MARCH 17/A whopping 11.89 tonnes “added” to our fraudulent GLD vehicle/Japanese exports collapse/China’s shadow banking Peer to Peer lending is imploding/Syrian Kurds to set up their own state on the border with Turkey and thus Erdogan’s worst nightmare/Chaos in Brazil as Judge releases wiretaps indicating Rousseff hired Lula as chief of staff to avoid prosecution: riots on the streets in Brazil/Bellwether Caterpillar guides 2016 earnings down 30%: stock tanks/

Gold:  $1,264.50 up $35.20    (comex closing time)

Silver 16.02  up 81 cents

In the access market 5:15 pm

Gold $1256.70

silver:  15.90


At the gold comex today, we had a poor delivery day, registering 0 notices for nil ounces and for silver we had 4 notices for 20,000 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 rose by 2325 contracts up to 168,505  with silver down by 5 cents yesterday (pre announcement by Yellen). In ounces, the OI is still represented by .843 billion oz or 120% 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 rose by 8,465 contracts to 501,551 contracts as the price of gold was DOWN $1.10 with yesterday’s trading.(at comex closing). The rise in OI in gold should add considerable  pressure on our bankers and thus expect future raids.

We had another big change in gold inventory at the GLD, a whopping deposit of 11.89 tonnes/ thus the inventory rests tonight at 807.09 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 rose by 2325 contracts up to 168,505 as the price of silver was down 5 cents with yesterday’s trading. The total OI for gold rose by 8,465 contracts to 501,551 contracts as gold was down $1.10 in price from yesterday’s level.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)



i) Late  WEDNESDAY night/ THURSDAY morning: Shanghai closed UP BY 35.11 POINTS OR 1.22% , /  Hang Sang closed UP by 246.11 points or  1.21% . The Nikkei closed DOWN 38.07 or 0.22%. Australia’s all ordinaires was UP 0.68%. Chinese yuan (ONSHORE) closed UP at 6.47800.   Oil ROSE  to 39.07 dollars per barrel for WTI and 40.91 for Brent. Stocks in Europe so far ALL IN THE RED . Offshore yuan trades  6.4751 yuan to the dollar vs 6.4780 for onshore yuan/yesterday 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). Japan’s exports plummet (see below).Yesterday China signals that they are going to tax financial transactions. This morning they raise the yuan trapping the shorts with huge losses (see below)


ii)report on Japan 


Japan exports to the USA collapse.  However imports collapse even more as their trade balance improves.  However it is not a good sign in an economy when both exports and imports collapse!

iii)Japanese intervention saves the Nikkei from disaster as the USA/Yen plummets to the 111 handle: a complete policy failure for Kuroda.

iv) report on China


The next bombshell to hit.  Peer to Peer lending has exploded in China especially in the housing sector.  Many Chinese do not have any money for homes especially the downpayment.  So what do they do?  They borrow money on the shadow banking sector as these entities lend money for the downpayment.  Thus Chinese  new home owners put up 0% and everything is mortgages and loans.  Tier one home prices have risen by over 22% this year.  This is a disaster waiting to happen:
(courtesy zero hedge)

i)The following is a big story as the Syrian Kurds want a separate state.  They were not invited to Geneva but they are now declaring a proto state on Turkey’s border.

This is exactly, the worst nightmare for Erdogan

(courtesy zero hedge)

ii) No words can describe what Erdogan is doing.  Democracy in Turkey is non existent.

( zero hedge)
i)as expected, Norway cut its interest rate by 25 basis points as it hints of NIRP and QE. Interestingly the Norwegian Krone rose on the easing instead of falling as the central bank is falling way behind in its currency wars.  The article explains why the NOK is rising!
(courtesy zero hedge)

ii)the bounce that we have experienced in the Baltic Dry Index just ended:

also Iron ore has been down in price for the past 6 days;
(courtesy Baltic Dry Index/zero hedge)

i)A  judge released wiretaps on Rousseff and Lulu and they suggest that Rousseff picked Lulu for chief of staff in order to avoid prosecution: Brazil broke into utter chaos!!

( zero hedge)



( zero hedge)
non today.
i) Munich Re purchases gold and stays in cash as they express concern on NIRP

ii) Ronan Manly has written basically an encyclopedia of gold markets around the world/ trading volumes and other interesting factoids.  Markets covered our South Africa, London, Singapore, Switzerland and the USA

( Ronan Manly/GATA)

iii)It was a foregone conclusion that all of Venezuela’s gold would end up in China after undergoing conversion to kilobars:( Ronan Manly/Bullionstar/GATA)

iv) More on our basket case country: Venezuela


v)Tonight’s topic is on the USA election:

“The Circus We Call the Election Process!”

(courtesy Bill Holter/Holter-Sinclair collaboration)


vi)Steve St Angelo explains why silver is a great investment:

( Steve St Angelo/SRSRocco report)


vii)Lawrie Williams talks about the break out in gold:

(Lawrie Williams/Sharp’s Pixley)


i)Very important:  the impact of a dovish message from the Fed is very bad news for risk assets like financials;(Bank of America/ zero hedge)

ii)Bellwether stock Caterpillar slashes its guidance for the year as they see Q1 earnings per shore 30% below their forecast.  Caterpillar is a stock to follow to give us a great idea as to how the entire globe is performing. In a nutshell: not good at all!

( Caterpillar/zero hedge)

iii)Initial jobless claims steady.  However ISM services which is 70% of uSA GDP crashes:

( zero hedge)
iv)Nothing but phony seasonal adjustments.  Do not pay any attention to this rubbish!
( Philly Fed mfg index//zerohedge)

v)The once darling of the NYSE, Valeant sees its credit default swaps hit a record high as they scramble to avoid going bust:

( zero hedge)

vi) The JOLTS survey is certainly of concern to the Fed:  lower quits/lower job openings

and lower highers.  Also the revision of jobs openings going back to November is also of great concern:
( zero hedge/JOLTS SURVEY)

vii)The evidence sure looks like Hillary knew her blackberry was not secure and that she would not be allowed to pass classified stuff to various people

It looks like she is in serious trouble on this:
( zero hedge)

Let us head over to the comex:

The total gold comex open interest rose to 501,551 for a gain of 8,465 contracts despite the fact that the price of gold was down $1.10 in price.  Expect our bankers to undergo relentless attacks on our two precious metals. 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 14 contracts up to 149.We had 0 notices filed upon yesterday, and as such we gained 14 contracts or an additional 1400 oz will stand for delivery.  After March, the active delivery month of April saw it’s OI rise by 3,968 contracts up to 248,452. 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 270,700 which is very good.Tomorrow’s number will be extremely high.  The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was  good at 232,762 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 rose by 2325 contracts from 166180 up to 168,505 despite the fact that  the price of silver was down by 5 cents with yesterday’s trading. The next big active contract month is March and here the OI fell by 231 contracts down to 715 contracts. We had 230 notices served upon yesterday, so we lost 1 contract or an additional 5,000 ounces will not stand for delivery. The next contract month after March is April and here the OI rose by 18 contracts up to 363.  The next active contract month is May and here the OI rose by 1920 contracts up to 115,929. The volume on the comex today (just comex) came in at 73,248 , which is huge. The confirmed volume yesterday (comex + globex) was excellent at 52,426. Silver is now in backwardation at the comex until April.  In London it is in backwardation for several months.
We had 4 notices filed for 20,000 oz.

March contract month:

INITIAL standings for MARCH

March 17/2016

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


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) 149 contracts(14,900  oz)
Total monthly oz gold served (contracts) so far this month  585 contracts (58,500 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 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 0 customer withdrawals:
total customer withdrawal:nil oz
we had 0 customer deposits:
total customer deposit: nil oz

we had 1 adjustment:

out of Brinks:

200.000 oz was adjusted out of the dealer and this landed into the customer account.

Can someone explain how we can get an adjustment of exactly 200.00??

what is also interesting is that even though we had an adjustment of 200.00 oz  the dealer account was not adjusted lower.

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 (149 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 (149) minus the number of  notices served upon today (0) x 100 oz which equals 73,400 oz standing in this non  active delivery month of March (2.283 tonnes).  This is an excellent showing for gold deliveries in this non active month of March.
we gained 14 contracts or  1400 additional gold ounces will stand for March delivery.
We thus have 2.283 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 2.283 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17) = 9.2896 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 17/2016:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 922,262.25 oz (Scotia,CNT/JPM)
Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory nil oz
No of oz served today (contracts) 4 contracts 20,000 oz
No of oz to be served (notices) 711  contract (3,555,000 oz)
Total monthly oz silver served (contracts) 729 contracts (3,645,000 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 10,096,266.6 oz

today we had 0 deposits into the dealer account

total dealer deposit: nil oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil


we had 0 customer deposits


total customer deposits: nil  oz


We had 3 customer withdrawal:


i) Out of Scotia: 12,114.960 oz

ii) Out of JPM: 299,856.400 oz

iii) Out of CNT; 610,290.89 oz


total customer withdrawals:  922,262.25 oz



 we had 0 adjustments



The total number of notices filed today for the March contract month is represented by 4 contracts for 20,000 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 (729) x 5,000 oz  = 3,645,000 oz to which we add the difference between the open interest for the front month of March (715) and the number of notices served upon today (4) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the March. contract month:  729 (notices served so far)x 5000 oz +(715{ OI for front month of March ) -number of notices served upon today (4)x 5000 oz  equals  7,200,000 oz of silver standing for the March contract month.
we lost 1 contract or an additional 5,000 oz  that will not stand.
No doubt this was cash settled as they are running out of real silver.
Total dealer silver:  30.492 million
Total number of dealer and customer silver:   154.529 million oz
The two ETF’s that I follow are the GLD and SLV. You must be very careful in trading these vehicles as these funds do not have any beneficial gold or silver behind them. They probably have only paper claims and when the dust settles, on a collapse, there will be countless class action lawsuits trying to recover your lost investment.There is now evidence that the GLD and SLV are paper settling on the comex.***I do not think that the GLD will head to zero as we still have some GLD shareholders who think that gold is the right vehicle to be in even though they do not understand the difference between paper gold and physical gold. I can visualize demand coming to the buyers side:i) demand from paper gold shareholders ii) demand from the bankers who then redeem for gold to send this gold onto China

And now the Gold inventory at the GLD:

March 17/we had a whopper of a deposit tonight: 11.89 tonnes/with London in backwardation this is nothing but a paper addition/inventory rests tonight at 807.09 tonnes

March 16.2016:/we had a deposit of 2.09 + 2.97(last in the evening)  tonnes of gold into the GLD/Inventory 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 17.2016:  inventory rests at 807.09 tonnes



Now the SLV
March 17/no changes in silver inventory at the SLV/Inventory rests at 325.868 million oz
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 17.2016: 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 17.2016).
2. Sprott silver fund (PSLV): Premium to NAV falls to  4.06%!!!! NAV (Mar 17.2016) 
3. Sprott gold fund (PHYS): premium to NAV falls  to -0.64% to NAV Mar 17.2016)
Note: Sprott silver trust back  into positive territory at +4.06%/Sprott physical gold trust is back into negative territory at -0.64%/Central fund of Canada’s is still in jail.

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

Trading in gold and silver overnight in Asia and Europe

Happy Saint Patrick’s Day ————– Gold Surges Nearly 3% After Fed


Breaking News and Commentary

Gold jumps to $1,260/oz after Fed statement pressures dollar – Reuters
Gold Jumps After Fed Scales Back Forecasts for Interest Rates – Bloomberg
Yellen Revives Gold Rally as Fed Scales Back Rate Outlook – Bloomberg
Fed Scales Back Rate-Rise Forecasts as Global Outlook Weakens – Bloomberg
Fed under Yellen and the gold trade – CNBC

Casey Says Gold Going Over $3,000/oz – Casey Research
Yellen-era Fed hasn’t been great to gold investing …. yet – CNBC
4 Investors That Lost Combined $3.66 Bil In Valeant’s Tuesday Bloodbath – Forbes
Silver Supply under $16 Limited. Backlash If Futures Market Break – Safe Haven
SILVER: Moving From Commodity To High Quality Store Of Value – SRS Report

Read More Here

Mark O’Byrne
Executive Director
This story is worth repeating.  One of the world’s largest insurers stashes gold and cash as they say it is to counter negative interest rats:
(courtesy Reuters/GATA)

Munich Re stashes gold and cash to counter negative rates

Submitted by cpowell on Wed, 2016-03-16 17:01. Section: 

From Reuters
Wednesday, March 16, 2016

MUNICH, Germany — 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 today.

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. …

… For the remainder of the report:

Ronan Manly has written basically an encyclopedia of gold markets around the world/ trading volumes and other interesting factoids.  Markets covered our South Africa, London, Singapore, Switzerland and the USA
(courtesy Ronan Manly/GATA)

Ronan Manly’s encyclopedia of the world’s gold markets

Submitted by cpowell on Wed, 2016-03-16 17:13. Section: 

1:12p ET Wednesday, March 10, 2016

Dear Friend of GATA and Gold:

Our friend gold researcher Ronan Manly has written what is essentially an encyclopedia of gold markets around the world, detailing their mechanisms, participants, trading volumes, and many other characteristics, from London to New York to South Africa to China and in between. This is likely to become a basic reference work for the industry. It can be found at Bullion Star here —

— where it starts with the London market. Sections on other markets are linked in the left column.

