April 19/GLD loses an enormous 7.43 tonnes with gold rising? Silver adds a huge 1.437 million oz into the SLV inventory/Silver breaks above the $16.52 resistance level and attacks the 17.00 price barrier/Brazil close to social collapse/they are not paying pensions to seniors/Iran wishes to flood the world with oil/Goldman Sachs is the next bank to report lousy earnings and poor revenue/United Health is set to leave all exchanges and be totally out of ACA (Obamacare)

 

Good evening Ladies and Gentlemen:

Gold:  $1,253.60 up $19.40    (comex closing time)

Silver 16.97  up 72 cents

In the access market 5:15 pm

Gold $1250.50

silver:  16.94

 

Today’s huge run up in both gold and silver certainly caught our bankers offside.The banksters rarely allow momentum to build so they will most likely raid tomorrow.  The big question is whether those who wish to buy paper gold will take on the crooks.

 

Let us have a look at the data for today

.

At the gold comex today, we had a fair delivery day, registering 28 notices for 2800 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 220.60 tonnes for a loss of 82 tonnes over that period.

In silver, the open interest rose by another 1447  contracts UP  to 194,076 as the silver price was UP 14 cents with respect to FRIDAY’s bullish trading. In ounces, the OI is still represented by .970 billion oz or 138% of annual global silver production (ex Russia ex China). We are now at multi year highs in OI with respect to silver

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

In gold, the total comex gold OI fell BY A rather large 4434 contracts DOWN to 489,778 contracts DESPITE THE FACT THAT the price of gold was UP $.50 with MONDAY’S TRADING(at comex closing). Maybe the boys are a little frightened

We had another huge change in gold inventory at the GLD,this time a withdrawal of 7.43 tonnes thus the inventory rests tonight at 805.03 tonnes.The boys loading  gold into and/or removing gold at the GLD must be getting dizzy at the sheer pace of transactions!!   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 another deposit of 1.437 million  oz of silver with silver’s rise.  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 512 contracts DOWN to 193,564 as the price of silver was DOWN 6 cents with MONDAY’S trading. The gold open interest fell by A LARGE 4434 contracts DESPITE GOLD’S RISE YESTERDAY.Somebody big is standing FOR SILVER and surrounding the comex with paper longs ready to ponce once called upon to take out physical silver.

(report Harvey)

2 a) Gold trading overnight, Goldcore

(Mark OByrne)

3. ASIAN AFFAIRS

i)Late  MONDAY night/ TUESDAY morning: Shanghai closed UP 9.16 POINTS OR 0.30%  /  Hang Sang closed UP 270.00 OR 1.28%. The Nikkei closed UP 452.50 POINTS OR 2.73% . Australia’s all ordinaires  CLOSED UP 0.48%. Chinese yuan (ONSHORE) closed UP at 6.4680.  Oil ROSE  to 40.39 dollars per barrel for WTI and 43.77for Brent. Stocks in Europe ALL IN THE GREEN . Offshore yuan trades  6.4733 yuan to the dollar vs 6.4680 for onshore yuan.

REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) REPORT ON JAPAN

 none today

b) REPORT ON CHINA

 none today

EUROPEAN AFFAIRS

The following is the true cost of borderless travel in Europe’s economy:  $530 billion

( zero hedge/Bertlesmann)

RUSSIAN AND MIDDLE EASTERN AFFAIRS

as expected, Obama, succumbing to Saudi pressure is to veto the release of the redacted 28 pages on the 9/11 attack

( zero hedge)

GLOBAL ISSUES

Malyasia’s CDS spike higher after Abu Dhabi puts the Malaysian sovereign wealth fund , 1 MDB into default:

(zero hedge)

EMERGING MARKETS

Brazil is now close to a social collapse.  Pensions owed to seniors have not been paid in March and now the Summer Olympics looks to be in jeopardy!!

(courtesy zero hedge)

 

OIL ISSUES

i)there seems to be a secret Shanghai agreement to push the dollar down.  That means, no rate hikes :  in other words, one and done sort of affair.  The lower dollar is pushing up asset prices among which is oil

( zero hedge)

 

ii)Iran wishes to flood the world with oil but they have only one problem, they have no ships to put it on.  Iran has used up its fleet to store and no foreign ship wants to bring on Iranian oil with the threat of angering the Saudis

( zero hedge)

PHYSICAL STORIES

i)Silver broke through its resistance of $16.52 early in the session as the gold/silver ratio continues to plunge:

( zero hedge)

ii)For thousands of years, the Chinese hoarded silver. As a matter of fact in the late 1980’s they were the primary refiners of silver in the world, refining close to 80% of all unrefined silver.  Now, as well as hoarding gold, they have commenced in a big way accumulating silver

( B. of America/zero hedge)
iii)John Embry talks about the problems the riggers of gold and silver are having this past week:

( John Embry/Kingworldnews)
iv)The twice daily Chinese gold fix in yuan begins today:( Bloomberg/GATA)

v)Zero hedge comments on the above story on the historic yuan gold fixing:

( zero hedge)

vi)Interview with Bill Murphy and SilverDoctors

( Bill Murphy/SilverDoctors/GATA)

viiRonan Manly figures out where HSBC’s secret gold vault is located in London

( Ronan Manly/HSBC)

USA STORIES WHICH WILL INFLUENCE THE PRICE OF GOLD/SILVER

i)March housing starts as well as permits plunge.  We look forward to lower amount of rental units and thus expect high rents in the future in the USA

( zero hedge)

ii)Our favourite banker as just recorded a lousy quarter as earnings plummet by 55%. Our poor employees will now expect lower worker compensation and it will be the lowest since the financial crisis.  Pay attention to the revenue side:  absolutely disastrous!

( zero hedge)
iii)The following is a must read as Stockman describes the lunacy of earnings in the USA, the printing of money in Europe to get inflation well above 2% and the huge problems in Italy with government spending equal to 51% of GDP and debt to GDP hovering pretty close to 140%

( David Stockman/ContraCorner)
iv)This is a bombshell to the Obamacare  (ACA): United Health is done and will exit most of the state exchanges:( zero hedge)

Let us head over to the comex:

The total gold comex open interest FELL CONSIDERABLY to an OI level of 489,778 for a loss of 4434 contracts DESPITE THE FACT THAT the price of gold UP $0.50 with respect to MONDAY’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 227 contracts from 2198 contracts down to 1971.  We had 35 notices filed ON FRIDAY so we LOST  192 CONTRACTS or an additional 19,200 gold ounces will NOT stand for delivery. The next non active contract month of May saw its OI RISE by 88 contracts UP to 3022. The next big active gold contract is June and here the OI FELL by 2,716 contracts DOWN to 364,111. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was FAIR at 219,484 . The confirmed volume YESTERDAY (which includes the volume during regular business hours + access market sales the previous day was POOR at 158,506 contracts. The comex is not in backwardation.

Today we had 28 notices filed for 3500 oz in gold.

 

And now for the wild silver comex results. Silver OI FELL by a TINY 512 contracts from 194,076 DOWN to 193,564 as the price of silver was DOWN 6 cents with YESTERDAY’S TRADING.  We are now in the next contract month of April and here the OI fell by 18 contracts falling to 6. We had 18 notices filed on YESTERDAY so we NEITHER  gained NOR LOST ANY SILVER OUNCES THAT will stand for delivery in this non active month of April.   The next active contract month is May and here the OI FELL by 3,885 contracts DOWN to 92,381. This level is exceedingly high AS WE ONLY HAVE LESS THAN 2  weeks before first day notice on Friday, April 29.The volume on the comex today (just comex) came in at 130,812, which is HUMONGOUS. The confirmed volume yesterday (comex + globex) was EXCELLENT at 58,083. Silver is not in backwardation. London is in backwardation for several months.
THE HIGH OPEN INTEREST FOR THE ENTIRE COMPLEX PLUS THE HIGH OI FOR THE FRONT MAY CONTRACT MUST BE SCARING OUR BANKERS TO NO END. 
 
We had 0 notices filed for 90,000 oz.
 

April contract month:

INITIAL standings for APRIL

April 19/2016

Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  321.50 oz (Manfra)

10 kilobars

Deposits to the Dealer Inventory in oz 52,229.23 OZ

 

BRINKS

 

Deposits to the Customer Inventory, in oz  nil

 

No of oz served (contracts) today 28 contracts
2800 oz)
No of oz to be served (notices) 1943 contracts 194,300 oz/
Total monthly oz gold served (contracts) so far this month 2317 contracts (231,700 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month 103,445.5 oz

Today we had 1 dealer deposit

i) Into Brinks:  a biggy: 52,229.23 oz

Total dealer deposits; 52,229.23 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 1 customer withdrawal:

i) Out of Manfra: 321.50 oz (10 kilobars)

total customer withdrawal:  321.50 oz

Today we had 0 adjustment:

.
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 28 contracts of which 9 notices was stopped (received) by JPMorgan dealer and 8 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 (2345) x 100 oz  or 234,500 oz , to which we  add the difference between the open interest for the front month of April (1971 CONTRACTS) minus the number of notices served upon today (28) 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 (2345) x 100 oz  or ounces + {OI for the front month (1971) minus the number of  notices served upon today (28) x 100 oz which equals 428,800 oz standing in this non  active delivery month of April (13.337 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 13.930 tonnes of gold standing for April and 17.164 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 13.930 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   = 21.32 tonnes still standing against 17.164 tonnes available.  .
 
