April 7/Turmoil on global markets/GLD had 4.17 tonnes to its inventory/Gold and silver rise but contained by our banking manipulators/ UK Prem Minister exposed as he states he had a hand in his father’s off shore company/Deutsche bank, Credit Suisse and Royal Bankof Scotland plummet: also their credit default swaps skyrocket!!/Jim reid of Deutsche bank states that the ECB/EU has no choice but to undergo the helicopter route to provide spending money to the masses/Holland votes no for association with Ukraine: a huge win for our Euroskeptics and accelerates fears in England for a BREXIT/

Gold:  $1,236.20 up $13.70    (comex closing time)

Silver 15.16  up 11 cents

In the access market 5:15 pm

Gold $1240.60

silver:  15.22

Let us have a look at the data for today.


At the gold comex today, we had a good delivery day, registering 41 notices for 4,100 ounces  for gold,and for silver we had 0 notices for nil oz for the non active April delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 212.603 tonnes for a loss of 90 tonnes over that period.

In silver, the open interest fell by a very tiny 55 contracts DOWN  to 179858 DESPITE THE FACT THAT the silver price was DOWN 7 cents with respect to yesterday’s trading. In ounces, the OI is still represented by .899 billion oz or 128% of annual global silver production (ex Russia ex China).

In silver we had 0 notices served upon for NIL oz.

In gold, the total comex gold OI FELL by 3,668  contracts DOWN to 470,426 contracts as the price of gold was DOWN $5.90 with yesterday’s trading.(at comex closing).

We had another huge  change in the GLD, a deposit of 4.17 tonnes / thus the inventory rests tonight at 819.60 tonnes and the withdrawal was no doubt  for fees to the custodian and insurance. 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,  and thus the Inventory rests at 334.724 million oz.


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

1. Today, we had the open interest in silver FALL by A TINY 55 contracts DOWN to 179,858 as the price of silver was DOWN 7 cents with yesterday’s trading. Investors continue to flock into silver on the dovish Yellen speech where she indicated that she is reticent to raise rates All global mints are recording record silver sales. The total OI for goldFELL by 3668 contracts to 470,426 contracts as gold was DOWN $5.90 in price from yesterday’s level a

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)


i)Late  WEDNESDAY night/ THURSDAY morning: Shanghai closed DOWN 42.17 POINTS OR 1.38%  /  Hang Sang closed UP 59.38 OR 0.29%. The Nikkei closed UP 34.48 POINTS OR 0.22% . Australia’s all ordinaires  CLOSED DOWN 0.46%. Chinese yuan (ONSHORE) closed UP at 6.4683.  Oil FELL SLIGHTLY  to 37.72 dollars per barrel for WTI and 39.95 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.4828 yuan to the dollar vs 6.4683 for onshore yuan. LAST WEEK:Japanese INDUSTRIAL PRODUCTION plunges the most in almost 5 years as negative interest rates ARE KILLING BUSINESS./JAPANESE TANKEN CONFIDENCE INDEX PLUMMETS/JAPAN HAS NEVER RECOVERED FROM THOSE BAD DATA RELEASES/TODAY THE USA/YEN CROSS PLUMMETS TO 108.33 SETTING OFF CRUMBLING BOURSES AROUND THE GLOBE




ii)USA/Yen currency cross crashes (yen rises hugely) which causes equities to fall.  The entire yen carry traders are now visiting the mortuary.  Gold rises as the citizens around the globe seek  the only safe haven:  gold!!

( zero hedge)


iii)NIRP has caused the hoarding of cash in Japan as citizens there are scared of the economy as saving rates increase.  Thus NIRP is having the opposite effect of the intended policy of NIRP:  it is deflationary whereas the central bankers want to build inflation  into the economy.

Thus unintended consequences are huge in Japan with NIRP.  Now the Central Bank of Japan must print additional 10,000 Yen bills.

( zero hedge)





none today



i)Holland rejects by a big margin, closer ties to the Ukraine.  This is a huge victory for the Euroskeptics. Also this sends a huge warning to the EMU with respect to an increasing BREXIT

(courtesy zero hedge)


ii Your big story of the day:


 a)Deutsche bank in trouble today along with Credit Suisse and Royal Bank of Scotland.
The environment for negative interest rates in Europe is killing the banks. As stated below, the problem is NOT A BALANCE SHEET PROBLEM BUT AN INCOME PROBLEM.
The banks just cannot make money and recapitalization will be impossible. NIRP also causes an inversion of the yield curve also makes it very difficult for banks to make money.  They generally borrow short and lend long.  The deflationary environment sends out signals to MAIN STREET that something is wrong.  The negative interest price sends the wrong signals.  Only the casinos run by hedge funds borrow. Main street stays away.
(zero hedge)

b)Then late this afternoon: both credit default swaps on European banks and faltering bank shares was the big story of the day in Europe

( zero hedge)

iii)We now have our second major city where inflows of cash to buy properties have cooled.  First, we had Manhattan and today:  London

( zero hedge)

iv)Both JPMorgan and the ECB are hinting that the arrival of helicopter money in Europe will be upon them following the “next downturn”

Here is a summary as to what happens when “free money’ is created for every citizen to spend:

( zero hedge)


v)and late this afternoon, both Jim Reid of Deutsche bank and zero hedge both realize that the ECB is now trapped and they must use the helicopter route:

very important…..
( zero hedge/JIM Reid)

vi)Boy!! this is escalating real fast..UK Prime Minister now admits that he had a stake in his father’s offshore trust:(courtesy zero hedge)


This is certainly not going to help build confidence in the world economies:The EU may require visas from Americans and Canadians:

(courtesy Yahoo.com/Reuters/Baczynska)



Putin is angry as he states that the release of the “Panama Papers” is nothing but a plot to destabilize Russia.  Now we await Russia’s “truth bomb” against USA interests:

(courtesy zero hedge)


In order to conserve electricity, our basket case Venezuela has now ordered 3 day weekends:

( zero hedge)



i)I think I have just about seen everything. Now in India if a prospector finds a deposit he must then put it up for bidding to the highest bidder to put the mine into operation destroying whatever incentive there is to look for gold.

At least the citizens in India (accumulating gold) are a lot smarter than the government that supposedly guides them.
( Singh/Bloomberg/GATA)

ii)We have been bringing this to your attention due to its significance. Yesterday Puerot Rico passes a bill which will halt debt payments(New York Times/Walsh/GATA)







i)Early trading from NY today:  USA equities plunge !! Gold bolts higher

(zero hedge)


ii)Initial claims decline but continual claims jumped.

The data still seems to suggest that the USA economy is still in the doldrums

( BLS./zero hedge)


iii)This should surely help the USA economy:  40% of student borrowers do not even make any payments on their loans.

( Mish Shedlock/Mishtalk)


iv)In the USA an astounding plunge in 37% truck orders.  Unsold inventories skyrocket!

( zero hedge)


v)And at the end of the day, we see that our two famous consumer credit accounts keep on rising, student loans and automobile loans.

Last month it rose by another 17.2 billion dollars courtesy of the uSA government:
( zero hedge)

Let us head over to the comex:

The total gold comex open interest was DOWN to 470,426 for a LOSS of 3,668 contracts as the price of gold was DOWN $5.90 in price with respect to yesterday’s trading.  We are now entering the active delivery month of April. 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. We certainly witnessed both parts today . In the front month of April we lost 182 contracts from 3901 contracts down to 3719.  We had 142 notices filed so we lost 40 contracts or an additional 4,000 gold ounces that will not stand for delivery. The next non active contract month of May saw its OI FALL by 19 contracts DOWN to 2622. The next big active gold contract is June and here the OI FELL by 4655 contracts DOWN to 353,513. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was FAIR at 218,155 . The confirmed volume yesterday (which includes the volume during regular business hours + access market sales the previous day was poor at 141,534 contracts. The comex is not in backwardation. You can bet the farm that tomorrow’s OI gain will be huge! .

Today we had 41 notices filed for 4,100 oz in gold.


And now for the wild silver comex results. Silver OI fell by a tiny 55 contracts from 179,913 down to 179858 as the price of silver was DOWN 7 cents with yesterday’s trading.  We are now in the next contract month of April and here the OI fell by 0 contracts remaining at 76. We had 0 notices filed yesterday so we neither lost nor gained any silver contracts standing for delivery in this non active month of April. The next active contract month is May and here the OI fell by2609 contracts down to 108,102. This level is exceedingly high. However we do have 3 weeks before first day notice on Friday, April 29.The volume on the comex today (just comex) came in at 48,465 , which is very good. The confirmed volume yesterday (comex + globex) was very good at 48,512. Silver is not in backwardation.    In London it is in backwardation for several months.
The bankers must be getting very anxious as they orchestrated a huge raid yesterday with the obvious objective to loosen many silver leaves from the silver tree.  They failed miserably!!
We had 0 notices filed for nil oz.

April contract month:

INITIAL standings for APRIL

April 7/2016

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


Deposits to the Dealer Inventory in oz nil
Deposits to the Customer Inventory, in oz  nil oz
No of oz served (contracts) today 41 contracts
(4100 oz)
No of oz to be served (notices) 3678 contracts 367,800 oz/
Total monthly oz gold served (contracts) so far this month 1115 contracts (111,500 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 55,954.4 oz

Today we had 0 dealer deposits

Total dealer deposits; nil oz

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 0 customer deposit:

total customer deposits:  nil oz


Today we had 0 customer withdrawals:

total customer withdrawals; NIL OZ

Today we had 1 adjustments:

From BRINKS AND ANOTHER DILLY:  3,000.000 oz was adjusted out of the customer and this landed into the dealer account of BRINKS.  This lot of exactly 3,000.000 oz is for sale (REGISTERED).  How could we have another exact weight like this?????? AND IT IS NOT DIVISIBLE BY 32.15 AND THUS NOT KILOBARS


it sure looks to me like the comex has little physical gold inside their facilities. 

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 41 contracts of which 12 notices was stopped (received) by JPMorgan dealer and 12 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 (1115) x 100 oz  or 111,500 oz , to which we  add the difference between the open interest for the front month of April (3719 CONTRACTS) minus the number of notices served upon today (41) x 100 oz   x 100 oz per contract equals the number of ounces standing.
Thus the initial standings for gold for the April. contract month:
No of notices served so far (1115) x 100 oz  or ounces + {OI for the front month (3719) minus the number of  notices served upon today (41) x 100 oz which equals 479,300 oz standing in this non  active delivery month of April (14.908 tonnes).
Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you. 
We thus have 14.908 tonnes of gold standing for April and 10.846 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 15.03 tonnes (April) +2.2311 tonnes (March) + 7.99 (total Feb)- .940 (probable delivery on March 1) tonnes -.0434 tonnes (March 11,12,17,18) + March 31: 1.2470 and then  April 1,2: – .0006 tonnes   = 22.889 tonnes still standing against 10.846 tonnes available.  .
Total dealer inventor 349,358.291 oz or 10.846 tonnes
Total gold inventory (dealer and customer) =6,835,208.989 or 212.603 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 212.603 tonnes for a loss of 90 tonnes over that period. 
JPMorgan has only 21.15 tonnes of gold total (both dealer and customer)
And now for silver


/April 7/2016:

Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 651,880.500 OZ. CNT, Delaware


Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 506,207.768 OZ



No of oz served today (contracts) 0 contracts nil oz
No of oz to be served (notices) 76 contracts)(380,000 oz)
Total monthly oz silver served (contracts) 121 contracts (605,000 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 1,988,284.1 oz

today we had 0 deposits into the dealer account

total dealer deposit: nil oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil


we had 2 customer deposits:

i) Into Delaware:  26,158.838 oz

ii) Into Scotia: 480,048.930 oz

total customer deposits: 506,207.768 oz

We had 4 customer withdrawals:

i) Out of CNT: 1877.300 oz

ii) Out of Delaware: 5973.200 oz

iii) Out of HSBC: 20,235.960 oz

iv) Out of Scotia: 623,794.04


total customer withdrawals:  651,880.500 oz



 we had 0 adjustments



The total number of notices filed today for the April contract month is represented by 119 contracts for 595,000 oz. To calculate the number of silver ounces that will stand for delivery in April., we take the total number of notices filed for the month so far at (121) x 5,000 oz  = 605,000 oz to which we add the difference between the open interest for the front month of April (76) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the April. contract month:  121 (notices served so far)x 5000 oz +(76{ OI for front month of April ) -number of notices served upon today (0)x 5000 oz  equals 985,000 oz of silver standing for the March contract month.
we neither lost nor gained any silver contracts (or ounces) standing in this non active delivery month of April.
Total dealer silver:  32.452 million
Total number of dealer and customer silver:   155.300 million oz
The open interest on silver continues to rise despite the low price of silver. It looks like we are heading for a commercial failure.