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




It was a foregone conclusion that all of Venezuela’s gold would end up in China after undergoing conversion to kilobars:

(courtesy Ronan Manly/Bullionstar/GATA)

Ronan Manly: Venezuela’s gold keeps moving to Switzerland

Submitted by cpowell on Wed, 2016-03-16 19:23. Section: 

3:20p ET Wednesday, March 16, 2016

Dear Friend of GATA and Gold:

Venezuela continues to ship its gold reserves to Switzerland as part of gold swap arrangements to finance the Venezuelan government, gold researcher Ronan Manly reports today, with 12 1/2 tonnes sent via Paris on March 8. Manly’s report is posted at Bullion Star here:…

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



More on our basket case country: Venezuela


Imagine how much they’d save if they NEVER went back to work

Submitted by cpowell on Wed, 2016-03-16 17:22. Section: 

Venezuela to Shut Down for a Week to Cope With Electricity Crisis

By Andrew Rosati
Bloomberg News
Wednesday, March 16, 2016

Venezuela is shutting down for a week as the government struggles with a deepening electricity crisis.

President Nicolas Maduro gave everyone an extra three days off work next week, extending the two-day Easter holiday, according to a statement in the Official Gazette published late Tuesday. Maduro had originally said over the weekend that the extended holiday would apply only to state employees.

The government has rationed electricity and water supplies across the country for months and urged citizens to avoid waste as Venezuela endures a prolonged drought that has slashed output at hydroelectric dams. The ruling socialists have blamed the shortage on the El Nino weather phenomena and “sabotage” by their political foes, while critics cite a lack of maintenance and poor planning.

“We’re hoping, God willing, rains will come,” Maduro said in a national address Saturday. “Look, the saving is more than 40 percent when these measures are taken. We’re reaching a difficult place that we’re trying to manage.” …

… For the remainder of the report:




Lawrie Williams talks about the break out in gold:

Lawrie Williams/Sharp’s Pixley)


LAWRIE WILLIAMS: Gold back at $1270 level after cautious Fed statement


Well the latest Fed deliberations appear to have favoured the so-called ‘doves’ with the consensus predictions coming about with the predicted number of any further interest rate rises this year (if indeed there are any at all) being halved to two.  This suggests year end Fed interest rates of between 0.75 and 1 percent – and no immediate rate rise triggered.  The whole scenario will play out again in around 6 weeks’ time.  Will it be any different then?

The immediate beneficiary of the Fed non-decision was a boost to general equities, both in the U.S. and globally (apart from Japan’s Nikkei which slipped a little).  This should be a little worrying for the Fed in terms of possible future rate hikes.  Does this mean that equities will fall should the Fed increase rates later in the year?  Equities markets are fragile at the moment amidst talk of a potential global recession.  The last thing the Fed would want to do would be to take any measure that might precipitate a Wall Street crash.

An even bigger beneficiary was the gold price which gained $40 or so and is now back trading – consolidating gold bulls will hope – in the high $1,260s – low $1,270s.  However it should be said that gold only fell back to the $1,230s over the past week engendered by nervousness ahead of the Fed’s statement.  One doubts that the Fed takes the likely movement of the gold price into consideration when deciding whether or not to raise interest rates – but it will certainly take the likely path of U.S. equities markets into account.  Sentiment is everything in maintaining any confidence in the progress of the U.S. economy and a crash in equities would be hugely counter-productive.  Gold, on the other hand, may be seen as a bellwether for the U.S. dollar and the economy among some savvy investors, but in terms of the general public it remains something of an irrelevance.  It accounts for too small a percentage of investment assets to be seen as having any real significance, except by those who understand its true role – and they are few and far between.

So how about the U.S. dollar (which also has an important impact on gold and dollar traded commodity prices)?  Well it fell back with the Index level down at around 95 – down from over 100 back in December when the general consensus was that raising interest rates would lead to further dollar strength.  This did not come about, and not raising them further appears to have led to a fairly significant fall.  This may not worry the Fed too much – U.S. exporters had been suffering as the higher dollar had been making their products uncompetitive.

However, this will be a blow to other competing currencies like the Euro, the Swiss Franc, the Japanese yen and the Chinese yuan and may lead to moves by their central banks to try and devalue their currencies against the dollar, even if only by fairly small amounts.  All these are the kinds of consequences the Fed will be having to take into account in its deliberations.

So where next for the Fed?   Inflation remains below its target.  The Fed’s inflation figures may well not tally with those of other observers, but they are the figures it bases its decisions on!  Unemployment in Fed terms is on track, although again independent assessors of the true unemployment situation feel the official figures are way, way too low.  But again the Fed figures are those on which it will base its future decisions.  There’s a strong chance that at the next Fed Open Market Committee meeting, scheduled for late April, nothing much will have changed, but then it may find itself under stronger pressure to confirm a forthcoming rate rise, if only to try and maintains credibility in its prior forecasts.  We don’t yet see it doing an about turn and cutting, or implementing a new QE phase, although some forecasters have predicted this.  Such a decision would be a bitter blow to the Fed’s forecasting credibility, which is fragile enough anyway.  So kicking the can further down the road would seem to be the most likely scenario failing a big upturn in the U.S. and global economies – for which there is little in the way of evidence to support this in the short term at least.

So where does this all leave gold – and silver?  Poised we would reckon.  Gold has moved back to the $1,270 level as I write and silver is picking up nicely pari passu with gold.  If momentum continues then we see no reason why gold couldn’t move ahead towards the $1,300 level and silver to say $16.25 or higher.  But gold is always tough to forecast.  When you expect it to rise, something brings it back down to earth – usually strange dealings on the futures exchanges.  We can probably expect to see something like this taking place in an attempt to curb, or at least control, any upwards movement.  But as trading continues moving eastwards towards China with the opening of the Shanghai Gold Exchange’s new benchmarking system next month, the abilities of the U.S. futures markets to control the global gold price will become more and more limited.  But will a Chinese-influenced system be any more supportive of gold while that nation continues to build its gold reserves?  We will have to wait and see.

Lawrence Williams



Steve St Angelo explains why silver is a great investment:

(courtesy Steve St Angelo/SRSRocco report)


SILVER INVESTMENT: Switching From A Commodity To High Quality Store Of Value

by on March 16, 2016

The biggest trade of a lifetime will occur when the value of silver switches from a mere commodity to a high-quality store of value.  Actually, it’s not really a trade of a lifetime, but rather a fundamental repricing of real assets verses supposed assets.  According to the Investment Company Institute, the supposed value of the total U.S. Retirement Market was $23.5 trillion in the third quarter of 2015:


As we can see, the value of the U.S. Retirement Market is down $1 trillion from its peak of $24.5 trillion in the previous two quarters.  Could this be the peak of U.S. Retirement assets??  While the broader stock markets rebounded in the fourth quarter of 2015, they fell again during the first quarter of 2016.

If there are any investors who still believe the Fed and member banks aren’t propping up the markets, you need to get your head examined.  We know many of the other Central Banks such as Japan and China have officially stated they were buying stocks, why wouldn’t the Fed and U.S. Govt??   Of course we are.

And it makes a lot of sense why they are doing it.  The overwhelming majority of Americans that are invested in the markets are invested in the typical assets that comprise the U.S. Retirement Market.  Only a tiny fraction of Americans are invested in physical precious metals.  So, in order to keep “CALM” in the markets, the major indexes are not allowed to collapse…. well, for a while.

Look what happened to the Mainstream investor when the Dow Jones Index fell just 11% in the first two months of 2016… they moved into the Gold & Silver ETF’s and Funds in a major way.  I discuss what is taking place in the Gold Market in detail in a new upcoming BULLET REPORT.

What on earth would happen to the Gold & Silver Markets if the Dow Jones Index was decimated by 30- 50%??  I believe it would cause Mainstream investors to move into gold and silver in such a forceful way, that it would totally overwhelm the supply causing the prices to shoot up much higher.  And the higher the price of gold and silver would go, the more Mainstream investors would pile in.

The Fed’s worst nightmare…..

Right now the values of the major stock indexes are extremely overvalued.  However, the market isn’t allowed to find their true fundamental value, but it will.  This will likely happen when gold and silver switch from a commodity pricing mechanism to a high-quality store of value.   Let me explain this in silver’s case.

Silver Trades As A Mere Commodity Due To The Oil Price

The value of silver has been tied to the price of oil for quite some time.  While some analysts suggest this isn’t the case, the charts below provide ample evidence:

Silver vs Oil Price & Ratio 1961-1970

These charts were published in an article I wrote a couple of years ago.  However, they still just as valid today.  As we can see there was very little volatility in the price of oil and silver in the 1960’s.  Why?  Because the price of oil remained unchanged from 1962 to 1970 at $1.80.  Can you imagine that?  No change in the oil price for nearly a decade?  Well, that all changed in 1970’s when the U.S. peaked in oil production and Nixon dropped the Dollar-Gold peg.

The next chart shows the change in the price of oil and silver due to two oil price shocks:

Silver vs Oil Price & Ratio 1971-1980

The price of oil jumped from $3.29 in 1973 to $11.58 in 1974 due to the Arab Oil Embargo.  This impacted the value of silver as it increased from $1.98 in 1972 to $4.39 in 1974.  Both the price of oil and silver increased slightly by 1978, but then jumped violently in 1979.  This was due to the Iranian Revolution led by Ayatollah Khomeini which resulted in a huge reduction in the country’s total oil production.  Total oil Iranian oil production fell from 5.3 million barrels per day (mbd) in 1978 to 1.5 mbd in 1980.  This had a profound impact on the price of oil.

The price of oil jumped to $31 in 1979, up from $14 in 1978.  Thus, the price of silver also skyrocketed to nearly $22 (average annual price), from $5.93 the previous year.  Why did silver move up so high?  Well, if silver mining costs were going to increase because of the jump in the price of oil, so would the price of silver.  Of course, there was increased speculation as more investors piled into silver, but we can plainly see the rise in the price of oil was the underlying fundamental cause that impacted the silver price…. as well as gold.

This the exact same thing that took place since 2000:


Again, the price silver moved up with the price of oil.  And as we can see, it also fell with fall in the price of oil… even though prematurely.  That is a discussion for another article.

The fact remains, that the cost to produce silver is based on the price of oil.  This is called a “Commodity Price Mechanism.”  Those folks who believe it will take a price of oil at $200 to see silver reach $50-$75, it’s likely not going to happen.  Why?  I don’t see a high price of oil as sustainable…. even if oil production starts to decline.  That’s another topic for discussion in an upcoming report.

And decline it will.  Especially, in the United States:


This chart is by one of the contributors (Verwimp) at the website.  This is an oil production profile of the Bakken, regardless of price.  It has to do with the high decline rates and the amount of new wells.   This isn’t the only person who believes the Bakken oil production is going to collapse.  Jean Laherrere also arrives at the same production profile:

North-Dakota-Oil-Production-Nov- 2015-JeanL

The Bakken is the second largest Shale oil field in the United States.  The Eagle Ford Shale oil field is the largest, but it will suffer the same fate as the Bakken.  With U.S. oil production to collapse over the next 5-10 years, this will have a profound impact on all paper assets including Stocks, Bonds and Retirement Accounts.  Burning energy gives these paper assets their value.  The collapse of this energy supply will cause a collapse of the paper assets.

For those who think the United States will just import more oil to make up the future shortfall… you are sadly mistaken.  There is a reason why China and Russia are adding gold to the Official Reserves.  They realize the value of the Dollar will be toast… and collapsing domestic oil production will be one of the leading causes.



Tonight’s topic by Bill Holter is on the USA election:

(courtesy Bill Holter/Holter-Sinclair collaboration)



The Circus We Call the Election Process!

