March 16:Fed’s Yellen chickens out of increase in interest rates/Gold skyrockets on Fed’s lack of accountability/Gold advances to $1263.00 in the access market/Silver to $15.62/Japan signals it may not cancel NIRP as they do another U turn/Deutsche bank reports that it will lose money throughout 2016 and thus it’s stock plummets on the day/More trouble in Brazil as its central bank head honcho may leave on the appointment of LULA/Insurance giant Munich Re purchases gold and states it is because of negative interest rates/Peabody, largest USA coal miner misses interest rate payment and may declare bankruptcy/China and Kazakhstan wish to increase co operation in developing a physical market for gold/

Gold:  $1,229.30 down $1.10    (comex closing time)

Silver 15.21  down 5 cents

In the access market 5:15 pm

Gold $1262.60

silver:  15.62


In the words of Bill Murphy of GATA today on remarking on gold’s huge advance in the access market:  “Houston, we have a problem”

The Fed’s credibility has now been shot as Yellen backs away from increasing rates due to global disturbances.



At the gold comex today, we had a poor delivery day, registering 0 notices for nil ounces and for silver we had 230 notices for 1,150,000 oz for the active March delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 211.33 tonnes for a loss of 92 tonnes over that period.

In silver, the open interest fell by 2055 contracts down  to 166,180  with silver down by 9 cents yesterday. In ounces, the OI is still represented by .831 billion oz or 119% of annual global silver production (ex Russia ex China).

In silver we had 230 notices served upon for 1,150,000 oz.

In gold, the total comex gold OI fell by 6,624  contracts to 493,086 contracts as the price of gold was DOWN $14.00 with yesterday’s trading.(at comex closing). The fall in OI in gold should relieve a little pressure on our bankers.

We had another big change in gold inventory at the GLD, a deposit of 2.09 tonnes/ thus the inventory rests tonight at 792.23 tonnes.Late tonight, another 2.97 tonnes were added. Thus the new inventory 795.20 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 2055 contracts down to 166,180 as the price of silver was down 26 cents with yesterday’s trading. The total OI for gold fell by 6,624 contracts to 493,086 contracts as gold was down $14.00 in price from yesterday’s level.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)



i) TUESDAY night/ WEDNESDAY morning: Shanghai closed UP BY 6.11 POINTS OR 0.21% , /  Hang Sang closed DOWN by 31.07 points or  0.15% . The Nikkei closed DOWN 142.62 or 0.83%. Australia’s all ordinaires was UP 0.15%. Chinese yuan (ONSHORE) closed DOWN at 6.5200.   Oil ROSE  to 37.12 dollars per barrel for WTI and 39.38 for Brent. Stocks in Europe so far ALL MIXED . Offshore yuan trades  6.52118 yuan to the dollar vs 6.5200 for onshore yuan/china’s industrial production collapsed along with retail sales. jAPAN RE SIGNALS that they may continue with nirp a little longer which sends the USA/Yen spiraling northbound/markets in Japan tumble (see below). Yesterday China signals that they are going to tax financial transactions

 ii report on Japan and CHINA

Kuroda again does a U Turn:  we are now pack to a potential increase in NIRP: down goes the Yen!  China’s decrease in the offshore yuan ends the short squeeze so Mr Kyle Bass can continue with his shorting!

( zero hedge)


iii) The Chinese consumer has been hit hard by the layoffs and the deteriorating conditions inside China:

( zero hedge)
Yesterday we reported on the horrible results from Jefferies.  Today it is Deutsche bank reporting that it will not be profitable for the entire year.  The stock crashed!!
(courtesy zero hedge)

i) Oil jumps on a supposed new meeting

( zero hedge)

ii) Big  Cushing, Oklahoma build but smaller gasoline draw causes crude to be confused;

( zero hedge)

iii)Oil will not stage a rally until Cushing Ok refining storage levels decline:

( Nick Cunningham/Oil



More trouble in Brazil, as the chief of the Central Bank of Brazil is ready to resign amid the appointment of LULA as chief of staff in Rousseff’s government;

(courtesy zero hedge)


i A.  Reuters discusses the huge story of Munich Re purchasing huge quantities of gold.

(courtesy Reuters/Alexander Huebner/in Germany)


iB )Why is this not shocking to us;  JPMorgan corners the LME aluminum market

( zero hedge)

ii)Peabody, the largest USA coal producer has just skipped an interest payment and now warns of bankruptcy as it’s stock crashes

( zero hedge)

iii) Ambrose Evans Pritchard reports on the high USA core inflation as it rears its ugly head. He states that the global cycle is near the danger zone(Ambrose Evans Pritchard/UK Telegraph)

iv)Craig Hemke describes the huge net short position by the criminal commercials as well as the total high OI.  He knows that continue raids are forthcoming:

(courtesy Craig Hemke/TFMetals)

v) Moriarty states that Jim Richards is minimizing gold manipulation.  By stating the obvious he is actually emphasizing it:(courtesy Moriarty/ Powell/GATA)

vi)Another biggy!! Kazakhstan and China will now join forces in developing a physical gold for gold;

( Koos Jansen/Bullion star)





i) Housing starts beat expectations but permits slowing down.  This suggests further rent increases are coming in the months ahead:

( zero hedge)

ii) This will not be liked by the Fed as core CPI surges by 2.3% year over year, the biggest jump since Oct 2008.

( zero hedge)

iii)The decline in the USA manufacturing sector continues as industrial production

has fallen for its 4th straight month! A worse than expected .5% month over month
( zero hedge)
iv) The following is a must read as Stockman goes into detail the real earnings of the S and P and the phoniness of the non GAAP  as it relates to the true GAAP figures:
( David Stockman/contraCorner)
v)  The big FOMC decision  5 commentaries

a)And now the FOMC results:  Fed boxed in due to global uncertainty!!( zero hedge)


b The decision:

(zero hedge/the Fed)


c)The Fed mouthpiece Sir Jon Hilsenrath hath spoken:

( Jon Hilsenrath/Wall Street Journal)

d)Immediate resultant action:

(zero hedge)

e)And the big winner of today’s Fed cowardly event:  GOLD

Faith in the cowardly Fed is fading fast!!
( zero hedge)

f)It seems that Goldman’s Brooks is crushing his clients with this predictions as to how to play this market:

( zero hedge)
Let us head over to the comex:

The total gold comex open interest fell to 493,086 for a loss of 6,624 contracts as the price of gold was down $14.00 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, only the first scenario was in order as we actually gained in actual ounces of gold standing. The front March contract month saw its OI rise by 5 contracts up to 135.We had 1 notice filed upon yesterday, and as such we gained 6 contracts or an additional 600 oz will stand for delivery.  After March, the active delivery month of April saw it’s OI fall by 8,841 contracts down to 244,484. This high level is 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 125,540 which is awful.  The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was  good at 211,875 contracts. The comex is not in backwardation .


Today we had 0 notice filed for 100 oz in gold.
And now for the wild silver comex results. Silver OI fell by 2055 contracts from 168,235 down to 166,180 as  the price of silver was down by 26 cents with yesterday’s trading. The next big active contract month is March and here the OI fell by 99 contracts down to 946 contracts. We had 8 notices served upon yesterday, so we lost 91 contracts or an additional 455,000 ounces will not stand for delivery. The next contract month after March is April and here the OI fell by 50 contracts down to 345.  The next active contract month is May and here the OI fell by 1873 contracts down to 114,009. The volume on the comex today (just comex) came in at 27,599 , which is fair. The confirmed volume yesterday (comex + globex) was good at 41,893. 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 230 notices filed for 1,1500,000 oz.

March contract month:

INITIAL standings for MARCH

March 16/2016

Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil 16,139.300 oz


502 kilobars

Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  nil
No of oz served (contracts) today 0 contract
(nil oz)
No of oz to be served (notices) 135 contracts(13,500  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 127,007.9 oz
Today, we had 0 dealer transactions
total dealer deposit:  nil oz
we had no dealer withdrawals
total dealer withdrawals: nil oz.
We had 2 customer withdrawals: another of these phony kilobar transactions
i) Out of Scotia:  16,075.000 oz
(500 kilobars)
ii) Out of Manfra 64.30 oz
total customer withdrawal: 16,131.300 oz  502 kilobars
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 (135 contracts) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals the number of ounces standing.
Thus the INITIAL standings for gold for the March. contract month:
No of notices served so far (585) x 100 oz  or ounces + {OI for the front month (135) minus the number of  notices served upon today (0) x 100 oz which equals 72,000 oz standing in this non  active delivery month of March (2.239 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 2.239 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 2.239 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12) = 9.2456 tonnes standing against 10.493 tonnes available.  .
Total dealer inventor 335,959.999 oz or 10.449 tonnes
Total gold inventory (dealer and customer) =6,794,318.789 or 211.33 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 211.33 tonnes for a loss of 92 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 16/2016:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  119,851.08 oz (Scotia,


Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 3121.69 oz


No of oz served today (contracts) 230 contracts 1,150,000 oz
No of oz to be served (notices) 716  contract (3,580,000 oz)
Total monthly oz silver served (contracts) 725 contracts (3,625,000 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 9,174,004.2 oz

Today, we had 0 deposits into the dealer account: 


total dealer deposit; nil  oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil


we had 1 customer deposits

i) Into Delaware:  3121.69 oz

total customer deposits: 321.69  oz

We had 3 customer withdrawal:

i) Out of Scotia: 90,942.54 oz

ii) Out of Delaware: 2919.65 oz

iii) Out of CNT; 25,998.89 oz


total customer withdrawals:  119,851.08 oz



 we had 1 adjustments

i) Out of CNT:

616,449.580 oz was adjusted out of the customer account and this landed into the dealer account of CNT



The total number of notices filed today for the March contract month is represented by 230 contracts for 1,150,000 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 (72) x 5,000 oz  = 3,625,000 oz to which we add the difference between the open interest for the front month of March (946) and the number of notices served upon today (230) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the March. contract month:  725 (notices served so far)x 5000 oz +(946{ OI for front month of March ) -number of notices served upon today (230)x 5000 oz  equals  7,205,000 oz of silver standing for the March contract month.
we lost 59  contracts or an additional 295,000 oz  that will not stand.
No doubt these were cash settled as they are running out of real silver.
Total dealer silver:  30.492 million
Total number of dealer and customer silver:   155.451 million oz
Strange!! this month 5 million oz has moved into the dealer side in an non active delivery month.
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 16.2016:/we had a deposit of 2.09 tonnes of gold into the GLD/Inventory rests at 795.23 tonnes.  with the new deposit GLD rests at 795.20 tonnes

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 16.2016:  inventory rests at 795.20 tonnes


Now the SLV
March 16./no changes in silver inventory at the SLV/Inventory rests at 325.868 million oz
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 16.2016: Inventory 325/868 million oz.
1. Central Fund of Canada: traded at Negative 4.5 percent to NAV usa funds and Negative 6.1% to NAV for Cdn funds!!!!
Percentage of fund in gold 63.9%
Percentage of fund in silver:36.1%
cash .0%( Mar 16.2016).
2. Sprott silver fund (PSLV): Premium to NAV rises to  5.41%!!!! NAV (Mar 16.2016) 
3. Sprott gold fund (PHYS): premium to NAV rises  to -0.33% to NAV Mar 16.2016)
Note: Sprott silver trust back  into positive territory at +5.41%/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, WEDNESDAY MORNING and also physical stories that may interest you:

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

This is a biggy!!  Munich RE the world’s largest insurer buying gold to counter negative interest rates:  you knew that this was coming!

World’s Largest Reinsurer Buying Gold To Counter Punishing Negative Rates

The world’s largest reinsurer,  German reinsurer Munich Re is boosting its gold reserves and buying gold in the face of the punishing negative interest rates from the European Central Bank, it announced today.

Munich Re Gold

As reported by Thomson Reuters this afternoon:

The world’s largest reinsurer is far from alone in seeking alternative investment strategies to counter the near-zero or negative interest rates that reduce the income insurers require to pay out on policies.

Munich Re has held gold in its coffers for some time and recently added a cash sum in the two-digit million euros, Chief Executive Nikolaus von Bomhard told a news conference.

“We are just trying it out, but you can see how serious the situation is,” von Bomhard said.

The ECB last week cut its main interest rate to zero and dropped the rate on its deposit facility to -0.4 percent from -0.3 percent, increasing the amount banks are charged to deposit funds with the central bank.

ECB policy has caused financial market interest rates to fall, reducing the return that insurance companies can earn from investments in bonds, hurting profit and raising concerns about their ability to meet future promises to policyholders.

Munich Re is one of the largest if not the largest reinsurance companies in the world. It had total assets‎ of ‎€273 billion in 2014.

A small 3% allocation to gold would equate to buying gold worth €8.19 billion. At the current spot price of €1,130 per ounce that would equate to 7.2 million ounces or 225.4 tonnes of gold bullion (1 metric tonne = 32,150.7 ounces).

The news is interesting and we believe that other institutions will follow in their footsteps and diversify into gold in order to protect themselves from negative yields. We have not heard of any other non central bank institutions diversifying into gold but it stands to reason that a small percentage will follow in Munich Res footsteps.

Due to the very small size of the above ground refined, investment grade gold bullion market, the development of even a small amount of institutional buying should help put a floor under prices and indeed could propel gold prices higher.

Read Reuters article on CNBC here


Gold Prices (LBMA)

16 Mar: USD 1,233.10, EUR 1,111.79 and GBP 874.09 per ounce
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

Silver Prices (LBMA)

16 Mar: USD 15.29, EUR 13.78 and GBP 10.84 per ounce
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

Gold News and Commentary

Gold holds near 2-week low as market eyes Fed statement – Reuters

Gold marks two-week low on caution ahead of Fed policy decision – Marketwatch

Retail Sales in U.S. Decline 0.1% After January Revised Down 0.4% – Bloomberg

Gold Today – Focus on Fed – Bullion Desk – Bullion Desk

American Silver Eagle – One Million More Ounces Allocated March 14 – Coin Week
Fed Impact On Gold – Bloomberg Intelligence Hoffman – Bloomberg Video

BlackRock Buys Gold – Seeking Alpha

50-Year Veteran Warns The World Is Headed For Difficult Economic Times – KWN

The Real Reason Gold Is Manipulated – Agora

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
And Reuters discusses this huge story!!
(courtesy Reuters/Alexander Huebner/in Germany)

Munich Re stashes gold and cash to counter negative ratesMUNICH, March 16 (Reuters) – German reinsurer Munich Re is boosting its gold and cash reserves in the face of the punishing negative interest rates from the European Central Bank, it said on Wednesday.

The world’s largest reinsurer is far from alone in seeking alternative investment strategies to counter the near-zero or negative interest rates that reduce the income insurers require to pay out on policies.

Munich Re has held gold in its coffers for some time and recently added a cash sum in in the two-digit million euros, Chief Executive Nikolaus von Bomhard told a news conference.

“We are just trying it out, but you can see how serious the situation is,” von Bomhard said.

The ECB last week cut its main interest rate to zero and dropped the rate on its deposit facility to -0.4 percent from -0.3 percent, increasing the amount banks are charged to deposit funds with the central bank.

ECB policy has caused financial market interest rates to fall, reducing the return that insurance companies can earn from investments in bonds, hurting profit and raising concerns about their ability to meet future promises to policyholders.

(Reporting by Alexander Huebner and; Jonathan Gould; Editing by David Goodman)


Why is this not shocking to us;  JPMorgan corners the LME aluminum market
(courtesy zero hedge)

JPMorgan Corners LME Aluminum Market, Leading To Strange “Price Anomalies”

While not nearly as exciting as JPM cornering and manipulating the gold or silver markets, over the past few years Jamie Dimon’s bank appears to have cornered a very prominent commodity traded on the London Metals Exchange, aluminum, resulting in price “anomalies” which as Reuters politely puts it “mean prices do not always reflect fundamentals” and which as we put it, reflect outright manipulation, however because regulators are captured have so far completely slipped through the cracks.