Total dealer inventor 551,823.822 oz or 17.164 tonnes
Total gold inventory (dealer and customer) =7,092,554.909 or 220.60 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 220.60 tonnes for a loss of 82 tonnes over that period. 
 
JPMorgan has only 21.15 tonnes of gold total (both dealer and customer)
 end

 

And now for silver
 

APRIL INITIAL standings

 april 19

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory 651,540.900 oz

DELAWARE,

SCOTIA.

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 300,453.54 oz

Brinks

No of oz served today (contracts) 0 contracts

NIL  oz

No of oz to be served (notices) 6 contracts)(30,000 oz)
Total monthly oz silver served (contracts) 189 contracts (945,000 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 5,403,581.0 oz

today we had 0 deposits into the dealer account

total dealer deposit: nil oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

we had 1 customer deposit:

i) Into brinks:  300,453.54 oz

Total customer deposits: 300,453.54 oz.

We had 2 customer withdrawals

i)Out of Delaware;  986.800 oz

ii) Out of Scotia: 650,554.100 oz

:

total customer withdrawals:  651,540.900   oz

 
 

 

 we had 1 adjustment

Out of CNT:

 

We had 219,806.20 oz leave the customer account and this landed into the dealer account of CNT

 

The total number of notices filed today for the April contract month is represented by 0 contracts for NIL 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 (189) x 5,000 oz  = 945,000 oz to which we add the difference between the open interest for the front month of April (6) 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:  189 (notices served so far)x 5000 oz +(6{ OI for front month of April ) -number of notices served upon today (0)x 5000 oz  equals 975,000 oz of silver standing for the March contract month.
we neither gained nor lost any silver ounces standing in this non active delivery month of April.
 
Total dealer silver:  32.457 million
Total number of dealer and customer silver:   153.104 million oz
The open interest on silver is now at multi year highs and silver is slowly disappearing from the comex vaults.
 
end
And now the Gold inventory at the GLD
April 19./we had a huge withdrawal of 7.43 tonnes from the GLD/Inventory rests tonight at 805.03 tonnes
April 18.2016/a huge addition of 6.38 tonnes of gold  in gold inventory at the GLD/Inventory rests at 812.46
April 14/another big change in gold inventory at the GLD/, a withdrawal of 3.26 tonnes/Inventory rests at 806.82 tonnes
April 13./another withdrawal of 5.06 tonnes of gold from the GLD/no doubt this gold was used in the raid/Inventory rests at 810.08 tonnes
April 12/another huge withdrawal of 2.67 tonnes of gold from the GLD and again despite the rise in gold. The boys must be desperate to get their hands on some physical.
Inventory rests at 815.14 tonnes.
April 11. We had a huge withdrawal of 1.79 tonnes of gold despite the rise in gold. No doubt whatever physical gold the GLD had just went over to China/inventory rests tonight at 817.81 tonnes

APRIL 8/no changes in tonnage of gold/rests tonight at 819.60 tonnes

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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

April 19.2016:  inventory rests at 805.03 tonnes

end

 

Now the SLV Inventory
April 19./we had a huge inventory deposit of 1.437 million oz/inventory rests at 334.724
April 18./no change in inventory at the SLV. Inventory rests at 333.297 million oz
April 15./we had a withdrawal of 951,000 oz of silver from the SLV/Inventory rests at 333.297
April 14./no change in inventory at the SLV/Inventory rests at 334.248 million oz
April 13/a strange withdrawal of 1.903 million oz with silver rising in price??/Inventory rests at 334.248 million oz
April 12.no change in silver inventory/rests tonight at 336.151 million oz
April 11.2016; a huge addition of 1.427 million oz of “paper” silver entered the SLV/Inventory rests at 336.151 million oz
APRIL 8/no changes in silver inventory/rests tonight at 334.724 million oz
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 19.2016: Inventory 334.724 million oz
.end
1. Central Fund of Canada: traded at Negative 3.7 percent to NAV usa funds and Negative 3,7% to NAV for Cdn funds!!!!
Percentage of fund in gold 62.5%
Percentage of fund in silver:37.6%
cash .-.1%( April 19.2016).
2. Sprott silver fund (PSLV): Premium to rises rises to +0.22%!!!! NAV (April19.2016) 
3. Sprott gold fund (PHYS): premium to NAV  rises.+46% to NAV  ( April19.2016)
Note: Sprott silver trust back  into positive territory at +22%% due to purchase of 75 million dollars worth of silver/Sprott physical gold trust is back into positive territory at +.46%/Central fund of Canada’s is still in jail.
It looks like Eric Sprott got on the nerves of our bankers as they lowered the premium in silver to +0.22%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.
 
 
 end

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

 

Trading in gold and silver overnight in Asia and Europe
 

By Mark O’Byrne

 

Trading in gold and silver overnight in Asia and Europe

China Gold Bullion Yuan Trading To Boost Power In Gold and FX Markets – End Manipulation?

