just prior to the implementation of the ceasefire late last month. Hezbollah and Russia’s air force had the rebels pinned down. Their supply lines to Turkey were cut, and civilians were fleeing the city en masse to avoid what they assumed would be a bloody siege. At that point is was readily apparent that the opposition couldn’t hold out much longer. Besides, it’s not as if the IRGC and Hezbollah are just going to pack up and leave once the Russians draw down their presence.

“We are heading toward being liquidated I think,” one opposition official said.

So it isn’t entirely clear that Assad is being forced to negotiate in Geneva by Putin’s exit any more than the HNC, which surely doesn’t want to go right back into a situation where they are on the verge of surrender.

Rather, it appears to us that Putin sensed the perfect moment to change tactics. As we wrote this morning, “if both sides come to some kind of tenuous agreement, Putin will get to claim that Russia’s military came, saw, and conquered, then brokered a peace settlement – two things no country had been able to do in Syria since the beginning of the war in 2011.”

NYU professor and Russian security affairs expert Mark Galeotti came to a similar conclusion and penned a piece for Reuters entitled “Russia Drops The Mic: Syria Pullout Comes At Perfect Moment,” excerpts from which are found below.

*  *  *

From “Russia Drops The Mic: Syria Pullout Comes At Perfect Moment

This was not a casually chosen timeframe: 10 years is how long Soviet troops were mired in Afghanistan, another intervention that was expected to be short-lived and uncomplicated and turned out to be anything but.

Politicians tend to find it easier to start wars than to end them, to escalate rather than to withdraw. For a leader who clearly relishes his macho image and who has been articulating a very aggressive foreign policy in recent years to opt for such a stand-down is a striking act of statesmanship.

That said, Putin’s announcement that “the objectives given to the Defense Ministry and the Armed Forces as a whole have largely been accomplished” is probably accurate.

This intervention was, after all, never about “winning” the war in Syria: even the most starry-eyed optimist would not expect a relative handful of aircraft and ground forces to end this bloody and complex conflict. Nor was it primarily to save Bashar al-Assad’s skin and position.

Rather, it had three main objectives. Firstly, to assert Russia’s role in the region and its claim to a say in the future of Syria. Secondly, to protect Moscow’s last client in the Middle East, ideally by preserving Assad, but if need be by replacing him with some other suitable client. Thirdly, to force the West, and primarily Washington, to stop efforts diplomatically to isolate Moscow. For the moment, at least, all three have indeed been accomplished.

Now, Russia is a more significant player in Syria’s future than the United States. Influence is bought by blood and treasure; by being willing to put its bombers, guns and men into play, Moscow not only helped Assad but reshaped the narrative of the war. The Kurds and even some of the so-called “moderate rebels” are beginning to show willing to talk to the Russians.

At the time of the intervention, Assad’s forces were in retreat, momentum was favoring the rebels, and Moscow was terrified that the regime’s elite might begin to fragment. The client state the Soviets left behind when they withdrew from Afghanistan was actually surprisingly stable and effective. But when Defense Minister Shahnawaz Tani broke with President Najibullah, it began to break apart and was doomed; this was something Moscow feared could happen in Damascus.

However, the unexpected injection of Russian airpower on Sept. 30 not only changed the arithmetic on the battlefield, it also re-energized the regime. The scale of the bombing assault, with more than 9,000 sorties flown according Defense Minister Sergei Shoigu, allowed government forces to turn back the tide. Not only were they able to retake Aleppo and some 400 other settlements by Shoigu’s count, but the Syrian Arab Army’s morale recovered considerably too, and with it Assad’s personal authority.

Finally, on the diplomatic front there is no question that Putin’s intervention did indeed end any hope of ignoring and isolating him. Russia and the United States are joint guarantors of the ceasefire in Syria now, and even in Ukraine the two countries have renewed conversations about a settlement in the Donbas, though it was Moscow that began the conflict.

In short, for once there is more truth than rhetoric in claims of a “mission accomplished.”

Full article here

* * *

And here’s a bit more color from Stratfor:

Russia’s involvement in Syria has been guided by a number of key priorities. The first is ensuring the stability of the allied Syrian government and by extension Russian interests in Syria. The second is demonstrating and testing its armed forces, which are undergoing a significant force modernization. The third is weakening the Islamic State and other terrorist organizations, especially given the large number of Russian nationals fighting in Syria among extremist factions. The fourth, and the most important, is for Russia to link its actions in Syria to other issues — including the conflict in Ukraine, disputes with the European Union and U.S. sanctions on Russia.

The support that the Russians and other external actors such as Iran and Hezbollah have given the Syrian government has largely reversed the rebels’ momentum, and currently loyalist forces have the advantage. However, rebel troops have not been defeated, and a significant drawdown of Russian forces could weaken loyalist efforts. However, it is important to remember that Russia alone did not reverse the loyalist fortunes; Iranian support for the Syrian government could go a long way in maintaining their advantage.

With their actions in Syria thus far, the Russians have showcased their improved combat capabilities and some new, previously unused weapons, which will likely contribute to important arms sales, including some to Iran. Russia has also largely achieved its goal of weakening the Islamic State.

*  *  *

Or, all of the above summed up in one picture…






China ocean freight indices plunge to record lows indicating that the global economy is in turmoil:


(courtesy Wolf Richter/WolfStreet)

China Ocean Freight Indices Plunge to Record Lows

by  • March 14, 2016

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There’s simply no respite.

Money is leaving China in myriad ways, chasing after overseas assets in near-panic mode. So Anbang Insurance Group, after having already acquired the Waldorf Astoria in Manhattan a year ago for a record $1.95 billion from Hilton Worldwide Holdings, at the time majority-owned by Blackstone, and after having acquired office buildings in New York and Canada, has struck out again.

It agreed to acquire Strategic Hotels & Resorts from Blackstone for a $6.5 billion. The trick? According to Bloomberg’s “people with knowledge of the matter,” Anbang paid $450 million more than Blackstone had paid for it three months ago!

Other Chinese companies have pursued targets in the US, Canada, Europe, and elsewhere with similar disregard for price, after seven years of central-bank driven asset price inflation [read… Desperate “Dumb Money” from China Arrives in the US].