As a rule I try not to comment all that much on politics because it is such a polarizing topic.  No matter what I could say one way or the other, “politics” will turn some normally placid folks into rabid trolls.  That said, what we are witnessing now has never happened before in our lifetimes and is not even about the candidates …it is about the survival of our Republic!
Immediately after turning on the business news this morning, I heard an interview of a Republican National Committee member talking about “rules”.  I did not catch who it was but the essence of the interview was it did not matter who had the most votes or delegates …the Republican committee would choose “their candidate” if no one had the majority leading into the convention.  He was questioned with “so the will of the people doesn’t matter”?  To which he answered and I will paraphrase in my own words as I understood, “it doesn’t matter who the people vote for and we will even overturn a majority if we see fit, the Republican party will choose their candidate for the good of the Republican party”.  As an aside, John (buddy can you spare a Kleenex) Boehner “endorsed” Paul Ryan for presidential nominee.  (Not sure I would have voted for him but I don’t recall his name on the ballot)?  Upon further searching, the interview can be found here  Voters don’t pick nominee, we do: GOP official .  All I can say is “in your face, we make the rules, you don’t even matter”!
  Please understand this fully, the tricks, sleight of hand and outright lying as to our country’s condition are not working anymore.  The primary voting on both sides show an electorate where a large percentage of the country has woken up in anger.  It doesn’t matter if the average guy does not know exactly “what” is wrong, he/she knows it is something!  Reality is so bad the “machine” can no longer hide it and the boiling point is being reached.  The election looks to me as if it is going to be a referendum of the average guy versus the establishment.  The danger of course is if enough “average guys” have their votes ignored they will rail against the machine.  The way I see it, the upcoming election will be about the establishment retaining the control and ability to continue bilking the system or the populous rising up and taking power back.
You might ask “what does this have to do with finance or economics”?  In no particular order, it has EVERYTHING to do with economics and finance!  Whatever happens will certainly affect the dollar (the currency of any nation is the equivalent of its common stock).  Future policy will affect the dollar as well as how foreigners view what happens.  Interest rates, stocks, real estate, everything imaginable will be affected.  It does need to be said that no matter who wins or loses, the system is already toast and only “timing” may be altered.  Most importantly I believe the only difference between who wins and who loses will dictate how quickly or severe the elimination of our civil rights and liberties will be.
In my opinion we are actually watching a circus that no fiction writer could have dreamed up.  On one side we have a socialist/communist running against an apparent felon.  On the other side we have a populist who says whatever he cares to as long as it’s something the people are thinking, running against a hardened conservative that no one in establishment Washington likes.  The odds favor a Clinton/Trump matchup.  I would ask a couple of questions.  What will the response be if Hillary Clinton is indicted?  A really far out question would be what if she is somehow pardoned and allowed to run?  On the other side, what will happen if the nomination is taken away from Mr. Trump?  Or better yet, what if it is taken away from both Trump and Cruz and instead given to a “preferred” candidate?  The most comical thing I can think of right now is future debates between Hillary and The Donald!
Before finishing it needs to be said the old adage “it doesn’t matter who you vote for, it only matters who counts the votes” is probably quite true now more than ever before.  Because of the financial backdrop I wonder whether or not we will even have an election?  If the financial system were to come down prior to the election (which I believe is likely), would we have an election under martial law conditions?  Financially our fate is carved in stone in my opinion, how we navigate, survive or perish with or without civil liberties is in question.
As I said at the beginning, I hesitate to write on this topic because my e-mail inbox explodes with hatred.  As an admission, my candidate of choice was Ben Carson.  Was he most qualified?  No.  Was he establishment or even a politician?  No.  Did he have ANY experience in government?  No.  In my opinion, Ben Carson is an American with his country’s best interest ahead of his own or anyone else’s.  He believes in God and in Christian values, whether real or not, the world would be a pretty cool place if everyone got along and acted as Christ did according to the Bible.  Mr. Carson was my choice because as I see it, our “inalienable” (or God given) rights have been frittered away and we are on the cusp of losing them altogether.  Maybe I am mistaken but I view him as a man of respect for everyone and their individual rights, not someone who wants control through handouts  I can only pray that we as a nation can find our way back in time when neighbor helped neighbor, and self reliance and accountability for one’s actions not only meant something but was expected.  No matter the outcome, this next election will be historical!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
“Lucid” comments welcome!


Your early morning currency, Asian stock market results,  important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight



1 Chinese yuan vs USA dollar/yuan DOWN to 6.4780 / Shanghai bourse  IN THE GREEN, UP 35.11 OR 1.22% :  / HANG SANG CLOSED UP 246.11 POINTS OR 1.22%

2 Nikkei closed DOWN 38.07  OR 0.22%

3. Europe stocks ALL in the RED /USA dollar index DOWN to 94.91/Euro DOWN to 1.1308

3b Japan 10 year bond yield: FALLS  TO -.036%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 111.34

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  39.07  and Brent: 40.91

3f Gold UP  /Yen UP

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

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

3h Oil 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 FALLS  to 0.311%   German bunds in negative yields from 7 years out

 Greece  sees its 2 year rate RISE to 9.65%/: 

3j Greek 10 year bond yield RISE to  : 8.88%   (YIELD CURVE NOW INVERTED)

3k Gold at $1266.50/silver $15.73 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble UP 68/100 in  roubles/dollar) 68.54

3m oil into the 39 dollar handle for WTI and 40 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 .9703 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0973 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 FALLS to  + .311%

/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 1.87% early this morning. Thirty year rate  at 2.66% /POLICY ERROR)

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

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


Another Fed “Policy Error”? Dollar And Yields Tumble, Stocks Slide, Gold Jumps

Yesterday when summarizing the Fed’s action we said that in its latest dovish announcement which has sent the USD to a five month low, the Fed clearly sided with China which desperately wants a weaker dollar to which it is pegged (reflected promptly in the Yuan’s stronger fixing overnight) at the expense of Europe and Japan, both of which want the USD much stronger.

This morning the global markets got a rude reminder that at the end of the day it is all about currency devaluation and competitive debasement – even if it means appeasing China in the process – when the plunge in the dollar,, much to Goldman’s ongoing embarrassment, extended overnight as seen in the chart below.

This has led the USDJPY slide to just over 111 while the EURUSD was surging over 1.13 as of this moment, and in the process undoing all the recent easing by both the ECB and the ECB; furthermore an expected 25 bps rate cut by the Norway Central Bank, not only did not weaken the NOK but in fact sent it surging against the EUR, indicating that even when central bank decisions are fully priced in, few can actually trade the reaction and the implication of such moves.

Worse, after briefly spiking in the aftermath of the Fed’s decision overnight European sovereign and US Treasury yields have tumbled, commodities and especially gold have soared, and as of moments ago, European stocks hit their lows on the day now that the European currency is surging, leading to this:


And since these are all the telltale signs of yet another Fed policy error, it was only a matter of time before the move also hit the Fed’s favorite asset class – equities, and sure enough, after posting modest gains overnight, US index futures have seen a sharp reversal lower, and from up 0.3% were down -0.3% at last check, as suddenly the market appears to be getting cold feet not only about the Fed’s decision to slam the Dollar at the expense of the Euro and the Yen, but also going back to that all important question which Yellen was unable to answer:has the Fed lost its credibility?

While risk assets are suddenly airpocketing, dollar-denominated oil, copper and zinc all jumped by more than 2 percent, with Brent trading above $40 a barrel, which means we can expect a rewriting of the narrative that higher gas prices are actually good for consumers, even if it also means that marginal shale production is likely to start coming back on line any moment.

And the cherry on top may have come when moments ago industrial bellwether Caterpillar slashed guidance, and now expects non-GAAP Q1 EPS of $0.65-$0.70 per share, about 25% below consensus estimates of 95 cents.

All of the above, this had led to sudden repricing of risk, which has seen equity futures stumble, and the ES is now down 10 points to 2,007, roughly where it was when the Fed unveiled its dovish surprise. Was that it for the Fed’s intervention halflife? We don’t know, but we expect much confusion today over whether even the Fed has now run out of dovish ammunition.

This is where we stand currently

  • S&P 500 futures down 0.5% to 2006
  • Stoxx 600 down 1.4% to 336
  • FTSE 100 down 0.7% to 613
  • DAX down 1.7% to 9816
  • German 10Yr yield down 7bps to 0.24%
  • MSCI Asia Pacific up 2.1% to 129
  • US 10-yr yield down 5bps to 1.86%
  • Dollar Index down 0.82% to 95.1
  • WTI Crude futures up 1.6% to $39.08
  • Brent Futures up 1.4% to $40.09
  • Gold spot up 0.6% to $1,270
  • Silver spot up 0.2% to $15.65

Top Global News

  • Witty to Step Down After Tumultuous Tenure as Glaxo Chief: CEO Andrew Witty plans to step down in 2017 after almost a decade, board to begin search for a successor
  • Rio Tinto Appoints Copper Chief Jacques CEO to Succeed Walsh: Copper boss Jacques replaces iron man Sam Walsh in July
  • FedEx Raises Floor of Full-Year Forecast After Cutting Costs: Now sees FY16 adj. EPS $10.70-$10.90, saw $10.40- $10.90, est. $10.56; 3Q adj. EPS $2.51, est. $2.34
  • Pershing Square Falls 26% Year Through March 15 on Valeant: Cut its stake in Mondelez to 5.6%
  • Toshiba Said to Face U.S. Probe Over Westinghouse Accounting: Justice Department, SEC reviewing conduct in Toshiba report
  • VW Said in Talks With U.S. Over Two Funds to Pay for Pollution: In talks to establish national remediation fund and a separate one for California as punishment for pollution from its cars after co. cheated on diesel- emissions tests, said people familiar with the matter
  • Fed Softens Rate-Rise Urgency as Risks Abroad Cloud Outlook: FOMC cites global concerns twice as Yellen highlights in Q&A
  • American Pilots Concerned by CEO Meeting on ‘Toxic’ Culture: COO Robert Isom named to deal with pilot contract concerns
  • Goldman Seen Succumbing Too as Wall Street Suffers Awful Quarter: Its trading revenue may slide 17%, Credit Suisse analysts say
  • New York’s Plaza Hotel Said for Sale in Foreclosure Auction: Billionaire Reuben brothers said to foreclose on mortgage
  • Oil Investors See $7.4b Vanish as Dividends Are Targeted: Conoco, Kinder resort to cuts “deplored” by shareholders
  • March Madness Puts Time Warner’s Big Bet on Sports to the Test: NCAA men’s championship game to air on TBS for first time
  • Valeant Lenders Said to Mull New Terms in Default Talks, Reuters Says: Lender’s demands include higher interest payments, pledge to pay a larger amount of bank loans from any Valeant asset sales proceeds
  • Amazon Said to Eye Office Depot’s Corporate Business Unit, NYP Report: May use some of Office Depot’s corporate accounts to jump-start its new office supply business
  • Canada to Announce Bombardier Aid Decision Within Weeks, Reuters Says: Govt has finished studying co.’s request for $1b in aid

Looking at global equity markets, Asia stocks traded mostly higher in the wake of the FOMC. ASX 200 (+1.0%) was led by energy and basic materials after commodity prices benefited from USD weakness post-FOMC, while oil prices were also underpinned following yesterday’s lower than expected DoE inventory build. Nikkei 225 (-0.2%) initially surged on the prospects of lower US rates for longer, but then shrugged off majority of gains as JPY strengthened, while the Shanghai Comp (+1.2%) conformed to the picture with the PBoC also said to be gauging banks for Medium-term Lending requirements. 10yr JGBs initially tracked T-notes higher following the Fed dovishness, however JGBs pared advances after a weaker 20yr bond auction result in which b/c, tail in price and lowest accepted price all disappointed.

Top Asian News

  • Li & Fung 2015 Earnings Top Estimates as New Clients Boost Sales: FY net $421m, est. $405.3m, sales down 2.4% to $18.8b
  • Billionaire Li’s CK Hutchison Profit Edges Above Estimates: FY adj. net HK$31.2b; est. HK$30.9b, profit helped by earnings from Europe telecom operations
  • China Mobile 2015 Profit Misses Estimates, Shares Reverse Gain: Govt request to lower mobile phone rates erodes profit
  • Mr. Yen Called the Rally, Now Sees Gain Toward Intervention Zone: Ex-MOF Sakakibara correctly predicted advance
  • Toshiba Gets $5.9 Billion Deal to Sell Medical Unit to Canon: Deal will be funded by existing cash and borrowings, Canon said, day after unsuccessful bidder Fujifilm questioned Toshiba about the sale
  • Escape From Negative Japan Rates Wrecked by Record Hedging Costs: Swap premium for yen holders reaches record 102.5 bps
  • Yuan Falls to 15-Month Low Versus Basket as Fixing Lags Dollar: Reference rate shows China doesn’t want excessive gains, DBS says
  • TPG Sees Opportunity in $131 Billion India Distressed Assets: Co. would like to triple India investments in 3 yrs

In Europe, this morning has seen focus fall on the fallout from the Fed rate decision and press conference yesterday and as such, has seen much of the price action continue on from US and Asian hours. Bunds have seen significant upside during European trade, with the June future residing above 162.00 and the German curve showing many of the characteristics as its US counterparts with the curve flattening amid expectations for a shallower rate path going forward.

In tandem with this, European equities saw initial upside at the open in the wake of the dovishly interpreted Fed announcement. However stocks came off their best levels by mid-morning to see Euro Stoxx reside relatively flat as some analysts begin to focus on recent central bank commentary which appears to be relatively downbeat for global growth prospects as highlighted by the Fed statement and UK budget yesterday and the SNB and Norges Bank today.

Top European News

  • Lufthansa Says Eurowings Price Cuts to Curb Profit Gains in 2016: Oper. profit will advance only “slightly” in 2016 amid deterioration in yields as Eurowings adds flights in long-haul market, where Lufthansa traditionally makes most of its money, and competition from low-cost rivals intensifies in Europe
  • LafargeHolcim Sees Demand Growing After 2015 Profit Falls: Says overall demand to rise 2% to 4% in 2016, co. says it has made progress towards asset sales target; 2015 adj. operating Ebitda fell 10.7% to CHF5.75b vs est. CHF5.73b
  • Swiss Keep Franc Intervention Threat Alive as Rates Left on Hold: SNB holds deposit rate at minus 0.75% as forecast by economist, repeats pledge to intervene in FX markets
  • Norway Cuts Rates and Signals More Easing Ahead Amid Oil Plunge: Overnight deposit rate was lowered by 25bps to 0.50%
  • HeidelbergCement Boosts Dividend Amid Expected 2016 Growth: Raises div. 73% to EU1.30/share, sees “moderate” improvement in 2016 profit
  • Gulf Keystone Tumbles to Seven-Year Low as Future in Doubt: Kurdistan-focused oil company faces “material uncertainties”
  • Bank of England Has Nowhere to Go With ‘Brexit’ in Limelight: Key rate will be kept at record low 0.5%, economists predict

In FX, early European flow has seen a continuation of the USD fallout from the Fed adjustment in rate hike projections for 2016. Commodities and their related currencies have benefited the most , notably USD/CAD, which is has torn through a series of support levels including 1.3000 to hit 1.2941. WTI is now looking to a move through $40.0, and the CAD seems to have pre-empted this to a degree, but near term stagnation in the Oil price sees some consolidation back around 1.3000 for now. AUD/USD took out .7600 in Asia, having previously contained the upside, but since then we have gone on to hit .7650. EUR/USD has had an easy ride on the upside and has traded to just shy of 1.1300, while EUR/GBP gains stalling at .7900 to allow for a Cable extension through 1.4300 , but lacking momentum here. USD/JPY is the one we are all watching from current levels, having taken out 112.00 to put 111.00 (double bottom) under threat. 111.45 is the low here so far, but now major pullback to note in the current climate.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency against 10 major peers, sank 0.9 percent at 10:18 a.m. in London, after losing 1.1 percent in the last session.