According to Reuters, large amounts of aluminum traded on the London Metal Exchange over the past couple of years “have at times been in the hands of a dominant position holder.” Citing sources at commodity trading houses, warehouses, producers, brokers and banks “one such position holder is U.S. bank JPMorgan.”

Reuters adds that “other companies have done so in past” which perhaps is meant to mitigate JPM’s culpability, but merely confirms that if it isn’t one bank manipulating commodity markets, it’s another – the famous example of Sumitomo’s Yasuo “Mr. Copper” Hamanakacomes to mind.

As Reuters points out, “while no rules have been broken, holding a large, sometimes dominant position can to an extent have an influence on prices in the short term for contracts that will soon reach maturity.” For its part, the LME said it “would seek additional information from market participants regarding activity that raises concern.”

“If a breach of the LME’s rules is deemed to have occurred, we would take appropriate action.”

We won’t hold our breath.

The details of JPM’s quasi-cornering of aluminum are as follows: the positions have typically meant a backwardation or premium for the nearby contract, suggesting tight supplies. But aluminum is oversupplied and inventories are massive, which mean the natural state of the market should be contango or discount.

It also means holders of short positions, which could be bets on lower prices or hedges for physical holdings, have had to pay more to roll over their positions.

“JPMorgan have been doing this on-and-off for a long time. The
backwardation (or premium) doesn’t accurately reflect oversupply,” a
Reuters source at a commodity trading firm said.

“The positions are large, not many people can do these amounts. It’s worthwhile for JP because they can borrow very cheaply, they have the credit rating,” an aluminum trader at a commodities broker said.

For some months now there have been large holdings of aluminum warrants, which are a claim to metal stored in warehouses approved by the LME. Currently there is a dominant position holding 50-79% of warrants. 

One consequence of this is the premium for the cash contract over the benchmark three-month future. It rose to around $23 a tonne in December, the highest since late 2014.

Reuters reveals the following details of large open interest holdings since April 2014 gathered from industry sources.


One company held 20-29 percent of open interest on February 10, between 403,000 and 584,000 tonnes. Prices on that day value the holding at $596-$864 million. A $5 contango for the February vs March contract became a backwardation of $8 on Feb. 15, 2 days before expiry.


One company held 20-29 percent of open interest on Jan. 18, between 238,000 and 346,000 tonnes or $350-$508 million. A $5 contango for the January versus February contract turned into a $8 backwardation on Jan. 19, one day before expiry.


One company held 20-29 percent of open interest on December 14, between 230,000 and 333,000 tonnes or $352-$493 million. A $7 discount for the December versus the January contract became a $31 a tonne premium on Dec. 15, one day before expiry.


One company held 30-39 percent of open interest on April 8, between 748,000 and 972,000 tonnes or $1.3-$1.7 billion. A $5 discount for the April versus the May contract turned into a $22 backwardation on April 13, two days before expiry


One company held more than 40 percent of open interest on Nov. 11, more than 1.223 million tonnes or a minimum of $2.5 billion. A $10 contango for the November versus the December contract became a $21 premium on Nov. 18, one day before expiry.


One company held 20-29 percent of open interest from Aug. 18, between 224,000-325,000 tonnes or $450-$650 million. A $10 discount for the August vs the September contract became a $16 premium on Aug. 18, two days before expiry.


One company held more than 40 percent of the open interest on April 9, more than 920,000 tonnes of metal or $1.7 billion. A $15 discount for the April versus the May contract became a premium of $14 a tonne on April 15, the day before expiry.

As a result, we now know that JPM has not only cornered the aluminum market as of this moment – something that very likely will go on indefinitely – but said cornering had lead to the abovementioned “price anomalies.” What is surprising is that according to the CFTC, the LME and various regional regulators  this is perfectly normal behacior, and likely happens every day as big banks are given a green light to do whatever they want with any one product.

We wonder if whether having had the above information at hand, U.S. District Judge Katherine B. Forrest would have dismissed the LME, JPMorgan, Goldman Sachs, Glencore and others from recent multidistrict litigation accusing them of manipulating aluminum prices.

If nothing else, at least today’s disclosure of aluminum manipulation answers the implicit question in our post from two months ago, in which we reported that “Someone Is Trying To Corner The Copper Market” on the LME, where the described pricing “anomaly” was virtually a carbon copy of what is taking place with aluminum on the LME.

We now have a pretty good idea of the “who”, and we wonder if that same “who” has also managed to corner by comparable means or otherwise, any other commodity markets, including certain precious metals.


Peabody, the largest USA coal producer has just skipped an interest payment and now warns of bankruptcy as it’s stock crashes
(courtesy zero hedge)

Largest U.S. Coal Producer Skips Interest Payment, Warns Of Bankruptcy; Stock Crashes

One of the more impressive short squeezes in recent history took place in the first two weeks of March, when the stock of distressed Peabody Energy, the largest U.S. coal producer which employs 8,300 workers, exploded higher from just $2.50 per share at the start of the month to a whopping $6.50 just last week.

Many scratched their heads at this move as nothing fundamental had changed in the company’s deteriorating operations, and its bonds are among the most distressed issues trading currently (with upcoming interest payments as we profiled last night).

Alas Peabody missed its narrow window to sell stock, and things were promptly normalized this morning, when the stock crashed back to earth plunging by nearly 40% back to $2.50 in the pre-market, wiping out all recent gains, after Peabody announced in its just filed 10-K, reported that it may have to join its peers Arch Coal and Alpha Natural in 11 bankruptcy protection, after it delayed $71 million in interest payment due on March 15.

As caught first by Bloomberg, Peabody’s auditor said there’s uncertainty about the company’s ability to keep running as a “going concern,” a 10-K filing with the U.S. Securities and Exchange Commission shows. More importantly, the company reported it will exercise the 30-day grace period on a $21.1 million semi-annual interest payment due March 15 for 6.5 percent senior notes maturing September 2020, and a $50 million payment for the same date on 10 percent notes due March 2022.

Here is the relevant section:

As a result of operating losses and negative cash flows from operations and our election to exercise a 30-day grace period with respect to certain interest payments, together with other factors, including the possibility that a covenant default or other event of default could cause certain of our indebtedness to become immediately due and payable (after the expiration of any applicable grace period), we may not have sufficient liquidity to sustain operations and to continue as a going concern.

We incurred a substantial loss from operations and had negative cash flows from operating activities for the year ended December 31, 2015. Our current operating plan indicates that we will continue to incur losses from operations and generate negative cash flows from operating activities. These projections and certain liquidity risks raise substantial doubt about whether we will meet our obligations as they become due within one year after the date of issuance of this report. We have also elected to exercise the 30-day grace period with respect to a $21.1 million semi-annual interest payment due March 15, 2016 on the 6.50% Senior Notes due September 2020 and a $50.0 million semi-annual interest payment due March 15, 2016 on the 10.00% Senior Secured Second Lien Notes due March 2022, as provided for in the indentures governing these notes. Failure to pay these interest amounts on March 15, 2016 is not immediately an event of default under the indentures governing these notes, but would become an event of default if the payment is not made within 30 days of such date. As a result of these factors, as well as the continued uncertainty around global coal fundamentals, the stagnated economic growth of certain major coal-importing nations, and the potential for significant additional regulatory requirements imposed on coal producers, among others, there exists substantial doubt whether we will be able to continue as a going concern.

The company also said that in February 2016 it borrowed approximately $945 million under the 2013 Revolver, the maximum amount available, for general corporate purposes. The company’s lender banks will surely be excited that they are about to see another $1 billion in secured loans promptly impaired in one month when BTU has no choice but to file for bankruptcy.

Peabody, which flagged bankruptcy risk under the “risk factors” section of a regulatory filing on Wednesday, said it skipped a $71.1 million interest payment on its senior notes, kicking off a 30-day grace period. The company also raised “substantial doubt” about its ability to remain a going concern.

Peabody’s lenders are pushing the company to restructure its debt through bankruptcy but the company has also been pursuing bond exchanges. As Reuters calculates, as of Dec. 31, the company had a total debt of $6.3 billion and cash and cash equivalents of $261.3 million.

As we reported last night when looking at the 100+ bonds trading at 30 cents or less with interst payments due in the next 6 months, the eye of the hurricane is about to shift away and the dire situation facing U.S. energy companies is about to be revealed when one after another after another company follows in Peabody’s footsteps and elects to not make upcoming bond payments, ushering in a tidal wave of defaults which we expect will hit U.S. capital markets around late spring, early summer. The full list of soon to be insolvent issuescan be found here.



Ambrose Evans Pritchard reports on the high USA core inflation as it rears its ugly head. He states that the global cycle is near the danger zone

(Ambrose Evans Pritchard)

U.S. inflation rears its ugly head as global cycle nears danger zone

Submitted by cpowell on Wed, 2016-03-16 00:10. Section: 

By Ambrose Evans-Pritchard
The Telegraph, London
Tuesday, March 15, 2016

The trigger for the next global recession is at last coming into view after a series of loud distractions and false alarms.

The Atlanta Federal Reserve’s gauge of “sticky-price” inflation in the United States soared to a post-Lehman peak of 3 percent in February. This index is a “pure” measure of core inflation — the underlying story once the noise is stripped out.

The Cleveland’s Fed’s “median consumer price index” jumped to 2.9 percent, with big rises are in medical services, housing rents, car insurance, restaurants, hotels, women’s clothing, jewelry, and car hire. This is the long-feared inflexion point we all forgot about in those halcyon days of deflation, now just a fond memory. …

… For the remainder of the report:…


Craig Hemke describes the huge net short position by the criminal commercials as well as the total high OI.  He knows that continue raids are forthcoming:
(courtesy Craig Hemke/TFMetals)

TF Metals Report: Gold futures market again in smashdown position

Submitted by cpowell on Tue, 2016-03-15 17:57. Section: 

1:56p ET Tuesday, March 15, 2016

Dear Friend of GATA and Gold:

The TF Metals Report’s Turd Ferguson today examines the charts of the gold futures market positions of the bullion banks and the small speculators and notes that the two groups are positioned as they always are just before the gold is smashed down in the famous “wash, rinse, repeat” cycle of gold price suppression.

Ferguson grouses again at the failure of the U.S. Commodity Futures Trading Commission to do anything about this, but if the bullion banks are executing trades for governments and particularly for the U.S. Exchange Stabilization Fund, the CFTC would be powerless, as the ESF is explicitly authorized by U.S. law to trade secretly in any market in the world — that is, to rig any market in the world:…

Ferguson’s analyis is headlined “CoT Persepctive” and it’s posted at the TF Metals Report here:

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





Moriarty states that Jim Richards is minimizing gold manipulation.  By stating the obvious he is actually emphasizing it:


(courtesy Moriarty/ Powell/GATA)

Moriarty says Rickards minimizes gold manipulation but Rickards actually emphasizes it

Submitted by cpowell on Wed, 2016-03-16 01:50. Section: 

10:03p ET Tuesday, March 15, 2016

Dear Friend of GATA and Gold:

No gold market analyst or mining stock tout is more determined to deny the manipulation of the gold market by central banks than Bob Moriarty, proprietor of Moriarty is always taking cracks, often gratuitous ones, at those who complain about that manipulation. But today Moriarty outdid himself.

In commentary headlined “Reviewing ‘The New Case for Gold,'” the new book by fund manager, geopolitical strategist, and author James G. Rickards, Moriarty writes —

— “One of the people I genuinely enjoy listening to at investment conferences is James Rickards, best-selling author of ‘The Death of Money’ and ‘Currency Wars.’ Well, he’s out with a new book to be released in another three weeks titled ‘The New Case for Gold.’ … He doesn’t start slobbering and howling at the moon with a cry of ‘manipulation.'”

And yet exactly simultaneously with Moriarty’s posting of his supposed review of Rickards’ new book, Rickards himself did“start slobbering and howling at the moon with a cry of ‘manipulation.'”

That is, just as Moriarty was posting his praise of Rickards for not complaining much about gold market manipulation, Rickards’ publisher, Agora Financial, posted an essay by Agora’s Dave Gonigan quoting both Rickards’ past assertions as well as assertions from his new book repeatedly affirming manipulation of the gold market.

In “The Real Reason Gold Is Manipulated” —…

— Gonigan wrote today:

“‘The manipulation of the gold market is not something that’s really debatable any longer,’ Jim Rickards said two years ago. ‘If I were running the manipulation, I would actually be embarrassed at this point because it’s so blatant.’

“Jim described the purpose of the manipulation in detail in his second book, “The Death of Money.” On the surface, it sounds ridiculous — the United States facilitating a steady flow of gold from the West to China to make sure China has the proverbial ‘seat at the table’ whenever the global monetary system collapses and a new system has to be devised. …

“‘The United States is letting China manipulate the market so China can buy gold more cheaply,’ Jim writes in his follow-up book, ‘The New Case for Gold’ — set for publication three weeks from today.

“The fact is, for now, both the U.S. and Chinese governments need a suppressed gold price.

“The U.S. government doesn’t mind if the price goes up — as long as it’s an ‘orderly’ increase. If it turns into $100-a-day spurts, that’s ‘disorderly,’ a sign of confidence evaporating from the markets, and the manipulators lower the boom. That’s what happened in September 2011 — a conscious decision was made that gold would not race past the round number of $2,000.

“China, meanwhile, wants to buy as much gold as it can, as cheaply as it can, for as long as it can … to get that seat at the table. …

“‘Gold manipulation is not new,’ Jim adds. ‘You can go back to the 1960s’ London Gold Pool or the U.S. and International Monetary Fund dumping of gold in the late 1970s.’

“The mechanics of the manipulation are fascinating — and a lot simpler than you might think.

“There’s no shortage of Internet screamers with mind-numbing analyses of the weekly commitment-of-traders report from the Commodity Futures Trading Commission.

“But in ‘The New Case for Gold,’ Jim exposes the whole manipulation scheme in 11 easy-to-read pages. You’ll understand exactly how it works and who’s pulling the strings. You can impress friends at parties with your newfound knowledge. …”

But you probably won’t impress Moriarty. While he says Rickards’ new book downplays gold market manipulation, according to Rickards’ own publicist the new book is all about gold market manipulation.

So did Moriarty really read Rickards’ book at all? Did he pick up Ben Bernanke’s recent memoir by mistake? Or is Moriarty so committed to disinformation that he doesn’t think anyone will notice?

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

Another biggy!! Kazakhstan and China will now join forces in developing a physical gold for gold;
(courtesy Koos Jansen)
Koos Jansen
Koos Jansen
Posted on 16 Mar 2016 by

Kazakhstan & China Join Forces In Gold Market

Silk Road Gold Trading Kicks Off

The other day I bumped into a small but potentially important news item on the website of the Shanghai Gold Exchange. The article was published in Mandarin, of course, as the Chinese (authorities) hardly ever publish valuable information in English – most articles published in English have been intentionally written to communicate what the State Council wants the West to hear. In the article it’s described a financial delegation from Kazakhstan visited the Shanghai Gold Exchange (SGE) to discuss cooperation in gold trading along One Belt One Road (OBOR), also referred to as the new Silk Road, that reaches over the whole Eurasian continent. From the SGE (exclusively translated by BullionStar):

A group led by Kairat Kelimbetov, the Chairman of the Board of Directors of the Kazakhstan International Financial Center, visited the Exchange

At noon on 26 February 2016 a group led by Kairat Kelimbetov, President of the Astana International Financial Center and former President of the National Bank of Kazakhstan, visited the Shanghai Gold Exchange and held talks with President Jiao Jinpu. Both parties reached consensus on strengthening cooperation and seeking development in the gold market under the “One Belt One Road” project. Zuo Qihan, Kazakhstan consulate general in Shanghai, Shen Gang, Vice General Manager of the Exchange and Zhuang Xiao, CTO, attended the meeting.

Although the article lacks any detail, we can discover its potential impact if we study the financial and political backdrop.