As exports of money from China is flourishing at a stunning pace, exports of goods are deteriorating at an equally stunning pace. February’s 25% plunge in exports was the 11th month of year-over-year declines in 12 months, as global demand for Chinese goods is waning.

And ocean freight rates – the amount it costs to ship containers from China to ports around the world – have plunged to historic lows.

The China Containerized Freight Index (CCFI), published weekly, tracks contractual and spot-market rates for shipping containers from major ports in China to 14 regions around the world. Unlike most Chinese government data, this index reflects the unvarnished reality of the shipping industry in a languishing global economy. For the latest reporting week, the index dropped 4.1% to 705.6, its lowest level ever.

It has plunged 34.4% from the already low levels in February last year and nearly 30% since its inception in 1998 when it was set at 1,000. This is what the ongoing collapse in shipping rates looks like:


The rates dropped for 12 of the 14 routes in the index. They rose in only one, to the Persian Gulf/Red Sea, perhaps in response to the lifting of the sanctions against Iran, and remained flat to Japan. Rates on all other routes dropped, including to Europe (-7.9%), the US West Coast (-3.5%), the US East Coast (-1.0%), or the worst drop, to the Mediterranean (-13.4%).


The Shanghai Containerized Freight Index (SCFI), which is much more volatile than the CCFI, tracks only spot-market rates (not contractual rates) of shipping containers from Shanghai to 15 destinations around the world. It had surged at the end of last year from record lows, as carriers had hoped that rate increases might stick this time and that the worst was over. But rates plunged again in the weeks since, including 6.8% during the last reporting week to 404.2, a new all-time low. The index is now down 62.3% from a year ago:


Rates were flat for three routes, but dropped for the other 12 routes, including to Europe, where rates plunged nearly 10% to a ludicrously low $211 per TEU (twenty-foot equivalent container unit). Rates to the US West Coast fell 8.4% to $810 per FEU (forty-foot equivalent container unit). Rates to the East Coast fell 5.2% to $1,710 per FEU. Rates to South America plunged 25.4%.

This crash in shipping rates is a result of two by now typical forces: rampant and still growing overcapacity and lackluster demand.

“Typical” because lackluster demand has been the hallmark of the global economy recently, and the problems of overcapacity have also been occurring in other sectors, including oil & gas and the commodities complex. Overcapacity from coal-mining to steel-making, much of it in state-controlled enterprises, has been dogging China for years and will continue to pose mega-problems well into the future. Overcapacity kills prices, then jobs, and then companies.

The ocean freight industry went on a multi-year binge buying the largest container ships the world has ever seen and smaller ones too. It was led by executives who believed in the central-bank dogma that radical monetary policy will actually stimulate the real economy, and they were trying to prepare for it. And it was made possible by central-bank-blinded yield-chasing investors and giddy bankers. As a result, after years of ballooning capacity, carriers added another 8% in 2015, even while demand for transporting containers across the oceans languished near the flat line, the worst performance since 2009.

“Massive Deterioration,” the CEO of Maersk, a bellwether for global trade, called the phenomenon. Read…  “Worse than 2008”: World’s Largest Container Carrier on the Slowdown in Global Trade









The Brazilian real tumbles as does their stock market as former President Lula accepts a cabinet position after he has been charged with graft.

(courtesy zero hedge)


Brazil Currency, Stocks Tumble As Former President Lula Accepts Cabinet Position

Update: Confusion abounds as the government is now said to delay Lula’s appointment after Senator Delcidio Amaral’s plea bargain. According to Veja, Rousseff’s former chief of staff Aloizio Mercadante allegedly offered financial, political and legal aid in exchange for Amaral’s silence.

*  *  *

Just yesterday, we showed you Brazil’s stagflationary nightmare in one simple chart.

Here’s the amusing (or depressing, depending on if you’re a Brazilian) graphic:

Just last week, the BRL was riding high on news that former President Luiz Inácio Lula da Silva was detained in connection with money laundering. He was then charged with corruption by state prosecutors.

The scrutiny on Lula – who founded the Worker’s Party and handpicked his successor, current President Dilma Rousseff – triggered violent street protests in front of his home where supporters and detractors came to blows.

But the market hoped his arrest and possible prosecution would give momentum to the effort to impeach Rousseff, who has presided this year and last over a disastrous turn in the Brazilian economy where unemployment has spiked above 10%, inflation has soared into the double digits, and output has collapsed, in a veritable “worst nightmare” scenario.

The impeachment bid rests on the idea that Rousseff cooked the fiscal books in 2014, but the fact that Lula was under fire seemed to suggest that the sweeping investigation into corruption at Petrobras could be getting closer to the President’s doorstep. Were she implicated in the Carwash probe on top of allegations she fudged the government’s books, the outlook for her presidency would darken considerably and that, market participants assumed, would be a boon for the beleaguered BRL, for Brazilian risk assets, and for the economy in general.

Well, no such luck.

In a dramatic turn of events, Rousseff invited Lula to accept a ministry post yesterday. Initially, reports indicated he would resist the idea of accepting, but that soon changed. Earlier today, Lula informed several party members that he has decided to accept according to Globo columnist Lauro Jardim. That is bad news for the BRL (which has nearly retraced the entirety of the Lula detention gains) and for Brazilian stocks:

Why is this so bad – besides the fact that it may insulate Lula just as a Sao Paulo state judge said a decision on his arrest should fall to federal judge Sergio Moro – you ask? Because apparently, the former President wants free rein over the economy and that could jeopardize the reform bid.

“Lula in a ministry could give Rousseff short-term survival,” Camila Abdelmalack, chief-economist at CM Capital told Bloomberg over the phone. “The market knows that Lula advocates for stimulus measures andhis Workers Party defends the usage of international reserves.

As we noted on Monday, if Brazil uses its reserves to finance infrastructure projects, they could end up jeopardizing the country’s ability to service its debt and that, in turn, could trigger capital outflows. Here are two more bullets which should give you an idea of why the market is concerned:

  • Lulaconsiders it fundamental thatBrazil has a new economic policy, but wouldn’t replace FinMin Barbosa right away: Folha
  • Former president sees redirecting economic policy as needed to rebuild the govt’s social support base: Estado

And so, just like, whatever hope there was for the BCB to fight inflation and for the government to get a hold on its fiscal problems just went out the window as perhaps, did the bid to impeach Rousseff.