And now the Gold inventory at the GLD

APRIL 7/ a huge deposit of 4.17 tonnes of “paper” gold was added to our GLD/Inventory rests tonight at 819.60 tonnes

APRIL 6/a withdrawal of .29 tonnes of gold and probably this was to pay for fees for the custodian and insurance/inventory rests at 815.43 tones

April 5/ a withdrawal of 2.37 tonnes of gold from the GLD/Inventory rests at 815.72 tonnes

APRIL 4/a withdrawal of 1.19 tonnes from the GLD/Inventory rests at 818.09 tonnes of gold

April 1/no changes in gold inventory at the GLD/Inventory rests at 819.28 tonnes

MARCH 31/a small withdrawal of 1.19 tonnes/inventory rests tonight at 819.28 tonnes

MARCH 30/no changes in inventory/inventory rests tonight at 820,47 tonnes

March 29/a withdrawal of 3.27 tonnes of gold from the GLD/Inventory rests at 820.47 tonnes.  (No doubt we will see a rise in gold inventory with tomorrow’s reading)

March 28/no change in inventory at the GLD/Inventory rests at 823.74 tonnes

March 24.2016: a deposit of 2.08 tonnes of gold into its inventory/and this after a big drubbing these past two days??/Inventory rests at 823.74 tones

March 23/no changes at the GLD today despite the gold drubbing. Inventory rests at 821.66 tonnes

March 22./no changes in inventory at the GLD/Inventory rests at 821.66 tonnes


April 7.2016:  inventory rests at 819.60 tonnes




Now the SLV Inventory
APRIL 7/no change in silver inventory/rests tonight at 334.724 million  oz
April 6/no change in silver inventory/Inventory rests at 334.724 million oz
April 5/ a deposit of 2.146 million oz of silver into the SLV/Inventory rests at 334.724 million oz/
APRIL 4/no change in silver inventory tonight/inventory rests at 332.578 million oz
Apri 1: we had a huge deposit of 2.189 million oz of silver into the SLV (with silver badly down?)/.Inventory rests tonight at 332.578 million oz
MARCH 31/ no change in silver inventory at the SLV tonight/inventory rests at 330.389 million oz
MARCH 30/no change in inventory/inventory rests at 330.389 million oz
March 29.2016: a huge deposit of 1.475 million oz of silver into the SLV/Inventory rests at 330.389 million oz
March 28/no change in silver inventory at the SLV/Inventory rests at 328.914 million oz
March 24.2016/no change in inventory/rests tonight at 328.914 million oz/
March 23/we lost 1.428 million oz as a withdrawal today/SLV inventory rests at 328.914 million oz
April 7.2016: Inventory 334.724 million oz
1. Central Fund of Canada: traded at Negative 6.4 percent to NAV usa funds and Negative 6.2% to NAV for Cdn funds!!!!
Percentage of fund in gold 64.1%
Percentage of fund in silver:35.9%
cash .0%( April 7.2016).
2. Sprott silver fund (PSLV): Premium to NAV falls to  5.71%!!!! NAV (April 7.2016) 
3. Sprott gold fund (PHYS): premium to NAV rises  to -0.09% to NAV  ( April 7.2016)
Note: Sprott silver trust back  into positive territory at +5.71%/Sprott physical gold trust is back into negative territory at -0.09%/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

By Mark O’Byrne


Fight Over Future of London’s $5 Trillion, 300 Year-Old Gold Market

The fight over the future of the global gold market, London’s 300 year old role in the market and the LBMA’s role in determining price makes Bloomberg’s lead article today and we contribute. The article begins:

“There’s a competition brewing to figure out how the world’s largest gold-trading hub can get bigger and better.”


Much of the $5 trillion in transactions cleared every year in London is done by telephone or in electronic chat rooms and are the same kind of one-on-one deals that gave birth to the marketplace three centuries ago. But traders and bankers say the system may not provide enough transparency to satisfy regulators or attract new business at a time when more gold is being bought and sold in New York and Shanghai.”

“That’s why the main participant group, the London Bullion Market Association, is evaluating bids to create a trading and reporting platform. At the same time, a different plan is being developed by the World Gold Council, a mining industry group that is working with the London Metal Exchange to come up with new futures contracts, said two people with direct knowledge of the venture. The proposals, if successful, would alter the way gold is bought and sold in the city.

“It’s a pretty big moment for London, and it’s time to choose,” said Mark O’Byrne, a director in Dublin at brokerage GoldCore Ltd. “Everybody wants to bring more players to the table, but there is a risk that through the failure to work together, liquidity is diluted and the market weakened.”

Our primary concern has long been that the market becomestransparent and the fundamentals of physical supply and demand ultimately determine the price. At present, London Bullion Market Association or LBMA trading involves the buying and selling of unallocated gold contracts largely amongst bullion banks and other LBMA members.


The LBMA offers “over-the-counter” (OTC) wholesale trading of unallocated gold between bullion banks and other members. Because of its importance to the global bullion trade, the LBMA has for many years overseen spot dealing in gold and silver for most of the world.

Gold traded by members of the London Bullion Market Association rarely, if ever, physically leave the vaults in which they are stored. The LBMA relies on paper transfers to denote gold trades, with physical bullion remaining in situ in unallocated accounts. Concern has been voiced in recent years that members may not have the gold they are trading and the market therefore may not reflect actual supply and demand on a daily basis or indeed over the longer term.

The LBMA points out on their website that

“In 2015, $20.7 billion (17.9 million ounces) of gold cleared daily through London.”

This equates to 556 metric tonnes (17.9 million ounces/ 32,150 troy ounces) of trading every single day. Meanwhile, annual global mining supply is just 3,000 metric tonnes. So in just one trading day, the LBMA is trading nearly 20% of the total global mining supply of gold for an entire year.

goldcore_03-02-2015Queen Inspecting Gold Bullion in the Bank of England Vaults

In addition to a lack of transparency regarding what gold bullion is in the LBMA gold vaults and what bullion is being traded, there is also a lack of transparency as to who the buyers are and who the sellers are. This creates the real risk that the LBMA market and prices can be manipulated and does not reflect the real world fundamentals of actual global supply and demand – as a market should.

The full Bloomberg article can be read here


Gold Prices (LBMA)
7 April: USD 1,237.50, EUR 1,086.07 and GBP 879.70 per ounce
6 April: USD 1,225.75, EUR 1,079.76 and GBP 868.38 per ounce
5 April: USD 1,231.50, EUR 1,083.59 and GBP 866.32 per ounce
4 April: USD 1,215.00, EUR 1,068.80 and GBP 854.58 per ounce
1 April: USD 1,232.10, EUR 1,080.69 and GBP 860.20 per ounce

Silver Prices (LBMA)
7 April: USD 15.22, EUR 13.38 and GBP 10.81 per ounce
6 April: USD 15.07, EUR 13.28 and GBP 10.71 per ounce
5 April: USD 15.19, EUR 13.37 and GBP 10.69 per ounce
4 April: USD 15.58, EUR 13.92 and GBP 10.99 per ounce
1 April: USD 15.58, EUR 13.92 and GBP 10.99 per ounce


Gold News and Commentary
Gold up on Fed caution over rates; higher equities cap gains (Reuters)
Indian Gold Imports Said to Plunge in March on Jewelers’ Strike (Bloomberg)
Gold gains in Asia as investors digest Fed tension on rate views (Investing.com)
Gold Gains as Fed Meeting Minutes Confirm Cautious Rates Outlook (Bloomberg)
Fed debated April rate hike but caution reigned due to global fears: minutes (Reuters)

300-year old, £5 trillion gold market set for facelift (Bloomberg)
Japan is Fast Approaching the Quantitative Limits of Quantitative Easing (Bloomberg)
Panama Papers – Big companies are in the firing line (Money Week)
Real Money is in Gold in a “Rotten World” (Daily Reckoning)
Own gold before government starts handing out free cash (Casey Research)

Read More Here

Thank you

Mark O’Byrne
Executive Director

Gold & Silver Surge Amid Crude & Copper Carnage

As the growth mirage fades (and short-squeeze ammo runs out), so crude and copper carnage is reappearing. Amid its biggest plunge since early Jan, Copper is now down 10 of the last 12 days and crude is plunging back towards it 50-day moving average. Amid this bloodbathery, precious metals are bid as Saxo Bank sees Gold “heading back to its highs and beyond.”

Copper & Crude carnage continues as PMs are bid…


Which as Saxo Bank’s Ole Hanson notes, is likely driven by NIRP’s spread across the world

  • New World Gold Council report cites negative rates as key XAU factor
  • Large portion of the world’s sovereign debt now holds negative interest rates
  • US earnings season trouble may also boost gold’s fortunes

A world below zero

A world below zero: many of the world’s central banks have taken the plunge into negative rates, and one potential consequence may be higher precious metal prices. Photo: iStock

Last week saw the World Gold Council release its latest market update titled “Gold in a world of negative interest rates”. The moves towards negative rates have probably been among the main catalysts behind the change seen in investor sentiment so far this year.

Following its January surge, gold has now been trading sideways for almost two months. During this time, the market has been contemplating whether the strong surge in investor demand witnessed since the beginning of the year could lead to profit-taking.
This is a particular concern given what happened last year, when gold followed a strong start with a sudden reversal in April. The selloff continued for the remainder of the year, marking one more false start among the many seen since the peak in 2011.

Strong gold demand during Q1

One of the main reasons for the belief that this time will be different was highlighted in the market update from WGC. The implementation of negative interest rates by central banks in Europe and Japan has seen trillions worth of sovereign government debt move to negative yields.
To this, the WGC writes “history shows that, in periods of low rates, gold returns are typically more than double their long-term average”.
A large portion of sovereign debt now carries negative interest rates; about 30% of high-quality sovereign debt (more than $8 trillion) trades at negative yields, and this figure rises to 51% once inflation is factored in.
Negative interest rates
Source: Bloomberg, WGC
Among the investments increasingly popping up as alternatives to no-yield bonds are precious metals. The WGC highlights four reasons why negative interest rates will structurally increase demand for gold as a portfolio asset:
  • Reduces the opportunity cost of holding gold.
  • Limits the pool of assets some investors/managers would invest in.
  • Erodes confidence in fiat currencies due to the threat of currency wars and monetary intervention.
  • Further increases uncertainty and market volatility as central banks run out of effective policy options to combat inflation/deflation and/or spur growth.
(The update, which includes a detailed look at the aforementioned points, can be accessedhere.)
After finding support below $1,210/oz on numerous occasions, gold has made a renewed attempt to the upside today. This has peen particularly aided by the latest FOMC minutes yesterday, where caution about raising US interest rates was a prominent topic of discussion.
Even if we come to see higher US interest rates, it does not change the outlook for very low and negative global interest rates elsewhere.
The first-quarter US earnings season kicks off next week and despite seeing the S&P 500 trading near the highs, the market is bracing itself for the worst season since the 2009 crisis.

Earnings recession

In our quarterly outlook released earlier this week, we highlighted the upside potential for gold following a period of consolidation. A weaker dollar (most recently against the JPY), the risk of rising stock market volatility, and the continued focus on negative interest rates may attract renewed interest for gold and silver earlier than expected.
Spot Gold
From a technical perspective, we see two important resistance levels. First of all there is $1,245/oz, which apart from being the recent top also represents a 50% retracement of the March selloff.
A break above the more important $1,255 area – the 61.8% retracement – would signal a return to the high and potentially beyond.The key area of support remains between $1,165/oz and $1,195/oz.
I think I have just about seen everything. Now in India if a prospector finds a deposit he must then put it up for bidding to the highest bidder to put the mine into operation destroying whatever incentive there is to look for gold.
At least the citizens in India (accumulating gold) are a lot smarter than the government that supposedly guides them.
(courtesy Singh/Bloomberg/GATA)

The gold miner excavating nothing but 13 years of red tape


By Swansy Afonso, Rajesh Kumar Singh, and Archana Chaudhary
Bloomberg News
Wednesday, April 6, 2016

After more than a decade struggling to cut through red tape to mine gold in India, Sandeep Lakhwara could be forgiven for thinking things couldn’t get much worse. Then they did.

Following a policy change last year, explorers such as Lakhwara’s Deccan Gold Mines Ltd. now have to bid in auctions for the right to mine deposits they find. He argued that leaves little incentive to scour the world’s seventh-largest land mass for minerals and metals.

“You could go and look for the deposits and once you identify the deposits the government will auction them off to anybody else,” Lakhwara said. “Why would anyone be going to do exploration then?” …

… For the remainder of the report:






We have been bringing this to your attention due to its significance. Yesterday Puerot Rico passes a bill which will halt debt payments

(New York Times/Walsh/GATA)


Puerto Rico passes bill allowing halt to debt payments


Is Illinois next?

* * *

By Mary Williams Walsh
The New York Times
Wednesday, April 6, 2016

Gov. Alejandro García Padilla of Puerto Rico on Wednesday signed a bill that would allow him to declare an emergency and give him authority to halt payments on the island’s crushing $72 billion debt.

The measures capped two days and nights of marathon debate in Puerto Rico’s legislature, where lawmakers from the main opposition party called any unilateral debt moratorium dangerous and members of the governor’s party insisted that doing nothing would be even worse.

In Washington, House Republicans seeking to rescue Puerto Rico prepared to release a revised plan that includes a federal oversight panel. The proposal has been contentious on the island, where the governor and his top advisers are increasingly at odds with investors over how to restructure the debt, most of it in the form of municipal bonds. …

… For the remainder of the report:





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



1 Chinese yuan vs USA dollar/yuan UP to 6.4683 / Shanghai bourse  CLOSED DOWN 42.17  OR 1.38% / HANG SANG CLOSED UP 59.38 OR 0.22% 


3. Europe stocks opened ALL IN THE RED /USA dollar index DOWN to 94.43/Euro DOWN to 1.1390

3b Japan 10 year bond yield: FALLS   TO -.053%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 108.33

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  37.72  and Brent: 39.95

3f Gold UP   /Yen UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to 0.122%   German bunds in negative yields from 9 years out

 Greece  sees its 2 year rate RISE to 11.60%/: 

3j Greek 10 year bond yield FALL to  : 9.09%   (YIELD CURVE NOW INVERTED)

3k Gold at $1236.70/silver $15.20 (7:15 am est) 

3l USA vs Russian rouble; (Russian rouble DOWN 19/100 in  roubles/dollar) 67.81

3m oil into the 37 dollar handle for WTI and 39 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/expect a huge devaluation imminently from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9558 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0888 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 9 Year German bund now  in negative territory with the 10 year RISES to  + .122%

/German 9 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 1.723% early this morning. Thirty year rate  at 2.56% /POLICY ERROR)

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

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


“There Is A Lot Of Fear In The Market” – Stocks, Futures Slide After Yen Soars

Two days after stocks slid in a coordinated risk-off session, and one day after a DOE estimate of US oil inventories sent US stocks surging while the failed Allergan-Pfizer deal unleashed torrential hopes of a biotech M&A spree leading to the single best day for the sector in 5 years, sentiment has again shifted, this time due to a violent surge in the Yen as the market keeps testing the resolve of the Japanese central bank to keep its currency weak, and so far finding it to be nonexistent.