“Currency reaction suggests market expectations for the Fed’s rate outlook were slightly more bullish,” Hiroshi Kurihara, chief U.S. economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The dollar’s been sluggish despite some positive signs over growth, hinting that it’s sensitive to negative news and that its advance may not be strong even as a rate hike approaches.”

The yen strengthened 0.8 percent versus the dollar, while the British pound rose 0.3 percent and Switzerland’s franc gained 0.4 percent. The Bank of England is forecast to leave interest rates unchanged on Thursday and maintain current stimulus levels, while the Swiss National Bank stuck with its ultra-loose monetary policy. The Norwegian krone appreciated 1.1 percent after a cut in borrowing costs.

In commodities, WTI and Brent continue to rally after yesterday’s FOMC comments with WTI close to testing the USD 40/bbl level. Gold also benefited from the FOMC reaching highs of USD 1267.60/oz while platinum and palladium are also appreciating respectively . In base metals Zinc advanced for the first time this week amid global production fell for a second month, while copper and iron ore prices were bolstered with the latter gaining over 4% amid the heightened risk sentiment. However, analysts at Jinrui futures did highlight that the market is waiting to see signs of Chinese demand given the increase in inventories and slowing physical trade.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • European equities fail to sustain opening gains as weakness in financials and the downbeat outlook for global growth prospects grips investor sentiment
  • Early European FX flow has seen a continuation of the USD fallout from the Fed adjustment in rate hike projections for 2016
  • Looking ahead, highlights include the BoE rate decision, US weekly jobs, Philadelphia Fed Business Outlook, JOLTS, and EIA Nat. Gas Storage Change

Treasuries rally overnight, global equity markets mostly lower and commodities rally after more a dovish FOMC statement and SEP than foreseen; today’s economic data includes jobless claims, JOLTS Job Openings.

Bank of England will announce their latest decision today together with minutes of their discussions. Investors are pricing in 20% chance they will cut benchmark interest rate this year

The Bank of Japan’s negative interest rate policy is making it more expensive for domestic banks to hedge dollar investments, threatening to slow their escape from negative rates into U.S. currency debt

Even with a 25% drop in the yen’s value, Japanese export volumes are basically unchanged from where they were when Prime Minister Shinzo Abe took office

Norway’s central bank cut its benchmark interest rate 25 basis points to a record low 0.50% and signaled it’s prepared to ease policy further to ward off a recession in western Europe’s biggest crude oil producer

Switzerland’s central bank held interest rates at a record low and repeated its pledge to intervene in currency markets, a threat President Thomas Jordan has used to keep the franc from strengthening

As Wall Street leaders warn publicly about this quarter’s plunging revenue from trading and deals, Goldman Sachs has provided no guidance. The mystery isn’t whether it is getting hit too — it’s how hard

$2.5b IG corporates priced yesterday; WTD $19.61b, MTD $106.03b, YTD $400.28b; $665m HY priced yesterday, MTD 13 deals for $7.315b, YTD 38 deals for $22.165b

Sovereign 10Y bond yields lower; European, Asian equity markets mostly lower; U.S. equity- index futures steady. WTI crude oil, copper, gold rise

DB’s Jim Reid concludes the overnight wrap

Although we saw the Fed closer align its rates expectations with those of the market, the market pushed Fed Funds expectations back even further with the probability of a June hike taken down to 38% (from 54%). Yellen made mention in her press conference of the April meeting being ‘live’ – which is unlikely to be surprising given her preference for optionality – although the market clearly sees that as an even longer shot now with the probability down to 8% this morning, after being at 25% just 24 hours ago.

Away from the Fed, it’s worth adding that Oil (+5.83%) rebounded hard yesterday (and is up further this morning) and in turn wiped out the heavy losses from Monday and Tuesday. That more than played its part in the price action for risk assets with the surge coming on reports that Saudi Arabia and other oil exporters will limit output levels even if Iran refuses to cooperate. According to the WSJ, Qatar have been reported as saying that they will host a meeting on April 17th for both OPEC and non-OPEC members to discuss such measures, although we highlight that this date has appeared to be pushed back on a number of occasions now.

Looking at the latest in Asia, aside from a drop in the Nikkei (-0.73%) with the stronger Yen weighing on markets there, bourses elsewhere are trading with broad based gains with the Hang Seng (+1.02%), Shanghai Comp (+0.88%), Kospi (+0.70%) and ASX (+0.96%) all up strongly. Credit indices are performing strongly too with the iTraxx Aus and Asia indices 5bps and 4bps tighter respectively. Asia FX is also posting some solid gains, while the Aussie Dollar is up over half a percent following an unexpected fall in the unemployment rate data this morning.

Back to yesterday and a quick recap of the economic data. As noted earlier, core inflation for the US in February was up a slightly better than expected +0.3% mom last month (vs. +0.2% expected) which has helped to nudge the YoY rate up one-tenth to +2.3% and the highest now in five years. Headline inflation was as expected at -0.2% mom last month, with the YoY rate down four-tenths to +1.0%. Elsewhere we saw industrial production disappoint with a -0.5% mom decline in February and more than expected (-0.3% expected) with utilities and mining output both contributing to the slump. Capacity utilization was down four-tenths to 76.7% (vs. 76.9% expected) although there was some better news in the latest manufacturing production data which showed a better than expected +0.2% mom gain last month (vs. +0.1% expected). Elsewhere, last month’s housing starts data showed a robust +5.2% mom increase (vs. +4.6% expected) although permits slipped -3.1% mom (vs. -0.2% expected).

In Europe yesterday price action was pretty benign which was of little surprise ahead of the Fed. The Stoxx 600 (+0.04%) closed barely unchanged while credit indices were flat to slightly wider (iTraxx sub fins being the notable underperformer, closing 10bps wider). Notable during the European session however was the €24bn of primary bonds issuance which priced in Europe which was the biggest volume day in two years and the week-to-date volume so far the second busiest YTD.

Looking at the day ahead now, this morning in Europe the notable data to be released will be the final revision to the February CPI report for the Euro area (no change to -0.2% yoy headline expected) along with the January trade balance. While the dataflow is light, there’s no shortage of central bank meetings however with the BoE, SNB and Norges Bank all due to announce their latest policy decisions – the latter the only one where the market is expecting a change with a 25bps cut to the deposit rate expected (to 0.5%). This afternoon in the US it’s another reasonably busy afternoon of data. The Philly Fed business outlook for March will be closely watched, while we’ll also receive employment data in the form of initial jobless claims and JOLTS job openings for January. The Conference Board’s February leading indicator will also be released.

Let us begin;



Late  WEDNESDAY night/ THURSDAY morning: Shanghai closed UP BY 35.11 POINTS OR 1.22% , /  Hang Sang closed UP by 246.11 points or  1.21% . The Nikkei closed DOWN 38.07 or 0.22%. Australia’s all ordinaires was UP 0.68%. Chinese yuan (ONSHORE) closed UP at 6.47800.   Oil ROSE  to 39.07 dollars per barrel for WTI and 40.91 for Brent. Stocks in Europe so far ALL IN THE RED . Offshore yuan trades  6.4751 yuan to the dollar vs 6.4780 for onshore yuan/yesterday 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). Japan’s exports plummet (see below).Yesterday China signals that they are going to tax financial transactions. This morning they raise the yuan trapping the shorts with huge losses (see below)


report on Japan

Japan exports to the USA collapse.  However imports collapse even more as their trade balance improves.  However it is not a good sign in an economy when both exports and imports collapse!

Japanese Exports To US Plunge Most Since 2011 As Weak Yen Tailwind Evaporates

Japan just posted its largest trade surplus in 5 years (+JPY243bn) as exports dropped 4% YoY (worse than expected) but imports fell 14.2% (better than expected). However, the biggest standout was the ongoing deterioration in Japanese exports to the US which dropped by the most since 2011 as the ‘advantages’ of a devalued currency appear to have hit their limit. Time for some more devaluation Abe… or Peter Pan(ic).

“The tailwind from the weak yen has gone. We can’t help but hold a pessimistic view on the outlook for exports,” said Atsushi Takeda, an economist at Itochu Corp. in Tokyo, said before the figures were released. “Domestic demand won’t be dependable at all, and the same goes for exports. I can’t deny the possibility of another economic contraction this quarter.”

Japanese intervention saves the Nikkei from disaster as the USA/Yen plummets to the 111 handle: a complete policy failure for Kuroda.
(courtesy zero hedge)

BOJ Intervenes After USDJPY Plunges To QQE2 Lows, Nikkei Crashes 700 Points

Nikkei futures rallied post-Fed into the Japaense open (despite weakness in USDJPY) and then when trade data struck (and exposed the utter failure of competitive devaluation), everything went into freefall. The Nikkei crashed 700 points and USDJPY plunged to its lowest since QQE2… and then  – on cue – “someone” started panic selling JPY…

And just as USDJPY hit QQE2 lows – so someone stepped in large…

Which juiced NKY back up…


Report on China

The next bombshell to hit.  Peer to Peer lending has exploded in China especially in the housing sector.  Many Chinese do not have any money for homes especially the downpayment.  So what do they do?  They borrow money on the shadow banking sector as these entities lend money for the downpayment.  Thus Chinese  new home owners put up 0% and everything is mortgages and loans.  Tier one home prices have risen by over 22% this year.  This is a disaster waiting to happen:
(courtesy zero hedge)

P2P Property Lending Explodes In China; Officials Panic

PBoC governor Zhou Xiaochuan thought about it, and decided it’s probably not a good idea for borrowers to get P2P loans for down payments on homes.

In fact, he said last weekend, it’s illegal: “Funds used for down payments cannot be borrowed.”

Vice-governor Pan Gongsheng, one of Zhou’s deputies, echoed his sentiments. “Property agencies and developers are not qualified to conduct financial business. They are illegally doing financial business,” he explained. “This business they are engaged in, and jointly with peer-to-peer lenders and down payment credit firms, has not only raised the leverage of residents’ house purchases, worn down the effectiveness of macro policy controls and added to financial risks, but has also increased risk in the property market.”

Now you might think that what’s implied there is too bad to be true – even in the increasingly ludicrous world of P2P and marketplace lending. But in fact, P2P lenders in China have indeed been funding down payments on homes, embedding an enormous amount of excess leverage into the market while simultaneously driving up prices in Tier-1 cities.

“Home sales in Beijing, Shanghai, Guangzhou and Shenzhen, China’s ‘first-tier’ cities, grew 14% last year compared with about 7% nationwide,” FT reports. “In Shenzhen, the average price per square meter in February increased by about 50% compared with a year earlier, according to Soufun, a real estate consultancy.”

Theoretically, this shouldn’t be happening. Although Beijing has gradually relaxed the rules on down payment requirements for both first- and second-homes in an effort to boost the economy, FT reminds us that “in the wake of the collapse of the US housing market in 2008, China launched restrictions on mortgages to rein in the country’s then red hot property market, which was part-fuelled by speculation on borrowed money.”

But as we noted late last month, shadow banking has a way of creeping into every market in China and as soon as you stamp out one conduit, another pops up in an endless game of Whack-a-Mole. Somehow, leverage always finds a way.

Over the past year or so, a new phenomenon has emerged: P2P lending for down payments on homes, and as we alluded to above, it’s just as utterly insane as it sounds. Bloombergrecounts one borrower’s experience:

When Fu Songtao found his ideal home in the suburbs of Shanghai, he faced the typical problem of would-be homebuyers: Coming up with enough cash for a down payment. So Fu turned to an online solution. His property agent offered him a zero-interest loan, funded entirely online by peer-to-peer lenders, that covered almost half his deposit.

“Everybody I know took out these loans,” said Fu, a 29-year-old employee of a state-owned enterprise, who borrowed 380,000 yuan ($58,000) a year ago, with interest payments to lenders subsidized by the property agent, for his 3 million yuan apartment, and has seen its value increase to 3.3 million yuan since. “If you can borrow like that, why not?”

Right, “why not?” One reason is because you are effectively taking out a zero down payment mortgage. If you can’t figure out the problem with that then you probably have no business buying a home in the first place.

In any event, this type of lending is proliferating – at a rapid clip. In fact, according to Bloomberg, “peer-to-peer lending for property in China grew more than six times fasterthan loans extended through banks last year” to $18 billion. That’s up 163% over 2014 and dwarfs the 21% increase in outstanding mortgages.

In some ways this is a self-fulfilling prophecy. That is, borrowers (and speculators) see the price gains the practice is fuelling and, not wanting to miss out, dive in as well, driving prices still higher and perpetuating a kind of greater fool boom. Have a look, for instance, at the following chart which shows that China’s housing bubble – at least in Tier-1 cities – is alive and well:

As we put it last month, “now that the Chinese stock market bubble has burst, the local population has to find a new asset class which to chase for the next few months, and for the time being that asset is housing; and since the politburo gets to boast that the Chinese economy is ‘improving’ as a result of this scramble, no ‘macroprudential brakes’ will be deployed before it is again too late.”