Of course this move will only anger the opposition and possibly the millions who took to the streets last weekend to call for change. Or, as CM’s Abdelmalack puts it, those opposed may see this as an opportunity to “aim at one to catch two.”


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

Euro/USA 1.1087 down .0012

USA/JAPAN YEN 113.13 DOWN .699 (Abe’s new negative interest rate (NIRP)a total bust/SIGNALS MAY BE END OF NIRP)

GBP/USA 1.4160 DOWN .0118 (threat of Brexit)

USA/CAN 1.3382 UP.0108

Early THIS MONDAY morning in Europe, the Euro FELL by 12 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 DOWN in value (onshore) The USA/CNY UP in rate at closing last night: 6.5134 / (yuan DOWN AND will still undergo massive devaluation/ which will cause deflation to spread throughout the globe)

In Japan Abe went BESERK with NEW ARROWS FOR HIS Abenomics WITH THIS TIME INITIATING NIRP . The yen now trades in a NORTHBOUND trajectory RAMP as IT settled UP in Japan by 70 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/SIGNALS TO THE MARKET THAT THEY MAY END NIRP

The pound was DOWN this morning by 118 basis points as it now trades WELL ABOVE the 1.40 level at 1.4160.

The Canadian dollar is now trading DOWN 108 in basis points to 1.3382 to the dollar.

Last night, Chinese bourses AND jAPAN were MIXED/Japan NIKKEI CLOSED DOWN 116.68 POINTS OR 0.68%, HANG SANG DOWN 146.57 OR 0.72% SHANGHAI UP 4.89 OR 0.17%  ON LAST HR RESCUE  / AUSTRALIA IS LOWER / ALL EUROPEAN BOURSES ARE IN THE RED, as they start their morning/.

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

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

2, the Nikkei average vs gold carry trade (blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

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

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

The NIKKEI: this TUESDAY morning: closed DOWN 116.68 OR 0.68%

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

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

Gold very early morning trading: $1234.00


Early TUESDAY morning USA 10 year bond yield: 1.93% !!! DOWN 3 in basis points from MONDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield falls to 2.70 DOWN 2 in basis points from MONDAY night.

USA dollar index early TUESDAY morning: 96.79 UP 22 cents from MONDAY’s close.(Now below resistance at a DXY of 100)

This ends early morning numbers TUESDAY MORNING



And now your closing TUESDAY NUMBERS


Portuguese 10 year bond yield:  2.98% UP 5 in basis points from MONDAY

JAPANESE BOND YIELD: -.007% DOWN 2  full basis points from MONDAY

SPANISH 10 YR BOND YIELD:1.52% UP 5 basis points from MONDAY

ITALIAN 10 YR BOND YIELD: 1.37  UP 7 basis points from MONDAY

the Italian 10 yr bond yield is trading 15 points lower than Spain.







Closing currency crosses for Tuesday night/USA dollar index/USA 10 yr bond: 2:30 pm

Euro/USA 1.1103 UP .0003 (Euro UP 3 basis points and for DRAGHI A COMPLETE POLICY FAILURE

USA/Japn: 113.09 DOWN .730 (Yen UP 73 basis points) and still a major disappointment to our yen carry traders and Kuroda’s NIRP. Today they hinted at abolishing NIRP.

Great Britain/USA 1.4144 DOWN .0134 (Pound DOWN 134 basis points.

USA/Canada: 1.3360  UP  .0085 (Canadian dollar DOWN 85 basis points as oil was LOWER IN PRICE (WTI = $36.37)


This afternoon, the Euro was UP by 3 basis points to trade at 1.1103 AS THE MARKETS CONTINUE TO HAVE SECOND THOUGHTS WITH DRAGHI’S BAZOOKA

The Yen ROSE to 113.09 for a GAIN of 73 basis pints 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 134 basis points, trading at 1.4144 (MORE BREXIT CONCERNS)

The Canadian dollar FELL by 85 basis points to 1.3360 as the price of oil was DOWN  today (as WTI finished at $36.39 per barrel)

The USA/Yuan closed at 6.5078

the 10 yr Japanese bond yield closed at -.007% DOWN 2 basis points in yield

Your closing 10 yr USA bond yield: UP 1 basis point from MONDAY at 1.97% //trading well below the resistance level of 2.27-2.32%) policy error

USA 30 yr bond yield: 2.72 PAR 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; 96.66 UP 8 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 TUESDAY

London: DOWN 34.60 points or 0.56%
German Dax :DOWN 56.41 points or 0.56%
Paris Cac DOWN 33.96 points or 0,75%
Spain IBEX DOWN 154.40 or 1.69%
Italian MIB: DOWN 216.40 points or 1.14%


The Dow up 22.40 or 0.13%
Nasdaq:down 21.61 or 0.45%


WTI Oil price; 36.39 at 2:30 pm;
Brent OIl: 38.73

USA dollar vs Russian Rouble dollar index: 71.12 (Rouble is DOWN 1 AND 8 /100 roubles per dollar from yesterday) as the price of Brent and WTI OIL FELL




It looks like many of the shale boys will be in trouble as banks cut revolving credit.Today Whiting Petroleum saw its revolving credit cut by 1.2 billion USA

(courtesy zero hedge)

The Liquidity Endgame Begins: Whiting’s Revolver Cut By $1.2 Billion As Banks Start Slashing Credit Lines

Earlier today we reminded readers about the circular (and why note fraudulent conveyance) scheme hatched by JPMorgan to reduce its secured loan exposure to Weatherford, when just two weeks ago none other than JPM underwrote an WFT equity offering in which it sold equity in the company, and which proceeds were promptly used by the company to repay the JPMorgan revolver.

We then showed that it wasn’t just Weatherford: most of the “uses of funds” from the recent record surge in oil and gas equity offerings, have been used to repay the secured debt/revolver facilities, thereby eliminating funded and unfunded balance sheet exposure of major US banks.

But while lender banks are all too eager to take advantage of the brief surge in equity prices just so they can “help” their clients dilute their shareholder base so to repay the very same lender banks, they know quite well that the equity offering window is rapidly closing; in fact it will slam shut as soon as the price of oil resumes its downward trajectory.