As a result, as we reported previously, the USDJPY plunged nearly 200 pips overnight, undoing all its gains since the expansion of Japan’s QQE on October 31 2014, and while equities did their best to ignore this move for as long as possible, ultimately they too succumbed.

The yen gained even after a government official said authorities would take necessary action on foreign exchange if needed. Futures, after urgently trying to ignore the Yen move, finally noticed it overnight, pushing the E-mini to session lows, and undoing almost all of the DOE gains.


As noted earlier, and as Bloomberg also reports, “the yen is being driven higher by risk aversion and by market participants testing the Bank of Japan’s tolerance toward a stronger currency,” said Thu Lan Nguyen, a foreign exchange strategist at Commerzbank AG in Frankfurt.

Also according to Bloomberg, JPMorgan’s Tohru Sasaki predicted the world-beating surge that carried the yen to a 17-month high. Now the former Bank of Japan official says the government will be reluctant to intervene to stem the currency’s advance – especially as such a move would probably be futile.

Exporters bringing cash home are the main driver of the yen’s 11 percent rally against the dollar this year, not speculators, so selling the currency to weaken it would be ineffective, said Sasaki, head of Japan markets research at JPMorgan in Tokyo. He forecasts a gain to 103 yen per dollar by year-end. He also sees attempts by officials to talk the currency lower as counterproductive.

“If you only shoot blanks, it just makes a sound — at first everyone is surprised, but once they get used to it, it’s just noise,” said Sasaki, who’s been the most accurate forecaster of the yen this year. More jawboning will encourage speculators to buy the yen on dips against the dollar, he said.

It’s not just the Yen. “There is a lot of fear in the market,” Herbert Perus, head of equities at Raiffeisen Capital Management in Vienna, told Bloomberg. “A lot of large investors do not believe in rising stock prices and were positioning themselves for a downturn.”

In other key overnight news, the Fed meeting minutes reaffirmed U.S. policy makers aren’t rushing to raise interest rates. Elsewhere, EMC said planning to sell Documentum business amid Dell deal. In China, the PBOC announced that after 4 months of declines, its foreign reserves posted a $32 billion rebound in the month of March.

This is where markets are currently:

  • S&P 500 futures down 0.5% to 2050
  • Stoxx 600 down 0.3% to 329.77
  • MSCI Asia Pacific up 0.9% to 126
  • US 10-yr yield down 2bps to 1.74%
  • Dollar Index up 0.03% to 94.46
  • WTI Crude futures up 0.2% to $37.82
  • Brent Futures up 0.4% to $39.98
  • Gold spot up 1.3% to $1,239
  • Silver spot up 1.3% to $15.26

Global Top News:

  • Dell and EMC Said to Be Talking to Buyers for EMC’s Documentum: Dell also said to seek buyer for Sonicwall, Quest for $4b; Dell and EMC are targeting deal completion by October
  • U.S. Braces for Worst Earnings Season Since the Financial Crisis; 1Q earnings are seen falling 9.8% y/y
  • McDonald’s Chairman McKenna Plans to Retire From Board: McKenna, 86, won’t stand for re-election at the May 26 shareholders’ meeting, will become chairman emeritus
  • Sprint Plans to Sell, Lease Back Network Assets for $2.2b: tower equipment is used as collateral to raise new loans; new finance entity will be consolidated into Sprint’s books
  • Valeant Said to Win Majority Lender Support to Waive Default: creditors gave their consent after Valeant revised terms Tuesday
  • March U.S. Retail Sales Seen Helped by Easter, Spring Break Deals: U.S. comp. sales are expected to rise 0.1% for the 5- week retail month of March, according to Retail Metrics; Costco, Zumiez kick off March comp. sales with releases post-mkt
  • Treasury Nears Rule to Force Banks to ID Shell Company Owners: Customer Due Diligence rule would close anonymity loophole; maneuver is in the spotlight after leak of law firm files
  • Monsanto Says It No Longer Sees Large-Scale M&A as Strategy: future deals will be collaborations, small acquisitions
  • Key Pieces of Dimon’s Annual Letter: Risks, Rates and Trading: warns Treasury rally may turn to rout as rates rise; Brexit outcomes are ‘large and potentially unknown,’ he says
  • China Foreign Exchange Reserves Rise for First Time in 5 Months: China’s forex reserves unexpectedly rose in March after capital outflow pressure eased as the nation’s currency steadied
  • SoftBank Said to Not Have Had Formal Talks on Yahoo Buy: Re/Code
  • China’s Apex Technology Said in Talks to Buy Lexmark: Reuters
  • Indonesia Demands Google, Facebook to Pay Taxes: Jakarta Post

Looking at regional markets, Asian stocks traded mixed as the region shrugged-off a firm Wall St. lead, where continued advances in crude prices and a cautious Fed initially boosted sentiment. ASX 200 (+0.4%) and Nikkei 225 (+0.2%) were both supported at the open by the energy sector after an unexpected DoE Inventory drawdown which saw oil prices break above USD 38/bbl. However, Japanese stocks then saw choppy trade as JPY strength persisted, while Shanghai Comp (-1.4%) failed to hold on to early gains amid weakness in telecoms and sentiment dampened following a reserved open-market-operation by the PBoC. 10yr JGBs saw relatively range-bound trade with prices marginally lower amid improved risk-appetite in Japan, while prices saw a mild recovery following the enhanced liquidity auction for 20y, 30yr and 40yr bonds.

Top Asia News:

  • China, Hong Kong Top Market for Firm at Center of Panama Papers: Region represents almost third of Mossack Fonseca’s cos.
  • Nomura Warned Against Lying After Jefferies Trader Charged: Charges against ex-Jefferies trader spurred training session
  • Yen Intervention Futile at 110 for JPMorgan After Picking Rally: Sasaki says currency will rise to 103 per dollar by year-end
  • OCBC to Buy Barclays’s Asia Wealth Division for $320 Million: Bank beats competing bid by DBS Group
  • Samsung Beats Estimates as Early Debut of S7 Boosts Sales: Analysts upgraded S7 estimates after channel checks

European equities struggle to form any significant direction as overall fundamental newsflow remains relatively light thus far, despite the fallout from last night’s FOMC meeting minutes. As such, Eurostoxx (+0.25%) resides in modest positive territory led by pharmaceuticals amid M&A speculation circulating for the likes of AstraZeneca following the collapse of a tie-up between Pfizer and Allergan, while gains had been capped by the pullback observed in oil prices.

In terms of the fixed income, Bunds saw a slight break above 164.00 having found support from the softness in energy prices, however German paper has retreated from earlier highs despite the market digesting supply from France, Spain and the UK.

Top European News

  • Praet Says ECB Can Recalibrate Stimulus Again If Shocks Arise: the ECB can boost the scale of its support to the euro-area economy yet further in the event that fresh risks to the outlook arise, Executive Board member Peter Praet says
  • ‘Brexit’ Risks Leaving European Banks With $123 Billion to Cover: lenders may have to dump some securities if Britain leaves EU; bonds may no longer meet liquidity requirements under Basel
  • Citigroup Sees ‘Brexit’ Risks Moving East as Zloty Most Exposed
  • Italian Officials Said to Hold Meeting on Banks’ State Backing: Finance Minister Padoan said to have met with some bank executives on Tuesday; officials said to discuss option of EU3b fund
  • Fintech Seen Risking 250,000 Jobs as Europe Insurers Cut Costs: old IT systems burden companies as savvy start ups compete; cuts among only options to boost S/T profitability
  •     U.K. House Prices Surge as Halifax Flags ‘Brexit’ Uncertainty: values +11% in March vs year earlier; EU vote and weakening confidence may damp price rises: Halifax
  • ING Groep CEO Targets Corporate Banking Expansion in Scandinavia: Dutch bank will target Scandinavia’s corporate lending market as fastest route to expansion in region

FX markets have been dominated by the relentless JPY buying, which is no doubt of great concern to Japanese officials, but outside of verbiage against these moves, have done little to respond to the rapid rise. USD/JPY is now approaching the 108.00 level, and after topping out at 113.80 a week and a half ago, we are close to 6 JPY lower in what will be seen to be a very short space of time. Cross rate losses are equally rapid, though EUR/JPY is now finding some support ahead of 123.00. GBP/JPY losses take us to levels last seen in mid-2013, while AUD/JPY has now taken out 82.00. GBP is again under pressure against the USD and EUR — the latter back above .8100 again, but Cable is finding support ahead of 1.4000 again as the USD index is pressured in the wake of the Fed minutes last night — not that this revealed anything new to prompt the latest hit on the USD.ECB meeting report later today, but EUR/USD still managed to take out the previous highs to tip 1.1350. All on the JPY though today.

In commodities, despite starting the session off on the front-foot in the wake of yesterday’s DoE report and FOMC minutes, energy prices have slipped into negative territory in recent trade alongside a modest recovery in the USD. Overall, newsflow in energy markets continues to remain light in the run up to the upcoming Doha meeting next weekend. Gold (+1.2%) saw steady gains overnight following cautious FOMC minutes and weakness in the greenback. Silver has also recovered currently priced at around USD 15.20/oz, while copper and iron ore prices saw subdued trade amid a risk-averse tone in China and a pullback in steel prices.

It’s a fairly quiet calendar over in the US this afternoon too with last week’s initial jobless claims (expected at 270k) and the February consumer credit reading the only data of note. There are a few more interesting events outside of the data to keep an eye on: the IMF release chapters of its World Economic Outlook, while the ECB’s Draghi is due to speak in Portugal. Later we will see Fed Chair Yellen partake in a discussion with former Fed Chief’s Bernanke, Greenspan and Volcker, so it’ll be interesting to see if that throws up anything of interest.

Bulletin Headline Summary:

  • FX markets have been dominated by relentless JPY buying, which is no doubt of great concern to Japanese officials, but outside of verbiage against these moves, have done little to respond to the rapid rise
  • European equities struggle to form any significant direction as overall fundamental newsflow
    remains relatively light thus far, despite the fallout from last night’s FOMC meeting minutes
  • Looking ahead, highlights include ECB Minutes, Initial Jobless Claims, EIA Nat Gas Storage Change, comments from Fed Chair Yellen and George
  • Treasuries rise in overnight trading as global equity markets mixed in Europe, higher in Asia while WTI crude oil moves lower amid global growth concerns.
  • Yen climbed above 109 vs dollar for first time in 17 months as market participants shrugged off remarks by Japanese government officials aimed at curbing the currency’s gains, according to analysts
  • European Central Bank officials underlined their readiness to ease monetary policy even further should fresh risks to the economic outlook arise
  • If Britain decides to leave the European Union, a corner of the credit market may depart with it and European banks could be left having to replace as much as 108 billion euros ($123 billion) of securities
  • Dutch voters rebelled against a treaty between the European Union and Ukraine in a referendum on Wednesday, albeit on low turnout that fell short of the stampede that anti-EU campaigners hoped for
  • Italian Treasury and central bank representatives are meeting again in Rome on Thursday to discuss the creation of a state-backed fund as the country’s cooperative lenders struggle to draw private investors
  • China’s foreign-exchange reserves unexpectedly rose by $10.3 billion to $3.21 trillion last month after capital outflow pressure eased as the nation’s currency steadied
  • Sovereign 10Y bond yields mixed; European equity markets mixed, Asian markets rise; U.S. equity-index futures drop. WTI crude oil and copper drop, gold rallies


DB’s Jim Reid concludes the overnight wrap

With newsflow fairly light yesterday, much of the broadly better sentiment which enveloped markets was blamed on the sharp bounce in Oil prices with WTI rallying back +5.18% and towards the $38/bbl mark again (which it has subsequently broken through this morning). The latest US crude inventory numbers, which showed an unexpectedly sharp decline in stockpiles, helped the story there, although digging deeper into some of the sector level performance yesterday it was actually healthcare names which led the way despite the news of that failed merger between Pfizer and Allergan. As reported by Bloomberg it appears that the two companies may look elsewhere in the sector for other potential M&A which lent some support to pharma names generally.

This morning in Asia we had initially seen most bourses follow the lead from the US last night (S&P +1.05%) in the early stages of trading, but momentum appears to be fading as we go to print. It’s bourses in China in particular which have dipped lower with the Shanghai Comp and CSI 300 -0.76% and -0.80% respectively. That has come before the latest China foreign reserves data for March (expected to show a modest fall) which is due to be released shortly.

Elsewhere the Hang Seng is flat along with the Nikkei after both opened strongly. Much of the focus has been on further strengthening for the Yen which is currently +0.6% firmer and close to breaking below ¥109 which it hasn’t done since October 2014. Elsewhere the Kospi is -0.23%, while the ASX (+0.23%) is just about holding onto gains.

The main focus yesterday was arguably on the release of those FOMC minutes. In truth there wasn’t much new material information to come out of them, instead they reinforced that fact that the Fed is clearly looking at both domestic and global economic and financial conditions. The minutes noted that ‘several participants expressed the view that the underlying factors abroad that led to a sharp, though temporary, deterioration in global financial conditions earlier this year had not been fully resolved and thus posed downside risks’. In light of that, the minutes also noted that ‘several expressed the view that a cautious approach to raising rates would be prudent or noted their concern that raising the target range as soon as April would signal a sense of urgency they did not think appropriate’.

That being said that view clearly wasn’t shared by all with the text also suggesting that some officials indicated that a move as soon as the next committee meeting this month could be warranted should the data allow for it. Clearly futures markets are unconvinced however with the market pricing in no hope of a move later this month and a still low 20% chance of a move in June.