China launched yuan denominated gold bullion trading today in a move that will further boost its power in the global gold and fx markets. Critics of the existing pricing mechanisms hope that it will lead to increased transparency and may end price manipulation.

china gold bullion

The Shanghai Gold Exchange (SGE), the world’s largest physical gold exchange, launched a yuan-denominated benchmark price today in Shanghai, a measure that will benefit both China’s domestic gold market and the global precious metals market.

The SGE set the price at 256.92 yuan a gram ($1,233.85/oz) at the 10:30 am session after members of the SGE submitted buy and sell orders for gold of 99.99 percent purity according to Bloomberg. Members include Chinese banks, jewelers, miners and the local units of Standard Chartered Plc and Australia & New Zealand Banking Group Ltd., according to the bourse.

The SGE said in a press release that the launch of the Shanghai Gold Benchmark Price will be useful as it adequately reflects the gold supply and demand in China, and represents the price trend of China’s gold market and China is now the largest producer and buyer of gold bullion in the world.

Shanghai Gold is gold bars or ingots with the standard weight of one kilogram and a fineness of no lower than 999.9, delivered in Shanghai, and traded via SGE price trading platform. It is quoted in yuan per gram, and settled via the SGE platform.

“At present, China’s gold derivatives market is lacking in an authoritative and equitable gold benchmark price which is denominated in renminbi. The launch of Shanghai Gold Benchmark Price will facilitate the development of China’s gold derivatives market which will also have a big impact on the price of gold related financial products, wealth management products and derivatives,” the release said.

Shanghai Gold Benchmark Price follows the principle which allows all orders executed on the SGE price trading platform. The benchmark price is determined when price and volume reach the balance during the auction period on the SGE price trading system.

Experts said the Shanghai Gold Benchmark Price will play a significant role in the global gold market.

According to David Marsh as quoted by the official China Daily, Managing Director and Co-Founder of Official Monetary and Financial Institutions Forum (OMFIM), the yuan-denominated gold benchmark offered by SGE is a necessary addition to the international gold market and should make the pricing of physical gold more open to the play of actual market forces.

PBOC Says “Potential” Is “Huge”
“The Shanghai gold benchmark will provide a fair and tradable yuan-denominated gold fix price … will help improve yuan pricing mechanism and promote internationalisation of the Chinese gold market,” Pan Gongsheng, deputy governor of the People’s Bank of China said at the launch in Shanghai.

“The Chinese gold market has rare opportunities for development,” Gongsheng said. “The market capacity and potential are huge. Today’s event will help enhance the impact of the renminbi on gold pricing,” Pan said.

End of Manipulation?
“(They) are aware it is a time consuming process. It is not going to happen in one day, one month or even one year,” a source familiar with SGE’s thinking said toldReuters.

“China has to show to the world over a consistent period of time that the price is open, rational, reasonable and that there is no manipulation.”

Transparency in the fixing process has come under scrutiny since a scandal broke out in 2012 over the rigging of the London interbank offered rate, or Libor.

The London gold fix, previously set via a teleconference among banks and facing allegations of manipulation, was replaced in 2015 by electronic auctions.

Gold Prices (LBMA)
19 April: USD 1,241.70, EUR 1,095.18 and GBP 867.01 per ounce
18 April: USD 1,237.70, EUR 1,095.02 and GBP 872.45 per ounce
15 April: USD 1,229.75, EUR 1,092.16 and GBP 867.46 per ounce
14 April: USD 1,240.30, EUR 1,101.04 and GBP 874.96 per ounce
13 April: USD 1,245.75, EUR 1,100.37 and GBP 875.33 per ounce

Silver Prices (LBMA)
19 April: USD 16.62, EUR 14.67 and GBP 11.57 per ounce
18 April: USD 16.20, EUR 14.33 and GBP 11.41 per ounce
15 April: USD 16.17, EUR 14.33 and GBP 11.40 per ounce
14 April: USD 16.13, EUR 14.32 and GBP 11.39 per ounce
13 April: USD 15.98, EUR 14.14 and GBP 11.21 per ounce


Gold News and Commentary
Silver surges 3% to 10-month high; lifts gold (Reuters)
China Starts Gold Fixing in Bid to Expand Global Market Sway (Bloomberg)
Gold’s Best Forecasters See Rally Resuming as Confidence Returns (Bloomberg)
Gold ends in the green as Doha oil-freeze talks unravel (Marketwatch)
Gold Climbs for Second Day as Oil Selloff Adds to Haven Demand (Bloomberg)

Gold is the spectre haunting our monetary system – Rickards (Telegraph)
It’s all suddenly going wrong in China’s $3 trillion bond market – (Bloomberg)
Silver Kryptonite? GATA Chairman Murphy Interviewed (Daily coin via Youtube)
World Energy Council: Cyber threat to world energy (City AM)
Bad smell hovering over the global economy (Guardian)

Read More Here

GoldCore: Storing Gold in Singapore


Knowledge Is Power. Read Our Most Popular Guides in Recent Months

Mark O’Byrne
Executive Director
 

By Mark O’Byrne

-END-

 

Silver broke through its resistance of $16.52 early in the session as the gold/silver ratio continues to plunge:

(courtesy zero hedge)

Silver Soars To 10-Month Highs, Gold-Ratio Continues To Plunge

It appears a combination of Rosengren’s comments (panic-jawboning about rates raises policy error fears), positioning unwinds (commercial hedgers covering), and gold/silver ratio compression has sparked a surge in both silver (10-month highs) and gold (back above 50dma) overnight.