That does not mean they are out of options to reduce their exposure to US shale, however. Quite the contrary, and in fact the “exposure reduction” is about to begin in earnest. We hinted at what it would look like in early January when we reported that already some 25 of the most distressed shale companies have seen their revolving bases slashed by as much as 50%.

These were just the beginning. As Bloomberg wrote earlier, U.S. exploration and production companies must brace for further cuts to their borrowing-base credit lines this spring, as part of the spring 2016 borrowing base redeterminations.

According to Bloomberg, Royal Bank of Canada estimated that cuts to U.S. borrowing-base credit lines last fall averaged only 6%, while – ironically enough – JPMorgan predicts that the average cut may reach 20% over the next several months. JPMorgan expects some credit lines to be chopped by as much as 50%.

What is ironic is that the credit lines with the biggest cuts will be those issued by JPMorgan.

At least 10 E&P companies had fully utilized their credit lines by the end of February, either because their capacities were cut or because they borrowed the remaining amount available to build liquidity. Bloomberg adds that companies nearing current borrowing base limits may be most affected by any further reductions. Those include Vanguard Natural Resources (95 percent), Legacy Resources and Atlas Resource Partners (both at 85 percent), Memorial Production and Breitburn Energy.

“The cuts we saw in 2015 were less than what the market expected, which may imply that the banks were trying to give these companies time to find other ways to address their balance sheet problems,” Bloomberg analyst Spencer Cutter said in a telephone interview on March 12.

One company that expects significant borrowing base cuts is Memorial Production whose treasurer, Martyn Willsher, said in an e-mail on March 12 that his company expects its borrowing base to be reduced. Memorial is generating $70 million to $80 million of positive cash flow this year and has “other liquidity measures that will ensure we do not have to change our strategy due to a lack of liquidity,” Willsher said.

Despite its recent rebound above $35 a barrel, oil is still below where it was when borrowing bases were reset in the fall. It has averaged $32 a barrel in 2016, versus $45 in September.

When oil fell below $30 a barrel in January, “that fundamentally altered the mindset for everyone in the industry, including the banks,” Cutter said.

Furthermore, with banks facing increasing scrutiny about their exposure to the industry, “they may not be as patient this time,” he said. After all, it was the Dallas Fed which made it very clear to banks to do everything in their power to reduce their exposure to energy companies without unleashing a default tsunami in the process. Most banks are confident they have held up to their end of the bargain, and now the revolver slashing will begin.

Nowhere is this reduction in bank exposure more evident than in shale giant Whiting Petroleum. Jim Volker, the CEO of Whiting, which recently announced a halt to all fracking in the Bakken shale,said last Thursday that he expects his company’s credit line to be cut by more than $1 billion in an early May loan review, in a move which Reuters dubbed “the latest industry fallout from low oil prices crimping margins and fueling massive spending cuts.”

For those unfamiliar, the semi-annual review of credit access for small- and medium-sized oil companies is critical in determining not only the market value of their working capital but more importantly their accessible liquidity as a result; because loans tends to be backed by the value of oil reserves, falling crude prices erode the underlying collateral and force a redetermination.

Whiting is the canary in the coalmine: the company’s massive credit line cut  would prove to be one of the biggest of this price downturn and be larger than executives themselves expected as recently as last month.

Whiting, the largest oil producer in North Dakota’s Bakken shale formation, had $2.7 billion left on a loan revolver at the end of 2015. Its CEO Volcker said on Thursday he expects Whiting will have “at least $1.5 billion” left on the loan after the redetermination, implying a cut of $1.2 billion.

What is most troubling is that as recently as late February, or just a few weeks ago, Volker said he expected a cut of no more than 30 percent, which would have been roughly $800 million.

What this suggests is that even as the price of oil has surged since the February lows, the banks have suddenly gotten far more aggressive about trimming their unfunded(and funded in the case of Weatherford) exposure.

To be sure, Whiting is trying to put a favorable spin on it: “I’m sure we’ll still have lots of liquidity after our next borrowing base redetermination,” Volker said at the DUG Rockies conference in Denver. In Whiting’s case, its strong position in North Dakota as well as Colorado, combined with hedges for nearly half of its 2016 production, likely worked in its favor as it met with lenders earlier this month.

As we reported previously, aware that it would lose billions in liquidity, Whiting entered cash hibernation mode: last month the company slashed its 2016 capital budget by 80 percent and suspended fracking; as part of that, Whiting plans to build a backlog of 168 wells this year that are drilled but not brought online, a step should help Whiting save $530 million this year, Volker said.

“Delaying these completions will afford us optionality to resume growth as oil prices begin to rebound,” Volker said.

Unfortunately, if only judging by the lenders’ sudden hardball, the price of oil is not going to rebound; quite the contrary and banks are taking every opportunity of the current bounce to reduce or outright eliminate all secured exposure.

And while Whiting may be big enough to get funding even when the next leg lower in crude hits, others won’t be nearly as lucky and in a few short weeks, once redetermination season is over, we will have the full list of companies whose liquidity is collapsing alongside the plunging price of oil in what will be the most toxic feedback loop of 2016.

* * *

But what is most ironic in this whole situation is who is on the other side of Whiting revolver cut. The bank which is rapidly slashing its oil and gas exposure, first to Weatherford and now to Whiting is shown below.



Our resident expert on oil explains why oil prices may not move higher

(courtesy Art Berman/Oil

Why Oil Prices May Not Move Higher

Submitted by Arthur Berman via,

The oil-price rally that began in mid-February will almost certainly collapse.

It is similar to the false March-June 2015 rally. In both cases, prices increased largely because of sentiment. As in the earlier rally, current storage volumes are too large and demand is too weak to sustain higher prices for long.

WTI prices have increased 47 percent over the past 20 days from $26.21 in mid-February to $38.50 last week (Figure 1).

Figure 1.NYMEX WTI futures prices & OVX oil-price volatility, 2015-2016. Source: EIA, CBOE, Bloomberg and Labyrinth Consulting Services, Inc. (click image to enlarge).

A year ago, WTI rose 41 percent in 35 days from $43 to almost $61 per barrel. Like today, analysts then believed that a bottom had been reached. Prices stayed around $60 for 37 days before falling to a new bottom of $38 per barrel in late August. Much lower bottoms would be found after that all the way down to almost $26 per barrel at the beginning of the present rally.