Well, when it comes to macroprudential brakes, the Politburo might be prepared to make an exception for P2P down payment loans. Just as P2P lenders were forbidden from loaning money for stock purchases last summer, so too is Beijing set to ban P2P loans for down payments. “New rules being drafted by the central bank, the China Banking Regulatory Commission and other bodies would bar developers, peer-to-peer networks and other non-banks from offering down-payment loans,” Bloomberg writes. “Banks would be required to scrutinize mortgage applications and reject those with deposits funded by loans.”

“[External financing] started to boom in 2014, helped by online and mobile technologies,” Clement Luk, chief executive officer for eastern China at realtor Centaline, told Reuters, who also notes that “property loans account for around 15 percent of all online financing in China, according to Xu Hongwei, chairman of a data provider on the business, Wangdaizhijia.” Shanghai-based Yingcan says the number is far higher, at 23%.

And while at least one broker is already under investigation for facilitating down payment loans, analysts say the sector will be difficult to police, given the fact that lenders brand them with innocuous names that would not immediately indicate that they were made for down payments on property. Here’s BofAML with a bit of color on the market:

The overall property market recovery that began in the spring of 2015 has been supported by a string of monetary-easing measures and supportive property policies. Moreover, the pursuit of capital gain and lack of attractive alternative investments amid the economic downturn have stimulated purchase demand in Tier-1 cities and helped fueling up prices while the supply remains tight. A recent Xinhua News article has warned about housing speculation, especially in Shenzhen, suggesting speculative purchases account for 30% home transactions at present. Home mortgages loan as a percentage of total loans are still relatively low, at 10.1% in Beijing, 14.5% in Shanghai and 22.9% in Shenzhen, vs. 15.4% nationwide. However, there are some other forms of leverage gaining its popularity to speculate in the Tier-1 housing markets, such as mortgage down-payment loans provided by some property agents and P2P platforms. But the size of such loans should still be quite small. For example, the outstanding loans by Lianjia (a leading player in this field) are at RMB2.9bn currently, with typical maturity of 90 days.

If the typical maturity is 90 days and with interest rates sometimes running as high as 2% per month, it seems rather clear to us that borrowers might indeed default en masse should the economy take a decisive turn for the worst and should Beijing live up to its promise of stripping excess capacity from the industrial sector.

On the other side of the equation, lenders are promised returns of up to 10% per year for financing this madness.

Of course this is, like the rest of China’s shadow banking sector, a Catch-22 for Beijing. If China cracks down on down payment loans, it may curtail the property market and thus dent the economy. If they don’t crackdown, more and more leverage will be embedded into the system making the eventual collapse that much more spectacular. Summing up the government’s dilemma is Hu Xingdou, an economics professor at the Beijing Institute of Technology:

“China has learned a lesson from the U.S. subprime crisis. The Chinese government understands that they have to solve problems like housing and overcapacity. At the same time, they can’t bring further risks to the financial system, as the banks already have a lot of bad debt.”





The following is a big story as the Syrian Kurds want a separate state.  They were not invited to Geneva but they are now declaring a proto state on Turkey’s border.

This is exactly, the worst nightmare for Erdogan

(courtesy zero hedge)


In Dramatic Move, Syrian Kurds Set To Declare Proto-State On Erdogan’s Border

Well, Turkish President Recep Tayyip Erdogan’s worst nightmare is about to come true.

For days there have been rumors that Syria might attempt to adopt some manner of federal system at peace talks in Geneva as a kind of compromise on the way to negotiating a political solution to the country’s five-year conflict that’s killed some 300,000 people and created the worst refugee crisis Europe has seen since World War II.

But one of the problems with the “peace talks” is that no one who really matters in terms of the opposition was invited. The High Negotiations Committee (which represents a collection of Saudi-backed anti-Assad elements) is only comprised of representatives from the “moderate” rebels and let’s face it: Russia and Hezbollah just rolled most of them up in five short months, all but forcing them to surrender at Aleppo.

So it’s not even clear what a federal system would look like with the FSA and the other “moderates.” How would they administer anything in their current depleted condition especially considering they’d live under constant threat of attack from the half dozen (at least) jihadist elements operating in the country?

The groups who are actually still capable from an operational perspective are al-Nusra, ISIS, and of course, the Kurds (the YPG). Now obviously, you can’t exactly invite ISIS or al-Nusra to Geneva (even though you can, apparently, arm them and send them money), but you could certainly have invited the Syrian Kurds who have been exceptionally effective at battling extremists and who control the entire northern part of the border with Turkey save one small strip west of the Euphrates.

(Kurdish controlled areas are in purple)

But when the Kurds checked the mail for their Geneva invitation they discovered that as usual, they got the short end of the stick (no doubt thanks to Erdogan). But that’s ok. Because now,they are simply going to take matters into their own hands and declare a federal system.

“After being excluded from the talks in Geneva, which began on Monday, [the Kurds] are drawing up plans to combine three Kurdish-led autonomous areas of northern Syrian into a federal arrangement,”Reuters reports, adding that “Aldar Khalil, a Kurdish official and one of the organizers, said he anticipated the approval of a new system, and ‘democratic federalism’ was the best one.”

Idris Nassan, another Kurdish official, told Reuters he also expected a declaration of federalism.

According to a document seen by Reuters, the Kurds felt the step was necessary because they “envision the failure of U.N.-led peace talks in Geneva.”

“The system envisions areas of democratic self-administration that will manage their own economic, security and defense affairs,” the document asserts. The details, Kurdish officials said, would be worked out later. The name of the new proto-state: “The Federal Democratic System of Rojava-North Syria.”

“Now the conference has just started in Rmelan, about 200 representatives of Rojava have joined [the event]. They represent different ethnicities and nationalities. There are Kurds, Arabs, Assyrians, Syriacs, Turkomans, Armenians, Circassians and Chechens,” Barzan Iso, a Kurdish journalist, told RT. “Also we have representatives from the Syrian democratic forces, YPG, women defense units.”

“Within days, probably today, self-governing [bodies] of three Kurdish cantons in Syria’s north will declare a federation,” Abd Salam Ali, a PYD party rep in Moscow, told RIA Novosti “Separation of Rojava [Western Kurdistan] from Syria is not an option. We remain [a part of Syria], but declare a federation,” he said.

From a common sense perspective this makes perfect sense. The Kurds have been defending themselves against virtually everyone for years in Syria and not only that, they managed to make territorial gains while fending off random shelling from inside of Turkey. They’re certainly in a better position to govern themselves than any other group operating in the country including the Alawite government and those who are still loyal to it.

Of course this is just about the last thing Erdogan wants to see. Ankara equates the YPG with the PKK and thus with terrorism and worse, Erdogan fears that a Kurdish state on his border will embolden Kurds in southeast Turkey – who, you’re reminded are under bloody seige by government forces that allegedly burned 150 people alive in Cizre last month – to declare autonomy, something the pro-Kurdish HDP supports.

For their part Russia is firmly on the side of the Kurds after demanding that they be invited to Geneva.

“If the Kurds are ‘thrown out’ of the negotiations on Syria’s future, how can you expect them to want to remain within this state?”  Sergei Lavrov asked in an interview with Russian REN TV channel that aired on Sunday.

Good question.

“The second round of inter-Syrian talks is underway in Geneva, but Syrian Kurds were not invited. It means that the future of Syria and its society is decided without Kurds. In fact, we are pushed back into a conservative, old-fashioned system which does not fit well with us,” Rodi Osman, the head of Syrian Kurdistan’s office in Moscow, told RIA Novosti. “In light of this, we see only one solution which is to declare the creation of [Kurdish] federation. It will serve the interests of the Kurds, but also those of Arabs, Turks, Assyrians, Chechens and Turkomans – all parts of Syria’s multinational society.

And with that, we can start to see how the next conflict in Syria begins. Erdogan has already shelled the Syrian Kurds in the past month and he’s made it very clear that a Kurdish state on his borders would not be tolerated. “Unilateral moves carry no validity,” the Turkish foreign ministry said, in a terse statement. Ankara will now use every PKK attack and every suicide bombing as an excuse to attack the new proto-state and Erdogan will probably invade later on down the road on the excuse that he’s not invading Syria, but rather a hostile country that supports terrorist elements in southeast Turkey.

Note that you heard it here first.

No words can describe what Erdogan is doing.  Democracy in Turkey is non existent.
(courtesy zero hedge)

Turkey’s Erdogan Goes Full-Dictator: Designates Journalists And Teachers As “Terrorists”; Arrests Lawyers

“It is not only the person who pulls the trigger, but those who made that possible who should be defined as terrorists, regardless of their title,” Turkish President Tayyip Recep Erdogan said on Monday, in an attempt to convince parliament to include journalists, politicians, academics, and activists under the country’s anti-extremism laws.

Erdogan’s comments came a day after the latest in a string of suicide bombings ripped through Ankara, killing 34 and wounding more than 100 in Kizilay. Since then, Turkey has arrested nearly 50 people with “suspected ties” to the PKK against which Erdogan is waging a highly personal crusade.

Apparently, the President doesn’t think parliament is moving fast enough on his “request” to expand the definition of “terrorist” because in a speech on Wednesday, he effectively instructed lawmakers to get moving before also urging parliament to deal with “the issue of immunities.”

Erdogan desperately wants to prosecute HDP members who he says are guilty of “inciting terrorism.” “We must swiftly finalize the issue of immunities,” he said. “Parliament must take steps on this issue swiftly,” he added, as if the first statement was in some way unclear.

(Erdogan gets it, why don’t you?)

But frankly, we’re not even sure why he bothers parliament with these things. Erdogan is going to do whatever Erdogan wants to do. We’re talking about a man who arrested two of the country’s preeminent journalists and had the nerve to charge them with “deliberately aiding a terrorist organization” when what they were in fact doing was exposing Erdogan for… wait for it… deliberately aiding a terrorist organization.

And if that’s not absurd enough for you, there are countless other examples including an incident which saw a medical doctor put on trial for posting a picture of the President next to a picture of a fictional creature from a Tolkein novel on social media.

Turks are in fact so scared of their “leader” that just last month, a Turkish truck driver literally sued his own wife for cursing at Erdogan when he spoke on television. “I warned her,” the man later said.

True to form, Erdogan didn’t wait on parliament to expand the definition of “terrorist” before he went ahead and arrested three academics for “terrorist propaganda” after they made the mistake of publicly asking the government to stop the siege on Cizre and other cities in the predominantly Kurdish southeast.

“More than 2,000 academics signed a petition in January criticizing military action in the southeast, including round-the-clock curfews aimed at rooting out PKK militants who have barricaded themselves in residential areas in southeastern cities,” Reuters notes. “The petition outraged President Erdogan, who said the academics would pay a price for their ‘treachery’“.

A few days ago, a group of lawyers made the mistake of holding a press conference to defend the academics who signed the aforementioned petition. On Tuesday, Erdogan arrested the lawyers too.

Finally, when a British citizen who teaches at Bilgi University showed up at the courthouse to support the lawyers, he was also arrested. His crime, in his own words: “I am accused because I had several invitations to Kurdish new year (celebrations on March 21) published by the HDP – the third-largest party in the Turkish parliament – in my bag.”

So there you go. Lessons learned all around we suppose.

Better still, the President says he plans to start campaigning in April for his long-planned push to expand the powers of the presidency (because clearly he’s not powerful enough). Erdogan will look to rewrite the constitution (literally) in order that it might, inBloomberg’s words, “feature a strengthened presidency while retaining a key role for the parliament.”

Yes, “a key role for parliament,” where the third largest party is about to have their immunity stripped away so that Erdogan can prosecute the whole lot of them for being terrorists.

Erdogan, Bloomberg goes on to write, “has devoted much energy to expanding the executive role of what’s traditionally been a largely ceremonial post, arguing that strong leadership will help extend a record of economic growth [but] only holds 317 seats in the 550-member parliament, short of the 330 votes needed to take a new charter to a public vote.”

Trust us. He’ll get it to a referendum. Votes or no votes. And then he’ll rig the referendum.

Clearly, Nihat Ali Ozcan at the Economic Policy Research Foundation in Ankara (who spoke to Bloomberg) doesn’t get it: “The PKK is engaged in a direct confrontation with Erdogan with the aim of preventing him from turning his office into an executive presidency. However,Erdogan may benefit from a growing nationalist backlash in his campaign for a presidential system, as long as he maintains his crackdown on the PKK.”

Gee, do you think so?

That’s been the entire gambit since last June’s elections. Erdogan lost ground to the pro-Kurdish HDP and so, he used the war on ISIS as an excuse to deliberately restart the conflict with the PKK in order to convince the public that it needs his protection lest the entire country should descend into chaos. Three months and a whole lot of lost lives later, AKP performed better in a November redo election that Erdogan – gun to his head – was “forced” to call when the coalition building process was sabotaged fell apart in August.

We have no doubt that Erdogan will succeed one way or another in his bid to rewrite the constitution. Even if it kills him. Or wait. No. Even if it kills you.



as expected, Norway cut its interest rate by 25 basis points as it hints of NIRP and QE. Interestingly the Norwegian Krone rose on the easing instead of falling as the central bank is falling way behind in its currency wars.  The article explains why the NOK is rising!
(courtesy zero hedge)

Norway Cuts Rates, Hints At NIRP, QE As Central Bank Falls (Way) Behind In FX Wars

We’ve long said the Norges Bank would ease in March in the face of falling crude prices and the continuation of the negative rates regime at the ECB, the Riksbank, and the NationalBank.