Staying with the Fed, yesterday we heard from the Fed’s Bullard who once again maintained his view that all meetings remain live, but highlighted that the US data since the March meeting has been somewhat mixed and that ‘growth has been somewhat tepid’ and that should sluggish growth persist unexpectedly, then ‘I’d be willing to push rate hikes further into the future’.

While we’re on the subject of Fed officials, yesterday our US economists published an update of their FOMC scorecard, looking at the relative hawkishness/dovishness of each member and the overall committee as a result. Using a 1-5 scale, with the former being the most dovish and latter being the most hawkish, they attribute scores of 1 to Brainard and Tarullo and scores of 2 to Yellen, Dudley and Rosengren. Esther George (who was the only dissenter at the March meeting) is the lone voter to score a 5 with the remaining four officials scoring a 3 or 4. That means the average ranking comes in at 2.7 or in other words fairly middle of the park in terms of the dove/hawk scale.

Moving on. It was a broadly better day for risk in Europe yesterday too and particularly in the equity space where we saw the Stoxx 600 bounce back +0.76%. A less softer than expected German IP print in February (-0.5% mom vs. -1.8% expected) was the only data of note, while in the rates space we saw 10y Bunds have a rare weaker session with the yield closing up 2bps at 0.117%. In fact, that’s just the third time in since March 15th that 10y Bund yields have closed higher. Much like the moves for Oil, it was a fairly decent day for the bulk of the commodity space although Gold was an exception to that after weakening -0.72%. That hot start to the year for the precious metal, particularly through January and February, has paused for breath somewhat with Gold now 12% below where it closed February.

Wrapping things up, performance for credit markets and particularly in Europe was a little more subdued yesterday. The iTraxx Main and Crossover indices finished 0.5bps and 2bps tighter respectively however financials were a notable underperformer (sub fins +6bps, senior fins +1bp) during the day with some attributing this to some concern of a potential weak upcoming quarterly reporting period. There’s been no stopping the primary market this week though where in Europe we saw close to €13bn price in what was the busiest day for issuance in 3 weeks. It was a similar story across the pond where we saw the third straight double digit day of issuance. Meanwhile and on a more bottom-up specific topic, after the market close yesterday the WSJ reported that Valeant is said to have secured a commitment from debt holders to amend the terms of its debt in a long running saga which had investors call into question a potential technical default not long ago. The deal looks like giving the company some breathing room for now.

Taking a look at today’s calendar, this morning in Europe the only notable data of note is out of France, where we’ll get the February trade balance reading, and the UK where the latest house price data is due. Shortly after midday we’ll then get the ECB minutes from that famous March meeting. It’s a fairly quiet calendar over in the US this afternoon too with last week’s initial jobless claims (expected at 270k) and the February consumer credit reading the only data of note. There are a few more interesting events outside of the data to keep an eye on. This afternoon we’ll see the IMF release chapters of its World Economic Outlook, while the ECB’s Draghi is due to speak in Portugal this afternoon. This evening will see Fed Chair Yellen partake in a discussion with former Fed Chief’s Bernanke, Greenspan and Volcker, so it’ll be interesting to see if that throws up anything of interest.




i)Late  WEDNESDAY night/ THURSDAY morning: Shanghai closed DOWN 42.17 POINTS OR 1.38%  /  Hang Sang closed UP 59.38 OR 0.29%. The Nikkei closed UP 34.48 POINTS OR 0.22% . Australia’s all ordinaires  CLOSED DOWN 0.46%. Chinese yuan (ONSHORE) closed UP at 6.4683.  Oil FELL SLIGHTLY  to 37.72 dollars per barrel for WTI and 39.95 for Brent. Stocks in Europe ALL IN THE RED . Offshore yuan trades  6.4828 yuan to the dollar vs 6.4683 for onshore yuan. LAST WEEK:Japanese INDUSTRIAL PRODUCTION plunges the most in almost 5 years as negative interest rates ARE KILLING BUSINESS./JAPANESE TANKEN CONFIDENCE INDEX PLUMMETS/JAPAN HAS NEVER RECOVERED FROM THOSE BAD DATA RELEASES/TODAY THE USA/YEN CROSS PLUMMETS TO 108.33 SETTING OFF CRUMBLING BOURSES AROUND THE GLOBE



USA/Yen currency cross crashes (yen rises hugely) which causes equities to fall.  The entire yen carry traders are now visiting the mortuary.  Gold rises as the citizens around the globe seek  the only safe haven:  gold!!

(courtesy zero hedge)


USDJPY Crashes, Drags Equities With It As Gold Soars

Ever since the USDJPY breached the 110 support level three days ago for the first time in 17 months, the pressure on this all important FX carry cross has been rising, and then overnight, following the latest bout of recurring and increasingly ignored jawboning by various Japanese officials, the Yen soared, with the USDJPY plunging first below 109 and then moments ago dropping as low as 108.02 before rebounding modestly, dragging US equity futures lower with it.


Today’s latest drop has dragged the USDJPY to levels not seen since the October 2014 expansion of Japan’s QE, when Kuroda unexpectedly announced a boost to the monthly amount to be monetized.


Overnight, Japanese finance ministry officials told reporters that there are one-sided moves in yen market, and will take necessary action if needed, a finance ministry official tells reporters. “We monitor the markets with sense of vigilance and will take necessary action as needed,” Chief Cabinet Secretary Suga says in response to a question on FX.  The market however, completely ignored this attempt to normalize the “one sided” move, and sent the USDJPY crashing.

Some analyst thoughts:

  • BOJ’s ability to influence market is waning and it’s hard for central bank to prevent yen strength by itself, says Shusuke Yamada, a currency strategist at Bank of America’s Merrill Lynch unit in Tokyo; intervention possible at 105, but more likely at 100; yen may reach 100 per dollar this year
  • Even though BOJ’s rhetoric is intensifying, USD/JPY may fall further if there are no concrete actions from central bank and finance ministry, Credit Suisse macro strategist Trang Thuy Le says; market is disappointed that 110 didn’t hold
  • FX intervention is unjustifiable above 105, says Yunosuke Ikeda, head of Japan foreign-exchange research at Nomura Securities; until around 105, FX intervention is difficult because of recent G-20 meeting in Shanghai; intervention requires U.S. support
  • BOJ “shock and awe” stimulus is a risk at April meeting, but any USD/JPY boost may only provide speculators with a better level to sell dollars, says Peter Redward, principal at Redward Associates; BOJ may increase monetary base to JPY100t, accelerate ETF purchases and lower interest rates by 10 bps after Governor Kuroda said Japan is ready to ease without hesitation
  • Negative rates reduce buffer for Japanese investors’ risk-taking and USD/JPY’s recent drop could keep Mitsubishi UFJ Kokusai Asset Management from “aggressively” making new investments, according to Hideo Shimomura, chief fund investor in Tokyo; says USD/JPY may reach about 105 this month or in May

As Bloomberg explains, expressions of concern from Japanese officials failed to convince markets that yen sales or other measures to curb the gains were imminent, and the currency rose at least 0.9 percent against all 16 of its major peers. It advanced even as a Ministry of Finance official said recent moves have been one-sided and that the authorities will take what action is necessary.

“The yen is being driven higher by risk aversion and by market participants testing the BOJ’s tolerance toward a stronger currency,” said Thu Lan Nguyen, a foreign-exchange strategist at Commerzbank AG in Frankfurt. “Japan doesn’t want to give the impression it’s planning to intervene given it’s hosting the next Group-of-Seven summit. There’s also a perception that it has very few measures left to aggressively ease monetary policy.”

Japan’s government is watching yen movements with vigilance, Chief Cabinet Secretary Yoshihide Suga said for a third day Thursday. Excessive currency moves have a negative impact on the economy, he said.

“If Japanese officials start saying ‘will take bold action if necessary,’ then it is time to be wary of the risks of market intervention,” said Joseph Capurso, a currency strategist at Commonwealth Bank of Australia in Sydney. “In any case, history shows market intervention by the MOF via the Bank of Japan does not lead to a sustained weakening of the yen.”

For now, however, the market is roundly ignoring any words coming out of Japan, and demanding action instead.

The funny thing is that “currenct intervention” is precisely what was agreed upon at the Shanghai Accord, but for now the concern for China and its currency is far greater than that for Japan, or Europe, where the Euro is likewise soaring. As such, Draghi and Kuroda will have to last it out, unless they are willing to form a strategic splinter group of central banks in what is shaping up to be a massive round of currency warfare.

Elsewhere, the ECB did try to jawbone a little, and was “undermined after European Central Bank Vice President Vitor Constancio reiterated that policy makers will do “whatever is needed” to return inflation to target, sparking speculation that another interest-rate cut is in the cards,with the EURUSD declining from 1.450 to just under 1.40.

Equity futures did their best to ignore the move as long as possible but even they ultimately had to admit that something is cracking below the surface.

Meanwhile, the only currency that does not need central banks manipulation to preserve its value under any circumstances, gold, spiked moments ago, hitting a one week high of $1240.



NIRP has caused the hoarding of cash in Japan as citizens there are scared of the economy as saving rates increase.  Thus NIRP is having the opposite effect of the intended policy of NIRP:  it is deflationary whereas the central bankers want to build inflation  into the economy.

Thus unintended consequences are huge in Japan with NIRP.  Now the Central Bank of Japan must print additional 10,000 Yen bills.

(courtesy zero hedge)



Japan Prints Additional ¥10,000 Bills As People Scramble To Stash Away Cash

Long before negative interest rates shifted from the monetary twilight zone into the mainstream (with some 30% of global government bonds now trading with a subzero yield), one organization wrote a report warning about the dangers of NIRP. The NY Fed. Back in 2012, NY Fed staffers wrote “If Interest Rates Go Negative . . . Or, Be Careful What You Wish For” it warned “if rates go negative, the U.S. Treasury Department’s Bureau of Engraving and Printing will likely be called upon to print a lot more currency as individuals and small businesses substitute cash for at least some of their bank balances.

Then, last October, Bank of America looked at the savings rates across European nations which had implemented NIRP and found something disturbing: instead of achieving what what central banks had expected, it was leading to precisely the opposite outcome: “household savings rates have also risen. For Switzerland and Sweden this appears to have happened at the tail end of 2013 (before the oil price decline). As the BIS have highlighted, ultra-low rates may perversely be driving a greater propensity for consumers to save as retirement income becomes more uncertain.”

The evidence:

Which was to be expected by most people exhibiting common sense: NIRP by definition is deflationary, and as such as prompts consumers to delay consumption, and as a result to save as much as possible, if not in the banks where their savings may soon be taxed under NIRP regimes, then in cash.

And nowhere if the failure of NIRP – and unconventional monetary policy in general – more evident than what just happened in Japan, where according to Japan Times, the Finance Ministry plans to increase the number of ¥10,000 bills in circulation, amid signs that more people are hoarding cash.

It will print 1.23 billion such notes in fiscal 2016, 180 million more than a year earlier. The number of ¥10,000 bills issued annually leveled off at around 1.05 billion in the fiscal years from 2011 to 2015.

The paper adds that some financial market sources believe it is because more people are keeping their money at home rather than in banks, because interest rates on deposits have fallen to almost zero after the Bank of Japan introduced a negative interest rate in February.

Actually make that most market sources, because the failure of NIRP is now too staggering for even tenured economists to deny. As for Japan, Kuroda appears to have made the country’s chronic over-saving problem even worse.

The total amount of cash stashed at home is estimated to have surged by nearly ¥5 trillion to some ¥40 trillion in the past year, Hideo Kumano, chief economist at Dai-ichi Life Research Institute, said.

He attributed the sharp increase to people not wanting their wealth to become known to authorities following the introduction of the My Number common identification system for tax and social security.

In addition, the BOJ’s negative rate policy “may have fueled concerns among the public about depositing their money in banks,” Kumano said.

There will be 200 million ¥5,000 bills issued in fiscal 2016, down by 80 million, and 1.57 billion ¥1,000 bills, down by 100 million.

Recent BOJ data show daily averages for currency in circulation rose 6.7 percent from a year before to ¥90.3 trillion at the end of February, the sharpest growth in 13 years.

The number of ¥10,000, ¥5,000 and ¥1,000 bills in circulation increased 6.9 percent, 0.2 percent and 1.9 percent, respectively.

The punchline: not only has the Japan’s aggressive attempt to escalate QE now been unwound, with all USDJPY gains since the October 2014 expansion of the BOJ’s QE been lost, leading to a comparable collapse in the Nikkei.

As for the BOJ printing more cash, that is merely a case study for what will soon happen in other NIRP-friendly regimes at least until cash is banned, of course.



Holland rejects by a big margin, closer ties to the Ukraine.  This is a huge victory for the Euroskeptics. Also this sends a huge warning to the EMU with respect to an increasing BREXIT


(courtesy zero hedge)

EU President Is “Sad” After Dutch Reject “Closer Ties” With Ukraine In Huge Victory For Euroskeptics

Watching the European collapse over the past 6 years has been mostly an exercise in futility, during which unelected bureaucrats throw everything at an unsolvable problem just to maintain the “dream” a little longer, punctuated with moments of sheer, delightful absurdity. This was one of those moments.

After yesterday’s shocking Dutch referendum outcome, in which a vast majority of local voters rejected a Ukraine-European Union treaty on closer political and economic ties, seen by many as an indication of “Euroskepticism”, moments ago European Commission President Jean-Claude Juncker explained how that made him feel. According to Reuters, “he was saddened by the outcome.”

“The president is sad,” European Commission spokesman Margaritis Schinas told a regular news briefing.

This is the same president who was caught lying repeatedly during the many years of the Greek crisis, and chalked it off to “when it gets serious, you have to lie.”

And, just to confirm that European rules are made to be broken, he said the referendum would not affect the wider EU deal on closer ties with Ukraine and it was up to the Dutch government to analyze the outcome of Wednesday’s vote.