Higher prices were unsustainable a year ago partly because crude oil inventories were more than 100 mmb (million barrels) above the 5-year average (Figure 2). Current inventory levels are 50 mmb higher than during the false rally of 2015 and are they still increasing.

Figure 2.U.S. crude oil stocks. Source: EIA and Labyrinth Consulting Services, Inc. (click image to enlarge).

International stocks reflect a similar picture. OECD inventories are at 3.1 billion barrels of liquids, 431 mmb more than the 2010-2014 average and 359 mmb above the 2015 level. Approximately one-third of OECD stocks are U.S. (1.35 billion barrels of liquids).

For 2015, U.S. liquids consumption shows a negative correlation with crude oil storage volumes (Figure 3). During the 2015 false price rally, consumption began to increase in April and May following the lowest WTI oil prices since March 2009–response lags cause often by several months. First quarter 2015 prices averaged $47.54 compared to an average price of more than $99 per barrel from November 2010 through September 2014 (44 months).

Figure 3. U.S. liquids consumption, crude oil stocks and WTI price. Source: EIA, Bloomberg and Labyrinth Consulting Services, Inc. (click image to enlarge).

This coincided with the onset of declining U.S. crude oil production after April 2015 (Figure 4).

Figure 4.U.S. crude oil production and forecast. Source: EIA March 2016 STEO and Labyrinth Consulting Services, Inc. (click image to enlarge).

Net withdrawals from storage continued until consumption fell in July in response to higher oil prices that climbed to $60 per barrel in June. Production increased because of higher prices from July through November before resuming its decline after prices fell again, this time, far below previous lows. This complex sequence of market responses shows how sensitive the current market is to relatively small changes in price, production and consumption.

Most importantly, it suggests that a price variation of only $15 per barrel was enough to depress consumption a year ago. That has profound implications for the present price rally that is now $12 per barrel above its baseline and has already increased by a greater percentage than the 2015 rally.

Why Storage Matters

Although most analysts pay attention to storage volumes, market balance is generally thought of as a simple balance between supply and demand. But U.S. production is difficult to measure with confidence until several months after-the-fact and the EIA reports crude oil production but not supply. Likewise, EIA reports consumption but not demand.

That’s because supply and demand can only be determined by evaluating stock changes and how storage modulates production and consumption. Production plus available storage equals supply. In today’s over-supplied market, consumption plus withdrawals from storage equals demand.

Since April 2015, U.S. production has declined 583,000 barrels of crude oil per day. With 163 mmb of crude oil in storage, that net production decline could be eliminated and April levels of production maintained by storage withdrawals for more than 9 months. That is why storage volumes must fall probably into the 2011-2014 range before a meaningful price rally can be maintained. That assumes that demand can tolerate those higher prices.

Oil is accumulating in storage because of low demand and low prices. It makes more sense to pay the monthly storage cost (~0.65 per barrel) and sell the oil forward with ongoing futures contracts until the spot price increases and, hopefully, demand also increases.

Many people think that the strip of futures contract prices are a reasonable guide to future prices. They are not. Futures prices mostly reflect the supply and demand of futures contracts.

That in no way discounts the profound effect that futures trading has on oil prices. The WTI futures market is one of the biggest gambling casinos in the world. Bets are often made on sentiment that in turn is related to world events. Price fluctuations that are based primarily on sentiment, however, have little chance of lasting longer than the sentiment or related events that produced them.

Crossing A Boundary

The current oil-price rally is based partly on a weaker U.S. dollar but mostly on hope that OPEC and Russia will cut production. For now, that is not even on the table. Rather, a somewhat meaningless production freeze is possible. Some rightfully believe that a dialogue about a production freeze may lead to a production cut some time in the relatively near future. I agree with that but it is a rather empty reason for oil prices to increase by almost 50 percent.

Traders are “following the tape,” meaning they have covered previous short bets and are following the momentum testing increasingly higher price thresholds as long as someone is willing to take the other side of the bet. That’s the way the market works.

It would not surprise me if this price rally lasts a while like the 2015 rally. I am interested in the requisite conditions that would allow a meaningful and sustainable price rebound. Early in the 2014 oil-price collapse, I thought it was a relatively straight-forward matter of reducing production so that the market could balance.

As low prices persisted, I recognized that a boundary had been crossed and that somehow, the principles that seemed to govern oil markets before September 2014 no longer applied in the same ways. I now believe that the world economy has been substantially weakened and injured by debt following the 2008 Financial Collapse and the easy-credit monetary policies that followed.

At some time in the not-too-distant future, the relentless depletion of legacy production and underinvestment in current exploration and production will result in much higher oil prices. The global economy will have to be much stronger to adjust to that.

The investigation I have presented here about the possible similarities between the present increase in oil prices and the false price rally of March-June 2015 reinforces my sense that a return to higher oil prices is not at all straight-forward. Oil markets are a leading indicator for the broader economy because the economy runs mostly on energy and not so much on money.

It seems that price and demand may be range-limited. Small changes in demand move prices up and down until those price changes feedback to changes in demand. Production has been like a machine working tirelessly in the background as easy money has kept it moving regardless of low prices and the absence of profit. That is how distorted the market has become.

World production now appears to be falling and that is certainly a necessary step in the right direction toward market balance. I anticipate an OPEC plus Russia production cut in 2016 and that will unquestionably move the market to some kind of balance. I suspect, however, that the new balance may be one in which prices and demand both remain lower than on the other side of the price-collapse boundary that was crossed in 2014.

Lower than expected crude build
(courtesy zero hedge)

Oil Pops After Lower-Than-Expected Crude Build


Against expectations of a 3.2mm build, API reported a 1.5mm build after-hours today which sparked a modest pop in crude prices. Cushing saw its 7th weekly build (471k) as Gasoline extended its run of draws to the 4th week.