The overnight spike…

Smashing Silver to 10-month highs..

UBS analyst Joni Teves tells The Financial Times:

“It’s a combination of silver getting a bit of attention over the past week with the big move in the gold/silver ratio and quite a few market participants looking at silver in and its relative performance to gold and thinking it might be time for a bit of catch up.”

As the ratio drops to 5-month lows…

Even as Gold lifts back above its 50dma…

end

For thousands of years, the Chinese hoarded silver. As a matter of fact in the late 1980’s they were the primary refiners of silver in the world, refining close to 80% of all unrefined silver.  Now, as well as hoarding gold, they have commenced in a big way accumulating silver
(courtesy B. of America/zero hedge)

The Chinese Start Buying Silver: BofA Says “Momentum Breaks Out To Highest In Years”

While most traders’ attention has been glued to the daily gyrations in oil, it is another commodity that has gained 21% this year and is the best performing asset in the Bloomberg Commodity Index. Silver.

As we reported earlier, the buying accelerated this morning, when ongoing demand for the precious metal pushed it to fresh 10 month highs above $17/ounce. One reason suggested for the buying came from Reuters, which said “that there is heavy buying in silver in Shanghai, and that has triggered buying in gold as well,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

This may just be the beginning as technicians are finally starting to pay attention.

Here is the just released report from BofA technical strategist Paul Ciana, who highlights the key chart observations:

Silver breaks through neckline of head and shoulders bottom

The price breakout up through the Ichimoku cloud and horizontal neckline at $16.10 points silver back to a historically important area of about $18.59. The Ichimoku cloud is also nearing a bullish cross while MACD just turned more bullish by crossing above zero. Momentum as defined by RSI broke out to its highest level in years suggesting momentum supports this trend.

He does have a warning, however, for those who wish to jump on today’s rally:

Today’s large silver rally led to a TD Setup sell signal. Of the past 16 signals where RSI was overbought, 11 times or 69% of the time silver prices declined the next day. Of all the 55 sell signals since 2000, price declined 35 times or 64% of the time one day later. Tomorrow, price may retrace some of the recent move providing a better opportunity to go long silver. Looking forward four and five days after the TD Setup sell signal with RSI overbought, price tends to continue higher.

Odd how being overbought is never a factor for stocks dropping shortly thereafter.

So is a continuation of the breakout imminent or will silver suffer its traditional intraday slamdown as “someone” dumps enough paper silver (and/or gold) to take out the entire bidstack and reprice the commodity lower? It all depends on what the patriotic Chinese, now in possession of a brand new gold fixing mechanism, do next.

 

end
John Embry talks about the problems the riggers of gold and silver are having this past week:
(courtesy John Embry/Kingworldnews)

John Embry: A bad week for the market riggers

Submitted by cpowell on Mon, 2016-04-18 18:01. Section: 

2p ET Monday, April 18, 2016

Dear Friend of GATA and Gold:

Sprott Asset Management’s John Embry tells King World News that last week was a bad one for the market riggers, with Deutsche Bank’s confession and discontent rising in Saudi Arabia and China. An excerpt from Embry’s interview is posted at KWN here:

http://kingworldnews.com/great-dangers-now-threaten-to-destroy-the-globa…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 

end

 

The twice daily Chinese gold fix in yuan begins today:

(courtesy Bloomberg/GATA)

China starts gold fixing in bid to expand global market sway

Submitted by cpowell on Tue, 2016-04-19 10:49. Section: 

From Bloomberg News
Tuesday, April 19, 2016

China, the world’s biggest producer and consumer of gold, started a twice-daily price fixing today in an attempt to establish a regional benchmark and bolster its influence in the global market.

The Shanghai Gold Exchange set the price at 256.92 yuan a gram ($1,233.85 an ounce) at the 10:30 a.m. session after members of the exchange submitted buy and sell orders for metal of 99.99 percent purity. Members include Chinese banks, jewelers, miners, and the local units of Standard Chartered and Australia & New Zealand Banking Group Ltd., according to the bourse.