“The Commission remains strongly committed to the development of its relations with Ukraine,” he said.

Asked whether the Commission still intended to propose liberalization of visa requirements for Ukrainians this month, he noted that Juncker had previously proposed this.

Meanwhile, we wonder just how “sad” Junkcer will be as the Euroskeptic wave leads to a new government in the Netherlands, followed by all the other states swept up by the recent refugee crisis, and ultimately culminating with the victory of nationalist presidents in the upcoming European presidential elections.

Deutsche bank in trouble today along with Credit Suisse and Royal Bank of Scotland.
The environment for negative interest rates in Europe is killing the banks. As stated below, the problem is NOT A BALANCE SHEET PROBLEM BUT AN INCOME PROBLEM.
The banks just cannot make money and recapitalization will be impossible. NIRP also causes an inversion of the yield curve also makes it very difficult for banks to make money.  They generally borrow short and lend long.  The deflationary environment sends out signals to MAIN STREET that something is wrong.  The negative interest price sends the wrong signals.  Only the casinos run by hedge funds borrow. Main street stays away.

Deutsche Bank Is Crashing Again As European Banks Slide To Crisis Lows

As of this moment, various European banks but most prominently Deutsche Bank...

as well as Credit Suisse and RBS, have been crashing back to lows hit in early February and then all the way back to the March 2009 “the world is ending” lows.  We commented on this yesterday using, ironically enough, a note by Deutsche Bank strategist Jim Reid, in which weshowed all the things that were not supposed to happenwhen Draghi unleashed his massive quad-bazooka QE expansion.

The problem is that now that global central banks are more focused on appeasing China and keeping the USD weaker (by way of a dovish, non-data dependent Fed), the pain for Europe (and Japan), and their currencies, and their banking sector, will likely only get worse. This is precisely the case proposed by Francesco Filia of Fasanara Capital, who explains below his “Short European Bank Thesis.”

Here is his note:

Here below, we update our views on negative rates and our consequential short European Banks equity and sub debt thesis. In a nutshell, we think that not only no bank is ever designed to survive in an environment of deeply negative rates for a prolonged period of time, but their business model is further impaired by negatively sloping interest rate curves. In a twisted unwelcome side-effect following ECB meeting, curves are ever closer to inversion in Europe. They recently became inverted in Japan, for the first time since 1994.

Drivers below, in no particular order:

1.    Deeply negative interest rates for a prolonged period of time.

Banks’ business model is at risk. If deeply negative interest rates is the way forward, it doesn’t matter consolidation or bad banks talks or country-specific policymaking (e.g. Italy or Europe): the business model is impaired, needs a rethink/restructuring, even before FinTech is taken into account. No bank is ever designed to function in durable negative rates environment. It is a profitability issue, not a balance sheet problem. Banks’ capitalisation then, however healthy it may seem today, may have to be looked at as no more but the number of years of negative profitability it can withstand before a recap is eventually needed. A fragile banking sector is the Achilles heel of the equity market overall, paving the way for gap risks to the downside.

2.    Inverted interest rate curves.

Now then, one more element is potentially adding to negative rates in impacting banks’ business: negatively-sloping interest rate curves. The spread between 10y JGBs and overnight rates turned negative in Japan last month. The same spread in Germany is only 20bps steep. Charts attached below. The curve steepness tightly correlates, in broad terms, to how much of a spread profit is left for banks when lending to good large businesses in Europe. No creditworthy business in Europe will accept borrowing for the longer term at much higher costs than that, especially when factoring in a weak-inflation environment. Incidentally, such business is better off borrowing for shorter terms, at more inverted curves, for then rolling-over such debt at a time when it has better visibility on how things evolve in the real economy and if the inflation outlook deteriorates from here or not.

3.   In  deflationary economy, demand for loans is anaemic.

By subsidising T-LTROs to the private business sector, Draghi was masterful in avoiding immediate damage to the banking sector. Banks’ agonising core business model was given a breathing space, in the name of helping the real economy. Surely a smart and well-thought system of incentives. However, as Keynes once wrote, quoting the old English proverb, “You can lead a horse to water but you can’t make him drink”. The lack of positive real expected returns dampens new investments in hiring plans, plant & machinery, and related borrowing and credit formation with it. Thus, making Draghi’s move just another artefact of financial leverage, not a game changer.

4.    No more safety net in the near term for markets.

If anything,  Draghi has now gone closer to full exhaustion of his arsenal of policy tools. Last year, we estimated for Central Banks to be 70% done; we may now argue for their arsenal to be more than 80% exhausted. Their lack of policy space from here is evident. The failed repression of volatility post ECB and the reaction of the EURUSD are there to testify it. Current policies can be expanded, new tools can be devised, but their marginal effectiveness is clearly free-falling. Next time around, a troubled equity market will have less of a safety net in the build-up of expectations into the subsequent ECB meeting.

* * *

In consequence of the risk assessment above, we resolve to stay out of banks equities and equity-like instruments (while we like banks’ senior debt) and equities in general, for limited upside is combined with the risk of a sizeable sell-off in the months ahead. We stay put. We keep dry powder ready should the market become way cheaper between now and September, as we expect.

* * *

Japanese 10yr JGB vs Japan Overnight Rate
The Japanese curve (10yr JGB’s minus overnight rate) is inverted


German 10yr Bund vs Refi Rate


Ratio of EU Banks / Eurostoxx vs German 10yr Bund
Banks tend to underperform the broader market index when interest rates fall


Ratio of EU Banks / Eurostoxx vs European Interest Rate Curve
Banks tend to underperform the broader market index when interest rates curves flatten/invert


Then late this afternoon: both credit default swaps on European banks and faltering bank shares was the big story of the day in Europe

(courtesy zero hedge)

European Banks Crash Most In 4 Years As Default Risk Spikes To Pre-Draghi Levels

All the gains post-Draghi’s bazooka-est efforts in March have gone as bank credit risk is spiking…Today was the biggest jump in EU bank credit risk in 2 months…


And the last 4 weeks have seen the biggest collapse in European banking stocks since April 2012.


Having blown his wad in March and been front-run by every Tom, Dick, and Harry trader, “whatever it takes” appears to be failing hard and with nothing left up his sleeves, Mario may not be so super anymore.







Boy!! this is escalating real fast..UK Prime Minister now admits that he had a stake in his father’s offshore trust:

(courtesy zero hedge)



UK Prime Minister Admits He Had A Stake In His Father’s Offshore Trust

It took about 48 hours for Iceland’s prime minister to lose his job over his involvement in the Panama Papers scandal, a move which may or may not have led to the early release of three of Iceland’s criminal bankers early after serving just one year of their 5 year sentences. But Sigmundur David Gunnlaugsson may not be the only casualty: the tax haven scandal may have just set its sights on a far more prominent target, following a story by ITV in which UK prime minister David Cameron admits he did have a stake in his father’s offshore trust.

Considering the media spectacle in the UK press “exposing” Putin’s offshore affairs, we wonder if they will target the UK prime minister’s potential involvement as assiduously?

From ITV:

David Cameron admits he did have a stake in his father’s offshore trust

David Cameron and his wife owned shares in the Panamanian trust set up by his late father, before selling them for around £30,000 in 2010, he has told ITV News.

The prime minister made the revelations about his involvement with the offshore fund set up by his father Ian – exposed in the Panana Papers – in an interview with Political Editor Robert Peston.

Mr Cameron said he made a profit on around 5,000 units the couple owned in Blairmore Investment Trust, but insisted the money was subjected to UK tax rules.

He also divulged details of his £300,000 inheritance and said recent criticism of his father was “unfair”.

The Conservative leader was dragged into the the Panama Papers scandal after leaked documents from law firm Mossack Fonseca included details of a multi-million-pound offshore firm set up by his father.

Downing Street has been forced to issue four statements on the matter, initially saying it was a “private matter” whether the Cameron family still had funds in offshore investments, before stating they “do not benefit from any offshore funds” and there are none they will benefit from in the future.

Today the prime minister told ITV News: “We owned 5,000 units in Blairmore Investment Trust, which we sold in January 2010. That was worth something like £30,000.

“I paid income tax on the dividends. There was a profit on it but it was less than the capital gains tax allowance so I didn’t pay capital gains tax. But it was subject to all the UK taxes in all the normal way.

“I want to be as clear as I can about the past, about the present, about the future, because frankly I don’t have anything to hide.”

Since the scandal was exposed there has been criticism of the arrangements under Blairmore, including of Mr Cameron’s father, and suggestions the prime minister only reached his position because of his privileged upbringing.

Mr Cameron said he received a £300,000 inheritance from his father when he died.

“I obviously can’t point to every source of every bit of the money and dad’s not around for me to ask the questions now,” he said.

“In all of this I’ve never hidden the fact that I’m a very lucky person who had wealthy parents, who gave me a great upbringing, who paid for me to go to an amazing school. I have never tried to pretend to be anything I am not.

“But I was keen in 2010 to sell everything – shares, all the rest of it – so I can be very transparent. I don’t own any part of any company or any investment trust or anything else like that.”

The prime minister admitted it had been “a difficult few days” hearing criticism of his father and said much of it was based on a “misconception” that Blairmore was set up to avoid tax.

“It wasn’t,” he said. “It was set up after exchange controls went so that people who wanted to invest in dollar denominated shares and companies could do so.”

Mr Cameron added: “There are many other unit trusts like it, and I think it’s being unfairly described and my father’s name is being unfairly written about.”

Labour leader Jeremy Corbyn has said it is in the prime minister’s “own interests” to disclose details of his family’s arrangements with offshore tax havens.

Mr Corbyn said he wanted an investigation conducted by Revenue and Customs “about the amount of money of all people that have invested in these shell companies or put money into tax havens and to calculate what tax they should have paid over the years”.

Labour MP Jess Phillips branded Ian Cameron’s tax arrangements “utterly disgusting“.

Source: ITV


We now have our second major city where inflows of cash to buy properties have cooled.  First, we had Manhattan and today:  London
(courtesy zero hedge)

UK Housing Bubble Pops: London Offers 20% Discounts On Luxury Apartments

Hot money flows into real estate have become an issue in some of the world’s largest markets, as prices have skyrocketed. As we’ve repeatedly noted before, China is experiencing massive capital outflows (even if technically, overnight the PBOC said that in the last month these flows reversed to inflows for the first time in 5 months), which have mostly targeted foreign real estate, especially that in major UK, US, and Canadian urban centers. The impact of this has been so significant, that something such as living in a box in someone’s living room has become reality for some unlucky people.

Countries such as the US and UK are finally taking long overdue steps to at least slow down this massive inflow of capital – which at least in the US is the equivalent of laundering money due to the NAR’s exemption from Anti money laundering regulations – and it’s starting to take hold. What we are learning as a result of these actions is that the housing “recovery” is being exposed as being driven largely by foreign capital flight, and has nothing to do with underlying fundamentals improving.

A few days ago we discussed that although Manhattan’s median sales prices have increased, the underlying contracts signed in 2016 have pulled back. We pointed out that this was occurring just as the US Treasury started to crack down on “secret” buyers.

We now have another major city experiencing a pullback in demand for its property – once again as a direct result of Government action to dampen the impact of foreign investment. In London, as Bloomberg reports, demand has slumped so badly that developers are offering discounts of up to 20% for their newly constructed homes. And just as the case was in Manhattan, it’s a result of the UK putting in a speed bump. The UK recently increased taxes on those deemed to be purchasing a second home, specifically designed to slow the pace of overseas investment. 

According to Bloomberg, the U.K. government’s plan to increase sales taxes on second homes in Britain will also apply to people who live abroad.

From April, buyers of second homes and buy-to-let properties in the U.K. will be subject to stamp-duty sales tax that’s 3 percentage points higher than those who are buying a home to live in, U.K. Chancellor of the Exchequer George Osborne announced in November. In deciding whether an individual is purchasing an additional home, the government will also consider assets outside the U.K., according to a consultation document published on Monday.


“This means that if someone is purchasing their first or only property in England, Wales or Northern Ireland, they may pay the higher rates if they own property outside these areas,” the document shows.


Demand from overseas buyers has contributed to a jump in London house prices, and off-plan sales abroad helped developers finance projects including Battersea Power Station. House prices in the city rose 7.7 percent in the year through October, according to the Office for National Statistics.

The takeaway, as noted above, is that the housing recovery has been driven primarily by a steady flow of foreign investment, and not necessarily the underlying economic fundamentals improving. You just have to dig a little deeper than the headlines.





Both JPMorgan and the ECB are hinting that the arrival of helicopter money in Europe will be upon them following the “next downturn”

Here is a summary as to what happens when “free money’ is created for every citizen to spend:

(courtesy zero hedge)


JPM, ECB Hint At Arrival Of “Helicopter Money” In Europe Following Next “Significant Downturn”

Moments ago, ECB governing council member and Bank of Italy governor Ignazio Visco had some very troubling comments.

He said that while helicopter money is not currently part of the discussion in the Governing Council that “no policy tool within our mandate can or should be dismissed a priori.” The reason for this startling admission is “the importance of expectations of low inflation in determining wage outcomes, and thus giving rise to second- round effects, may be increasing.”

He cited Italy’s recently signed collective contracts where “it was agreed that parts of future pay rises will be revised downwards in the event that the inflation rate falls short of current forecasts” adding that a “a generalized adoption of this type of contract would significantly decrease the rate of growth of wages and this would in turn be reflected in the dynamics of consumer prices.”

He went on to defend existing monetary policy which has so far only resulted in savings hoarding, ongoing deflation and a slammed banking sector, saying that “Regarding Italy, the effects are estimated to be somewhat stronger: absent the monetary impulse, the Italian recession would have ended only in 2017; inflation would have remained negative for the whole three-year period.”