  • Crude +1.5m
  • Cushing +471k
  • Gasoline -1.2m

5th weely crude build, 7th weekly Cushing build, but 4th weekly Gasoline draw…


The reaction was a modest pop for now…


But algos now running stops…



WTI crude price at 5. 00 pm:  $36.68
Brent: 38.78
This ends the stock indices, oil price, currency crosses and interest rate closes for
And now USA stories

S&P Loses Key Technical Support As Bears Battered Brazil & Black-Gold

Keep calm… It’s The Fed tomorrow, what could possibly go wrong…


Ahead of tomorrow’s Fed statement and press conference, here is what has happened since they last “did” something…


The Dow clung desperately to unchanged but The S&P could not get green (as Small Caps tumbled)


Since Friday…


Which meant the S&P lost its 200DMA support…


Blame Kuroda!!


Biotechs Battered…


But Valeant was Baumgartner’d…


HY credit was clubbed (worst 2 days in 5 weeks) – likely hurt by Valeant bond crash


Treasury yields were a mixed bag today (long-end outperforming) but traded in a very narrow range…


But the curve flattened further (down 2bps to 174bps) to its lowest since Dec 2008…


Which is disastrous for banks…


The USD Index flatlined today as stronger JPY offset weakness in commdopity currencies (and cable)…


The biggest mover was BRL as Lula was dragged back into the cabinet… This is the worst 2-day drop (over 5%) for BRL since Sept 2011


Commodities were all lower, gold and silver marginal as crude crapped the bed again…


Oil’s worst 2-day drop in over a month…


With just hours to go before OPEX, WTI appears to be pinning towards the $35 strike…


Charts: Bloomberg

Bonus Chart: It appears even WSJ has given up trying to pretend non-GAAP earnings are in any way real…

h/t Randy W


Retail suffers the biggest 2 month drop of .54%/the biggest sequential drop in over a year.

Retail Sales Suffer Biggest 2-Month Drop In A Year After Huge Negative Revision

Thanks to dramatic downward revisions (from “resilient” historical data which we pointed out were entirely anomalous at the time and due entirely to seasonal adjustments) retail sales have dropped 0.54% in the last two months – the biggest sequential drop in a year.

While the YoY change rose from +3.0% to +3.1%, it remains below historically-recessionary levels and given the revisions suggests Q1 GDP growth markdowns are on their way with sales down MoM for every cohort from gas stations to furniture.

Retail Sales down most in a year:

And YoY changes still at weak recessionary levels…

And the breakdown shows sales dropped across the board, with all the key segments, including the all important online sales, posting sequential declines:

  • Motor Vehicles: -0.2%
  • Furniture and Home Furnishing: -0.5%
  • Electronics: -0.1%
  • Food and Beverage: -0.2%
  • Gasoline Stations: -4.4%
  • General Merchandise: -0.2%
  • Miscellaneous: -1.1%
  • Online Sales: -0.2%

Jefferies reports a huge 166 million dollar loss in the latest quarter.
The loss was in two areas:
i) equity
ii) bond trading
these guys always report one month ahead of everybody due to Nov 30 year end
This kind of forecasts what the rest of the banks will report next month:
(courtesy Jefferies/zero hedge)

One Week After Trolling Zero Hedge For Being Negative, Jefferies Posts Worst Quarter Since Financial Crisis

One weekend ago, in an unexpected episode of Zero Hedge trolling by Jefferies economists, the junk-bond focused mid-tier investment bank sent out a note in which it defended the “recovery” as follows:

“Lightweights like Zero Hedge might point to a sub-50 ISM as another reason to hate equities, but there’s a reason why little ZH is a choker, a reason he’s got one of the worst records in predicting markets anywhere, just a harrable record, harrable, I mean, successful people have pointed out that he’s 0 for 2600. He’s succeeded at being wrong. Success is my son-in-law, I’m successful, my daughter is both beautiful and successful. I have many successful friends.” Made up quote, but the point is that it’s hard to be successful when just reacting to backward looking information. Our work suggests that by the time the ISM breaks 50 to the downside the market is already pricing in much of the concern–actually a break through 50 to the downside tends to be quite positive for the market over the next 12M even when you include recessionary periods. When that break of 50 hasn’t been associated with an immediate recession (i.e. perhaps now), median market performance is up 11% over the next 6M, and 21% over the next 12M. This week we got a better than expected ISM, and skeptics point to the fact that it’s still below 50, but that may be a positive.  See supporting chart, table and methodology below. (T.J. Thornton, US Product Management).

We responded not by retaliating with childish name calling, but by showing both the recent collapse in Jefferies revenues, the stock price of Jefferies Group owner Leucadia…

… as well as the massive restructuring in the company’s investment bank group, as a result of which countless current Jefferies employees would become former:

Jefferies Group LLC will merge its junk-rated loans and bonds business with the junk debt unit of its joint venture with MassMutual Financial Group, according to people familiar with the matter, in the biggest reorganization by a U.S. investment bank since the leveraged finance markets seized up last year.

Jefferies’ management presented the changes internally as a way to boost efficiency and focus on clients, rather than a response to troubled deals, the sources said. It was not immediately clear if the combination would offer Jefferies more financial resources to increase lending.

In retrospect it appears the changes were indeed in response to troubled deals, but more in that in a second.

We further said, that if instead of trolling “fringe blogs”, the company’s economists actually did their job and actually “predicted” what was coming instead of cherrypicking goalseeked economic datapoints to “justify” the bank’s falsely bullish outlook and help their employer be better positioned for the proper trading environment, Jefferies wouldn’t be forced to report quarter after quarter of abysmal results.

Well, make that after another quarter.

Moments ago Jefferies, which is still on the investment banking cycle of reporting where its earnings (and in this case, losses) arrive one month ahead of the other banks, and as such is a good bellwether into overall Wall Street revenue trends, reported an absolute disaster of a quarterits worst since the financial crisis.

The appalling numbers: trading revenue plunged 82% in the fiscal first quarter, leading to the firm’s first non-GAAP loss for the period since 2008. Unlike previous quarters, this time the collapse in sales and trading was not led by massive losses in bond trading but by a massive remarking to market of its equity exposure, which is not to say bond trading was ok: revenue from fixed income plunged 55%, while equities imploded by an unprecedented 99%, down from $203 million to just $2 million!

The result: a ghastly net loss of $166.8 million, which not even non-GAAP adjustments could make stink any less.