Kelimbetov has an impressive track record. Previously he served as the Minister of the National Economy, Deputy Prime Minister and Governor of the National Bank of Kazakhstan. Currently, he’s the head of the brand new Astana International Financial Center (AIFC) that was officially launched in January 2016, aimed to become one of the top 10 financial centers in Asia and one of the top 30 financial centers in the world by 2020. The government of Kazakhstan contributes full support to the AIFC .

Kairat Kelimbetov and Jiao Jinpu at the SGE
26 February 2016, on the left SGE President Jiao Jinpu, in the middle AIFC President Kairat Kelimbetov. Courtesy SGE.

The main language spoken at the AIFC is English and the center includes an independent court for financial and investment disputes using English law. Kenneth Rogoff, Professor at Harvard University and former chief economist at the IMF, has said with English law at the basis the AIFC will be a game changer.

The AIFC decree signed in May 2015 at the Astana Economic Forum (AEF) by the President of Kazakhstan, Nursultan Nazarbayev, commands the National Bank of Kazakhstan and the Kazakhstan Stock Exchange to relocate from the city of Almaty to Astana. The AIFC will be installed on the premises of the EXPO 2017 starting from 1 January 2018.

At the AEF Nazarbayev stated the financial crisis that broke out in 2008 is systemic and will only end when the key cause is eliminated: the profound accumulated imbalances in the currency markets. He added that these hidden, latent roots of the crisis have spawned currency wars and economic wars in the form of sanctions hurting many countries. Nazarbayev said, “This is what generates an increase in confrontation between East and West, the U.S. and NATO against Russia and China, … deep reforms are needed for sustained economic growth.”

Nazarbayev may 2015 AEF
Nazarbayev speaking at the AEF 22 May 2015.

Nazarbayev has always been a vocal critic of US supremacy and an advocate of gold. Under his guidance, in 2011 the National Bank of Kazakhstan has taken the pre-emptive right to buy all domestic gold mine output to strengthen its international reserves and develop the local gold industry. In 2012 a (third) large gold refinery, Tau-Ken Altyn, was erected as one of the key projects of the Astana Industrial Park, to ensure all domestic mine output can be refined in Kazakhstan.

President Nazarbayev paid a visit to the Tau-Ken Altyn refinery in December 2013, as can be seen in the video below starting at 1:13. Tau-Ken Altyn can produce 12.5 Kg investment bars for the central bank, as well as 100 gram and 1 Kg bars for personal investment.

Although official documentation is lacking, from the news item at the SGE website I assume the AIFC has included the Shanghai International Gold Exchange (SGEI) for servicing gold trading in renminbi – supporting the internationalization of the renminbi.

It’s unclear if the AIFC has exclusively attracted the SGEI platform for gold trading. On 11 March 2016 Kelimbetov visited London where he held a meeting with the heads of UK government institutions, large investment banks (Goldman Sachs, Morgan Stanley, UBS) and international financial organizations to discuss the AIFC’s progress. Though, Kazakhstan is likely to prefer cooperating with its Chinese partner in gold business, as both nations share a common interests of making a fist against US dollar domination.

The central banks of Kazakhstan and China are among the most aggressive gold buyers in the world. Since 2010 the official gold reserves of Kazakhstan have grown from 67 metric to 222 tonnes. In turn, over the same time horizon China has increased its official gold reserves from 1,054 tonnes to 1,762 tonnes, according to official statistics – it’s thought China’s central bank has significantly more gold than it publicly discloses.

Kazakhstan & China Gold Reserves 2011 2015

The central banks of numerous other countries in (central) Asia are buying gold as well, in example Russia, Belarus, Tajikistan, and Kyrgyzstan, sharing an objective to diversify foreign exchange reserves and unwind the US dollar hegemony.

But increasing their official gold reserves is not all these countries do, it’s part of something bigger. In recent years a vast movement of economic collaborations between countries in Eurasia has unfolded. One of these collaborations is the Silk Road economic project (/OBOR) that was launched in 2013. Partially funded by China’s foreign exchange reserves the project focuses on connectivity and cooperation among countries in Asia, Europe and Africa. Aside from its independent activities OBOR also provides the structure to connect other collaborations, of which the most relevant ones are:

  • The Shanghai Corporation Organization (SCO). The SCO is a political, economic and military alliance, comprising the member states Russia, China, Kazakhstan, Tajikistan, Uzbekistan and Kyrgyzstan, that was launched in 1996.
  • The Eurasian Economic Union (EEU). Launched in 2014 the EEU members Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan now form a space that is modeled on the European Economic Community.
  • The Asian Infrastructure Investment Bank (AIIB). The AIIB is an international financial institution, erected to support the building of infrastructure in the Asia-Pacific region, launched in 2015 counting 57 prospective founding members. Most Asian (except Japan) and European countries participate in the AIIB.

If we look closely we can observe that China is slowly pushing for more integration of the clubs mentioned above with OBOR. For example, in May 2015 Xi Jinping and Vladimir Putin signed a decree on cooperation in tying the development of the EEU with OBOR and in December 2015 the first discussions were held to integrate the SCO with OBOR. (Chinese state press agency Xinhua has a dedicated Silk Road web page that covers developments regarding OBOR and the SCO, EEU and AIIB.)

Kazakhstan recently opened a logistics terminal in Lianyungang, China, and completed the construction of its Zhezkazgan-Beineu railway to create a better connection for China through Kazakhstan to the Caspian seaports. “All these projects are aimed at increasing the transit potential of both our country and the whole of the Eurasian Economic Union,” said Nazarbayev at the AEF on 22 May 2015. “This is the new Silk Road. Forty countries have showed an interest in free trade with the Eurasian Economic Union. But we must not stop there. I propose to create a new … Eurasian transcontinental corridor.”

Screen Shot 2016-03-15 at 11.23.11 pm
Kazakhstan has a strategic position in Eurasia.

Coincidentally, also on 22 May 2015 the Silk Road Gold Fund was launched at a conference in Xi’an, China, with the subject of “Serve the New Strategy of the Silk Road, Lead the New Development of Gold”. From iFeng we can read (exclusively translated by BullionStar):

Representatives from gold and financial institutions talked freely about bringing gold’s superiority into full play, seizing the historic and strategic opportunity of One Belt One Road [OBOR], strengthening bank-enterprise cooperation and financial-industrial combination, and leading the transformation and upgrading of the gold industry under the economic background of the new normal.

Time will tell to what extent the cooperation between the SGEI and the AIFC will execute what this quote describes. Namely, increasing gold business in the economies along the Silk Road.

A few days later in May 2015 China unveiled the Silk Road Gold Fund to the English-speaking world. From Xinhua:

The fund, led by Shanghai Gold Exchange, is expected to raise an estimated 100 billion yuan in three phases.

…Among the 65 countries along the routes of the Silk Road economic belt … there are numerous Asian countries identified as important reserve bases and consumers of gold.

…About 60 countries have invested in the fund, which will in turn facilitate gold purchase for the central banks of member states to increase their holdings of the precious metal, …

I’m not sure if the National Bank of Kazakhstan will buy its gold through the SGEI anytime soon, more likely some of Kazakhstan’s gold production will be sold through the Chinese exchange.

From all information presented above the intensions of China and numerous Asian countries with respect to gold and the Silk Road are clear. Through OBOR China will not only use its foreign exchange reserves for infrastructure in Eurasia to boost growth and strengthen economic ties and in the region, additionally, gold business is developed and gold is promoted as a key reserve currency.

Koos Jansen




Another record for silver eagle sales: Another 1 million oz has been allocated on March 14.

(courtesy coinweek)


American Silver Eagle – One Million More Ounces Allocated March 14

American Silver Eagle - 1 oz silver bullion coins

By CoinWeek News Staff ….

The week of Monday, March 14 sees another one million ounces of the 2016 American Silver Eaglesilver bullion coin allocated for purchase by authorized dealers. This brings the March month-to-date allotment, starting with the February 29 allocation, to three million ounces.

Out of that three million, the United States Mint has sold 1,972,500 coins (ounces) so far this month.

To compare, February saw a sales total of 4,782,000 coins and January 2016 saw the sale of 5,954,500 silver eagle bullion coins. But we’re only approximately halfway through March, so a final monthly sales figure of at least four million ounces is not out of the question–especially if the March 21 allotment is yet another million.

The Mint has been fairly predictable this year, with relatively high allocations every week since the bullion version was released on January 11. This makes sense; high demand for the series from both foreign and domestic consumers is anticipated since 2016 marks the 30th anniversary of the American Eagle silver bullion coin program. President Ronald Reagan initiated the program in 1986.

Much of that collector interest has been generated by the special commemorative edge lettering found on the Proof and Uncirculated versions. Customers should note, however, that the 2016 bullion issue retains the usual reeded edge.

It should also come as no surprise that Mint officials are anticipating another record year for sales of the series. Even if the Mint maintained a rate of one million ounces allotted per week, sales would top 2015’s record-breaking 47 million ounces (coins). 44,006,000 ounces of the .999 fine silver bullion coin were sold in 2014, and 42,675,000 were sold in 2013.

The Mint’s weekly allocations of silver eagle bullion coins are distributed to the consumer and investor via a network of authorized dealers. This network consists of sellers (coin dealers, precious metals traders, financial companies, et al.) approved by the U.S. Mint to distribute bullion product.

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 DOWN to 6.5200 / Shanghai bourse  IN THE GREEN, UP 6.11 OR 0.21% :  / HANG SANG CLOSED DOWN 31.07 POINTS OR 0.15%

2 Nikkei closed DOWN 147.62  OR 0.83%

3. Europe stocks ALL MIXED /USA dollar index UP to 96.85/Euro DOWN to 1.1087

3b Japan 10 year bond yield: RISES  TO -.031%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 113.13

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  37.12  and Brent: 39.38

3f Gold UP  /Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES  to 0.316%   German bunds in negative yields from 7 years out

 Greece  sees its 2 year rate RISE to 9.02%/: 

3j Greek 10 year bond yield FALL to  : 8.73%   (YIELD CURVE NOW INVERTED)

3k Gold at $1232.50/silver $15.27 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble UP 18/100 in  roubles/dollar) 70.77

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 .9881 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0956 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 7ear German bund now  in negative territory with the 10 year RISES to  + .316%

/German 7 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 1.95% early this morning. Thirty year rate  at 2.71% /POLICY ERROR)

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

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

All Eyes On Yellen: Futures Flat Ahead Of Fed Meeting Expected To Usher In More Rate Hikes

Today Janet Yellen and the FOMC will go back to square one and try to reset global expectations unleashed by the ill-fated December rate “policy mistake” hike, when at 2pm the Fed will announce assessment of the economy (even if not rate hike is expected today) followed by Yellen press conference half an hour later. Just like in December the Fed will be forced to telegraph that it is hiking rates as a signal of a strengthening US, and global, economy where “risks are balanced” and hope that the subsequent global reaction will not be a rerun of what happened in January and February when confusion about the Fed’s intentions led to a global market rout.

Just as important this time around is that as of yesterday, stocks have largely entered a buyback blackout period, meaning the biggest (and according to many, the only) marginal buyer of equities has been sidelined for the next month.

Financial markets are being swayed by divergent monetary policies in the world’s leading economies. Fed funds futures show the odds of a U.S. rate increase by the end of June have shot up to 54 percent from about 6 percent in the past month as data has indicated growth recent has strengthened modestly and taken off the immediate risk of a recession off the table.

The U.S. currency will probably respond favorably to signals from the Fed, which will look to keep its options open, Alan Ruskin, Deutsche Bank AG’s global co-head of foreign-exchange research in New York, wrote in a research report. “This also means leaving the door wide open to a June hike, and even ajar to an April hike,” he wrote, saying the March payrolls report and global risk sentiment will be important deciding factors. “The market will see this as more hawkish than currently discounted.”

“We’re waiting for U.S. monetary policy so its difficult for investors to rush in and buy,” said Chihiro Ohta, general manager of investment information at SMBC Nikko Securities Inc. in Tokyo. “We need to see whether we’ll have one or two rate hikes this year, and whether the next one will come in June.”

As a result Fed officials are broadly expected to reduce the number of rate hikes they see in 2016 and leave the target range for the federal funds rate unchanged at 0.25 percent to 0.5 percent.

So as we await Yellen in a few hours, European stocks rose initially then took a modest leg lower following downbeat comments from the UBS CEO detailing that 2016 has remained a challenging year for the company while markets speculated about the Credit Suisse CFO dropping out of a Morgan Stanley conference. The sentiment has now breached into the broader European sphere with the likes of Deutsche Bank lower by 2.2% and European stocks in the red. Asian equities fell as Japan’s Topix extended Tuesday’s retreat from a five-week high, while China closed modestly higher after Premier Li Keqiang said that China isn’t headed for a hard landing and the government will ensure expansion hits targets.

Meanwhile, WTI has halted its 2-day slide after API data overnight showed U.S. crude stockpiles climbed last week around half expectations for today’s more definitive EIA data. The price extended gains gains after Qatar said it would host an April producers meeting where the topic would be what else, a production freeze, one which however would not include Iran; Brent recovers above $39, moving in parallel w/ WTI market.

“OPEC/non-OPEC is doing its best to keep the verbal intervention going, indicating a production freeze might be done without Iran’s participation,” said Ole Hansen, Saxo Bank head of commodity strategy. “Prices have also been helped by API data yesterday. We broke some technical levels and that attracted selling, but with the API data and renewed talk of an April mtg this has enabled prices to resume higher.”

The dollar strengthened against most major currencies while US equity futures are broadly unchanged.

Market Snapshot

  • S&P 500 futures up 0.1% at 2008
  • Stoxx 600 down 0.1% to 340
  • FTSE 100 up 0.2% to 6154
  • DAX up 0.6% to 9997
  • German 10Yr yield down less than 1bp to 0.31%
  • Italian 10Yr yield down 2bps to 1.35%
  • Spanish 10Yr yield down 2bps to 1.5%
  • MSCI Asia Pacific down 0.6% to 126
  • Nikkei 225 down 0.8% to 16974
  • Hang Seng down 0.2% to 20258
  • Shanghai Composite up 0.2% to 2870
  • US 10-yr yield down 1bp to 1.96%
  • Dollar Index up 0.19% to 96.81
  • WTI Crude futures up 1.6% to $36.92
  • Brent Futures up 1.2% to $39.19
  • Gold spot up less than 0.1% to $1,233
  • Silver spot up less than 0.1% to $15.29

Top Global News

  • Oracle Cloud Growth Shows Promise as Company Tops Estimates: 3Q adj. EPS 64c, est. 62c; sales of key cloud-based products exceeded the co.’s outlook and Co-Chief CEO Safra Catz said growth rates could rise further
  • Trump, Clinton Tighten Grip as Kasich Wins Ohio; Rubio Drops Out: Trump lost Ohio to John Kasich, Florida Senator Marco Rubio suspended campaign after losing in home state; Rubio’s Disappointing Presidential Run Ends With Florida Defeat
  • Kasich Vows to ‘Go All the Way to Cleveland’ After Ohio Victory
  • LSE to Merge With German Rival to Create European Titan: LSE’s equity holders will own 45.6% of the enlarged group, while Deutsche Boerse stockholders will get the remaining 54.4%
  • Apple Takes Swing at U.S. Over Demand to Help Unlock IPhone: Apple said in a court filing Tuesday that forcing it to create software to degrade iPhone security features would inevitably endanger the privacy of hundreds of millions of people
  • Chipotle Forecasts First-Quarter Loss as Food Crisis Lingers: Sees 1Q loss at least $1-shr vs est. EPS 3c; Feb. comp sales down 26.1% vs est. down 23%
  • Most U.S. Dealmakers See Volume Drop This Year After Record 2015: Brunswick survey finds 70% expect N. America activity to fall
  • FCC May Circulate Draft Order Approving TWC, Charter Deal: WSJ: FCC Chairman Tom Wheeler likely to circulate draft order approving Charter Communications deal to buy Time Warner Cable with certain conditions, WSJ reports
  • Mitel Said in Talks to Buy Polycom: Reuters

Looking at regional markets, we start in Asia where stocks traded mixed following the lacklustre close from Wall St. with price-action muted as participants remained cautious ahead of today’s FOMC decision. ASX 200 (+0.2%) saw choppy trade as financial and tech gains counter-balanced weakness in material names. Nikkei 225 (-0.8%) underperformed amid losses in financials and a firmer JPY post-BoJ policy decision, while Sharp shares declined around 10% as Foxconn continued to delay a deal agreement. Chinese markets were also indecisive amid a lack of catalysts to spur trade, with the Shanghai Comp (+0.2%) relatively flat. 10yr JGBs initially extended losses following yesterday’s BoJ inaction although prices have rebounded from their worst levels, with the BoJ in the market for JPY 1.27tr1 of government debt ranging from 1yr-10yrs.