Indeed by the time of today’s announcement, the market was pricing in a ~75% chance that Oystein Olsen would cut rates by 25 bps. And he didn’t disappoint, slashing the depo rate to 0.50%. Incidentally, we’d hate to be the 1 economist out of 20 surveyed by Bloomberg that managed to miss this one.

The picture in Norway is clouded by a number of factors.

Obviously, the economy is heavily dependent on oil, and the sharp decline in prices has taken a significant bite out of revenue. At the same time, falling crude has also put pressure on the NOK, which has naturally adjusted downward with oil, providing somewhat of a cushion for the country’s economy.

Still, there are two factors that prevent the currency from adjusting as much as it otherwise might: 1) competitive easing from the ECB, the Riksbank, the NationalBank, and 2) the fact that when Norway taps into oil revenues to provide fiscal stimulus to the economy, the Norges Bank becomes a buyer of NOK. We explained the latter dynamic in detail here, but suffice to say that in February, the bank bought 900 million kroner per day, a marked increase from previous purchases. Here are two simple graphics which show that when the budget deficit began to catch up with oil revenues, the Norges Bank began buying NOK:

As Bloomberg put it last November, there’s a certain extent to which the krone “just can’t get weak enough.” And if it did, it’s not yet clear what effect that would have on the country’s housing bubble and on financial stability in general.

By the time the March decision rolled around it was pretty clear that “financial system vulnerabilities” – as the central bank puts it – would have to take a backseat to concerns about the economy and worries about what effect Draghi’s new package of easing measures would have on EURNOK. Further, the Riksbank also cut rates again last month, putting still more pressure on the Norges Bank. Oil prices have rebounded thanks to incessant banter about an output freeze led by Saudi Arabia, Russia, and Qatar, but the outlook is hardly encouraging and as we’ve outlined on a number of occasions, Norway will this year be tapping the rainy day SWF (which, at $830 billion, is the largest on the planet) to help plug budget holes and provide stimulus to the economy.

And so, cut they did and an effort was made to send a dovish signal to markets. “The current outlook for the Norwegian economy suggests that the key policy rate may be reduced further in the course of the year,” Oeystein Olsen said. The Norges Bank also said it “will not exclude the possibility of negative rates.”

Meanwhile, the bank revised lower its estimates for oil investment which is now seen declining by 12% in 2016, by 75 in 2017, and by 2% in 2018. The 2016 GDP growth forecast was cut to 0.8% from 1.1%.

“[The] rate path is more dovish than expected,” said Erica Blomgren, SEB’s Norway chief strategist. “[The] determination to support growth through weaker krone suggests that bank will be forced to cut rates again.”

Yes it does, and all things equal, all of the above would certainly suggest that the NOK should be getting some respite. But as explained above, all things in this case are not equal which is why in the aftermath of the cut, the NOK gained against all G-10 currencies except the NZD. How is that possible you ask? Well for the reasons outlined above. “There’s appreciation pressure from Norges Bank NOK purchases, stabilizing oil price and attractive valuation; should the government decide to increase fiscal stimulus it will increase further,” SEB’s chief FX strategist told Bloomberg. “[The] policy decision was dovish but the market obviously was very long EUR/NOK into the announcement.”

In other words, Norway has fallen behind in the currency wars and in a world where Draghi is buying corporate bonds, Kuroda pontificates daily about his “three forms,” and Janet Yellen is leaning dovish, a 25bps cut to positive 0.50% and a hint that more cuts are coming doesn’t even come close to being competitive. Especially when you are buying your own currency hand over fist to support fiscal stimulus.

So good luck Norway because really, there’s no way out of this one.

And for the final punchline, note that Olsen says he’s “not considering QE right now.” Well that’s good, because there’s nothing to buy:

the bounce that we have experienced in the Baltic Dry Index just ended:
also Iron ore has been down in price for the past 6 days;
(courtesy Baltic Dry Index/zero hedge)

The Dream Is Over – Baltic Dry Bounce Ends

Despite its 98% crash from 2008 highs, and its plunge to record (35 year-plus) lows, the recent rally (off sub-300 lows) sparked a wave of exuberance with such luminaries as Jim Cramer proclaiming this a sign that everything is fixed again in China. Having risen non-stop since Feb 10th, coincidentally the same time that the entire world suddenly and unexplainedly went full risk-on short-squeeze buy-buy-buy, The Baltic Dry Index dropped today – which should not surprise many as China’s Containerized Freight Index crashes to record lows


The Baltic Dry drops for the first time since Feb 10th…


It appears BDIY gets over-excited relative to CCFI’s lead…


And tthis won’t help…

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



A  judge released wiretaps on Rousseff and Lulu and they suggest that Rousseff picked Lulu for chief of staff in order to avoid prosecution: Brazil broke into utter chaos!!

(courtesy zero hedge)


“It’s All F**ked”: Brazil Descends Into Chaos As Rousseff, Lula Wiretaps Trigger Mass Protests

Just yesterday, we said the following about Brazil: It seems as though this country can’t get through a single day without some piece of political news or economic data creating confusion and turmoil.

We said that on the way to noting that central bank chief Alexandre Tombini looked set to resign for fear that former President Lula’s new cabinet position and attendant promise to “turn the economy around” would lead invariably to government interference in monetary and FX policy.

As regular readers and Brazil watchers alike are no doubt aware, the BRL has been on a veritable rollercoaster ride of late and it’s all thanks, one way or another, to Lula. The currency rallied on his arrest, sold off when he was offered a position in Rousseff’s cabinet, and now, is headed sharply higher after a court injunction blocked his nomination as chief of staff.

The injunction appears to stem from some 50 audio recordings released to the media on Wednesday by Judge Sergio Moro, the lead prosecutor in the car wash probe. At least one of the recordings seems to suggest that Rousseff did indeed offer Lula the ministry post in order to shield him from prosecution.

The most damning call was recorded on Wednesday afternoon, when Rousseff can be heard telling Lula that she is sending him his ministerial papers “in case of necessity.” Obviously, that sounds a lot like an attempt to make sure Lula has proof of his new position in case authorities come to arrest him before he’s sworn in. In Brazil, ministers can only be tried in the Supreme Court which, as you might imagine, could take virtually forever compared to lower courts.

Lula was questioned earlier this month in connection with the possibility that he received luxury properties in exchange for favors tied to the Petrobras scandal.

On other calls recorded Wednesday Lula can be heard cursing the court, telling Rousseff the following: “…we have a totally cowardly supreme court, a totally cowardly high court, a totally cowardly parliament … a speaker of the house who is fucked, a president of the senate who is fucked, I don’t know how many legislators under threat, and everyone thinking that some kind of miracle is going to happen.”

Well, he’s got one thing right: everyone is “fucked,” and Moro doesn’t care. “Democracy in a free society requires that the governed know what their governors are doing, even when they try to act in the dark,” he said.

“Moro also said he believes Lula had advance warning of the raid on 4 March and may have known his phone was tapped,” The Guardian notes, adding that “by midnight on Wednesday there were reports of demonstrations against the government in at least 17 of Brazil’s 26 states. In the southern city of Curitiba, where Moro is based, hundreds gathered in front of the court to show support for the judge and his investigation.”

(protests on Wednesday night in Sao Paulo)

(demonstrations in Brasilia)

Rousseff says the court and the media’s interpretation is incorrect. She claims that she was trying to tell Lula that she was sending him his papers early in case he was unable to attend the swearing-in ceremony.

Put simply: no one was buying that excuse.

“Military police fired tear gas at demonstrators outside government buildings in Brasília, while groups set fire to a doll resembling the ex-president and waved banners calling for his imprisonment,” FT recounts, “[While] thousands of protesters filled São Paulo’s main avenue, Rio de Janeiro’s Copacabana beach and cities in at least 15 other states.”

Rousseff now intends to take legal action against Moro for “breaking the constitution. Here’s a summary of Rousseff’s comments, some of which are outright hilarious in light of the circumstances:

  • Says justice system should be focused on proof
  • There’s no justification for selective leaks in probes
  • There’s no justice when constitutional guarantees are violated
  • We want to know who authorized phone taps between her and Lula
  • This is a serious act
  • Says she has always defended the search for truth
  • Convulsing society based on lies is serious, coups can start that way
  • Says she won’t retreat from what happened yesterday
  • Brazil fights corruption, respects individual rights
  • Brazil counts on my work and determination
  • Says she counts on Lula’s experience, his ability to understand the people
  • Whoever bet on my separation from Lula was wrong
  • Brazil confronting economic, political difficulties
  • At this moment, we have to be together for Brazil
  • We have to leave political paralysis behind us
  • We want to reduce inflation, are acting to recover employment
  • We extend an open hand to all who want best for Brazil
  • People wanting coup won’t pull us off our path, won’t bring people to their knees

A lawyer for Lula called Moro’s release of the tapes “arbitrary.”

Right. “Arbitrary.” In fact, there was nothing “arbitrary” about it. Moro was due to decide on whether to arrest Lula this week and effectively, he and Rousseff were about to circumvent the entire investigation by using ministerial immunity to keep the car wash probe from reaching any higher up in the government than it already has. In other words, it was now or never for Moro and as you might have noticed, he isn’t one to let things go.

The release of the tapes led to a raucous session in Congress where some lawmakers chanted for Rousseff’s head, figuratively speaking… we think. Here are some clips from the protests that swept the country on Wednesday:

This, ladies and gentlemen, is what’s called chaos. Just ask Delcídio do Amaral, the senator whose testimony has only added to Rousseff’s troubles. “I am a prophet of chaos,” he told reporters after the court accepted his plea deal.

According to Eurasia, the leaked phone calls put Rousseff on the brink of impeachment, with odds of her ouster now rising to 75%. A vote, Eurasia says, could come as early as May.

“We’re in the hands of leaders who are bandits,” said Arivaldo Gomes, 54, a deliveryman. “I’m ashamed of this country,” he told The New York Times. But perhaps Josias de Souza, a political commentator put it best: “Brazil is being governed by a joke. It’s turned into an aspiring banana republic.”



(courtesy zero hedge)

Venezuela Runs Out Of Electricity, Will Shut Down For A Week, El Nino Blamed

When last we checked in on our favorite socialist paradise, Venezuela, President Nicolas Maduro’s opponents “had gone crazy.”

Or at least that’s how Maduro described the situation in a “thundering” speech to supporters at what he called an “anti-imperialist” rally in Caracas last Sunday.

Meanwhile, thousands of demonstrators held counter-rallies calling for the President’s ouster. Maduro angered the opposition – which dealt Hugo Chavez’s leftist movement its worst defeat at the ballot box in history in December – last month when he used a stacked Supreme Court to give himself emergency powers he says will help him deal with the country’s worsening economic crisis.

“Now that the economic emergency decree has validity, in the next few days I will activate a series of measures I had been working on,” he said, following Congress’s declaration of a “food emergency.”

Needless to say, Maduro’s “measures” didn’t do much to help the situation on the ground, where Venezuelans must queue in front of grocery stores and where 90% of medicine is scarce.

Venezuela is the world’s worst performing economy and barring a sudden (not to mention large) spike in crude prices, the country will in all likelihood default this year as 90% of oil revenue at current prices must go towards debt service payments.

But that hasn’t deterred Maduro, who has vowed to remain defiant in the face of (loud) calls for his exit. “Let them come for me,” he bellowed on Sunday. “I will hang on to power until the final day.”

Maybe so, but one place that’s not “hanging onto power” is the Guri Dam, which supplies more than two-thirds of the country’s electricity. As The Latin American Herald Tribune writes, the dam “is less than four meters from reaching the level where power generation will be impossible.”

“Water levels at the hydroelectric dam are 3.56 meters from the start of a ‘collapse’ of the national electric system,’” The Tribune continues, adding that “Guri water levels are at their lowest levels since 2003, when the a nationwide strike against Hugo Chavez reduced the need for power, masking the problem.”

(arrow shows where the water shoud be if the dam were operating at capacity)

It is not Guri that is in disarray, it is the whole system. Rates frozen, companies nationalized, capacity that was supposed to be installed was never installed and maintenance not carried out”, Miguel Lara, an engineer who worked in the industry for three decades said.

Not so says Maduro. The problem isn’t mismanagement, it’s El Nino.

“The emergency decision we took is due to El Nino,” he said. “We will save more than 40% from these measures.”

The “emergency measures” the Tribune references amount to a shutdown of the country. “Venezuela is shutting down for a week as the government struggles with a deepening electricity crisis,” Bloomberg writes. “President Nicolas Maduro gave everyone an extra three days off work next week, extending the two-day Easter holiday, according to a statement in the Official Gazette published late Tuesday.”

“We’re hoping, God willing, rains will come,” Maduro told the country on Saturday.

Yesterday, Venezuela’s energy minister took back his warning that water levels at Guri were set to plunge the country into an electricity crisis, but did ask the public to do as Maduro asks. “It’s a matter of cooperating,” he said.

Right. But as The Tribune points out, “Venezuela is now seeing three street protests a day, according to NGO Observatorio de Conflictividad Social [and] on any given day, one of those protests has to do with blackouts — even though rates have been frozen since 1982.”