Dick Handler’s apologetic commentary for the third month in a row could make life for the firm’s CEO difficult if its main shareholder, Leucadia decides it has had enough. This is what he said:

“Our overall first quarter results reflect an exceptionally volatile and turbulent market environment during our first fiscal quarter, although our core businesses performed reasonably, considering the environment. A quiet December was followed by an extremely challenging January and first few weeks of February. Almost every asset class, including equities and fixed income, suffered significantly amid concerns about the pace of global economic growth, outflows from the high yield market, forced selling from hedge funds, uncertainty over China, a potential Brexit, and an overall void in liquidity.

But wait, aren’t your “economists” expected to anticipate events such as these and help your traders position accordingly? Perhaps they have “more important things” to do with their time.

What caused the collapse? First equity:

Although our Equities revenues declined to $2 million for the quarter from $203 million for the first quarter of 2015, this was primarily attributable to a $145 million difference in net revenues related to two listed equity block positions, including KCG, and our share of the results of our Jefferies Finance joint venture. The two equity block positions generated pre-tax, mark to market losses during the quarter that totaled $82 million, $67 million of which is unrealized, including KCG, which was written down by $37 million. This compares to the combined net revenues of the same positions of positive $30 million during the first quarter of 2015, a year-on-year decline of $112 million.

And then credit:

Leverage lending activity and related liquidity was very muted during the quarter, and two loans Jefferies Finance closed during the quarter and held for sale as of the end of the quarter were marked down by a total of $38 million. That is reflected in our share of Jefferies Finance’s results. The two loans held for sale in Jefferies Finance as of the end of February 2016 were marked at prices believed to be required to clear their sale, with the potential for gains should markets improve prior to sell-down.

There was the odd defense of the balance sheet, which explained the firm’s ongoing gross derisiking as well as its dramatic reduction in risk positions as confirmed by the 13% drop in VaR:

Our balance sheet at February 29, 2016 was $35.2 billion, down $3.4 billion from 2015 year-end and $8.6 billion from the year ago period. We estimate period-end tangible leverage to be 9.8 times. We continue to have ample excess liquidity. At the end of the first quarter our liquidity buffer was about $4.3 billion and represented 12.9% of gross tangible assets. We repaid our $350 million March debt maturity today from cash on hand and have retired a net $784 million of debt in the last six months. Our Level 3 assets decreased 10% to $489 million, from the year end level of $542 million and represents 3.6% of inventory. Average VaR for the quarter of $8.4 million was lower by 13%, compared to $9.7 million for the fourth quarter.”

Jefferies Finance’s equity is $949 million. Jefferies Finance is highly liquid and positioned well to serve our clients in this important business as the market recovers. We recently strengthened our Leveraged Finance origination team and expect to grow further our presence in this segment.

But first the team will be substantially trimmed, as reported last weekend. Handler went on:

New issue equity and leveraged finance capital markets were virtually closed throughout January and February, which resulted in many of our potential Investment Banking capital markets transactions being postponed until some stability returns to the markets. As we have done through many other turbulent periods in our history, we reduced our already smaller balance sheet to continue to reduce risk during this difficult period. We are humbled by Jefferies’ quarterly loss and will strive to deliver the better results that our shareholders deserve and Jefferies is more than capable of achieving.

Humbled enough to actually read the economy correctly, or still unhumbled to where your novelty clown “economist” appears on Bloomberg TV wearing “I Heart QE” hats? Actually, we have a feeling said economist was instrumental in soothing investor nerves with the following Dick Handler line:

While we are early in the second quarter and one can never predict the future, it appears markets have not only stabilized, but aggressively snapped back. Bank holding company stocks in the U.S. and globally have halted their sell-off, high yield inflows have been at record levels, hedge funds appear to have stabilized, equity markets have rebounded, and energy/commodity prices have improved significantly. We are experiencing mark-ups in our block equity positions and believe there may be potential upside in the value of the loans held for sale in Jefferies Finance should the current market tone continue. Our core businesses are performing well, with total sales and trading net revenues for the first ten trading days of our second quarter averaging above our recent periods’ mean results, and our investment banking backlog is stronger.

Yes, Jefferies just extrapolated a trend based on 10 trading days, which considering its novelty “market strategist” – who seems to be good at anything but actually ‘strategizing markets’ – appears on TV dressed as follows…

Inline image 1… is not really unexpected.

We wish Jefferies well, and that sooner or later the much “hearted” Fed QE will return and help the bank regain its central-bank infused mojo, in lieu of actual analysis by its highly overpaid cadre of forecasters.


the all important business inventory to sales ratio jumps to 1.40 and a 7 yr high. It certainly shows that the USA economy is in the doldrums:
(courtesy zero hedge)

US Business Inventory-Sales Ratio Jumps To Post-Crisis (7 Year) High

Following the recessionary surge in Wholesale Inventories-to-Sales ratio, this morning’s Total Business inventories-to-sales rose to 1.40x – the highest since May 2009. With a 0.4% slump in sales and 0.1% rise in inventories, the smell of recession lays heavy on US businesses… but then again – who cares if Draghi can keep buying ‘assets’ and saving the world?

Look at this chart!

And this…

Do these look like the charts of a “recovering” economy?

Someone has been peddling you fiction that everything is awesome.

Pay no attention to this garbage report:
(courtesy zero hedge)

Empire Fed Miraculously Surges By The Most Since 2010 Despite Continued Job Contraction

Sure why not. Against expectations of a -10.5 print, Empire Fed Manufacturing spiked from -16.64 (7 year lows) to 0.62 (8-month highs). This is the biggest MoM rise since Dec 2010 as New Orders and Shipments miraculously surged to 18 month highs (hhmm?). Hope jumped to 3 month highs but what is odd about this unequivocally good print is that number of employees dropped once again (its 7th month of contraction) as did Prices Received.

From worst to first… Do you believe in miracles?

Must be the Trump effect?

Bank of America clients do not believe in the rally and they massively sell.
The buyers:  corporations buying their own stock with debt
(courtesy zero hedge)

Bank of America Throws In The Towel: “Clients Don’t Believe The Rally, Continue To Sell Stocks”

One week ago, as the bear market rally was about to hit its peak post-ECB crescendo, we reported that according to Bank of America data, “The “Smart Money” Is Quietly Getting Out Of Dodge: Sells For A Sixth Straight Week As Buybacks Soar.”