But back to helicopter money: Visco also said that: “such an extreme measure would undoubtedly be subject to operational and legal constraints.

Is the ECB really this cloase to helicopter money? It appears so, because as he notes “the redistributive implications and the close ties with fiscal policy would all make it very complex, all the more so in the euro area given its institutional framework.” He concluded that a discussion on the measure “is noteworthy, not much per se, but because it underlines the concern that monetary policy is left to act in isolation.”

* * *

What catalyzed this dramatic shift in perception? It may be the following research note from JPM’s David Mackie titled “Helicopter money may come to a Euro area airport near you.”

In it JPM writes that “over the past few years, the ECB has provided monetary stimulus by cutting interest rates, providing forward guidance, purchasing assets, and making low-cost loans to banks. Even though these policies have been successful in helping to lift the real economy and sustain inflation expectations, there is widespread concern that we have reached a point of diminishing marginal returns. If this is correct, policymakers may need to consider other options in the event of a significant economic downturn. Helicopter money is one of the options that is often suggested.”

Here is how Mackie summarizes his thoughts:

  • Helicopter money should be viewed as the combination of a fiscal expansion and an expanded QE program
  • As such, it is possible to imagine helicopter money in the Euro area in the event of a significant downturn
  • Fiscal and monetary coordination may be limited, but that may not matter too much
  • Additional benefits would come from greater risk sharing across the ECB balance sheet, but this is uncertain

Some more highlights:

Against this backdrop, it was perhaps not surprising that at the March press briefing, ECB president Draghi was asked “theoretically, does your toolbox also include helicopter money, either in the form of direct financing of public investment, for example the EIB, or in the form of direct money to consumers?”


What was surprising was Draghi’s answer: “We haven’t really thought or talked about helicopter money. It’s a very interesting concept that is now being discussed by academic economists and in various environments. But we haven’t really studied yet the concept.” Clearly, Draghi did not dismiss helicopter money out of hand.


A week later ECB chief economist Praet was asked, “In principle the ECB could print checks and send them to people?” To which he answered: “Yes, all central banks can do it. You can issue currency and distribute it to people. That’s helicopter money. Helicopter money is giving to the people part of the net present value of your future seigniorage, the profit you make on the future bank notes. The question is, if and when it is opportune to make recourse to that sort of instrument which is really an extreme sort of instrument.” Instead of dismissing helicopter money, Praet seemed to be sympathetic.

How it works mechanistically:

JPM’s take on the consensus view behind helicopter money:

Many commentators see helicopter money as the answer to the problem of limited traction of monetary policy. While monetary policy impacts spending indirectly, by changing borrowing costs and asset prices, helicopter money seeks to impact spending directly, by putting money straight into the hands of households and non-financial corporates. They could still save the money, but most proponents of helicopter money assume it would be spent, providing a direct boost to demand

How it will be pitched:

In our view, helicopter money should be viewed as the combination of a fiscal expansion and a QE program, essentially a money-financed fiscal expansion. The benefits relative to a QE program alone come from the fiscal expansion. There may also be benefits of a money-financed fiscal expansion compared with a bond-financed fiscal expansion, especially in an environment of elevated government debt. This could be particularly important in the Euro area. The benefits of helicopter money could be even larger in the Euro area if a money-financed fiscal expansion involved much more risk sharing than a bond-financed fiscal expansion, but that would not necessarily be the case. Risk sharing in the current QE program is limited.


Looked at in this way, the key constraint on helicopter money in the Euro area is on the fiscal side. The fiscal architecture is not well suited to a coordinated, area-wide fiscal expansion, especially given very elevated levels of debt in a number of countries. The ECB’s contribution via an expanded QE program looks straightforward by comparison. Some argue that an explicit coordination of monetary and fiscal policy is needed, perhaps as part of a signaling mechanism. Explicit coordination in the Euro area would be hard, especially if linked to the idea of the central bank becoming subservient to the fiscal authorities. In the event, explicit coordination may not be necessary to experience the benefits of helicopter money. Overall, in the event of a significant economic downturn, helicopter money as defined here would likely be implemented in the Euro area to some extent.

Of course, there are problems:

There are a number of perceived problems with bondfinanced fiscal expansions: crowding out through higher interest rates, Ricardian equivalence of future tax increases to redeem debt, and roll-over risks in refinancing operations. A money-financed fiscal expansion using irredeemable reserves overcomes these problems, even if interest is paid on the reserves. Money-financed fiscal expansions may also have a financing benefit if short-term interest rates are lower than long-term interest rates. In addition, in the Euro area there may be risk-sharing benefits if the risks of asset purchases by the central bank are spread out across the region in a way that sovereign bond issuance is not. However, risk sharing is not inevitable in the Euro area: risk sharing in the current ECB QE program is limited. But, it is very important to stress that helicopter money still involves the creation of a sovereign liability (central bank reserves) that will receive interest at whatever level the central bank sets for macroeconomic stability purposes unless reserve requirements are imposed.

JPM’s concluding thoughts as first the ECB, and then all other central banks, prepare to embark on the final lap before it all blows up:

For many, the key distinction between helicopter money and QE is that helicopter money is viewed as permanent whereas QE is viewed as transitory. It is the irredeemable nature of the reserves created by helicopter money that matters. While this may be important in theoretical macro models, we doubt that it has much relevance in the real world. The efficacy of QE over recent years has not been limited by a broad-based perception that the policy will be reversed, but rather by the headwinds from balance sheet deleveraging. Essentially, despite low borrowing costs and elevated asset prices, banks have been reluctant to lend and households and non-financial corporates have been reluctant to borrow.


For other advocates of helicopter money, it is the absence of paying interest on reserves that is the key benefit of helicopter money relative to QE, as occurs in the example of helicopter money with the central bank sending out checks. Essentially, the idea is that there is a free lunch to be had from the creation of non-interest-bearing money that can be distributed to households. This is often referred to as the creation of an asset for the private sector without a corresponding liability for the public sector. In our view, this free lunch does not really exist. We would argue that the lunch has to be paid for either by future non-inflationary seigniorage income, the inflation tax, or a tax on banks through reserve requirements.


Some advocates of helicopter money argue that it has to involve an increase in the inflation objective. This is partly where the idea of coordination between the monetary and fiscal authorities comes from: there is an idea that the central bank has to be made subservient to the fiscal authorities. We would disagree. In an environment where demand is depressed, and inflation is running well below the central bank’s objective, monetary and fiscal easing is warranted by the need to restore macroeconomic balance in terms of full employment and price stability. Policy efficacy does not require an increase in the central bank’s inflation objective.


In our view, the main argument for helicopter money is that there are benefits to be had from a money-financed fiscal expansion rather than a bond-financed fiscal expansion, even if interest is paid on the reserves that are created. The fiscal expansion is important because it adds directly to demand. The monetary financing helps to contain drags from crowding out and Ricardian equivalence, which may be particularly important in the Euro area where government debt is elevated.


In the event of a significant economic downturn in the Euro area, something that looked a lot like helicopter money as described here would likely take place. Despite the fiscal compact, there would be a move towards fiscal expansion. And, the ECB would expand its asset purchase program for both price stability and financial stability reasons. In order for the fiscal expansion to be meaningful, however, there would need to be either a broad-based rethink or a suspension of the fiscal compact. It is unlikely that there would be much explicit coordination between the monetary and fiscal authorities, due to sensitivities around the ECB’s independence, although it is not clear that this would be essential. Potentially very important is the issue of risk sharing. In the event of a significant economic downturn, automatic stabilizers would drive deficits wider and fiscal easing would add to this. With debt already very elevated in a number of Euro area countries, further increases in debt would be uncomfortable. Additional QE should make this much more comfortable. Greater risk-sharing in a future QE program would likely add significant additional benefits. Many in financial markets would view this as de facto equivalent to a eurobond.

In short, the final all-in bet is almost at hand.

and late this afternoon, both Jim Reid of Deutsche bank and zero hedge both realize that the ECB is now trapped and they must use the helicopter route:
very important…..
(courtesy zero hedge/JIM Reid)

How The ECB Trapped Itself In A “Catch 22”

With speculation of helicopter money in Europe spreading like wildfire, here is a simple summary of how the ECB may have no choice but to go with the “final solution” and engage the “chopper” for one simple reason: by pushing bond yields lower, the ECB is now actively impairing the functioning of Europe’s banks, and it’s getting to the point where European bank stocks are now back to crisis lows, leading to questions about their viability. Here is the explanation courtesy of DB’s Jim Reid.

It is fair to say that markets have for a long time exhibited Stockholm syndrome tendencies towards central bank policies – loving the fact that things were so bad that they had to act so aggressively. However they have been rebelling of late especially in Europe and Japan. As we highlighted yesterday its 4 weeks today since Draghi fired his quadruple bazooka and as we also remarked yesterday assets that might have been expected to benefit have been laggards on a global scale since. European banks (-9.1%), the FTSE-MIB (-5.3%) and IBEX (-3.8%) are down notably since the package was announced.


With the recent underperformance of banks one wonders how important their health is to the European economy. Is a weak banking sector holding back the European economy? It probably is as the monetary policy transmission mechanism can’t work effectively without them. But is QE and ultra low yields actually perversely holding back the banks and thus the economy?Interestingly in their latest bank piece our European equity sector analysts suggested that one of the key upside risks were higher rates and one of the the key downside risks was persistently low inflation & QE extension. 


So the banks team would seemingly like to see higher yields and less QE for banks to perform. The graph [below] arguably supports this as since December there has been a very strong correlation between 10 year bund yields and the Euro bank equity index. The lower yields go the weaker banks are and visa-versa. However the question mark is whether you could actually have a stable financial system without QE and ultra low borrowing costs.



So maybe banks and the European economy would be better off without QE and ultra low rates in theory but the reality might be that this would leave us with much higher systemic risk. A catch-22 situation it seems to us.

Judging by Visco’s comments from this morning, to the ECB now too. But before celebrations over the demise of central planning commence, keep this in mind: instead of QE, what the ECB will attempt next (and last) is helicopter money. Because with helicopter money it is simple: it is no longer of “if it works” but “how much money to paradrop” in order to stimulate inflation. And stimulate it they will…




Putin is angry as he states that the release of the “Panama Papers” is nothing but a plot to destabilize Russia.  Now we await Russia’s “truth bomb” against USA interests:

(courtesy zero hedge)

Putin Denounces “Panama Papers” As U.S. Plot To Destabilize Russia


the last few days days have been rife with speculation about the motivation, if any, behind the release of the Panama Papers, with the most prominent example coming from Wikileaks two days ago on Twitter which accused the journalist consortium behind the leak, the ICIJ, of being a “Washington DC based Ford, Soros funded soft-power tax-dodge which has a WikiLeaks problem” and adding that “PanamaPapers Putin attack was produced by OCCRP which targets Russia & former USSR and was funded by USAID & Soros.”


As we further suggested, the fact that none other than Rothschild, which is trying to corner the US-based “tax haven” sector, stands to benefit from the collapse of the Panama offshoring industry (as international clients who demand to maintain their anonymous status are forced to move to the US), may lead to further questions about a potential conflict of interest behind said release.

But while these and many other questions will remain unanswered, including why the ICIJ is cherrypicking which names to release especially as pertains to US clients of the Panamanian law firm, earlier today Russian president Putin made his first public announcement on the topic of the Panama Papers.

Acording to AP, Putin denied having any links to offshore accounts and described the Panama Papers document leaks scandal as “part of a U.S.-led plot to weaken Russia.” Putin described the allegations as part of the U.S.-led disinformation campaign waged against Russia in order to weaken its government. “They are trying to destabilize us from within in order to make us more compliant,” he said.

President Vladimir Putin attends the Russian Popular Front’s third media forum,
Truth and Justice, featuring independent regional and local media. April 7, 2016

So here we’ve got some friend of the Russian president, he has done something, probably there is an aspect of corruption to it… But what aspect [exactly]? Well, there is none,” Putin said on Thursday, addressing a media forum in St. Petersburg. He also pointed out that he himself had not been mentioned in the leaked documents.

You are all journalists here and you know what an informational product is… They’ve plowed through offshore [funds]. [Putin] is not there, there is nothing to talk about. But the task has been assigned! So what have they done? They’ve created an informational product by having found some acquaintances and friends,” the president told the media forum.

According to Putin, the Panama Papers episode is yet another attempt to destabilize Russia from within, and make it “more agreeable.”

“The easiest way to do so is to induce some mistrust to authorities within the society,” Putin said, adding that the creators of the leak aimed at the unity of the multiethnic Russian people.

The Washington-based International Consortium of Investigative Journalists said the documents it obtained indicated that Russian cellist Sergei Roldugin acted as a front man for a network of Putin loyalists, and, perhaps, the president himself.

Putin defended Rolgudin, describing him as a philanthropist who spent his own funds to buy rare musical instruments for Russian state collections. Speaking at a media forum in St. Petersburg, Putin said Western media pushed the claims of his involvement in offshore businesses even though his name didn’t feature in any of the documents leaked from a Panamanian law firm.

Putin said Roldugin, a longtime friend, did nothing wrong. He said he was proud of Roldugin, adding that the musician spent his personal money to advance cultural projects. Roldugin used the money he earned as a minority shareholder of a Russian company to buy rare musical instruments abroad and hand them over to the Russian state.

I am proud of people like Sergey Pavlovich [Roldugin]… and am proud to have him among my friends,” Putin said, adding that claims that the cellist has billions are nonsense. “Almost all money that he has earnt he spent on buying music instruments abroad, which he then brought to Russia” and gave them to state institutions, Putin said.

“Without publicizing himself, he also has worked to organize concerts, promote Russian culture abroad and effectively paid his own money for that,” Putin added. “The more people like him we have, the better. And I’m proud to have friends like him.”

Putin contended that Washington has fanned allegations of Russian official corruption in order to weaken Moscow as the U.S. has become concerned about Russia’s growing economic and military might.