BoJ Governor Kuroda said will ease on all 3 dimensions if necessary and added there is still a possibility of further rate cuts if additional easing is judged to be appropriate. Kuroda added he cannot say now which tools would be utilised if they decided to ease further and said it was theoretically possible to reduce rates when asked if BoJ could lower rates to -0.5%.

China’s Premier Li said downward pressures on the economy continue to expand, but added he is fully confident in long-term growth prospects. Premier Li also stated that China find new jobs for workers in over capacity sectors and that China is willing to spend more than planned for re-employment.

Asia Top News

  • Kuroda Says Minus 0.5% Rate Is Theoretically Possible for Japan: Governor says BOJ has quite a lot of room to cut key interest rate further
  • Asia Hedge Funds Had Worst-Ever Start to Year, Eurekahedge Says: Returns are also the worst among major global regions
  • China’s Li Outlines Dual Growth-Reform Plan as Challenges Mount: Chinese premier says economic reforms and development are not in conflict
  • Singapore Wireless Battle Heats Up as Entrant Taps Goldman, DBS: MyRepublic enlists banks to help raise S$250m
  • BlackRock’s India Venture Buys Long Bonds as Rate Cut Room Seen: Quarter-point RBI rate cut more or less priced in, fund says

In Europe, equities initially kicked off the session in the green today, benefitting from upside in the energy and materials sector (Euro Stoxx: 0.0%). However, stocks were then dragged lower by the SMI (-0.2%) amid softness in UBS (-3.0%) and Credit Suisse (-4.6%) following downbeat comments from the UBS CEO detailing that 2016 has remained a challenging year for the Co. while markets also speculate about the Credit Suisse CFO dropping out of a Morgan Stanley conference, although the Co. have denied to comment on such speculation. Nevertheless, the sentiment has now breached into the broader European sphere with the likes of Deutsche Bank lower by 2.2% and European stocks in the red.

European Top News

  • Volkswagen Europe Market Share Continues Drop Amid Recalls: Volkswagen’s brands accounted for 24% of new auto registrations in Feb. vs. 25.4% y/y; industrywide European car sales jumped 14% in February to 1.09m vehicles
  • Munich Re Continues Share Buybacks Amid Lower Profit Outlook: Plans to repurchase EU1b of its stock before 2017 shareholder meeting; targets EU2.3b-EU2.8b FY profit after EU3.1b in 2015
  • BMW CEO’s Strategy Puts Focus on Electric, Luxury Vehicles: Plans to roll out more electric cars and add self-driving features faster than rivals, also roll out more sport- utility vehicles; targets “slight’’ rise in 2016 pretax profit, revenue
  • Bilfinger Scraps Payout as Widening Losses Pile on Pressure: Won’t pay a div. for 2015; net losses widened almost 7-fold
  • Zodiac Shares Tumble After Profit Forecast Cut an Eighth Time: Current operating income in the year ending Aug. 31 will “come in close to” the amount reported last year
  • Osborne Seeks Low-Cost Vote Winners as Budget Tightens Austerity: Schools in England to be freed from local- authority control, school days will lengthen under GBP1.5b package of measures designed to improve education standards

In FX, it has been mostly a morning of consolidation in Europe today, with the FOMC ahead keeping most players on the side-lines for now.

The Bloomberg Dollar Spot Index rose 0.2 percent, climbing for a third day on bets the Fed will reaffirm its commitment to raising interest rates. The U.S. currency will probably respond favorably to signals from the Fed, which will look to keep its options open, Alan Ruskin, Deutsche Bank AG’s global co-head of foreign-exchange research in New York, wrote in a research report. “This also means leaving the door wide open to a June hike, and even ajar to an April hike,” he wrote, saying the March payrolls report and global risk sentiment will be important deciding factors. “The market will see this as more hawkish than currently discounted.”

The yen retreated 0.5 percent to 113.70 per dollar, after strengthening 0.6 percent on Tuesday as the Bank of Japan kept its policy rate at minus 0.1 percent at a review. The central bank has quite a lot of room to cut the key rate further and theoretically it could go to minus 0.5 percent, Governor Haruhiko Kuroda told parliament on Wednesday.

China’s yuan was headed for its biggest three-day loss since January as the central bank lowered its daily fixing for the currency amid concern a potential tax on foreign-exchange transactions will hurt investor sentiment. It slipped 0.14 percent from Tuesday’s close. Indonesia’s rupiah slumped 0.7 percent before a central bank policy meeting on Thursday at which interest rates are forecast to be cut.

In commodities, oil prices were boosted today as producers agreed to meet in April, WTI rose USD 0.50/bbl and a smaller than expected build in the APIs. West Texas Intermediate crude climbed 1.3 percent to $36.82 a barrel, after sliding 5.6 percent over the past two days as Iran indicated it won’t be joining other major producers in freezing output. It’s tumbled 38 percent since the middle of last year.

U.S. crude inventories increased by 3.2 million barrels last week, according to a Bloomberg survey ahead of government data Wednesday, with a report from the American Petroleum Institute said to indicate an increase of 1.5 million barrels. Total SA Chief Executive Officer Patrick Pouyanne sees the oil market back in balance during 2016, he said in an interview with Le Progres newspaper.

Copper was little changed in London, while nickel added 0.2 percent. Gold for immediate delivery fell 0.1 percent to $1,231 an ounce, set for the lowest close in two weeks. It’s still up 16 percent for the year.

“Gold has pulled back over the last few days, which was long overdue after an otherwise continuous rally since the start of 2016,” Jordan Eliseo, Sydney-based chief economist at trader Australian Bullion Co., said in an e-mail. “All eyes will be on the Fed meeting, and any clues as to potential pace of monetary tightening throughout 2016.”

Bulletin Headline Summary from Bloomberg and RanSquawk

  • Softness in banking names has dragged European equities in the red amid downbeat comments from the UBS CEO and reports of the Credit Suisse CFO dropping out of a conference
  • FX markets have seen a morning of consolidation in Europe today, with the FOMC ahead keeping most players on the side-lines for now.
    Looking ahead, highlights include FOMC Rate Decision, UK Budget US Housing Starts, US Industrial Production, New Zealand GDP
  • Treasuries little changed in overnight trading, global equity markets mixed before today’s FOMC rate decision and updated SEP at 2pm ET to be followed by Yellen presser at 2:30pm ET.
  • Treasuries are the world’s worst-performing bonds over the past month on speculation the Federal Reserve will signal it’s sticking to its plan to raise interest rates — even if it delays the moves
  • The Bank of Japan has quite a lot of room to cut its key interest rate further and theoretically it could go to minus 0.5 percent, Governor Haruhiko Kuroda said in parliament; Japan’s regional banks are shifting their investments toward riskier assets abroad or outside of fixed income as yields below zero erode the appeal of Japanese government bonds
  • Oil producers from OPEC and beyond are finalizing a plan to discuss freezing output at a meeting in Qatar in mid-April, the latest move in a campaign by financially-stricken crude exporters to shift the dynamics of an over-supplied market
  • If Saudi Arabia and Russia were to pull off a diplomatic coup and persuade producers all over the world to join their oil-output freeze, it would have little impact on the global surplus
  • U.K. unemployment held at its lowest rate for a decade and wage growth ticked higher as the labor market continued to improve
  • Donald Trump’s road to securing the Republican presidential nomination got longer while Hillary Clinton’s got shorter as the split decision on Trump in two critical states in Tuesday’s voting increased the possibility of a chaotic Republican national convention
  • $8.81b IG corporates priced yesterday; WTD $17.11b, MTD $103.53b, YTD $397.78b; $350m HY priced yesterday, $6.65b MTD, $21.5b YTD

US Event Calendar

Central Banks

  • 2:00pm: FOMC Rate Decision (Lower Bound), est. 0.25% (prior 0.25%)
  • FOMC Rate Decision (Upper Bound), est. 0.5% (prior 0.5%)
  • 2:30pm: Fed’s Yellen holds news conference

DB’s Jim Reid concludes the overnight wrap

Today is one of those days to get the pulses racing as we hear the latest from the Fed after their FOMC. The probability of a June hike has gone up to 54% (from 2% at the lows last month) and the Fed are probably going to be in a more confident mood than they were at the end of January. For reference as to prevailing conditions we’ve tracked where important assets were the day before the Dec and Jan meetings and where they are now. The S&P 500 was 2,043, 1,904 and 2,016 now. 10y Treasuries were 2.267%, 1.995%, and 1.956% now. WTI Oil has gone from $37.35/bbl to $31.45/bbl to $36.86/bbl now. US IG spreads from 165bps to 190bps to 175bps now. US HY from 688bps to 766bps to 663bps now. Finally the 5y5y inflation swap forward has gone from 2.145% down to 1.920% and back to 1.952% now. So if you looked at current vs Dec the world appears fairly calm. However the volatility in between needs to be acknowledged.

As a prelude to today’s main event, DB’s Peter Hooper expects the Fed to be very much in wait and see mode but also see risks as close to balanced and a rate hike by June as likely if economic and financial conditions develop along the lines they are expecting. Economic data on the whole has been improved since January (yesterday’s retail sales data aside – which we go into below) which should allow the FOMC to sound a bit more upbeat. Wage inflation indicators are pointing to a small net acceleration on balance, while the price inflation picture, although still mixed, is also moving in the right direction. US financial conditions, after deteriorating sharply earlier this year, have returned most of the way to their end-2015 levels in recent weeks. Peter thinks that on balance, the BoJ and ECB actions will not restrain the Fed. Clearly a lot of the focus will also be on the dot plots which will likely be revised down with the median number of rate hikes this year reduced from four to three. It’s also possible we see the longer-term neutral dot move down from 3.5% to 3.25%. All this at 6.00pm GMT tonight.

Price action and activity this week leading into the meeting, has been very subdued. Yesterday was another lower than average volume day (by over 25%) for the S&P 500 with the index closing -0.18% and a second consecutive small daily loss, with the intraday range of 0.53% taking over from Monday as the smallest this year. Prior to this we’d seen European equities snap two days of strong gains (Stoxx 600 closing -1.10%), but it was credit markets which were the under-performers again. Itraxx Main was 4bps wider by the close of play and combined with the weak day on Monday (+5bps), has now given up close to half of the post ECB gains. Crossover was 11bps wider also, while financials also had a rough day (iTraxx senior and sub fins +5bps and +15bps respectively) despite the FT reporting that yesterday was the biggest supply day for new financials issuance in Europe in 15 months. US credit markets had a weak day too with CDX IG ended 4bps wider also.

Another weak day for commodity markets more than played its part with WTI (-2.26%) extending its poor start to the weak and going below $37/bbl in the process, seemingly on the Iran news we touched on yesterday. Base metals were also soft (Aluminium -1.46%, Zinc -2.35%) while Iron Ore tumbled 4.81% and has now plummeted an impressive 17% from those highs made just over a week ago. Also weighing on sentiment (and most notably the healthcare sector) was the latest news from the big North American drug developer and distributor Valeant. As well as slashing full year profit guidance for the second time in just five months, prospects of a technical default on its $30bn debt load was also raised unless the company can negotiate an extension on its 10-K report. That saw the shares close down -51.49% yesterday while the bonds were also hammered. The longest dated 2025 bonds were down over 10pts and are trading around 77c, while bonds due in just two years were down over 7pts and quoted around 91c. A big deal given the sheer quantum of debt and the fact that the company is the 4th largest US HY corporate issuer.

This morning in Asia we’ve seen markets generally follow the lead from the US and Europe yesterday with pre-FOMC caution in full display. Despite a bit of a rebound for Oil, the Nikkei (-0.75%), Hang Seng (-0.14%) and ASX (-0.15%) are all down. China is a bit more mixed with the Shanghai Comp (+0.31%) in positive territory after the midday break, but with the Shenzhen (-0.63%) lower. Credit indices in Asia and Australia are a tad wider. Meanwhile there’s been some further comments from Bank of Japan Governor Kuroda, who, when questioned this morning has indicated that ‘an additional rate cut to -0.5% is possible, in theory’.

Elsewhere the other main news overnight is the latest on the US President race where Hilary Clinton is one step closer to securing the Democratic nomination with victories in Florida, Ohio and North Carolina over Sanders. In the Republican race, Trump has secured victory in the important Florida vote as well as Illinois and North Carolina. Kasich has secured Ohio, while Rubio has now announced that he is ending his campaign.

A quick recap of that US data now. Retail sales last month were a little better than expected (with the exception of the control group component), but it was the material downward revisions to the January readings which most disappointed. In February the headline (-0.1% mom vs. -0.2% expected) and core (+0.3% mom vs. +0.2% expected) both beat, however there was a six-tenth downward revision and five-tenth downward revision to the respective January prints to -0.4% mom and -0.1% mom respectively. The control group component came in flat last month (vs. +0.2% expected) while the January reading was also taken down four-tenths to +0.2% – the most concerning given its input into GDP. That gives a very different read to retail sales so far this year, while the Atlanta Fed downgraded their Q1 GDP forecast for this year to 1.9% from 2.2% previously on the back of the data.

Elsewhere, the rest of the data was a bit of a mixed bag. Headline PPI last month was in line following a -0.2% mom decline, while the core was also as expected at +0.1% mom. The big positive surprise came from this month’s empire manufacturing print which saw a robust 17pt rise to +0.6 (vs. -10.5 expected) and the highest since July 2015. Business inventories nudged up +0.1% mom in January (vs. 0.0% expected) and finally the NAHB housing market index remained unchanged this month at 58.

Treasury yields did actually rise post the data, although were little changed by the close of play with the 10y benchmark hovering around 1.970%. Sovereign bond yields in Europe had previously crept higher while some of the sharper moves were reserved for currencies. Commodity-sensitive currencies were the big underperformers, while Sterling tumbled over 1% as investors reacted to the latest Brexit referendum poll and today’s looming Budget. On the former, an ORB poll conducted for the Telegraph newspaper showed that voting is tight, but the number of votes for the leave campaign slightly outweighed the stay campaign at 49% vs. 47%. However interestingly the same poll also showed that, accounting for the likelihood of voting being taken into account, the leave campaign actually rose to 52% versus 45% to remain.

Taking a look at the day ahead now then, where this morning in Europe the bulk of the attention will be on the UK where we will first receive the latest employment report (no change in the unemployment rate expected) followed thereafter by the release of the Budget. This afternoon in the US, its another busy session with the most notable release being the February CPI report where currently expectations are running for -0.2% mom at the headline and +0.2% mom at the core. February housing starts and building permits data is due at the same time, before the February industrial production (-0.3% mom expected), capacity utilization and manufacturing data is released. Of course this is all before the main event tonight with the conclusion of the March FOMC meeting, the outcome of which we will know at 6.00pm GMT with Fed Chair Yellen due to speak shortly after.