The writing was on the wall with the selling prevalent across every investor class: “similar to the prior week, hedge funds, institutional clients, and private clients (aka the “smart money”)were all net sellers, though sales last week were led by private clients (vs. hedge funds the week prior). Our hedge fund clients remain the biggest net sellers of US stocks year-to-date.”

As for the ‘buyer’ no surprise there either: “buybacks by corporate clients accelerated last week to their highest level since August, and are tracking above levels we saw this time last year, though below levels we observed in 2014.”

In other words, the smart money sold to corporations buying back their stock, courtesy of bondholders who continue to eagerly fund this transfer of money, something even Bloomberg figured out yesterday with its report showing the “Only One Buyer Keeping The Bull Market Alive” (buybacks, for those who missed it).

Which brings us to the latest week, where in the latest BofA report on client flow trends, we find that Bank of America has largely thrown in the towel and reports that “Clients don’t believe the rally, continue to sell US stocks” and notes that the “smart money” has now sold stocks in the face of this bear market rally for a near record seven consecutive weeks.

The details:

Last week, during which the S&P 500 climbed 1.1%, BofAML clients were net sellers of US stocks for the seventh consecutive weekNet sales of $3.7bn were the largest since September and led by institutional clients (where net sales by this group were the second-largest in our data history). Hedge funds and private clients were also net sellers, as was the case in each of the prior two weeks, but a different group has led the selling each weekClients sold stocks across all three size segments, and net sales of mid-caps were notably the largest since June ’09. 

The details:

  • Hedge funds have been net sellers on a 4-week average basis since early Feb.
  • Institutional clients have been net sellers on a 4-week average basis since early Feb.
  • Private clients have been net sellers of US stocks on a 4-week average basis since early January.

And if the smart money continues selling, means…that’s right, the corporations are buying their own stock:

Buybacks by corporate clients accelerated for the third consecutive week to their highest level in six months, which is also above levels at this time last year. This suggests that overall S&P 500 completed buybacks—which are reported with a lag—have likely picked up significantly as well.

It gets better: “Buybacks of Industrials stocks by our corporate clients last week were the largest in our data history, and Materials buybacks were also near record levels. These two sectors, along with Staples, have led the pick-up in overall buybacks in recent weeks.”

The stunning long-term chart which confirms that without buybacks, the S&P would be orders of magnitude lower:

Which brings us to BofA’s chart of the week: buybacks are picking up (in case someone was not aware).

The once darling of Wall Street, Valeant falls 45% on poor guidance. Looks like Bill Ackman, of  Pershing Square, Valeant’s largest shareholder will get a massive margin call:
(courtesy zero hedge)

When Ackman Gets A Valeant Margin Call Today, This Is What He Will Sell

With Valeant in free-fall this morning, collapsing well over 20% after surprising Wall Street with the magnitude of its guidance cut and its simply atrocious results now that the rollup strategy has well and truly blown up, we thought it worth revisiting just what else Bill Ackman will have left to liquidate to meet margin calls on his core biotech holding as it collapses to its lowest since 2012.

As Bloomberg reports, Valeant Pharmaceuticals International Inc., dropped 16 25 29 percent in early U.S. trading after giving a new sales and profit forecast for 2016.

The guidance is lower than predictions Valeant provided in December, then pulled last month after the return of Chief Executive Officer Michael Pearson from a two-month medical leave. Sales for the year will be $11 billion to $11.2 billion, and adjusted earnings per share will be $9.50 to $10.50, the company said Tuesday in a statement.

“The challenges of the past few months are not yet behind us,” Pearson said in the statement.

And the result is an absolute sluaghter for longs

… none of whom are bigger than Pershing Square’s Bill Ackman, who after today will have a YTD performance of worse than -25%.  Furthermore, given his cost basis around $170, means the margin calls will slowly but surely start coming in.

So what will he have to liquidate to come up with the cash? Here is a list of his top holdings.

And it appears he already is…

Trade accordingly.


Ackman loses 1 billion USA/Pershing Square fund is halted:
(courtesy zero hedge)

Ackman Loses $1 Billion, Pershing Square Fund Halted

Circuit-breakers have kicked in as  Pershing Square Holdings, the publicly traded vehicle led by hedge fund billionaire Bill Ackman, has been halted. With the stock down over 11%, Bill Ackman’s 30.7mm share personal holding means a loss of over $1 billion…

The stock trades on Euronext Amsterdam…

But there is a US tracker…

As Valeant is now dow over 45% on the day!!!

Bye bye “three comma” club.

Ackman sends out a frantic letter:
(courtesy zero hedge)

Bill Ackman Sends Out Desperate “Hail Mary” Letter Defending Valeant, Says Business Worth “Multiples” More

With Valeant down nearly 50%, and Pershing Square fielding an unknown number of margin calls and redemption requests as of this moment, Bill Ackman just did the only thing he could do at this moment:send a letter to anyone who still cares, defending his disastrous investment, yet again.

Pershing Square Holdings, LTD. Sends Communication to Investors Regarding Valeant

Dear Pershing Square Investor,

Today, Valeant reported preliminary unaudited earnings for Q4, updated guidance for Q1, full year 2016 and the next twelve months. In particular, management shocked the market with revenue and earnings guidance for the next twelve months (Q2 2016 to Q1 2017) which does not appear to foot with continued favorable prescription trends and management’s commentary on the call about the strength of the underlying businesses. Furthermore, the company’s 10-K has been delayed requiring the company seek a waiver under its credit agreement. While we believe that it is highly likely that the banks will provide a waiver, uncertainty about the potential for a default creates enormous investor fear.

The above factors have caused investors to lose total confidence in the company as reflected by the current 44% decline in Valeant’s stock price.

Last week, Steve Fraidin, our Vice Chairman, joined the board. We are going to take a much more proactive role at the company to protect and maximize the value of our investment. We continue to believe that the value of the underlying business franchises that comprise Valeant are worth multiples of the current market price. Getting to those values, however, will require restoration of shareholder confidence in the management and governance of the company.

We will do our best to keep you promptly informed subject to any limitations that we have now that we have recently become insiders at the company.

Please feel free to contact the investor relations team or me if you have further questions.




See you tomorrow night


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