China has overtaken India as the largest consumer as rising incomes and surging economic growth boosted purchases of jewelry, bars, and coins. The central bank has also been adding to its bullion holdings in a move to diversify its foreign-exchange reserves. The country’s plans to develop a benchmark to rival the twice-daily London auction may be hampered by capital controls.

“This is a very important development and will obviously be very closely watched,” said Robin Bhar, an analyst at Societe Generale SA in London. “But as long as it exists inside a closed monetary system, it will have limited global repercussions. For a truly efficient benchmark, the market has to be as unimpeded and unfettered as possible,” he said by phone Monday. …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2016-04-19/china-starts-gold-fixi…

 

end

 

Zero hedge comments on the above story on the historic yuan gold fixing:

(courtesy zero hedge)

China Launches Yuan Gold Fix To “Exert More Control Over Price Of Gold”

Overnight a historic event took place when China, the world’s top gold consumer, launched a yuan-denominated gold benchmark as had been previewed here previously, in what Reuters dubbed “an ambitious step to exert more control over the pricing of the metal and boost its influence in the global bullion market.” Considering the now officially-confirmed rigging of the gold and silver fix courtesy of last week’s Deutsche Bank settlement, this is hardly bad news and may finally lead to some rigging cartel and central bank-free price discovery. Or it may not, because China would enjoy nothing more than continuing to accumulate gold at lower prices.

The first Chinese benchmark price, derived from a 1 kg-contract traded by 18 participants on the Shanghai Gold Exchange (SGE), was set at 256.92 yuan ($39.69) per gram on Tuesday, equivalent to $1,234.50/ounce.

China’s gold benchmark is the culmination of efforts by China over the last few years to reform its domestic gold market in a bid to have a bigger say in the bullion industry, long dominated by London where the global spot benchmark price is currently set. As is well known, as the world’s top producer, importer and consumer of gold, China has balked at having to depend on a dollar price in international transactions, and believes its market weight should entitle it to set the price of gold.

The new benchmark may not be an immediate threat to London, but industry players say over time China could set the price of the metal, especially if the yuan become fully convertible.

Cited by Reuters, Pan Gongsheng, deputy governor of the People’s Bank of China which has been disclosing gold purchases every month since last summer, said that “the Shanghai gold benchmark will provide a fair and tradable yuan-denominated gold fix price … will help improve yuan pricing mechanism and promote internationalization of the Chinese gold market.”

The mechanics of the Shanghai fix are comparable to those of London: the benchmark price will be set twice a day based on a few minutes of trading in each session. The London benchmark, quoted in dollars per ounce, is set via a twice-daily auction on an electronic platform with 12 participants.

The 18 trading members in the yuan price-setting process includes China’s big four state-owned banks, foreign banks Standard Chartered and ANZ, the world’s top jewelry retailer Chow Tai Fook and two of China’s top gold miners.

When discussing the Chinese gold fix previously, World Gold Council CEO Aram Shishmanian said that “it is a stepping stone to a new multi-axis trading market consisting of London, New York and Shanghai and signals the continuing shift in demand from West to East.”

“As the market expands to reflect the growing interest in gold by Chinese consumers, so too will China’s influence increase on the global gold market.”

It may already be working: according to Reuters, one reason for today’s spike in silver is due to “heavy buying of silver in Shanghai, and that has triggered buying in gold as well,” said Ronald Leung, chief dealer at Lee Cheong Gold Dealers in Hong Kong.

Finally, when Chinese capital capital flight into Canadian real estate and offshore tax havens is curbed, we expected that gold could well follow the path of bitcoin, which has doubled since our article presenting it as an attractive alternative to avoiding Chinese capital controls.

end

Interview with Bill Murphy and SilverDoctors

(courtesy Bill Murphy/SilverDoctors/GATA)

Deutsche Bank’s admission, silver’s strength covered in GATA chairman’s interview

Submitted by cpowell on Tue, 2016-04-19 10:58. Section: 

6:57a ET Tuesday, April 19, 2016

Dear Friend of GATA and Gold:

Deutsche Bank’s admission to rigging the gold and silver derivatives markets, the shift in psychology in the monetary metals markets, and the strength in the shares of silver-mining companies are among the topics in GATA Chairman Bill Murphy’s interview this week with Eric Dubin and Jason Burack at The News Doctors. It’s posted here:

http://thenewsdoctors.com/gata-vindicated-but-deutsche-bank-a-limited-ha…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 

end

 

Ronan Manly figures out where HSBC’s secret gold vault is located in London

(courtesy Ronan Manly/HSBC)

 

Ronan Manly: Is this gold’s secret hiding place in London?