“The events in Syria have demonstrated Russia’s capability to solve problems far away from its borders,” he said, adding that Moscow has achieved its goal “to strengthen the Syrian statehood, its legitimate government bodies.”

He also touched on the topic of Ukraine, which yesterday suffered a major diplomatic loss after a Dutch referendum voted against an accession agreement meant to bring Ukraine and Europe closer together. Some of Russia’s counterparts on the international arena “got used to a monopoly” there “and don’t want to consider others,” he said, having also quoted some opinions on why relations with the West have worsened.

“Our position on the situation in the south-east of Ukraine, as well as smaller scale things, such as [Russia’s] refusal to extradite [Edward] Snowden have become irritants in our relations,” Putin said.

Meanwhile, Ukraine’s president, Petro Poroshenko, who was explicitly named in the ICIJ leaks, had to be defended by Rothschild. As the FT writes, Rothschild Trust, a branch of Rothschild Wealth Management & Trust, on Thursday confirmed signing what it described as a transparent trust arrangement agreement to manage the assets of Petro Poroshenko, “an oligarch with business interests spanning from chocolates to television who was elected president of Ukraine following the 2013-2014 Maidan revolution.”

The emailed statement follows reports and claims of possible impropriety by Mr Poroshenko in setting up a British Virgin Islands-registered company, writes Roman Olearchyk in Kiev. Documents leaked from Panama’s law firm Mossack Fonseca revealed Mr Poroshenko’s registration of a BVI-registered offshore company.

In an emailed statement seemingly aimed to dispel concerns, the Zurich-based company said:

As a matter of principle, we never comment on individuals or client relationships, but on this occasion we have been authorized by our client to confirm that Rothschild Trust has been appointed by Mr Poroshenko as trustee of a blind trust to hold his shares in Roshen. This follows over 12 months of extensive preparation, and the relevant trust deed was signed on 14th January 2016. The trust has been modelled on international standards for politicians requiring trusts to hold their assets while they are in office.

Despite his name explicitly appearing in the ICIJ files, Poroshenko has gotten zero media attention across western countries. We wonder if Rothschild will pen comparable “explanation letters” for other oligarchs or pundits who tend to have a pro-Western bent?



This is certainly not going to help build confidence in the world economies:The EU may require visas from Americans and Canadians:

(courtesy Yahoo.com/Reuters/Baczynska)


EU may require visas from Americans and Canadians: EU source

By Gabriela Baczynska

BRUSSELS (Reuters) – The European Union executive is considering whether to make U.S. and Canadian citizens apply for visas before traveling to the bloc, a move that could raise tensions as Brussels negotiates a trade pact with Washington.

Only Britain and Ireland have opt-outs from the 28-nation EU’s common visa policy and the European Commission must decide by April 12 whether to demand visas from countries who have similar requirements in place for one or more EU state.

Washington and Ottawa both demand entry visas from Romanians and Bulgarians, whose states joined the EU in 2007. The United States also excludes Croatians, Cypriots and Poles from a visa waiver scheme offered to other EU citizens.

“A political debate and decision is obviously needed on such an important issue. But there is a real risk that the EU would move towards visas for the two (Americans and Canadians),” an EU source said.

Whether such a step was practical, however, was in question given that it would seriously undermine the EU’s vast and lucrative tourist industry. The U.S. and Canadian missions to Brussels were not immediately available for comment.

The discussion, prompted by U.S. and Canadian refusals to waive their visa requirements for holders of some EU member states’ passports, will take place on Tuesday, just over a week before U.S. President Barack Obama arrives in Europe on a visit that will include trade talks.

Trade negotiations between Brussels and Washington are at a crucial point since both sides believe their transatlantic agreement, known as TTIP, stands a better chance of passing before Obama leaves the White House in January.

Obama is due to visit Britain before meeting German Chancellor Angela Merkel at a trade fair in Hanover onApril 24.

“There are major question marks over TTIP, no one could now say exactly how it’ll go in the end. We’ll see if we can get Obama in Hanover to commit to more of what we want,” said one European Parliament member tracking TTIP.

(Editing by Alastair Macdonald and Mark Heinrich)




In order to conserve electricity, our basket case Venezuela has now ordered 3 day weekends:

(courtesy zero hedge)


Venezuela Orders Three-Day Weekends To Save Electricity

When we last checked in on everyone’s favorite Latin American 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 in mid-March.

Meanwhile, thousands of demonstrators had been holdingcounter-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 – the previous 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.”

The “emergency measures” in effect, amounted to a shutdown of the country. “Venezuela is shutting down for a week as the government struggles with a deepening electricity crisis,” Bloomberg wrote. “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.”

The reason for the electrical rationing was the water content of Venezuela’s 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. 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)


As a result, Maduro blamed El-Nino for implementing what was a three-day weekend.

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

For now, however, the weather has refused to comply and as Bloomberg reports this morning, Maduro has expanded his mid-March decree, and designated every Friday in the months of April and May as a non-working holiday in his ongoing bid to save electricity as a prolonged drought pushes water levels to a critical threshold at hydro-generation plants.

The country will unveil details of a 60-day plan to conserve energy Thursday, Maduro said, adding that measures would include asking large users such as shopping malls and hotels to generate their own electricity for nine hours a day. Heavy industries operating in the country will be asked to cut consumption by 20 percent, he said.

“This plan for 60 days, for two months, will allow the country to get
through the most difficult period with the most risk,”
Maduro said on
state television late Wednesday. “I call on families, on the youth, to
join this plan with discipline, with conscience and extreme
collaboration to confront this extreme situation” of the drought blamed
on the El Nino weather system.

As noted above, the announcement comes after
Maduro shut down the country for a week over the Easter holiday last
month, giving workers an extra three days off. Those efforts saved
almost 22 centimeters of water at Guri Dam in the southern state of
Bolivar, which supplies as much as 75 percent of the electricity
consumed in the capital Caracas.

If water levels at the dam fall
below 240 meters above sea level, the government may have to shut down
the plant to avoid damaging turbines – a move that would inevitably
lead to increased rationing. The level is currently around 243 meters,
Maduro said.

It wasn’t immediately clear if the new four-day work
week would be extended only to public sector workers or if the measure
would include the private sector.

It also wasn’t clear if, in case the water level drops below 240 meters, and Venezuela is essentially without power, if the 3 days weekend would be expanded to comprise every day of the week.

Then again, considering the economic state of Venezuela, this may not be bad news for the long-suffering local population.


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




USA/CAN 1.3085 UP.0005

Early THIS THURSDAY morning in Europe, the Euro FELL by 8 basis points, trading now WELL above the important 1.08 level FALLING to 1.1390; 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 NIRPand NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night t


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 UP 34.48 OR 0.22%

Trading from Europe and Asia:

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

Gold very early morning trading: $1237.50


Early THURSDAY morning USA 10 year bond yield: 1.723% !!! DOWN 3 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 2.56 DOWN 1 in basis points from WEDNESDAY night.

USA dollar index early THURSDAY morning: 94.43 DOWN 7 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:  3.42% UP A WHOPPING 42 in basis points from WEDNESDAY

JAPANESE BOND YIELD: -.052% DOWN 2/5 in   basis points from WEDNESDAY

SPANISH 10 YR BOND YIELD:1.61% UP 10 IN basis points from WEDNESDAY

ITALIAN 10 YR BOND YIELD: 1.39  UP 10 IN basis points from WEDNESDAY

the Italian 10 yr bond yield is trading 22 points lower than Spain.




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

Euro/USA 1.1377 DOWN .0022 (Euro DOWN 22 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/AND HUGE FALL IN USA;YEN CROSS TODAY

USA/Japan: 108.13 DOWN 1.594 (Yen UP 160 basis points) and A MAJOR BOMB LAST AGAINST  our yen carry traders and Kuroda’s NIRP.


USA/Canada: 1.3157  UP  .0.0076 (Canadian dollar DOWN 76 basis points AS  oil being  FELL(WTI = $36.99)



This afternoon, the Euro was DOWN by 22 basis point to trade at 1.1377   as the markets REACTED TO THE PLUMMETING USA:YEN CROSS, AND PLUMMETING COPPER AND OIL. 

The Yen ROSE to 108.13 for a GAIN of 160 basis pints as NIRP is a big failure for the Japanese central bank/also all our yen carry traders are being fried!!.

The pound was DOWN 66 basis points, trading at 1.4063 ( BREXIT CONCERNS/POOR ECONOMIC DATA/ SEE ABOVE)

The Canadian dollar FELL by 76 basis points to 1.3157, as price of oil was DOWN today (as WTI finished at $36.99 per barrel)

The USA/Yuan closed at 6.4700

the 10 yr Japanese bond yield closed at -.058% DOWN 1/5 BASIS  points in yield

Your closing 10 yr USA bond yield: DOWN 6 basis point from WEDNESDAY at 1.69% //trading well below the resistance level of 2.27-2.32%) HUGE policy error/ AND PUNISHING MANY OF OUR HUGE SHORTERS OF USA BONDS (SEE ABOVE)

USA 30 yr bond yield: 2.52 DOWN 6 in basis points on the day ( HUGE POLICY ERROR)The drop in yield means many trying to seek safe haven status for investments. China is very happy about today’s results.


Your closing USA dollar index, 94.48 DOWN 2 in  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:  CLOSED  DOWN 24.74 POINTS OR 0.40%
German Dax :CLOSED DOWN 93.89 OR 0.98%
Paris Cac  CLOSED DOWN 38.73  OR 0.90%
Spain IBEX CLOSED DOWN 105.70 OR 1.26%
Italian MIB: CLOSED DOWN 422.66 OR 2.45%

The Dow was DOWN 179.09 points or 0.98%

Nasdaq up 73.35 points or 1.49%
WTI Oil price; 36.99 at 2:30 pm;

Brent Oil: 39.06
USA dollar vs Russian Rouble dollar index: 68.14 (Rouble DOWN 47  /100 roubles per dollar from yesterday)AS the price of Brent and WTI OIL FELL


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


Closing Price for Oil, 5 pm/and 10 year USA interest rate:



BRENT: 39.60


USA DOLLAR INDEX:94.57 UP 7 cents on the day


And now your more important USA stories which will influence the price of gold/silver

Trading Today in Graph form:


Bonds & Bullion Surge As Stocks Slump Most In 2 Months

But, but, but… jobs…


Financials suffered their biggest drop in 2 months… (down 3 of the last 4 days) – on target for the worst week since the first week of the year


We suspect Financials have further to fall…


Which weighed on overall sentiment…


Leaving the S&P in the red YTD…


Since the great jobs report, Bonds and bullion lead the way…


Treasury yields plunged…


As Scotiabank’s Guy Haselmann exorts, the bottom line: I remain steadfast in my view that 10’s and 30’s will hit an all-time low yield in 2016, regardless of Fed action.

Below is what I wrote on January 4th (“The Bond Awakens” note which is attached).  Its explains the demand for long Treasuries.  For the time being, I continue to stand by all of these factors.


There still remain strong arguments for owning long-dated Treasuries. The reasons are fundamental, technical, Pension-related, relative, fiscal, regulatory, and due to the Fed’s balance sheet management.

  • Fundamental – Economists frequently forecast 10-year Treasury yields by adding expectations for growth and inflation rates to a risk premium. This formula has been unreliable in recent years. Poor understanding of factors such as globalization, innovation, indebtedness, and demographics has led to chronic over-estimations.  The business cycle might now be turning lower just as the Fed is hiking.
  • Technical – The Fed owns around 40% of all Treasuries 10 years and longer. The ECB is buying 2X the amount of net issuance.  The BoJ remains in full QE mode. There might be a shortage of long dated high-quality collateral.
  • Pension Demand – Moreover, since 2008, the Pension Benefit Guarantee Corporation has doubled its ‘per participant premium’ and tripled its ‘per unfunded vested benefits (UVB) premium’. These premiums rise on January 1st every year through 2019 and are scheduled to rise by another 25% and 30% respectively. The UVB motivation is to encourage Liability Driven Investment (LDI). The potential demand by the $3.2 trillion in corporate DB plans could be massive and have a profound impact on long Treasury securities.
  • Relative – The US 10-year yields more than Germany (164 bps), France (128), Italy(67), Spain (50), Norway (85), and Japan (197). It yields 60 bps more than Slovenia and has the same yield as Bulgaria.  In a highly globalized world, sovereign yield differentials among developed world economies may be more limited than in the past.  A strengthening USD also increases its relative attraction.
  • Fiscal – The US fiscal deficit has fallen dramatically.  Net coupon issuance is expected to fall around 25% to the lowest level since 2008.   Without any debt ceiling limits to worry about and due to money market reform needs, the Treasury will be funding a larger amount of its budget deficit with Bills (whose issuance as a percentage of outstanding debt is at the lowest level in almost 20 years).
  • Regulatory – New capital rules (i.e., LCR) have incentivized banks to move toward more liquid securities with limited credit risk components.
  • Balance Sheet – The Fed has approximately $215 billion of Treasury securities that mature in 2016 which it will be reinvesting across the coupon curve at auctions.  This amount will be the equivalence of 10% to 15% of the entire gross new issuance of Treasuries in 2016.

Economist still want to predict long Treasuries by the formula:  10yr yield = growth + inflation (+/-) risk premium.  This formula is dead for now.


TV anchors and their guests fail to understand the reasons driving long rates.  They have less to do with inflation and more to do with demand.  FOMC member also misinterpret what low rates mean and what are driving long Treasuries to higher prices (lower yields).


For the time being, the long end remains a commodity whereby demand is greater than supply.

While the USD Index remained relatively flat on the day, the FX market turnoiled…


USDJPY has given up all the gains post QQE2 and the end of QE3…


Gold and Silver surged as Crude and Copper was clubbed like a baby seal…


Copper plunged most since September today and broke both the 50- and 100-DMAs…


The 2015 analog continues to suggest down side…


Charts: Bloomberg



Early trading from NY today:  USA equities plunge !!