It would certainly appear that Venezuelans are sick of “cooperating.”

And that’s bad news for Latin America’s “best” leader…



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


USA/JAPAN YEN 111.34 DOWN 1.456 (Abe’s new negative interest rate (NIRP)a total bust/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP)


USA/CAN 1.3000 DOWN.01151

Early THIS THURSDAY morning in Europe, the Euro ROSE by 91 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 NOW THE NON tightening by  FAILING TO RAISE THEIR INTEREST RATE / Last night the Chinese yuan was UP in value (onshore) The USA/CNY DOWN in rate at closing last night: 6.4780 / (yuan DOWN BUT will still undergo massive devaluation/ which will cause deflation to spread throughout the globe)

In Japan Abe went BESERK with NEW ARROWS FOR HIS Abenomics WITH THIS TIME INITIATING NIRP . The yen now trades in a NORTHBOUND trajectory RAMP as IT settled UP in Japan by 146 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 DO A U TURN ON  NIRP AND INCREASE NEGATIVITY

The pound was UP this morning by 89 basis points as it now trades JUST ABOVE the 1.40 level at 1.4339.

The Canadian dollar is now trading UP 115 in basis points to 1.30000 to the dollar.

Last night, Chinese bourses AND jAPAN were MIXED/Japan NIKKEI CLOSED DOWN 38.07 POINTS OR 0.22%, HANG SANG UP 246.11 OR 1.21% SHANGHAI UP 35.11 OR 1.22%  LAST HR RESCUE   / AUSTRALIA IS HIGHER / ALL EUROPEAN BOURSES ARE IN THE RED, as they start their morning/.

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

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

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

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

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

The NIKKEI: this THURSDAY morning: closed DOWN 38.07 OR 0.22%

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

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

Gold very early morning trading: $1267.50


Early THURSDAY morning USA 10 year bond yield: 1.87% !!! DOWN 6 in basis points from WEDNESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield falls to 2.66 DOWN 6 in basis points from WEDNESDAY night.

USA dollar index early THURSDAY morning: 94.91 DOWN 84 cents from WEDNESDAY’s close.(Now below resistance at a DXY of 100)

This ends early morning numbers THURSDAY MORNING



And now your closing THURSDAY NUMBERS


Portuguese 10 year bond yield:  2.85% DOWN 11 in basis points from WEDNESDAY

JAPANESE BOND YIELD: -.044% DOWN 3  full basis points from WEDNESDAY

SPANISH 10 YR BOND YIELD:1.43% DOWN 8 basis points from WEDNESDAY

ITALIAN 10 YR BOND YIELD: 1.27  DOWN 7 basis points from WEDNESDAY

the Italian 10 yr bond yield is trading 16 points lower than Spain.



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

Euro/USA 1.1316 UP .0100 (Euro UP 100 basis points and for DRAGHI A COMPLETE POLICY FAILURE/also USA folds!

USA/Japn: 111.49 DOWN .1/297 (Yen UP 130 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 1.4479 UP .02298 (Pound UP 230 basis points.

USA/Canada: 1.2997  DOWN  .0.0188 (Canadian dollar UP 118 basis points as oil was HIGHER IN PRICE (WTI = $40.18)


This afternoon, the Euro was UP by 100 basis points to trade at 1.1316 AS THE MARKETS REACTED TO THE FAILED USA INTEREST RATE POLICY.

The Yen ROSE to 111/49 for a GAIN of 130 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 229 basis points, trading at 1.4479 (LESS BREXIT CONCERNS)

The Canadian dollar ROSE by 118 basis points to 1.2997 as the price of oil was UP  today (as WTI finished at $40.18 per barrel)

The USA/Yuan closed at 6.4785

the 10 yr Japanese bond yield closed at -.044% DOWN 3 FULL basis points in yield

Your closing 10 yr USA bond yield: UP 4 basis point from WEDNESDAY at 1.90% //trading well below the resistance level of 2.27-2.32%) policy error

USA 30 yr bond yield: 2.70 DOWN 4 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, 94.79 DOWN 94 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 THURSDAY

London: UP 25.63 points or 0.42%
German Dax :DOWN 91.21 points or 0.91%
Paris Cac DOWN 20.11 points or 0,45%
Spain IBEX UP 16.00 or 0.18%
Italian MIB: DOWN 123.72 points or 0.66%

The Dow was up 155.73 points or 0.66%

Nasdaq :up 11.01 points or 0.23%
WTI Oil price; 40.18 at 2:30 pm;
Brent OIl: 41.45
USA dollar vs Russian Rouble dollar index: 69.15 (Rouble is UP 1 AND 07 /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


CLOSING PRICES FOR OIL 5 PM/ and 10 year USA interest rate:
 WTI  crude price at 5 pm:  $40.16
Brent: $41.38
USA 10 yr bond yield: 1.90%
USA dollar index at 5 pm  94.78
And now USA stories

Fed ‘Downgrade’ Sends Stocks To Largest Quarterly Comeback…Ever

It’s easy…


But, before we start, some context for just how different it is this time… if The Dow is able to hold this gain through the end of the quarter, it will be the largest quarterly comeback in the history of stocks…


And all it took was the four largest central banks in the world coordinating on easing.


“Off The Lows”...From the oddly coincidental day when The BoJ intervened to juice USDJPy off the lows and Jamie Dimon piled in…


Ramping The Dow (and The S&P briefly) green for 2016


VIX was slammed in an effort to keep S&P above 2043.94…but failed…


Trannies are up over 4% post-Fed (but Nasdaq is lagging)…


Same old Same old… “Most Shorted” stocks are up almost 4% from The Fed…


Oh and Ackman’s week just got worse…


Bonds and FX Carry seem less excited about the panic-buying…


Yields are down across the entire Treasury Complex…


The USD was smashed against everything… (stabilizing after Europe closed)


The USD Index continues to clubbed like a baby seal…back to pre-QE End, QQE2 Start levels…


USD weakness sparked commodity strength – though note that gold underperformed…


Silver leads the way post-Fed…


Charts: Bloomberg



What a farce;  the Dow surges back to unchanged for 2016 despite huge earnings plunge.This is going to end badly for those holding the bag:

(courtesy zero hedge)


Dow Surges Back To Unchanged For 2016 Despite Earnings Plunge

For the first time in 2016, The Dow Jones Industrials Index is back to unchanged (17,424 vs 17,425 2015 close). Of course, Dow Transports are the big winner, exploding today to over 5.3% gains for the year…

Dow briefly tounches unchanged…

But then again, there is this…

Who needs “mother’s milk” anyway when you have The Fed, The ECB, The BoJ, and The PBOC??!! What a total farce!


Very important:  the impact of a dovish message from the Fed is very bad news for risk assets like financials;

(courtesy zero hedge)

Bank of America: “The Impact Of A Very Dovish Message Is Bad For Risk Assets”

In a note that may have been quite prescient, BofA’s HY strategist Michael Contopoulos released a note last night titled “Fed acknowledges global growth concerns… again”, in which he said that “we have to admit; today’s dovish comments by Yellen took us by surprise” and adds that “although the market’s initial reaction was positive, we think the longer run impact of a very dovish message is bad for risk assets. In fact, we’re a bit amazed by the initial response from high yield today.”

The catalyst that clued Contopoulos to what the Fed really meant was to be found in the reaction of financial stocks:

We also believe it is telling that bank stocks moved significantly lower after the rate decision. Though the price action in banks makes sense – a lower for longer rate environment and slower economic growth is not a positive scenario for financials – typically the moves in bank equity and high yield spreads are very well correlated (-48%). In our view the challenging bank environment is a canary in the coal mine for high yield. As financial volatility increases, bank earnings decline, and unease about the global economy heightens, banks pull back on risk and lending. Note the latest Fed survey on lending standards as a prime example of declining risk tolerance of loan officers.

Judging by the market’s performance this morning, Contopoulos was correct. And if he was correct about that, then he may well be correct about what happens next, which is as follows:

Given the apparently weaker consumer (retail sales, nonmanufacturing ISM), the poor Q4 earnings season, and problems abroad, the acknowledgment by Chair Yellen of stresses in financial markets creating tighter financial conditions should have created renewed fears of a growth slowdown in the US, in our view. In fact,the last 2 times the Fed indicated global risks to the domestic economy, while holding rates steady, were at the September meeting and January meeting. And in both cases HYG declined 4.5% and 4% over the next 13 days (Chart 1). Although we don’t know if the same reaction will occur after this meeting, we are convinced that our bearish view on high yield continues to hold merit.

He concludes with a look at fundamentals which are troubling:

With defaults picking up in the commodity space, incredible stress in some individual non-commodity high yield issuers, a wave of downgrades looming and now the Fed’s revisions to near-term forecasts, we wonder how long asset allocators will continue to ignore both the weak macro as well as poor micro credit environment and feed money into high yield. Chair Yellen told us today that inflation is likely to remain weak and dollar strength will continue to cause headwinds. This latter admission is particularly interesting to us. If a strong dollar persists in 2016 corporate earnings hurt by FX exposure are unlikely to improve meaningfully. Couple this dynamic with ever increasing write offs and impairment charges (even ex-Energy) and the recent rally looks to have limited staying power in our view.

For now the dollar is weaker, however that is only until the ECB and BOJ intervene to crush their currencies, which we believe is imminent.

Bellwether stock Caterpillar slashes its guidance for the year as they see Q1 earnings per shore 30% below their forecast.  Caterpillar is a stock to follow to give us a great idea as to how the entire globe is performing. In a nutshell: not good at all!
(courtesy Caterpillar/zero hedge)

Reality Check: Catepillar Slashes Guidance Again, Sees Q1 EPS 30% Below Estimate

Moments ago Caterpillar, the company which as we promptly report every month, has never seen a “greater depression”…

… “surprised” markets with yet another reality check when it announced early this morning that it is slashing its Q1 revenue and EPS guidance, as follows:

  • Caterpillar expects first quarter 2016 sales and revenues to be in a range of $9.3 to $9.4 billion. Wall Street’s estimate was for a $10.2 billion number
  • The EPS estimate for the first quarter 2016 is expected to be $0.50 to $0.55 per share. Excluding restructuring costs, the profit estimate for first quarter 2016 is expected to be $0.65-$0.70 per share. On a non-GAAP basis, the consensus estimate was $0.95, implying a nearly 30% cut to expectations.

What is perplexing is that even as CAT slashed Q1 guidance, the Company also said that its “remained comfortable with full year guidance for 2016 sales and revenues and profit per share.” It is unclear just how the company plans to make up for the Q1 drop in future quarters, as it is unclear if anyone else “remains comfortable” with this guidance which puts CAT’s 2016 revenue outlook of $42 billion…

…. some $20 billion lower than the company’s 2012 revenue. At this rate the company will have to buy back more than all of its stock by 2020 to continue the illusion that all is well in a world that continues to grind through a global industrial depression.

The question now is what will shareholders, who have bid up the stock by 15% in the past three months on both a short squeeze and hopes of operational improvement, do when presented with this latest reality check that things continue to deteriorate rapidly.

For now shares are down about 3% in the premarket; we would not be surprised to see the stock end higher as CAT spends a few hundred million to buyback its stock later today.


Initial jobless claims steady.  However ISM services which is 70% of uSA GDP crashes:
(courtesy zero hedge)


Initial Jobless Claims ‘Steady’ At 42 Year Lows As ISM Services Employment Crashes

Initial Jobless claims have hovered at near-42-year lows for much of the last year, despite day after day of new “job cuts” headlines – from energy to materials to tech unicorns. This week was no change with claims at 265k – dropping from last week’s orighinal 268k print but rising from a revised 258k. To all of this exuberance we have just one question – explain this!!

And we know manufacturing jobs are collapsing?


Nothing but phony seasonal adjustments.  Do not pay any attention to this rubbish!
(courtesy Philly Fed mfg index//zerohedge)

March Madness? Philly Fed New Orders Spike By Most In 11 Years

It’s March Madness in Philly. Thanks to the biggest jump in New Orders since Oct 2005, Philly Fed surged to 15-month highs (jumping from -2.8 to +12.4) crushing expectations of -1.5. Number of employees improved mopdestly but remains in contraction but “hope” soared to 5 month highs led by exuberant expectations for capex and average workweek. Do you believe in miracles?

The Manufacturing Business Outlook Survey suggests a pickup in general activity in March. The survey’s indicators for general activity, new orders, and shipments all improved notably from their readings in February. Firms reported that overall employment was steady. Indicators reflecting firms’ expectations for the next six months improved this month.

So the headline surges to 15 month highs…

Driven by a yuuge spike in new Orders…

Thank goodness for seasonal adjustments.

The diffusion index for current activity increased from a reading of -2.8 in February to 12.4 this month, its first positive reading in seven months. Both the current new orders and shipments indexes also showed improvement this month. The current new orders index returned to positive territory, increasing 21 points to 15.7. Nearly 37 percent of the firms reported an increase in new orders this month. The current shipments index rose 20 points, to 22.1. The unfilled orders and delivery time indexes showed notable improvement, increasing 11 points and 16 points, respectively. While the unfilled orders remained slightly negative, the delivery time index reached its first positive reading in 11 months. Firms continued to report overall declines in inventories.

Across the board, Philly Fed was higher…

But one has to wonder, with Japanese and Chinese trade data so dismal, and inventories at near record levels, just who is placing all these new orders?