Submitted by cpowell on Tue, 2016-04-19 12:15. Section: 

8:14a ET Tuesday, April 19, 2016

Dear Friend of GATA and Gold:

Gold researcher Ronan Manly’s latest detective work seems to have located the super-secret gold vault of HSBC in London. His analysis is headlined “HSBC’s London Gold Vault: Is This Gold’s Secret Hiding Place?” and it’s posted at Bullion Star here:

https://www.bullionstar.com/blogs/ronan-manly/hsbcs-london-gold-vault/

But we may need another Lavender Hill Mob to find out if there’s really any metal in the vault and how many ownership claims there are to it.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

end

 

Bill Holter’s paper tonight is a good one:

(courtesy Bill Holter/Holter-Sinclair collaboraiton)

 

 

..They lit the first candle. (public article)

 

Many of us have waited for today, April 19, as we anticipated the new Chinese daily gold fix and the opening of the ABX physical exchange.  Some may be disappointed, other ecstatic.  I will say I am personally pleased because it was almost exactly as I suspected. 
  Much has happened over the last couple of weeks and a lot of it has to do with “truth” being exposed.  The “markets” are no different.  China in my opinion is simply trying to aid in markets determining prices of gold and silver. 
Last Friday we got horrifying (from a contrarian standpoint) COT numbers with nearly record numbers for commercial shorts.  With history as any guide, gold and silver should have already been slaughtered, they have not been.  In fact, we now have silver and gold at nearly one year highs and mining equities exploding.  Yesterday saw a dozen or more juniors up 25%++ for the day!
As I have maintained, I believe today’s action will become more frequent with the Shanghai physical demand pushing prices higher.  I believe they lit the first candle of truth today, other candles will follow until the light switch gets flipped on.  COMEX/LBMA will either go along in price or they will be arbitraged completely out of inventory.  As I wrote several weeks back, “what good is a contract that cannot perform”?  It is very possible China will let this “stew” for a while and allow the markets time to adjust to real and free pricing …only then do I see China coming out with a gold backed yuan.  If they were to do that today, it would be a declaration of war on the U.S. hegemon, if they wait, they can have cover and say “hey, it was global free markets that pushed gold out of sight”. 
As mentioned above, commercials are very short gold and silver now, they have lost $billions just today.  Maybe they continue to throw paper at gold and silver, Shanghai ain’t buyin’ it!  No matter what the apologists say, COMEX can and will default when they can no longer deliver metal.  They say “cash settlement” is not a default …who are they kidding?  This is the rally you never sell …until you are offered a different “paper” (one that is backed by something, anything) that can be trusted.  China may be making this offer in the near future!

Standing watch,

Bill Holter
Holter-Sinclair collaboration
Comments welcome bholter@Hotmail.com

END

Your early TUESDAY 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 6.4680 / Shanghai bourse  CLOSED UP 9.16  OR 0.30% / HANG SANG CLOSED UP 270. OR 1.28% 

2 Nikkei closed U[P 452.50  or 2.73%%/USA: YEN FALLS TO 109.44)

3. Europe stocks opened ALL IN THE GREEN /USA dollar index DOWN to 94.30/Euro UP to 1.1330

3b Japan 10 year bond yield: RISES   TO -.121%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 109.44

3c Nikkei now JUST BELOW 18,000

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

3e WTI::  40.44  and Brent: 43.77

3f Gold UP   /Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to 0.167%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 12.18%/: 

3j Greek 10 year bond yield FALL to  : 8.94%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1243.50/silver $16.70 (7:45 am est) ABOVE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble UP 68 /100 in  roubles/dollar) 65.52

3m oil into the 40 dollar handle for WTI and 43 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.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN COLLAPSES TO 108.33 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9642 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0924 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.

3p BRITAIN STARTS ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .121%

/German 8 year rate negative%!!!

3s The Greece ELA NOW a 71.4 billion euros,

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.79% early this morning. Thirty year rate  at 2.59% /POLICY ERROR)

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

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

S&P To Open Above 2,100, Eyes All Time High As Global Markets Surge, Crude Rises Above $40

If asking traders where stocks and oil would be trading one day after a weekend in which the Doha OPEC meeting resulted in a spectacular failure, few if any would have said the S&P would be over 2,100, WTI would be back over $40 and the VIX would be about to drop to 12 and yet that is precisely where the the S&P500 is set to open today, hitting Goldman’s year end target 8 months early, and oblivious of the latest batch of poor earnings news, this time from Intel and Netflix, both of which are sharply down overnight. We expect that after taking out any 2,100 stops, the S&P will then make a solid effort to take out all time highs, now just over 1% away.

Instead of these fundamental drivers, the market is focusing on the possibility that Japan may unleash more stimulus in the aftermath of this weekend’s massive quake, which has pushed the USDJPY to 109.40 in the overnight session, wiping out about 160 pips of losses in two days. Toshihiko Matsuno, chief strategist at SMBC Friend Securities in Tokyo, said that “we now have concerns that the economic impact from the Kumamoto earthquake could become larger, which is leading to expectations of further easing from the Bank of Japan.”

And that’s how every M7 and larger earthquake not only has a silver lining but is bullish for stocks.