Let us begin;







Late  TUESDAY night/ WEDNESDAY morning: Shanghai closed UP BY 6.11 POINTS OR 0.21% , /  Hang Sang closed DOWN by 31.07 points or  0.15% . The Nikkei closed DOWN 142.62 or 0.83%. Australia’s all ordinaires was UP 0.15%. Chinese yuan (ONSHORE) closed DOWN at 6.5200.   Oil ROSE  to 37.12 dollars per barrel for WTI and 39.38 for Brent. Stocks in Europe so far ALL MIXED . Offshore yuan trades  6.52118 yuan to the dollar vs 6.5200 for onshore yuan/china’s industrial production collapsed along with retail sales. jAPAN RE SIGNALS that they may continue with nirp a little longer which sends the USA/Yen spiraling northbound/markets in Japan tumble (see below). Yesterday China signals that they are going to tax financial transactions


report on Japan and CHINA


Kuroda again does a U Turn:  we are now pack to a potential increase in NIRP: down goes the Yen!  China’s decrease in the offshore yuan ends the short squeeze so Mr Kyle Bass can continue with his shorting!


(courtesy zero hedge)

Kuroda U-Turn & PBOC Devaluation Send Yen, Yuan Tumbling In Early Asia Trading

3rd consecutive day of weaker Yuan fixhas sent Offshore Yuan tumbling again back to 1-week lows. However, it is Kuroda’s apparent U-turn on NIRP (dropping further rate cuts possible from the statement but now commenting that anything is possible) has sent Yen down hard (after strength during the US day session) almost back to pre-BOJ levels.

Yuan short-squeeze is over… for now

Bear in mind that while policymakers will crow about the apparent stability in Yuan (against the USD), based on the RMB Basket, Yuan has been notably weakening all year…

Kuroda jawbones JPY back lower…


And so it did…

Bring it on Janet…

The Chinese consumer has been hit hard by the layoffs and the deteriorating conditions inside China:
(courtesy zero hedge)

“At The Moment, It’s Carnage” – The Startling Truth About China’s ‘Strong Consumer’

One of the biggest false narratives pitched by the mainstream to mitigate concerns about a global recession, is that even as China’s massively overlevered manufacturing sector is careening into a hard landing, China’s “strong” consumer base will keep the country’s economy afloat (a narrative shared with the U.S.), even though as reported over the past weekend retail sales soundly disappointed expectations, while the latest proxy of China’s consumer strenth, namely “record” box office receipts, was recently uncovered to have been – like everything else in China – mostly fabricated.

There is one main problem with this: China’s consumer is neither strong, nor resilient, and is in fact getting weaker, and more angry by the day as China’s labor conditions continue to deteriorate: just yesterday we reported that “Enormous Crowds” Of Unemployed Chinese Miners Take To The Streets, Clash With Riot Police. Granted this is taking place in China’s industrial region, where massive overcapacity has led many local companies to the verge of bankruptcy, however the weakness has clearly spilled across to all other parts of the country.

An overnight report confirms as much: according to Reuters, “retailers in China are shedding staff, slowing expansion plans and seeing stocks pile up in warehouses as shoppers tighten their belts – a major headache for a country that has pinned its hopes on consumers to drive economic growth.”

Hardly supportive of the “strong Chinese consumer” narrative, Reuters adds that with that growth running at its slowest in a quarter of a century, China’s consumption patterns are changing, with wealthy middle-class households trading down from up-market to more affordable brands, and poorer families paring back on even basic purchases.

China’s top 50 retailers saw sales fall 6 percent at the start of the year, and sales of basic goods from noodles to detergent grew just 1.8 percent at the end of last year, down from over 9 percent just three years ago, according to Kantar Worldpanel data.

The weak sales of even cheap household goods underlines the challenge for China, desperate to get its 1.4 billion people to spend and give some fresh impetus to the economy.

Confirming that the Chinese consumer is anything by strong is Yang Shunjie, 28, a Shanghai-based client manager at a state-owned firm, who earns between 10,000-15,000 yuan ($1,500-$2,300) a month who said that “maybe before, if I wanted something I’d just go and buy it. Now I only buy things I really need.” He said he also shops more online where prices are cheaper and will wait for end-of-season discounts to buy new clothes.

And while the media narrative is desperately holding on to the lie, for many international names who have targeted Chinese consumers in sectors from retail to luxury and even fast-food, where they banked on continued growth, the truth has become a huge problem.

Procter & Gamble whose China products include Pampers diapers and Tide laundry detergent, said in January its sales were “significantly down” compared with 2014. Infant formula maker Mead Johnson Nutrition Co said price competition and a shift to smaller shops and online hit sales.

A customer looks at toothpaste products at a supermarket in
Shanghai, China, March 10, 2016.

“We are seeing shifts within retail. High-end luxury goods have had a very good few years, but that’s coming to an end. Tastes are changing,” said Mark Williams, chief Asia economist at Capital Economics in London.

Earlier today we got a stark warning about demand in China’s ultra luxury segment from none other than Patek Philippe Chairman Thierry Stern who said many watchmakers who relied too much on China aare cutting jobs, and added that “I strongly believe that we still have to wait a few years before mainland China is going to catch up.” Stern says, citing anti-corruption campaign.

Third party measures confirm as much: Westpac’s most recent consumer survey showed sentiment at its lowest since October. “The February update points to continued weak conditions and elevated job-loss fears again weighing on the consumer mood,” said Senior Economist Matthew Hassan, adding that any loss of momentum for consumer demand could raise the risk that growth stays weaker for longer.

Nobody has been hit harder in China, however, than retailers: executives and consumer goods makers said China’s slow growth is punishing the sector and forcing many to cut back, focus on smaller, faster-growing cities and offer more discounts.

“We are struggling to adapt as sales move online or to small mom-and-pop stores,” said a senior sales executive at a major Western consumer goods firm. “At the moment, it’s carnage.”

What measures are retailers taking to deal with this “carnage”? Actully none, and just like in the U.S., they are merely stockpiling inventory in hopes that the current weakness will pass soon.

According to the sales executive quoted above, inventory levels at some clients had jumped to as much as nine months, from a normal average of around two weeks. For retailers and consumer goods brands alike, that means re-thinking their sales pitch. China-based advertising executives say some are adopting a two-tier marketing strategy: imported, premium ranges to target more affluent consumers, but also buying up popular and affordable local brands.

Just like with the U.S. oil market where inventory stockpiling is off the charts on hopes a price recovery is imminent, all this excess product will sooner or later hit the market, leading to liquidation dumping, massive price cuts, and another global wave deflation.

Meanwhile, going back to the truth behind China’s “strong consumer” lie, we find that the weak consumer demand has triggered a spike in profit warnings from China-focused consumer firms. Some examples:

Food group Tingyi, grocery chain Lianhua Supermarket (0980.HK), China Outfitters and Man Sang Jewelleryare among those blaming poor sales on “weakening consumption” and an expectation of lower prices. Aka deflation.

“This year hasn’t been great, in fact up until now business has been slow,” said Chen Lu, a sales assistant at household goods chain Enjoy Easy in Shanghai. Chen added shoppers who spent 100-200 yuan ($15-$30) per visit last year on products from clothes hangers to sponges were spending a lot less. “Now each person might spend just a few dollars.

Sun Art, China’s second-biggest hypermarket operator, said last month that 2016 would be a “challenging year” for retailers. Its 2015 profits declined 16 percent.

Most troubling is that the mainland weakness has now spilled across the border to Hong Kong: retail sales there had their biggest fall in 13 years in 2015, and the slump has continued this year.

“Most of our members saw double digit falls in sales (in February),” Thomson Cheng, chairman of the Hong Kong Retail Management Association, said on a conference call this month, adding many retailers were cutting staff to stay afloat.

“We are all very worried about the situation.”

Which, of course, is music to the market’s ears: the more worries, the more certain monetary (and fiscal) stimulus becomes; stimulus which as 8 years of “developed market” case history has shown, does little to boost the economy but does miracles for risk assets.


Yesterday we reported on the horrible results from Jefferies.  Today it is Deutsche bank reporting that it will not be profitable for the entire year.  The stock crashed!!
(courtesy zero hedge)

Deutsche Bank Tumbles After CEO Says Bank Won’t Be Profitable This Year

Back in January, Deutsche Bank reported what were variously described as “horrible,” “grim” results.

The net loss for 2015 came in at roughly $7 billion, the first annual loss since the crisis. The abysmal year was capped off by €2.1 billion of red ink in Q4 of which some €1.2 billion was attributable to litigation.

The Q4 breakdown – which came a few days after CEO John Cryan initially reported how bad 2015 truly was – was a nightmare. Revenues plunged 30% in corporate banking and securities where provisions for credit losses jumped from just $9 million in Q4 2014 to $115 million. Citi questioned whether the bank’s investment bank model is in “structural decline.”

“We think that the bank is in for another difficult year in that guidance is that ‘2016 peak restructuring year’,” BofA said, adding that “it looks like revenues are under a lot of pressure, yet adjusted costs are guided to be flat with another €1bn of restructuring costs.”

Citi sees an additional €3.6 billion in litigation for 2016.

Cryan – who took the reins from Anshu Jain and Jürgen Fitschen (who is still hanging around) last summer – has cut thousands upon thousands of jobs as part of a desperate attempt to restructure the German behemoth which some say is in very real trouble.

Underscoring that assessment are comments out today from Cryan who spoke at a conference in London.

We’ve said this year is not going to be a profitable year, we may make a small profit, we may make a small loss, we don’t know,” he stammered.

But then again, maybe he does know, because moments later he said this: “There’s a lot of stuff we have to get done this year, so this year we’re not going to be profitable.”

Right. There’s “a lot of stuff to get done this year,” but making a profit isn’t one of them.

Meanwhile, according to Zeit, the bank is cutting its German branches to about 500.

As for the stock… well, it’s getting crushed:

Which reminds us of what we said in January: “don’t be surprised to see the equity trading in the single digits by year end.”

Still liking the job John?



The unintended consequences of NIRP: rising asset bubbles, namely housing prices.

Just take a look as to what is going on in Sweden

(courtesy zero hedge)

“Sweden Most At Risk Of Asset Bubble” Moody’s Warns, After Taking A Look At Swedish House Prices

Last September, in the aftermath of Sweden going full NIRP, we warned that “Sweden Goes Full Krugman, Gets Massive Housing Bubble“, in which we showed the unprecedented surge in Swedish home prices, which have been the one asset class to “benefit” the from the Riksbank’s ultra loose monetary policy hoping to stimulate inflation, even as overall inflation has failed to materialize.

Since then things have only gone more surreal, and the chart below shows what has happened to Swedish home prices in recent months.

Today, six months after our most recent observations on the state of the Swedish housing bubble, Moody’s chimes in and warns that as a result of NIRP, the country is most at risk of an “ultimately unsustainable asset bubble”:

… the unintended consequences of the ultra-loose monetary policy are becoming increasingly apparent — in the form of rapidly rising house prices and persistently strong growth in mortgage credit”, adds Ms Muehlbronner. In Moody’s view, these trends will likely continue as interest rates will remain low, raising the risk of a house price bubble, with potentially adverse effects on financial stability as and when house prices reverse trends. In all three countries, households are highly leveraged, and while they also have high levels of financial assets, returns on these assets will be under increasing pressure if the negative interest and yield environment persists.

And adds:

Moody’s believes that the Riksbank will find it difficult to achieve its objective of significantly pushing up consumer price inflation in a deflationary global environment, while the sustained and strong growth in mortgage lending and house prices risks leading to an (ultimately unsustainable) asset bubble.

We expect this latest warning to be soundly ignored because after all, what else can the central banks do in this global coordinated effort to stimulate economies with ever more debt, which by definition can only work if rates are not only at zero, but increasingly more negative.

* * *

Here is Moody’s with “Negative interest rates in Switzerland, Denmark, Sweden are having unintended consequences, with Sweden most at risk of asset bubble

The central banks of Switzerland, Denmark and Sweden (all rated Aaa stable) have been among the first to push policy rates into negative territory. A year into this novel experience, Moody’s Investors Service concludes that, from among the three countries, Sweden is most at risk of an — ultimately unsustainable — asset bubble.

Moody’s report, entitled “Governments of Switzerland, Denmark & Sweden: Negative interest rates have unintended consequences, with Sweden most at risk of asset bubble,” is available Moody’s subscribers can access this report via the link provided at the end of this press release. The rating agency’s report is an update to the markets and does not constitute a rating action.

The three countries’ central banks have lowered their key policy interest rates to the current -0.75% in Switzerland, -0.65% in Denmark and -0.5% in Sweden, albeit for different reasons. The Swiss and Danish central banks were aiming to reverse the intense appreciation pressure on their currencies as a result of the ECB’s introduction of its quantitative easing program. In Sweden, the central bank is focused on lifting persistently low inflation, in the context of the ongoing strong economic expansion.

“In Moody’s view, the Danish and Swiss central banks have achieved their main objective given that the appreciation pressure on their currencies has eased or, in the case of Denmark, even disappeared completely. But this is not the case for Sweden, where the Riksbank has not been successful in engineering higher inflation, while Sweden’s GDP growth continues to be among the strongest in the advanced economies,” says Kathrin Muehlbronner, a Senior Vice President at Moody’s.

“At the same time, the unintended consequences of the ultra-loose monetary policy are becoming increasingly apparent — in the form of rapidly rising house prices and persistently strong growth in mortgage credit”, adds Ms Muehlbronner. In Moody’s view, these trends will likely continue as interest rates will remain low, raising the risk of a house price bubble, with potentially adverse effects on financial stability as and when house prices reverse trends. In all three countries, households are highly leveraged, and while they also have high levels of financial assets, returns on these assets will be under increasing pressure if the negative interest and yield environment persists.

Moody’s is not overly concerned about Switzerland and Denmark as the rating agency considers these trends as “unavoidable” side effects of an otherwise successful policy. Mortgage lending also shows first signs of slowing in both countries, and Switzerland in particular has deployed several macro-prudential tools to reduce risks to financial stability.

However, Moody’s believes the situation is different in Sweden. It believes that the Riksbank will find it difficult to achieve its objective of significantly pushing up consumer price inflation in a deflationary global environment, while the sustained and strong growth in mortgage lending and house prices risks leading to an (ultimately unsustainable) asset bubble.

The Swedish authorities have imposed counter-cyclical capital buffers on their banks, and the country’s banking regulator has announced additional measures with effect from mid-2016 onwards. However, it remains to be seen how effective these measures will be in achieving a material slowdown in credit growth and house prices, while interest will likely remain at negative (or very low) levels.

* * *

The good news is that for now housing prices have nowhere to go but up; once the bubble bursts and prices crash, it will be a different story but we are confident that just like every time an asset bubble goes pop, we will get the usual excuses how  “nobody could have possibly seen it coming”, and so on.


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

Euro/USA 1.1087 down .0020

USA/JAPAN YEN 113.48 UP .384 (Abe’s new negative interest rate (NIRP)a total bust/SIGNALS MAY BE END OF NIRP)

GBP/USA 1.4099 DOWN .0056 (threat of Brexit)

USA/CAN 1.3370 UP.0015

Early THIS WEDNESDAY morning in Europe, the Euro FELL by 20 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: 6.5200 / (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 SOUTHBOUND trajectory RAMP as IT settled DOWN in Japan by 39 basis points and trading now well BELOW that all important 120 level to 113.48 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 56 basis points as it now trades JUST ABOVE the 1.40 level at 1.4099.

The Canadian dollar is now trading DOWN 15 in basis points to 1.3370 to the dollar.

Last night, Chinese bourses AND jAPAN were MIXED/Japan NIKKEI CLOSED DOWN 142.62 POINTS OR 0.83%, HANG SANG DOWN 31.07 OR 0.15% SHANGHAI UP 6.11 OR 0.21%  LAST   / AUSTRALIA IS HIGHER / ALL EUROPEAN BOURSES ARE MIXED, as they start their morning/.

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

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

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

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

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

The NIKKEI: this WEDNESDAY morning: closed DOWN 147.62 OR 0.83%

Trading from Europe and Asia:
1. Europe stocks MIXED

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

Gold very early morning trading: $1233.00 (STRANGE!! COMATOSE ALL NIGHT)


Early WEDNESDAY morning USA 10 year bond yield: 1.95% !!! DOWN 2 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 2.71 DOWN 1 in basis points from TUESDAY night.