The evidence sure looks like Hillary knew her blackberry was not secure and that she would not be allowed to pass classified stuff to various people
It looks like she is in serious trouble on this:
(courtesy zero hedge)

New Documents Reveal “Hillary Clinton Knew Her BlackBerry Wasn’t Secure”

Was Hillary Clinton just arrogant and ignorant (which is a decisively bad combination as it is) or did she knowingly traffic in state secrets on an unsecure server?

That’s pretty much what the entire, protracted investigation into her e-mail habits when she was the nation’s top diplomat boils down to. If she was simply arrogant and ignorant, she didn’t lie under oath. If she knew what she was doing was a bad idea when she was doing it,then she probably committed perjury, and obviously that’s no good.

Thanks to Judicial Watch, we now have new evidence to suggest that Clinton’s “I didn’t know” excuse is pure fiction. According to new documents obtained by the conservative legal advocacy group, Clinton lobbied (in the figurative sense of the word) the NSA for secure BlackBerrys that she and her staff could use inside Mahogany Row, the nickname given to the set of offices reserved for senior officials in the Department of State.

An e-mail from Senior Coordinator for Security Infrastructure, Bureau of Diplomatic Security Donald R. Reid reads as follows:

[W]e began examining options for S [Secretary Clinton] with respect to secure “Blackberry-like” communications … the current state of the art is not too user friendly, has no infrastructure at State and is very expensive…While our noses are out of joint for how this was handled, the issue will be what kind of support will NSA be offering to meet S demands (basically, wireless comm in Mahogany Row) …

Another e-mail finds Reid discussing Clinton’s BlackBerry addiction:

The issue here is one of personal comfort … S [Secretary Clinton] does not use a personal computer so our view of someone wedded to their email (why doesn’t she use her desktop when in SCIF?) doesn’t fit this scenario … during the campaign she was urged to keep in contact with thousands via a BB … once she got the hang of it she was hooked … now everyday [sic], she feels hamstrung because she has to lock her BB up … she does go out several times a day to an office they have crafted for her outside the SCIF and plays email catch up …Cheryl Mills and others who are dedicated BB addicts are frustrated because they too are not near their desktop very often during the working day…

It gets comical from there.

Apparently, Clinton and Mills (who we profiled here, for those interested in the Clinton-BlackRock connection) were “addicts” in the true sense of the word. When they were told “no” they tried to get around it – twice.

First, they tried asking what kind of arrangements were made for Obama. When they were stonewalled, Mills asked why Condoleezza Rice and her staff got wavers but Clinton and her staff didn’t. To that question, the NSA answered as follows (and this is a quote from an e-mail sent by an unidentified source): “Use expanded to an unmanageable number of users from a security perspective, so those waivers were phased out and Blackberry use was not allowed in her suite.”

“The department’s designated NSA liaison, whose name was redacted from the documents, expressed concerns about security vulnerabilities inherent with using BlackBerry devices for secure communications or in secure areas,” AP reports, adding that “Clinton began sending work-related emails through private accounts soon after, in March 2009.”

The full set of documents is embedded below.

Ok, so what’s the point, other than that Hillary Clinton is arrogant and isn’t used to being told “no”? For the answer we go to Judicial Watch’s president Tom Fitton who explains that “these documents show that Hillary Clinton knew her BlackBerry wasn’t secure.”

He continues: “Then why did she use it to access classified information on her illicit email server? The FBI and prosecutors ought to be very interested in these new materials.”

There you have it. Generally speaking then, this throws cold water on the idea that Clinton was ignorant to matters of cybersecurity and encryption and thus likely knew that using her home server to send work related e-mail was a poor decision from a national security perspective. More specifically, though, this seems to indicate that Clinton knowingly sent e-mail from an unsecure device.

Now at this juncture you might be asking yourself, “what difference does it make?!”

After all, Clinton is one of the most entrenched members of America’s political aristocracy and is without question one of the most influential power brokers in Washington. As such, she’ll almost assuredly never be prosecuted.

But it’s just that kind of ill-begotten, Washington privilege that has pushed so many Americans to vote for Donald Trump and Bernie Sanders. So maybe it’s a blessing in disguise.

Jw v State Hillary Bb Nsa Iad 00646

The once darling of the NYSE, Valeant sees its credit default swaps hit a record high as they scramble to avoid going bust:
(courtesy zero hedge)

Valeant CDS Hits Record High As Company Scrambles To Avoid Default

While everyone knows about failed rollup Valeant’s equity troubles, which have sent its stock crashing to 5 year lows after the biggest one day drop in history earlier this week, a just as interesting development is taking place with its debt, which incidentally at $31 billion (and accumulated during the company’s relentless acquisition spree over the past few years) is nearly three times greater than the company’s equity capitalization, and is the locus of the biggest problem facing the company currently.

Recall that recently Valeant announced it would be unable to file its 10-K on time, which put the company in violation of its covenants since Wednesday, and also meant it is now in danger of defaulting on its $30 billion debt load. As a result, Reuters reports that the company’s lenders are “beginning to demand new terms that could further pressure the drugmaker’s business model, according to three people familiar with the matter.”

As Reuters adds, “the risk of default has offered creditors an opportunity to attempt to renegotiate core elements of their agreements with Valeant, potentially saddling the company with higher costs of debt and more restrictions on how it deploys capital, according to people familiar with the matter.”

Suddenly, what was until incomprehensible – a Valeant default – appears all too likely: under its loan agreements, Valeant has until March 30 to file audited financial reports. If it fails to do so, it then has 30 days before lenders can demand accelerated repayment. Needless to say, Valeant would be unable to fund such a loan acceleration without rapidly selling off key assets in a liquidation firesale, although there even exist limits on just how many assets Valeant can sell.

Reuters adds that Valeant said it would meet with banks next week and ask them for an extension on the deadline. On Tuesday, Chief Executive Michael Pearson said that his best estimate for filing the annual report was April, but that he could not guarantee it.

In anticipation of those meetings, owners of Valeant’s senior bank loans are reaching out to investment banks, including Barclays, who will help mediate the negotiations, the sources said. Barclays did not immediately respond for comment.

The informal discussions are in early stages and the demands could change, the sources said. The lenders’ demands include higher interest payments and a pledge to pay a larger amount of the bank loans from the proceeds of any Valeant asset sales, the sources said. They would not provide names of specific lenders.

Under Valeant’s covenants, the company can sell up to 4 percent of its total assets per fiscal year and use the proceeds to pay down bank debt, Justin Forlenza, an analyst at Covenant Review in New York, said in an interview. The company can also carry unused capacity over from one year to the next to increase the potential amount of assets sold to 8 percent, he said.

And once Valeant is done with the banks, it then has to deal with the unsecureds: “it is not clear when Valeant may approach its bondholders, who will not be able to force repayment of debt until slightly later than the loan owners. If the company did approach bondholders, they would likely have similar demands to the loan creditors, according to one person familiar with the matter. 

Not surprisingly, impartial onlookers are souring on the Valeant story with every passing day : “This very quickly dematerializes from a growth story into a company that’s really standing still, just looking to right its capital structure,” said Jim Sanford, portfolio manager for Sag Harbor Advisors, which does not hold Valeant shares. “There’s not a lot of equity and market cap to go to, to issue equities and convertible bonds against.”

Recall that as we explained simply yesterday, the Valeant magic only worked because the stock price was high and rising (providing a cheap currency for acquisitions), while the cost of debt was low and falling (allowing Valeant to issue ever more debt offset by the surging market cap). All that is now over, and nobody wants to admit that the next phase in the Valeant lifecycle almost certainly goes through some sort of restructuring.

Well not nobody: as the chart below shows, Valeant CDS has soared to all time high, as has the company’s implied default risk over the next 5 years which as of this moment was 55% and rising. We expect this number to jump in the coming weeks as the true severity of Valeant’s balance sheet problems is fully appreciated.

The JOLTS survey is certainly of concern to the Fed:  lower quits/lower job openings
and lower highers.  Also the revision of jobs openings going back to November is also of great concern:
(courtesy zero hedge/JOLTS SURVEY)

Is This Why Yellen Went Full-Dove: U.S. Hiring Plunges Most Since November 2008

While the BLS’ JOLTs report usually gets a B-grade in terms of importance due to its one-month delayed look back (we just got the  January report which is one month behind the most recent payrolls number) it serves an important function due to its breakdown of various labor components such a job openings, new hires, separations, quits and terminations, all of which make up Janet Yellen’s “labor dashboard.” In fact, according to Yellen herself, the JOLTs data is as important, if not more so, than the BLS report.

Which may explain why yesterday the Fed surprised as dovishly as it did.

As a reminder, the key number most look for in the monthly JOLTs report is the number of Job Openings: for January the BLS reported a print of 5,541K, which modestly beat the expected 5,500K consensus number.

However, it wasn’t the January number that was the problem, but last month’s print, which was then reported at 5,607 and in the latest series was revised to 5,281, a downward revision of 326K. What will be concerning to Yellen – who certainly had these numbers in advance – is that as the chart below shows, this was the biggest downward revision to job openings in series history.

Additionally if one adds the December and November revisions together, the result of -474K is the biggest two-month cut to openings since December 2006.

Another notable disappointment in January was the plunge in the quits level: also known as the “take this job and shove it” indicator, higher “quits” levels (as opposed to discharges or terminations which barely moved in January) suggest workers are confident about job prospects, and vice versa – a drop in quite implies workers are more fearful of the labor market and unwilling to tell their employer they are out. According to the BLS, in January the Quits number dropped by 284K to 2,804K, after breaking out last month. This was the single biggest monthly drop since the financial crisis.

But while the revisions could be ignored, and the quits rate is at best a tertiary indicator, one data series that certainly caught Yellen’s attention was the number of January “hires“, because as shown in the chart below, with a print of 5,029K in January, this was a whopping 372K drop from the December 5,401K, which also happens to be the biggest single monthly drop in new hiring since November 2008!

In fact, the total number of hires in January 2016 was 23K lower than the 5,052K hired one year ago in January 2015, hardly confirmation of a growing labor market.

This dramatic drop is best seen when showing the two complimentary series of 12 month cumulative changes in payrolls (which has been rolling over ever since February 2015 when it peaked at 3.2 million and is now down to 2.5 million as payrolls have clearly slowed down), and the monthly hiring change. One look at the chart below and one can’t help but wonder if the December spike was the labor market top and the rollover in hiring now confirms that the US labor market is set for a slow, or not so slow, contraction in the coming months.

We wonder how much of the above was instrumental in Yellen finally admitting the Fed was at least 50% wrong in just three months the FOMC cut the number of expected 2016 rate hikes from 4 to 2.


And finally to add insult to injury to Bill Ackman, S and P, puts Pershing Square on downgrade watch:
(courtesy S and P/zero hedge)

S&P Adds Insult To Bill Ackman’s Injury, Puts Pershing Square Holdings On Downgrade Watch

As if the historic collapse of Valeant and his hedge fund crashing by 26% YTD was not enough, moments ago S&P added insult to injury when it warned it may downgrade Pershing Square, because “Pershing Square Holdings’ net asset value has dropped substantially, largely because of a precipitous decline in the market value of Valeant  Pharmaceuticals”  and “as a result, Pershing Square’s debt-to-total assets ratio increased to  above 20% as of March 15, 2016, from 15% at the end of October 2015. We are placing our ‘BBB’ issuer credit and senior unsecured debt ratings  on the company on CreditWatch with negative implications.”

It concludes that “the CreditWatch negative reflects the fund’s weak investment performance,  which has resulted in higher leverage.”

Full note below:

Standard & Poor’s Ratings Services  today said it placed its ‘BBB’ issuer credit and senior unsecured issue  ratings on Pershing Square Holdings Ltd. (PSH) on CreditWatch with negative implications.

“We placed the ratings on CreditWatch negative to reflect the substantial drop in PSH’s NAV over the past five months as a result of very weak investment performance,” said Standard & Poor’s credit analyst Trevor Martin. NAV was $5.3 billion at the end of October 2015 and $3.8 billion on March 15, 2016, primarily because of the steep drop in Valeant Pharmaceuticals’ stock price. The Valeant stock price fell about 50% on March 15. As a result of the weakness in the portfolio since October, PSH’s debt to total assets has increased from about 15% to above 20%.

While debt as a percentage of total assets has increased materially beyond our original expectations, liquidity (as measured by free cash) has strengthened, and we believe management has taken proactive steps to respond to the turmoil. PSH’s investors were informed that the fund completed a block sale of Mondelez International shares on March 16, raising substantial free cash. Subsequent to the sale, the level of cash held in the fund exceeded total debt.

Valeant’s stock price fell dramatically as the company again revised its earnings guidance for the next 12 months on March 15. Furthermore, the company has not reported its 10-K in time and is now seeking a waiver from banks on its credit agreements, introducing incremental risk of a bankruptcy to Valeant (although it has until the end of April to resolve the covenants in the credit agreement to avoid acceleration). In the event of bankruptcy, we would likely lower the rating.

“We aim to resolve the CreditWatch once we have more clarity on the situation regarding Valeant and we have reassessed the fund’s investment performance and leverage,” said Mr. Martin. “We expect to have the information to resolve the CreditWatch in the next 90 days, but we could extend the CreditWatch period if that is not the case.”

We could lower the rating if Valeant files for bankruptcy or if PSH materially reduces free cash before Valeant’s stock price has substantially recovered. Even if the position were to stabilize, we could still downgrade PSH if the investment performance of the portfolio as a whole deteriorates further.




Well that about does it for tonight
I will see you tomorrow night

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