10: am


a)”It’s Coming Apart At The Seams” – US Equities Plunge As Deutsche-Lehman Analog Looms

Once again, US equities have given up the ‘great’ jobs report gains and are plunging fast with The Dow sufferung its worst day in 6 weeks. FX markets are turmoiling(USDJPY <108) and bond yields are collapsing to on-month lows. European and US banks are tumbling as despite Dimon’s bottom and the coordinated ease-fest of the world’s central banks, investors prefer to sell a multi-trillion dollar opaque hole of derivatives debacle-ness that buy it. As one veteran trader put it, the central banks’ plans “are coming apart at the seams.”

Good jobs gains gone in stocks…


Bond yields have plunged to 6-week lows..


And USDJPY is collapsing…


As Deutsche heads the same way as Lehman…


And investors begin to realize that nothing has been fixed and nothing they have been told is true.




At 1 pm est.  Note that most hedge funds are short treasuries.  The drive for safe haven directives will cause further pain for our shorts

(courtesy zero hedge)



b)Treasury Yields Tumble Near Feb ‘Flash-Crash’ Lows

It appears the search for a safe-haven has left Biotechs and FANGs as investors’ flight to quality sparks a bid under bonds & bullion. US Treasury yields are tumbling with 10Y and 30Y near the low close from mid-February’s “flash-crash” lows.

7Y yields are outperforming for now and 2Y underperforming


And with aggregate speculative positioning still notably short…


We suspect there is a lot more pain to come as The Fed folds to China’s pressure.


Initial claims decline but continual claims jumped.



The data still seems to suggest that the USA economy is still in the doldrums

(courtesy BLS./zero hedge)

Jobless Claims Decline From Two Month High

Following three consecutive weeks of increases in initial jobless claims, which pushed the series to its highest level since the start of February, according to the BLS the last week saw a 9K decline in the number of claimants which dropped from 276K to 267K. This was fractionally below the 270K expected print, and suggests that recent concerns about an inflection point in job trends may have been premature.


Continuing claims, on the other hand, jumped from 2.172MM to 2.191MM, above the 2.17MM expected, and a modest pick up from recent series lows.


Finally, the chart below puts all reported labor trends in context:





In the USA an astounding plunge in 37% truck orders.  Unsold inventories skyrocket!

(courtesy zero hedge)


“It’s Probably Nothing”: Truck Orders Plunge 37% As Unsold Inventories Soar Most Since 2007

Tyler Durden's picture


This should surely help the USA economy:  40% of student borrowers do not even make any payments on their loans.



(courtesy Mish Sedlock/Mistalk)


Shocking Statistic: Over 40% Of Student Borrowers Don’t Make Payments

Submitted by Mike “Mish” Shedlock of MishTalk

Department of Education Wonders “Why 40% of Student Borrowers Don’t Make Payments”; Blame Bush (Seriously)!

Over 40 percent of those in student loan programs have stopped making payments. Many borrowers have never made any payments.

The department of education (a useless body that I would eliminate in one second if given the chance), cannot figure out why this is happening.

“We obviously have not cracked that nut but we want to keep working on it,” said Ted Mitchell, the Education Department’s under secretary.

The Wall Street Journal reports More Than 40% of Student Borrowers Aren’t Making Payments.

More than 40% of Americans who borrowed from the government’s main student-loan program aren’t making payments or are behind on more than $200 billion owed, raising worries that millions of them may never repay.


While most have since left school and joined the workforce, 43% of the roughly 22 million Americans with federal student loans weren’t making payments as of Jan. 1, according to a quarterly snapshot of the Education Department’s $1.2 trillion student-loan portfolio.


About 1 in 6 borrowers, or 3.6 million, were in default on $56 billion in student debt, meaning they had gone at least a year without making a payment. Three million more owing roughly $66 billion were at least a month behind.


Meantime, another three million owing almost $110 billion were in “forbearance” or “deferment,” meaning they had received permission to temporarily halt payments due to a financial emergency, such as unemployment. The figures exclude borrowers still in school and those with government-guaranteed private loans.


Navient Corp. , which services student loans and offers payment plans tied to income, says it attempts to reach each borrower on average 230 to 300 times—through letters, emails, calls and text messages—in the year leading up to his or her default. Ninety percent of those borrowers, which include federal borrowers as well as those who hold private loans, never respond and more than half never make a single payment before they default, the company says.

Crisis Easy to Explain

Carlo Salerno, an economist who studies higher education and has consulted for the private student-lending industry, noted that the government imposes virtually no credit checks on borrowers, requires no cosigners and doesn’t screen people for their preparedness for college-level course work. “On what planet does a financing vehicle with those kinds of terms and those kinds of performance metrics make sense,” he said.

I could easily come up with numerous reasons off the top of my head.

  1. Being in the workforce and having a job are two different things.
  2. Having a job and making enough money to pay back hundreds of thousands of dollars is yet another thing.
  3. Some feel cheated by the system, as well they should.
  4. Many have figured out the consequences of default are small. The worst that can happen is wage garnishment. Should that happen, one can always find another low-paying job, buying time until they are discovered again.
  5. Some never intended to pay back the loans in the first place. To those borrowers, it’s all free money for a few years. They will stay in school as long as they can. If by some miracle they actually graduate (or are kicked out), they never make a payment.

Blame Bush!

A large portion of the blame for this mess goes to George W. Bush. Seriously.

The Bankruptcy Abuse Prevention and Consumer Protection Act enacted April 20, 2005 made it much more difficult to discharge debts in bankruptcy.

Among other things, “BAPCPA amended the law to broaden the types of educational (“student”) loans that cannot be discharged in bankruptcy absent proof of “undue hardship.” The nature of the lender became irrelevant. Even loans from “for-profit” or “non-governmental” entities are not dischargeable.

The Deflation Guarantee Act of 2005

I predicted this mess when Bush signed the bill.  As proof, I offer The Deflation Guarantee Act of 2005.

Here are my lead paragraphs as I wrote them at the time.

Today Congress passed the “The Deflation Guarantee Act of 2005” currently known as the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005”. Twenty years from now economists are going to be studying legislation from this Congress and signed by this administration and be wondering: “What the * were they thinking?”.


Consumer Protection Act? LMAO


Anytime this administration passes a law with the “protection” in it, assume it will do just the opposite.

Student Debt Highly Deflationary

I have wanted to refer back to that post on numerous occasions.

I had not done so previously because I strongly dislike my writing style in those days. I frequently used chat room talk like “LMAO” (laughing my ass off), in those early posts.

There are other aspects of my 2005 post that I dislike as well. However, I nailed the idea correctly. Student debt is a hugely deflationary force.

In the wake of that act (albeit with a bit of a delay), we saw massive amounts of seemingly reckless lending to students. Because of government guarantees, lenders did not give a damn who they lent to.

For profit universities flourished. Abuses at the University of Phoenix became rampant. And because of various lending programs that followed, education costs soared as well.

Those debts cannot be paid back, and household formation has gone into reverse. Students moved back home after graduation, and attitudes on debt have changed.

These are all debt deflation forces.

Modest Fee Request

The Department of Education will no doubt waste millions of taxpayer dollars studying this issue, only to come up with the wrong answers because students will lie.

Will anyone realistically admit “I never intended to pay back these loans”?

My modest fee for this analysis is a mere $250,000. Of that amount, I pledge $249,999.99 to the Khan Academy.

All I ask is a penny for my thoughts, saving taxpayers countless millions in useless department of education studies.

For more on the Khan Academy please see Teaching Revolution: Online, Accredited, Free; Start Learning Now!

Obama’s Role

President Obama does not escape criticism for his efforts to fuel the problem.

Here’s my blast at Obama: For Profit Schools Turn Students Into Debt Zombies; It’s Time To Kill The Entire Pell Grant Program.

There is plenty of blame to go around, but I have not seen a single person take this crisis back to the logical origin, the “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005” making student debt non-dischargeable in bankruptcy.

And at the end of the day, we see that our two famous consumer credit accounts keep on rising, student loans and automobile loans.
Last month it rose by another 17.2 billion dollars courtesy of the uSA government:
(courtesy zero hedge)

Consumer Credit Rises $17.2 Billion; Holding Of Federal Debt Hit New All Time High

After a near record drop in non-revolving (student and car) loans in December, many were wondering if this pipeline which has kept the US auto sector afloat would remain shut. We are happy to report that for two consecutive months, this all important funding pathway has now been unclogged and nonrevolving loans are back to their soaring self.

As the chart below shows, in the latest, just released month of February, total consumer credit jumped by $17.2 BN, beating expectations of $14.9 BN, and up from January’s upward revised $14.9 BN (was $10.5 BN). This was driven by a $2.9BN increase in revolving debt, and a $14.3BN jump in nonrevolving student and car loans.


The breakdown – revolving debt:

And non-revolving:


As usual, the two primary uses of credit remained the same, as shown on the chart below:


Finally, in case there is any doubt, here is the primary source of credit: the US government.


We have highlighted this to you last week, but it is worth repeating:
From Robert H to me on the Gilder book:
“One of the best explanations of what is wrong and how to fix it.”

(courtesy David Stockman/ContraCorner/George Gilder)

The Fed Is A God That Has Failed

By George Gilder at Yahoo!

April 6, 2016

Why does Wall Street keep recovering after recessions but the economy seemingly never does?

The reason, as I document in my book, “The Scandal of Money: Why Wall Street Recovers but the Economy Never Does” is that Washington and the Federal Reserve together have created a closed loop economy where the Fed creates money for the government and the S&P 500 and Main Street is left out.

The Fed decides what money is worth and who receives it and how much. The Fed prices it at zero interest rates, allegedly to stimulate economic growth. But whenever something is free, it’s distributed by queue, and only the privileged, connected people in the front of the line get any, not the innovators who create growth and opportunity for Main Street. Trump voters are wrong if they blame Mexico and China, but they are right about one big thing: The economy is rigged against them.

The Fed takeover of the economy has turned Main Street into Mean Street; it has gelded Silicon Valley, reducing our most creative entrepreneurs to climate cranks obsequiously petitioning in Washington.

Almost two-thirds of jobs created between 2002 and 2010 came from 23 million small businesses, according to the Small Business Administration. But venture capital investment in 2014 of $48 billion is just one-third of the 2000 total (in 2015 dollars), according to the National Venture Capital Association. There were half as many IPOs in 2015 as in 2000, and they were mostly focused on a few large deals. Back in 1999, there were seven times more IPOs than mergers and acquisitions for tech companies. Today merger and acquisitions outnumber IPOs by almost 36 to 1.

The Fed regulations and money manipulations have displaced an open market of IPOs by an exclusive game of horse trading among “qualified investors” who get rich and leave Main Street out, and fail to create new jobs.

And Wall Street? The once powerful engine of capitalism has been nationalized by the Obama bureaucracies feeding on fines and fees. We’ve had a covert socialist coup in Washington and it must be reversed or the free enterprise engine of growth and opportunity is in jeopardy.

The Fed began as a necessary “lender of last resort” during financial crises. But today, the Fed regulates the entire financial sector, from hedge funds to pawn shops. It issues and values the money by manipulating interest rates and manipulating money. Today the Fed serves the Washington bureaucracy and a few banks that are growing bigger. Through these banks, it effectively can regulate the entire economy.

What the Fed cannot do is becoming increasingly obvious: magically manipulate growth, which is the product of learning, into being. The Fed won its vast new powers because both Democrats and Republicans wanted an alibi. Rather than legislatively reform this administrative state that is smothering our economy, we prefer to have the Fed just issue money to paper it all over.

This process reached a pinnacle during the Obama Administration when the Fed balance sheet rose fivefold.

Like all command economies, the Fed is failing to spur growth. This failure has become so obvious that leading economists such as Ken Rogoff of Harvard and former Treasury Secretary Larry Summers now advocate the abolition of cash, so that interest rates can go below zero, meaning that through the Federal Reserve, the government can steal your savings without your representatives in Congress having to take political responsibility for levying a tax.

The first step to economic growth is recognizing the Federal Reserve is a god that has failed. Manipulating money cannot command growth and opportunity but it can suffocate innovation and entrepreneurship, which is always unexpected, and not well-connected in Washington.

What we are doing now is having money’s value determined by international currency trading. Ten banks control 77 percent of all currency trading. When currency value is more varied and volatile than the economic activity that it measures, the horizons of economic activity shrink until today the famous “flash boys” trade by the second rather than investing for the future.

Currency trading is by far the biggest industry in the world economy. It is a runaway scandal of money. The banks make money off it. But the rest of us don’t even get a measuring stick that’s valid to gauge our savings, assure our retirements, or expand investment in business.

This is the first recovery in decades when small business jobs are actually shrinking. All the expansion is coming from the closed loop economy between the Fed, the bureaucracies and the big banks.

Declaring that the government monopoly on money is the source of all monetary evil, Friedrich Hayek, the great Austrian economist, predicted that capitalism would be saved by monetary competition from the private sector, which today can come from bitcoin and a new tie to gold. As the great British scholar Matt Ridley explained: “The government monopoly of money leads not just to the suppression of innovation and experiment, not just to inflation and debasement, not just to financial crises, but to inequality, too.”

The first step to a new prosperity is to give up the god that failed and break the government monopoly on money.

We don’t have to have a formal gold standard: A combination of bitcoin for the internet and treating gold in tax terms as currency, not an investment, would go a long way to restoring money as a measure of learning and growth, and jump-starting growth.

Source: The Fed ‘is a god that has failed’: George Gilder – Yahoo!


See you tomorrow night


  1. Harvey: Please read Jesse. Please send prayers. Thank you.


  2. […] by Harvey Organ, HarveyOrganblog: […]


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