USA dollar index early WEDNESDAY morning: 96.85 UP 19 cents from TUESDAY’s close.(Now below resistance at a DXY of 100)

This ends early morning numbers WEDNESDAY MORNING


And now your closing WEDNESDAY NUMBERS


Portuguese 10 year bond yield:  2.96% DOWN 2 in basis points from MONDAY

JAPANESE BOND YIELD: -.079% UP 8  full basis points from MONDAY

SPANISH 10 YR BOND YIELD:1.51% DOWN 1 basis points from MONDAY

ITALIAN 10 YR BOND YIELD: 1.34  DOWN 3 basis points from MONDAY

the Italian 10 yr bond yield is trading 17 points lower than Spain.






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

Euro/USA 1.1202 UP .0096 (Euro UP 96 basis points and for DRAGHI A COMPLETE POLICY FAILURE/also USA folds!

USA/Japn: 112.68 DOWN .408 (Yen UP 41 basis points) and still a major disappointment to our yen carry traders and Kuroda’s NIRP. Today they stated that  NIRP would continue.

Great Britain/USA 1.4236 UP .0081 (Pound UP 81 basis points.

USA/Canada: 1.3138  DOWN  .0213 (Canadian dollar UP 213 basis points as oil was HIGHER IN PRICE (WTI = $38.58)


The Yen ROSE to 112.68 for a GAIN of 41 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 UP 81 basis points, trading at 1.4236 (MORE BREXIT CONCERNS)

The Canadian dollar ROSE by 213 basis points to 1.3138 as the price of oil was UP  today (as WTI finished at $38.58 per barrel)

The USA/Yuan closed at 6.5188

the 10 yr Japanese bond yield closed at -.079% UP 8 FULL basis points in yield

Your closing 10 yr USA bond yield: DOWN 3 basis point from TUESDAY at 1.94% //trading well below the resistance level of 2.27-2.32%) policy error

USA 30 yr bond yield: 2.74 UP 2 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, 95.73 DOWN 93 cents on the day at 2:30 pm


Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for WEDNESDAY

London: UP 35.52 points or 0.58%
German Dax :UP 49.56 points or 0.50%
Paris Cac DOWN 9.63 points or 0,22%
Spain IBEX DOWN 25.50 or 1.69%
Italian MIB: DOWN 33.62 points or 0.18%


The Dow was up 74.23 points or .43%

Nasdaq :up 35.30 points or .75%
WTI Oil price; 38.58 at 2:30 pm;
Brent OIl: 40.78
USA dollar vs Russian Rouble dollar index: 69.56 (Rouble is UP 1 AND 39 /100 roubles per dollar from yesterday) as the price of Brent and WTI OIL ROSE


This ends the stock indices, oil price, currency crosses and interest rate closes for today.



More trouble in Brazil, as the chief of the Central Bank of Brazil is ready to resign amid the appointment of LULA as chief of staff in Rousseff’s government;

(courtesy zero hedge)

Head Of Brazilian Central Bank Ready To Quit Amid Political Insanity


It seems as though Brazil can’t get through a single day without some piece of political news or economic data creating confusion and turmoil.

Last weekend, millions of Brazilians took to the streets to call for the ouster of President Dilma Rousseff whose political career and legacy hang in the balance.

An impeachment bid tied to allegations she cooked the fiscal books in 2014 looms large and when the ever-expanding car wash probe ensnared former President (and Rousseff mentor) Luiz Inácio Lula da Silva, some assumed it was just a matter of time before Dilma buckled under the pressure.

But Rousseff had other plans.

Just as a Sao Paulo state judge said a decision on Lula’s arrest should fall to federal judge Sergio Moro,Dilma offered Lula a ministry position. In his new position, he plans to revive the flagging economy with what the market assumes will be a series of leftist policies. That explains why the BRL retraced all of the gains it posted when Lula was first detained.

Of course Lula himself denies that he would pursue policies that may harm the country’s fiscal position. According to Valor, Lula’s plans wouldn’t include a shift to the left. Nor would they include expanding credit. Or rate cuts. Or tapping Brazil’s FX reserves. Or social security reform. In short, it isn’t exactly clear what they would include but whatever the case, “investors see risk of government resorting to an economic policy shift in a last-ditch attempt to save President Rousseff’s mandate,” Luciano Rostagno, chief strategist at Banco Mizuho do Brasil told Bloomberg in a phone interview.

And it’s not just investors that are unnerved.

BCB President Alexandre Tombini is reportedly “giving signs” that he may resign. “The possible nomination of Lula points to deep economic policy changes, with repercussions in monetary policy and FX policy,” Valor reported on Wednesday, explaining Tombini’s reservations about Lula’s new post. The BCB chief worries Lula may tap FX reserves and put pressure on Tombini to cut rates, Valor continues, without citing sources.

Needless to say, this is all weighing heavily on the BRL:

Meanwhile, Senator Delcídio do Amaral – whose arrest in November unnerved markets and suggested sitting lawmakers are not in fact immune from investigation –  copped a plea-bargain and gave testimony which indicates that Rousseff knew of and tried to cover up bribery at Petrobras.

“According to the plea documents released Tuesday, Ms. Rousseff was aware of all the details of the 2006 purchase of an oil refinery in Pasadena, Texas. Prosecutors suspect Petrobras used the refinery deal to generate funds it allegedly used to pay for millions of dollars of bribes and personally benefit some Petrobras executives, according to the documents,” WSJ recounts, adding that “Mr. do Amaral also alleged Ms. Rousseff pressured Justice Minister José Eduardo Cardozo to free jailed suspects caught up in the graft probe, according to the documents. Mr. Cardozo left his post in late February, saying he was weary of ‘political and personal pressure,’ without being more specific.”

Amaral also says Rousseff’s former chief of staff and current Education Minister, Aloizio Mercadante tried to pay for his silence, allegations which Brazilian weekly Veja says it can prove via tape recordings. Lula is also implicated in the testimony.

According to the latest, Lula is set to become Rousseff’s Chief of Staff.

As you can see, this is a veritable circus. Throw in the fact that Lower House Speaker Eduardo Cuhna, the ringleader of the bid to impeach Rousseff, is himself facing impeachment for hiding Swiss bank accounts, and you have a political dynamic that is just about as poisonous as one could possibly imagine.

We wish Brazil’s beleaguered populace the best of luck in tossing the whole lot of them, because unless and until someone cleans house, the economic malaise is going to continue and the BRL will never have any lasting respite.

But not everyone is worried…







Oil jumps on a supposed new meeting

(courtesy zero hedge)

Oil Jumps After Latest Output Freeze Meeting “News”

One of the most farcical instances of report-it-then-promptly-deny-it headline hockey since last summer’s Greek bailout drama has been the incessant barrage of “news” surrounding the oft-celebrated oil output freeze deal struck last month by the Saudis, Qatar, Venezuela, and Russia.

At the time, the market was hoping against hope for an agreement to cut production. After all, Russia and Saudi Arabia are pumping at record levels. As we put it at the time, “it was not exactly clear how ‘freezing’ output at a record level will ‘stabilize and improve’ the market.” Still, this market will take what it can get at this point and since the “agreement” on February 16, prices have indeed risen and some of the gains have – rightly or wrongly – been attributed to the “freeze.”

Casting a pall over the entire thing is Iran who, having just begun to ramp up production after the lifting of international sanctions, isn’t particularly excited about the prospect of taking its foot off the pedal. Asked about participating in the freeze, Oil Minister Bijan Zanganeh said last week that Tehran should “just be left alone,” until production reaches 4 million b/d. At that point, Zanganeh says, “we will join them.”

Of course that’s a non-starter for the likes of Kuwait, whose own oil minister Anas al-Saleh recently warned that his country will “go full power” if everyone (and “everyone” includes the Iranians) isn’t on board with the deal.

On Monday, Russian Energy Minister Alexander Novak spoke with Zanganeh on the phone and once the call was over, indicated that Moscow “understood” its ally in Tehran’s position. “Since Iran’s production decreased under sanctions, we totally understand Iran’s position to increase production and revive its share in the global markets,” Novak said, adding that “within the framework of major oil producers (OPEC and non- OPEC), Iran is liable to have an exclusive way for increasing its oil production.”

And increase production Iran will – by another 1 million b/d by 2017. “The positions of Russia about Iran’s return as well as resumption of stability to the oil market were encouraging and very positive,” Zanganeh said of Novak’s comments.

It’s thus clear that Iran will not be participating in any freeze and so, OPEC and non-OPEC producers are left to decide whether to move ahead with the deal or not.

On Wednesday, we get the latest possibly bogus news in the never-ending output freeze saga as Reuters reported that producers will meet in Doha on April 17 to discuss the deal. That report was “confirmed” around an hour later by Qatari Oil Minister Mohammed Al-Sada. Here are the key points from Qatar:


“Oil producers including Gulf OPEC members support holding a meeting next month to discuss a deal to freeze output even without Iran,” Reuters wrote.

“It’s a setback but it will not necessarily change the positive atmosphere that has already started,” an OPEC source from a major producer said, referencing Iran’s refusal to participate.

“You can’t ignore all other oil producers. The meeting is likely to go ahead,” another source said, before saying that real, concrete progress on finalizing the details would be discussed. “We will not just meet for the sake of meeting.”

Well, we don’t know about that. OPEC meetings seem to always be “just for the sake of meeting,” ever since the group ceased to exist as a production-throttling cartel, but then again, it won’t just be OPEC in attendance. Besides, as Goldman’s Jeff Currie put it this morning on BBG TV, “it’s no sweat off their backs” if the Russians and the Saudis complete the agreement to freeze output given that Russia is pumping at a record and Riyadh has seen “flattening investment.”

“You can’t operate a cartel the way you used to” because U.S. shale supply can fill the gap if producers cut,” Currie added, before restating Goldman’s view that temporary spikes in the price of oil ultimately are not currently sustainable. “The market can’t trade higher until we finish that re-balancing process.” As a reminder, here’s what Currie said earlier this month:

The lack of a supply response in 2015 has shifted over the past two months into consensus expectations for broad based supply declines in 2016. This adjustment is only starting however and sustained low prices are necessary in our view to maintain a sufficient level of financial stress to finish this rebalancing process. This is why an early rally in oil prices before a real deficit materializes would prove self-defeating in our view, as it would reverse these nascent supply curtailments.

Given current suppply dynamics – i.e. overflowing storage – and the very real possibility that lackluster demand from EM (and especially Latin America) could further dent the fundamental picture, we somehow doubt that even if producers do manage to agree on and implement a freeze that things will change materially for prices. Indeed, given Iran’s determination to add an additional 1 million b/d of supply to an already glutted market, it’s still difficult to understand how “let’s freeze things at a record rate” is a viable way to permanently alleviate downside pressure.

For now, the headlines are good enough (for some algos at least) – as oil is up on the “news.”

As for the previously belligerent Kuwait, it looks like they’re coming around after all:




Big  Cushing, Oklahoma build but smaller gasoline draw causes crude to be confused;


(courtesy zero hedge)

Crude Confused After Production Cut Offsets Cushing Build, Smaller-Than-Expected Gasoline Draw

For the 7th week in a row, Cushing inventories saw a build (+545k) pushing to new record high stockpiles but that was offset by a smaller-than-expected build in overall crude (+1.3m vs +3.2m and less than API overnight). Smaller-than-expected draws in Gasoline and Distillates are helping to fade the early gains in crude.


  •  *CUSHING INVENTORIES ROSE 545,000 BARRELS, EIA SAYS (whsiper +497k)

9th weekly build in last 10 and 7th weekly build in Cushing…

Crude production saw a de minimus 0.11% drop WoW, led by a 0.2% drop in The Lower 48.

The kneejerk reaction was downward…

Although we are confident the algos will promptly find something which will ignite upward momentum and the gap will be filled within seconds.

Oil will not stage a rally until Cushing Ok refining storage levels decline:
(courtesy Nick Cunningham/Oil

Oil Won’t Stage A Serious Rebound Until This Happens

Submitted by Nick Cunningham via,

Oil prices have shown signs of life over the past few weeks, as production declines in the U.S. raise expectations that the market is starting to adjust. As a result, Brent crude recently surpassed $40 per barrel for the first time in months.

A growling list of companies are capitulating, announcing production cuts for 2016. Continental Resources, for example, could see output fall by 10 percent. A range of other companies have made similar announcements in recent weeks. The energy world has been speculating about declines from U.S. shale, and the declines are finally starting to show up in the data.

Despite the newfound optimism that oil markets are balancing out, crude oil sitting in storage is at a record high in the United States. Energy investors may have preferred to focus U.S. production declines, or the fall in gasoline inventories in early March, but meanwhile crude oil stocks continue to signal that oversupply persists.

Crude stocks rose once again last week, hitting yet another record of 521 million barrels. Storage levels at Cushing, Oklahoma, an all-important hub where the WTI benchmark price is determined, have surpassed 90 percent of capacity. U.S. output may be starting to decline, but it is doing so at a painfully slow rate.

(Click to enlarge)

It isn’t just a U.S. problem. Crude oil storage levels continue to climb around the world. Commercial stocks in the OECD surpassed 3 billion barrels in 2015. The EIA sees oil storage in the OECD rising to 3.24 billion barrels by the end of this year. It doesn’t stop there. Storage levels rise a bit more next year, hitting 3.30 billion barrels by the end of 2017.

That is a staggering forecast that should scare any oil investor. It also suggests that the price rally over the past few weeks, which has pushed oil prices up around 40 percent since early February, could be fleeting. There is evidence that suggests the rally was driven by speculators closing out short bets on oil, after accruing net-short positions at multiyear highs in recent months. In early March, hedge funds and other major investors shed short positions at the fastest rate in almost a year. The rally, then, hinged on the sudden shift in sentiment from oil speculators.

The underlying fundamentals, however, have not appreciably changed in recent weeks. U.S. oil production is declining, but more or less at the same pace that it has for months.

On the other hand, rising inventories undercut the notion that the market is adjusting. As a result, as the short-covering rally reaches its limits, and the markets digest the fact that the world is still oversupplied with oil, prices could fall once again.

The problem, as mentioned above, is that inventories could continue to rise around the world through the rest of this year, if EIA data is anything to go by. Oil prices may have rallied in recent weeks, but the EIA was more pessimistic in March than it was in February. The EIA says that global storage levels could rise by 1.6 million barrels per day (million b/d) in 2016 and by another 0.6 million b/d in 2017. Those predictions are higher than the EIA’s February estimate.

“With large global oil inventory builds expected to continue in 2016, oil prices are expected to remain near current levels,” the EIA concluded in early March. The EIA lowered its price forecast for Brent by $3 per barrel, expecting it to average $34 for the year.

2017 does not look much better: the EIA sees Brent prices averaging just $40 per barrel next year, a whopping $10 lower than what the EIA predicted last month. That could mean prices stay below $50 per barrel through 2017.

Price forecasts are always wrong, and often wildly off the mark. While it is difficult, if not impossible, to accurately predict price movements, especially a year or two out, it is impossible to argue with the sky-high levels of oil sitting in storage. Even if U.S. oil production continues to decline, the greater than 500 million barrels of oil inventories – a record high – need to start declining in a substantial way before the oil markets will see a sustained rally.



CLOSING PRICES FOR OIL 5 PM/ and 10 year USA interest rate:
 WTI  crude price at 5 pm:  $38.54
Brent: $40.23
USA 10 yr bond yield: 1.91%
USA dollar index at 5 pm  95.64
And now USA stories

Gold, Stocks, & Bonds Soar As “Cowardly Lyin'” Fed Batters Banks & Greenback

Watching the markets’ reaction and listening to Yellen’s incomprehensibe drivel brought to mind two Gladiator clips…


and Post-Fed…


So let’s survey the ‘damage’…

Rate hike odds plunged…


And the market turmoiled all over the place…


But Gold was the post-Fed winner…


Trannies were best on the day… (not the pump and dump between statement and Presser)…


Small Caps remain laggards on the week…


VIX was slammed to a 14 handle…


Financials were disappointed..


But have along way to go…


Today was biggest plunge in 2Y Yields since September…


Peabody was Ackman’d…


Treasury yields plunged on the Fed Fold… (notable steepening)…


The USD Index was clubbed like a baby seal…


Which sent USD Index back to mid-Feb “Dimon Bottom” lows…


Commodities all rallied notably after The Fed (weak USD)…


Gold soared…


Charts: Bloomberg

Bonus Chart: Have no fear America, Yellen is “heartened”…



Housing starts beat expectations but permits slowing down.  This suggests further rent increases are coming in the months ahead:

(courtesy zero hedge)

Housing Starts Beat Expectations, As Slowdown In Rental Permits Suggest Further Rent Increases In Coming Months

Coming at the same time as an inflationary report which showed Core CPI rising at 2.30%, or the highest rate since October 2008, and one which will put further pressure on the Fed to hike rates as shelter inflation is now simply too big to sweep under the rug, we also got February’s housing starts and permits, which while painting a mixed picture of the US housing market suggested further strength in the US housing sector in the past month.

Housing starts rose from last month’s disappointing an upward revised 1,099K (now 1,120K), to 1,178K, beating expectations of a 1,150K print, driven by a jump in single-family housing which rose from 767K to 822K, the highest print since the recession, on the back of a rebound in West (24.8%) and Midwest (18.6%) single-family housing, while multi-family or “rental” units were almost unchanged, rising from 333K to 341K.

Permits, on the other hand, disappointed, sliding from an upward revised 1,204K to 1,167K, below the 1,200K consesus expectations, where single-family rose fractionally from 728K to 731K, even as multi-family permits declined by 9.1% from 441K to 401K, the lowest print since September 2015, and perhaps suggesting that home builders are refocusing their attention away from rental units and back to single-family housing.

However, with most American households unable or unwilling to splurge for the privilege of owning a home, this slowdown in the rental pipeline will likely mean less rental supply in the coming months, putting further pressure on already record rents, and leading to even core inflation in the coming months, forcing the Fed to act with even more resolve when it comes to tightening financial conditions and popping the rental bubble before it gets too far out of hand.

This will not be liked by the Fed as core CPI surges by 2.3% year over year, the biggest jump since Oct 2008.
(courtesy zero hedge)

Bonds & Stocks Tumble As Core CPI Surges By Most Since October 2008

Following last month’s inflation ‘jolt’ to the marketplace, Core CPI increased 2.3% YoY in Feb – the biggest jump since October 2008 (led by the biggest monthly surge in apparel prices since 2009). Bond & Stock markets are dropping in the news as it corners The Fed further into a hawkish stance, despite the recessionary warning signals screaming from the manufacturing (and increasingly Services) sector.

The Core CPI print has not been higher since October 2008…

CPI Breakdown…

All items less food and energy

 The index for all items less food and energy increased 0.3 percent in February, the same increase as the prior month. The shelter index repeated its January increase of 0.3 percent, with the indexes for rent and for owners’ equivalent rent both increasing 0.3 percent, and the index for lodging away from home rising 0.9 percent. The apparel index rose sharply in February, increasing 1.6 percent, its largest increase since February 2009.The medical care index rose 0.5 percent, the same increase as in January, with the index for prescription drugs rising 0.9 percent and the hospital services index advancing 0.5 percent. The index for motor vehicle insurance increased 0.4 percent in February, the same increase as last month. The index for education rose 0.3 percent. The indexes for new vehicles, used cars and trucks, alcoholic beverages, recreation, and tobacco all increased 0.2 percent in February. The indexes for personal care and for airline fares both edged up 0.1 percent, while the index for household furnishings and operations was unchanged. The communication index was one of the few to decline in February, falling 0.5 percent.

The index for all items less food and energy increased 2.3 percent over the past 12 months, a figure that has been slowly rising since it was 1.7 percent for the 12 months ending May 2015. The index for shelter has risen 3.3 percent over the last year, its largest 12-month increase since the period ending September 2007, and the medical care index has increased 3.5 percent, its largest rise since October 2012.

Cost of “living” continues to surge with rent inflation at a new post crisis highs…

And that has sparked weakness in stocks and bonds…

Dear Janet, Good luck explaining any dovishness in light of your “data dependence” after this and 42 year lows jobless claims.

The decline in the USA manufacturing sector continues as industrial production
has fallen for its 4th straight month! A worse than expected .5% month over month
(courtesy zero hedge)

Manufacturing ‘Recession’ Continues (Unless Industrial Production Is Doing Something It Has Not Done In 64 Years)

The current decline in US manufacturing would be the first time since 1952 that Industrial Production has declined for four straight months without the US economy not being in recession. A worse-then-expected 0.5% MoM plunge – near the worst since 2009, led to a 1.0% drop YoY, the 4th monthly decline, led by a 9.9% YoY crash in mining.

Another data point to ignore…

If it walks like a duck, quacks like a duck… it must be a recession?



And now the FOMC results:  Fed boxed in due to global uncertainty!!

(courtesy zero hedge)


The Fed Decision Explained In 1 Simple Chart

Tumbling US unemployment and surging US inflation is not what really matters to ‘Global’ Janet. She knows what happened the last time “market” expectations were so dis-locatedly bullish relative to “economic” expectations… and doesn’t want to be driving the current bus off the great-er depression cliff…

A ‘hold’ in Sept – rally; a ‘hike’ in Dec – plunge; and this time ‘hold’ because everything is so decoupled…


“Boxed In” much? “Global uncertainty” is a suddenly very convenient truth – The Fed knows that any move to tighten ripples through the entire world’s collateral chains; and with the global economy already bleeding its deflationary collapse into US economic expectations, a hike is simply piling on – i.e. no moar rate hikes.




The decision:

(zero hedge/the Fed)


“Data Dependent” Fed Chickens Out Again: Blames “Global” Uncertainty For Unchanged Rates, Lowers Rate Hike Forecast

With gold up 15% since The Fed hiked in December (and stocks lower) and the market pricing a hike today at just 4% (June 53%), it is not surprising that Janet paniccedand folded again in the face of “unequivocally good” data based on what the “Dow Data Dependent” Fed has said it monitors. Of course there were plenty of excuses:


Not too dovish (upgrade uncertainty), not too hawkish (lowered rate hikes), a goldilocks statement, with just a little less inflation and just a little less GDP growth, and just two more quarter of near-ZIRP rates is what it takes for the world to get it all together.



The Fed mouthpiece Sir Jon Hilsenrath hath spoken:

(courtesy Jon Hilsenrath)


Fed Mouthpiece Parses Timid Janet’s Latest Pronouncement

Janet Yellen has spoken and the word was “hold.” 

And not only that, the FOMC median forecast now only implies two rate hikes for 2016 versus four as the Fed’s own outlook converges on market expectations. The read through on the US economy was relatively benign but worries about global markets persist, and the very fact that that has become what certainly appears to be a deciding factor in these decisions speaks to the notion that the invisible “third mandate” is becoming more and more apparent with each passing meeting.

In any event, here’s Jon Hilsenrath parsing the latest statement from the “data-dependent” Fed as only WSJ’s Fed whisperer can.

From WSJ

Federal Reserve officials reduced estimates of how much they expect to raise short-term interest rates in 2016 and beyond, nodding to lingering risks to the economic outlook posed by soft global economic growth and financial-market volatility.


New projections show officials expect the fed-funds rate to creep up to 0.875% by the end of 2016, according to the median projection of 17 officials. That would mean two interest-rate increases this year, compared with four projected increases when officials last met in December, and implies the Fed is looking toward its next rate increase in June.


For now, the Fed is keeping its benchmark lending rate steady between 0.25% and 0.50%, after raising it a quarter percentage point in December. Without committing to a timetable, officials said the next move would depend on “realized and expected economic conditions” and reiterated that it plans to move gradually.


The central bank sees the fed-funds rate at 1.875% by the end of 2017 and 3% at the end of 2018, also lower than the last quarterly projection officials released late last year. In the long run, the Fed expects its benchmark rate to reach 3.25%, less than the 3.5% rate it saw in December.


“Economic activity has been expanding at a moderate pace despite global economic and financial developments in recent months,” the Fed said in a policy statement released after its two-day meeting.


However, in a closely watched section of its policy statement, it added that market developments and the global outlook “continue to pose risks.” This risk assessment is important because it indicates whether the Fed is leaning toward raising rates, holding them steady or reducing them.


In January, officials declined to make an assessment of risks to the economy, a sign of their uncertainty about the impact of slow global growth and volatile

financial markets. The latest statement on risks suggests officials are inclined to wait until they have a clearer picture of the outlook before moving. That makes an April move a high hurdle, though not impossible.


The Fed’s economic projections were a bit more pessimistic about economic growth, but more optimistic on unemployment.

Fed officials said they expected economic output to expand by 2.2% in 2016, 0.2 percentage point less than they projected in December. They see growth of 2.1% in 2017, which is 0.1 percentage point less than previously expected, and 2.0% growth in 2018, in line with earlier projections. Slow growth overseas has hurt U.S. exports and may have been a factor in the reduced estimates.


Despite anemic output growth, the economy has continued to produce jobs, in part because firms are hiring more workers to compensate for soft worker productivity growth. Fed officials expect the pattern to continue. They see the jobless rate retreating to 4.7% by the end of this year and 4.5% through 2018, lower than previously expected.


“A range of recent indicators, including strong job gains, points to additional strengthening of the labor market,” the central bank’s policy statement said.


While the outlook for jobs and output growth is mixed, the outlook for inflation holds its own uncertainties. Fed officials projected inflation would rise 1.2% this year, that’s less than previously projected largely because of soft energy prices and because a strong dollar has put downward pressure on import prices. The Fed sees inflation starting to rise as oil prices and the dollar stabilize. Inflation is projected to reach 1.9% by the end of 2017 and to finally reach the Fed’s medium-run goal of 2% by the end of 2018. Officials see core inflation, excluding food and energy, at 1.6% by year-end, then 1.8% in 2017 and 2.0% in 2018, largely in line with earlier expectations.


The central bank was particularly preoccupied before the meeting with changes in inflation expectations. Market and survey measures had sagged in


January and February but more recently show signs of stabilizing. Data released ahead of Wednesday’s statement showed consumer prices fell in February due to a slide in gasoline prices, but other evidence pointed to steadily building inflation pressures. The consumer-price index showed core prices-excluding food and energy prices-climbed 2.3% in the year through February, notching the largest 12-month gain since May 2012.


“Inflation picked up in recent months,” the statement said, “however it continued to run below the [Fed’s] 2% longer-run objective, partly reflecting declines in energy prices and in prices for non-energy imports.” Market measures of inflation expectations “remain low,” the Fed said, and survey measures were “little changed, on balance.” Taken altogether, the central bank demonstrated little change in its outlook for inflation, but it said it was monitoring inflation “closely,” another sign of its trepidation.


The central bank’s new rate projections put its own expectations more in line with expectations in financial markets. Ahead of Wednesday’s release, futures market participants put a 35% probability on one additional rate increase this year and a 30% probability on two. A recent Wall Street Journal survey of 64 business and academic economists found they expect two quarter-percentage-point increases in the fed-funds rate this year, down from the three rate increases they predicted in December, and three increases in 2017 instead of four. Before the release, Fed officials had consistently predicted a steeper rate path than the market.


The Fed’s pledge to gradually continue increasing interest rates is in contrast to expansionary monetary-policy paths in other major economies. The European Central Bank last week ramped up stimulus and cut interest rates deeper into negative territory to bolster the eurozone’s fragile economy, weeks after the Bank of Japan introduced negative rates for the first time to ward off deflation.


The Fed’s decision to wait longer for more clues on the domestic economy’s path follows circumspect statements from senior policy makers in recent weeks.


Federal Reserve Chairwoman Janet Yellen told lawmakers in testimony last month that financial conditions “have recently become less supportive of growth,” hinting to Congress that the central bank had increased trepidation over the path of interest-rate increases.


Kansas City Fed President Esther George cast a dissenting vote Wednesday, the first at a meeting of the central bank’s rate-setting Federal Open Market Committee meeting since October, when Richmond Fed President Jeffrey Lacker objected to a then-decision to hold rates steady. She wanted the Fed to raise rates a quarter percentage point.

Immediate resultant action:
(zero hedge)

Bonds & Bullion Surge As Stocks Give Up Initial Fed Gains

Tyler Durden's picture

You’re gonna need to do some ‘splaining Janet…

Bullion Up, Bonds Up, Stocks Not Up


S&P Futures spiked and ran stops and that was it…


The USD is tumbling…


As EUR jumps to 1.12…

 And the big winner of today’s Fed cowardly event:  GOLD
Faith in the cowardly Fed is fading fast!!
(courtesy zero hedge)

The Biggest Winner From A Coward Fed: Gold

With the Fed Funds market now slashing rate-hike expectations for the rest of the year…


Just as The Fed tries to catch down to the market expectations, the biggest winner so far from the cowardly Fed is… a pet rock.



It appears “faith” in central bank omnipotence is fading fast.


Dave Kranzler’s commentary tonight is a good one.  He illustrates that the subprime auto loans is going to implode:
(courtesy Dave Kranzler/IRD)

A Collision Is Coming In Securitized Auto Debt

Delinquencies on subprime auto debt packaged into securities reached a high not seen since October 1996, as late payments continued to worsen in February, according to Fitch Ratings.  – Bloomberg News

The Fed and the Obama Government inflated a massive bubble in automobile sales (among all the other bubbles).  Over 30% of all auto loans over the past few years have been of the subprime variety.  Not just “subprime” per se, but absolute nuclear waste. Low credit score borrowers have been able to buy used cars with loan terms well beyond 5 years AND loan-to-value amounts far greater than 100% of the assessed NADA used car value.


It’s an absolute disaster waiting to happen.  Fitch of course puts a positive spin on the ticking time bomb by stating that it expects the payment rate to improve in the coming months as tax refunds kick in.   Only there’s a problem with this assertion – where are the tax refunds?  Not only that, many taxpayers have been taking advantage of the available of tax refund anticipation loans: Tax Refund Advances Are Back.   Sorry Fitch, a lot of that tax refund money is already spent.  And guess what?  Your beloved sub-prime auto CLO’s are now subordinated to the Tax Anticipation Debt.

Yesterday’s retail sales report from the Government reflects an economy in which the consumer is quickly losing its ability to spend money:

Constraining retail sales activity, the consumer remains in an extreme liquidity bind…Without sustained growth in real income, and without the ability and/or willingness to take on meaningful new debt in order to make up for the income shortfall, the U.S. consumer has been unable to sustain positive growth in domestic personal consumptiondependent on personal spending.  – John Williams,


The developing crash in subprime auto debt is just the tip of the iceberg and it will fuel a negative feedback loop that will include a collapse in general consumption spending other than for necessities and an eventual implosion in mortgages.  Just like the auto market, the mortgage market – aided and abetted by the Fed and the Government – has enable a massive reflation of subprime mortgages disguised as Fannie Mae, Freddie Mac and FHA low down payment, low credit score Government-backed home loans.

Perhaps this is why the inventory of both existing home listings and new  homes is beginning to pile up like, well, a slow motion car wreck…




It seems that Goldman’s Brooks is crushing his clients with this predictions as to how to play this market:
(courtesy zero hedge)

Goldman Does It Again: Dollar Plummets After Goldman FX Says “Dollar Rally Far From Over”

Goldman’s Robin Brooks has to be a sadist: that is the only way we can explain his ability to crush the greatest number of Goldman clients at every possible opportunity.

First, of course, it was his call to go very short the EURUSD ahead of the December ECBmeeting, which however led to the biggest EURUSD surge since the announcement of QE1.

Then, last week, ahead of the ECB meeting he “doubled down” on calls to short the EUR ahead of the ECB, the result again was a EUR super surge, the biggest since December.

And then, as we reported first thing this morning, Robin Brooks released a note titled the “The Dollar Rally Is Far From Over” in which he said the following:

Today brings the latest FOMC meeting. We expect the Fed to signal that it wants to continue normalizing policy, which means three hikes this year and four in 2017, with the statement referring to the risks as “nearly balanced,” reverting to phraseology used in October, just before December lift-off. Overall, our sense is that the outcome will be more hawkish than market pricing, in particular given that the FOMC may leave open the option of tightening at the April meeting. 

Wrong on every account. But Brooks did not stop there.This is what he predicted woudl happen today:

Implicitly, our estimates for Dollar strength are largely a reflection of the divergence between our Fed call and what markets are pricing. And there is admittedly a genuine tension there. On the one hand, some Fed speakers have recently flagged the importance of financial conditions in their decision making process. On the other hand, labor market slack is steadily diminishing and core PCE is rising towards two percent. Today’s FOMC will be an important marker in resolving this tension. Ultimately, we believe that the Dollar rally is far from over.

Well, the FOMC certainly resolved this tension. Here is how:

So much for that dollar rally, and for all those who were stopped out for the third time in a row after listening to Brooks, you will get no sympathy from us. This is what we said this morning:

Given the fact that i) Brooks’ calls are generally about as accurate as Gartman’s, and ii) Goldman is one for six so far on its Top Trades for 2016, you might want to go with the market’s view on this one to avoid getting the muppet treatment.

So to all those who once again listened to Goldman, well… assume the position.


The following is a must read as Stockman goes into detail the real earnings of the S and P and the phoniness of the non GAAP  as it relates to the true GAAP figures:
(courtesy David Stockman/contraCorner)

Here Comes The Big Flush—–Recession Pending, Fed ‘Put’ Ending

by  • March 15, 2016

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Talk about sheep being led to the slaughter. The S&P 500 is up 11% from its February 11th intra-day low (1812) because Wall Street still has inventory to unload. That much is par for the course.

Yet the signs of an impending macroeconomic and profits implosion are now so overwhelming that it is truly remarkable that there are any bids left in the casino at all. This morning’s release of business sales for January, for example, showed another down month and that the inventory-to-sales ratio for the entire economy is now at 1.40X—–a ratio last recorded in May 2009.

As Zero Hedge so aptly put it:

“Look at this chart!”

Once upon a time, real economists, investors and traders knew that business sales, wages and profits are the heart of the matter. No longer. The self-referential sentiment surveys, financial conditions indices and bullish spin on Fed word clouds which animate today’s casino muffle the fundamentals almost entirely.

Yesterday on Bloomberg TV, for example, my downbeat view was challenged with a chart showing that Goldman’s financial conditions index had perked up during the last 5-weeks. Where, I was asked, is the recession?

How about the quarter century of history shown below? Business sales reported this morning were down by 5.1% from their July 2014 cyclical peak. Self-evidently, declines of that magnitude have occurred only twice since 1992, and both of them bear the shaded imprint of recession.

The chart also bears something else. Namely, real economic meat and potatoes. Even at their slumping January level, business sales came in at a $15.5 annual trillion rate. That’s something; it measures the entire churn of manufacturing, wholesale and retail sales from coast-to-coast.

It trumps monthly purchasing manager sentiment surveys—often filled out by secretaries; and also such flickering signals as short-run fluctuations in credit spreads—-always banged around by the trading herd. And by a long shot.

Likewise, there is not much doubt that wages are slumping, too. And we are talking here about the actual wages paid by millions of employers who remit payroll taxes to the US Treasury. The latter reports its results daily; and its collections are self-evidently at stall speed already.

The four-week moving average is now just barely 2% above last year, meaning that after accounting for the 2% trend growth in wage inflation, there is no growth in hours worked at all. Nor is there any doubt that the trend is heading resolutely from the upper right to the lower left!

Needless to say, the number of employers who send in withholding taxes for seasonally adjusted phantom employees is somewhere between zero and none. Nor does the IRS even hear from companies who might have died or could have been born.

Indeed, the BLS’ clunky modeling fantasies should have been repudiated long ago by the chart below.

As of May 2008, the Great Recession was already six months old, but Wall Street was still unloading its inventory. And all the while, the same talking heads who have given the all-clear sign in the last 5 weeks were on bubblevision gumming about Goldilocks, no recession in sight and stability on the jobs front.

Here’s what happened next. Roughly 9 million jobs disappeared during the following 20 month. Yet it was only after the fact that the BLS job modelers caught up with the ongoing recessionary reality, and drastically adjusted downward their initial postings. That was long after declining trends in payroll tax remittances to the Uncle Sam signaled that recession had arrived.

Then there is the matter of capital investment in plant, equipment and other tangible assets capable of generating future economic growth and productivity. January orders for nondefense capital goods excluding the volatile aircraft category were down 7% from the year ago peak, and have, in fact, reverted to levels first reached in early 2000.

There is absolutely nothing in this chart indicating “escape velocity” is at hand, and everything to suggest that the next leg is likely to unfold in a distinctly southerly direction.

Moreover, the above graph is in nominal dollars and reflects the gross capital outlays planned by US companies. The fact is, the true CapEx data—-which is never mentioned on bubblevision—-is no higher than it was 18 years ago, and actually nearly 20% below the peak reached in the year 2000.

What is captured in this chart is something Keynesian spending oriented models never bother to consider. Namely, that upwards of $1.5 trillion of plant, equipment and other tangible assets are consumed each year in the process of production, meaning that until it is replaced out of gross CapEx the output capacity of the US economy is actually shrinking.

But when it comes to obfuscation, nothing can match Wall Street’s corruption and deformation of the data like its treatment of corporate profits. And as the great 1920’s economists, Benjamin Anderson, always said profits are the heart of the business outlook.

Needless to say, the current outlook is not good at all. With virtually 100% of the S&P 500 companies now having reported Q4 results, there can be no doubt that profits are heading south with some considerable haste.

On a GAAP basis, 2015 full year profits came in at $86.44 per share. That reflected a 5% sequential decline from the LTM rate for Q3 2015, and an18.5% decline from the cycle peak of $106 per share registered for the LTM period ended in September 2014.

So here is what we have. The casino closed today at 23.5X its actual current earnings, and those earnings are now going down for the count.

Moreover, that limpid profit level for the S&P 500 is enormously flattered by more than $2 trillion of stock buybacks since 2009, meaning that the share count has declined by upwards of 15%.  Still, profits for the LTM period just ended are up by only a hairline  since the prior peak in June 2007.

In fact, when reported S&P 500 earnings peaked at $84.92 per share in June 2007 (LTM basis), they had grown at a 6.8% annualized rate since the prior peak of about $54/share in Q3 2000. By contrast, at the reported $86.46 level for the LTM period ending in Q4 2015, the implied 8-year growth rate is…….well, nothing at all unless you prefer two digit precision. In that case, the CAGR is 0.22%.

That’s right. Based on the kind of real corporate earnings that CEOs and CFOs must certify on penalty of jail time, S&P 500 profits have now nearly reverted to their level at the time when the first fractures of the great financial crisis appeared in mid-2007. That’s when the Bear Stearns mortgage funds went under and Countrywide Financial was rescued by its ill-fated purchase by Bank of America.

So once again profits are heading down the slippery slope traced twice already during this era of central bank bubble finance. You would never know this, of course, because Wall Street has carried the adjusted profits or ex-items game and forward hockey sticks to such an extreme that honest information about corporate profits has essentially been banished from the casino.

Yes, the sell side stock peddlers will tell you that notwithstanding the fact that Uncle Sam spends upwards of $1 billion per year pursuing accounting malefactors, these GAAP profits are to be ignored because they are chock-a-block with non-recurring items.

Well, yes they are. As an excellent recent Wall Street Journal investigation showed, the Wall Street version of ex-items earnings came in for 2015 at$1.040 trillion for the S&P 500. But that was 32% higher than actual GAAP earnings of $787 billion!

Supposedly, the $253 billion difference indicated for 2015 in the chart above dudn’t count for nothin’ when it comes to valuing stocks. After all, what do the principal non-recurring items——asset write-offs, plant shutdowns, store closing costs, goodwill reductions, restructuring charges and stock options costs——have to do with Wall Street’s authoritative EPS hockey sticks?
The latter always and everywhere trend from the lower left to the upper right of the charts. And that’s because, apparently, by the lights of Wall Street, central banks always have your back.


Not exactly. The above chart has been generated over and over and has been spectacularly wrong nearly as often, and most especially at turning points in the business cycle.

Indeed, the yawning $253 billion gap between reported earnings and the Wall Street ex-items concoction for 2015 is nearly the same magnitude as the disconnect in the Great Recession cycle. Thus, S&P 500 aggregate net income on an ex-items basis for 2007 was $730 billion—so the sell side pitchmen had no problem insisting that the stock market was “reasonably” priced.  During 2007 the S&P’s average capitalization was about $13 trillion, implying an 18X PE multiple.

In fact, however, actual GAAP earnings that year were only $587 billion, meaning that the Wall Street ex-items number was 24% higher than the level of profits filed with the SEC. Like now, the pitchmen said ignore the $144 billion of charges and expenses that were deemed to be non-recurring; nor did they even remotely recognize the real market multiple on a GAAP basis was 22X and that this was extremely expensive by any historic standard—especially at the top of the business cycle.

Needless to say, Wall Street was shocked—–just shocked—-to find out the truth about it hockey sticks the next year. During the spring of 2007 it had happily predicted the usual—–that is, that ex-items earnings would rise by the usual 12-15% to about $120 per share in 2008. They actually came in, however, at $50 per share on an ex-items basis, but only $15/share on an honest GAAP basis.

Expressed in aggregate terms, the latter means that S&P profits plunged to$132 billion during 2008 after companies took a staggering $304 billion in write-downs for assets which were dramatically overvalued and business operations which had become hopelessly unprofitable.

In short, during those two years alone—when the business and financial cycle was heading sharply southward—–the S&P 500 companies took nearly$450 billion in charges and losses that the Wall Street stock peddlers said to ignore. That amounted to full 37% of purported ex-items earnings for 2007-2008 combined.

Stated differently, the market is supposed to be a forward discounting agency. Yet at the peak in October 2007 at a time when the subprime and credit markets were visibly fracturing, the index was being valued at $13 trillion based on the goldilocks theory then prevalent on Wall Street.

That’s right. The stock market was trading at 100X the earnings that actually materialized the next year, not at 13X the forward hockey stick which the talking heads peddled on bubblevision day after day.

If that sounds like history repeating itself, it most sure is.  The coming recession will again obliterate the sell side hockey sticks, which this time started last spring at $135 per share for 2016 and are already being reduced at a lickety-split rate not seen since the fall of 2008.

But this time there is one thing that decisively different, and it will make all the difference in the world. As will be reinforced once again by the post-meeting contretemps on Wednesday, the Fed has painted itself into a deathly corner and is utterly out of dry powder.

It has nothing left but to hint at the prospect of negative interest rates. And that will be usher in its thundering demise.

There is a new political sheriff in town on the verge of winning the GOP nomination. Even the hint of NIRP—–that is, of Washington criminally confiscating the savings of millions of savers and retirees—-would surely elicit from The Donald a resounding reprise of Clint Eastwood’s immortal injunction—-make my day!

So this time there will be no Fed rescue. When it becomes undeniable that the economy is in recession and that the Fed is utterly out of dry powder panic will envelope the casino.

And when it becomes further evident that no quick, artificial reflation of financial assets is in the cards like occurred after March 2009, the Big Flush will finally come.





And I leave you tonight with this humourous exchange between Rick Santelli and Steve Leisman  on the question he posed to Yellen:  “Did the Fed lose its Credibility”

enjoy the exchange!

Here Is What Janet Yellen Answered When Steve Liesman Asked If The Fed “Has A Credibility Problem”

The most amusing moment of today’s Janet Yellen press conference occured when none other than Steve Liesman asked Yellen a question, one which he may regret as it is dangerously close to “Pedro da Costa” territory, which goes to the heart of the matter: “does the Fed have a credibility problem?”

The question goes to the Fed’s self-described role of being “data-dependent”, because if the Fed indeed adhered to the data, it would be hiking right now: it’s latest forecast sees long-term unemployment of 4.7-5.0%, right where the official unemployment rate is currently, while the Core PCE of 1.7% is already higher than the high range of the Fed’s 2016 year end forecast of 1.4%. In light of this data, it makes no sense for the Fed not to be hiking, and certainly makes no sense to be reducing the number of expected rate hikes in 2016 from four to two.

The jarring congitive dissonance appears to have finally hit Liesman, who asked the following question:

Madam Chair, as you know, inflation has gone up the last two months. We had another strong jobs report. The tracking forecasts for GDP have returned to two percent. And yet the Fed stands pat while it’s in a process of what it said at launch in December was a process of normalization.

So I have two questions about this. Does the Fed have a credibility problem in the sense that it says it will do one thing under certain conditions, but doesn’t end up doing it? And then, frankly, if the current conditions are not sufficient for the Fed to raise rates, well, what would those conditions ever look like?
The answer was a 261 word jumbled nightmare of James Joyceian stream of consciousness interspersed with high-end econobabble that we, for one, were completely unable to follow. This is what Yellen responded verbatim:

Well, let me start — let me start with the question of the Fed’s credibility. And you used the word “promises” in connection with that. And as I tried to emphasize in my opening statement, the paths that the participants project for the federal funds rate and how it will evolve are not a pre-set plan or commitment or promise of the committee. Indeed, they are not even — the median should not be interpreted as a committee-endorsed forecast. And there’s a lot of uncertainty around each participant’s projection. And they will evolve. Those assessments of appropriate policy are completely contingent on each participant’s forecasts of the economy and how economic events will unfold. And they are, of course, uncertain. And you should fully expect that forecasts for the appropriate path of policy on the part of all participants will evolve over time as shocks, positive or negative, hit the economy that alter those forecasts. So, you have seen a shift this time in most participants’ assessments of the appropriate path for policy. And as I tried to indicate, I think that largely reflects a somewhat slower projected path for global growth — for growth in the global economy outside the United States, and for some tightening in credit conditions in the form of an increase in spreads. And those changes in financial conditions and in the path of the global economy have induced changes in the assessment of individual participants in what path is appropriate to achieve our objectives. So that’s what you see — that’s what you see now.
Got that?

Apparently neither did Liesman, who openly admitted in his traditional post-Fed spar with Rick Santelli, the following:

Santelli: Steve, could you understand any of it? Any of it seriously? Just a yes or no.
Liesman: Not much, it was not precisely responsive to the question i asked.
To be sure, Yellen’s response to Liesman’s very simple question merely confirms that any credibility the Fed may have had is long gone; but the real emerging problem for the Yellen Fed is when such stalwart adherents to the Fed’s party line as Steve Liesman are not only losing the plot, but are openly admitting that Yellen no longer makes sense.

And if the Fed can not make a favorable impression on those who are paid to at least pretend that they “get it”, what about the rest of the market.

Worst of all, since the Fed peddles only in faith and “perpetuating the narrative” du jour, in this case one that the Fed has credibility despite not doing what it has explicitly said it would do, how long until it is not just Liesman, but everyone else, who openly admits that the Fed’s emperor is fully naked.


The exchange between Liesman and Santelli is below. We apologize for the poor picture quality: CNBC appears to have edited this particular segment out.

And our second humourous event:
This ad from Donald Trump on Hillary:

“Is This What We Want For A President?” – Trump Launches First Hillary Attack Ad

For weeks, pundits had been wondering why Donald Trump is holding back from launching direct attacks on Hillary Clinton: after all, only some unpredictable event, or a “brokered convention” (which would “lead to riots” according to Trump) can prevent Trump from being the republican candidate at this point, and the longer Trump delays, the higher the momentum against him on the national arena.

That all changed earlier today when Trump finally launched his first “attack ad” against Hillary in a tweet asking “Is this what we want for a president”:


The clip, which will surely attact national attention tonight, contains everything from a laughing Putin, to an ISIS terrorist, and of course, a barking Hillary, has a simple message: “we don’t neet to be a punchline.” It will resonate.



Well that about does it for tonight

I will see you tomorrow night




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