Meanwhile OPEC watchers continue to focus on the Kuwait oil worker strike hoping it takes away enough production from the market over the next few days that the oil price jump despite the Doha meeting failure, is justified.

As a result, global stocks climbed to a four-month high and emerging markets rallied as oil rose above $40 a barrel whie European equities were poised for their highest close since January as financial reports boosted companies including Danone SA and L’Oreal SA. The Stoxx Europe 600 Index jumped 1.3% after energy shares snapped a two-day decline, tracking oil higher.

S&P 500 Index futures rose 0.5%, indicating U.S. equities will extend gains after reaching their highest level since Dec. 1.

It wasn’t just risk assets as gold jumped while silver surged to its strongest level since June. The metal has gained 21 percent this year, and is the best performing asset in the Bloomberg Commodity Index. And even as Treasury markets sold off modestly (the 10Y is still below 1.80%), Japan’s long TSY yields continued to make fresh record lows following strong demand for 5 year paper.

As Michael McCarthy, chief market strategist at CMC Markets in Sydney, summarized the market action: “There appears to be less skepticism, with investors shrugging off oil’s losses overnight. Pessimism in analysts’ expectations in the lead-up to the U.S. earnings season appears overdone. There’s room for an upward surprise.”

On the calendar today, we have data on housing starts in March, with economists estimating a drop from the previous month. Goldman Sachs’s earnings follow results from JPMorgan Chase & Co.,
Bank of America Corp. and Morgan Stanley that helped fuel a rally in
financials.

Where markets are now:

  • S&P 500 futures up 0.5% to 2098
  • Stoxx 600 up 1.2% to 348
  • FTSE 100 up 0.5% to 6387
  • DAX up 1.8% to 10304
  • German 10Yr yield up 2bps to 0.18%
  • Italian 10Yr yield up 5bps to 1.4%
  • Spanish 10Yr yield up 4bps to 1.53%
  • S&P GSCI Index up 0.6% to 337.7
  • MSCI Asia Pacific up 1.8% to 133
  • Nikkei 225 up 3.7% to 16874
  • Hang Seng up 1.3% to 21436
  • Shanghai Composite up 0.3% to 3043
  • S&P/ASX 200 up 1% to 5189
  • US 10-yr yield up 2bps to 1.79%
  • Dollar Index down 0.13% to 94.37
  • WTI Crude futures up 1% to $40.19
  • Brent Futures up 1.2% to $43.41
  • Gold spot up 0.8% to $1,242
  • Silver spot up 2.6% to $16.65

Top Global News

  • Oil Halts Losses as Kuwait Labor Strike Cuts Crude Production: oil halted drop, investors weighed strike in Kuwait
  • Japan Stocks Rally Most in Seven Weeks on Quake Stimulus Outlook: crude up first time in 5 days, boosting energy stocks
  • IBM Earnings Show It’s Still Struggling With New Product Growth: sales fell for 16th consecutive quarter to $18.7b
  • Netflix Shares Slump on Forecast for Weakening Subscriber Growth: international gains to shrink despite global expansion
  • Valeant CEO Deposed for at Least Nine Hours by Senate Committee: Pearson deposed ahead of public hearing April 27
  • BlackRock Asks Hong Kong to Stop Listed Companies Hoarding Cash: Hong Kong exchange would have to consult on rules change
  • Theranos Under Investigation by SEC, U.S. Attorney’s Office: co. was asked to provide documents, is cooperating
  • Yahoo to Weigh Bids From Verizon, TPG, YP as First Round Closes: earnings report set to show further revenue declines
  • Fed’s Rosengren Says Market Is Too Pessimistic on Rate Path: U.S. economy remains ‘fundamentally sound’ despite slow 1Q
  • Hedge Fund Leverage Faces New Scrutiny by Top U.S. Regulator: FSOC creates working group to study use of borrowed money
  • Gulf’s Biggest Buyer of U.S. Properties to Double Investments: Investcorp also plans to return to Europe
  • NOTE: Companies reporting earnings today include Goldman, Intel, J&J, Philip Morris

Looking at regional markets, Asian stocks reversed yesterday’s losses following the positive lead from Wall St. as a recovery in crude lifted global sentiment. Nikkei 225 (+3.7%) outperformed on JPY weakness and bargain buying following yesterday’s over 3% declines, while ASX 200 (+1.0%) was underpinned by commodity names after oil’s resurgence and iron ore reclaiming the USD 60/ton level. Furthermore, industry heavyweight Rio Tinto also reported its production update in which iron ore output rose 13% and shipments increased 11%. Elsewhere, Chinese markets are also higher alongside the improvement in global risk sentiment and the PBoC upping its liquidity injection, although gains have been capped amid speculation that monetary policy could be more prudent. 10yr JGBs traded relatively flat despite the firm risk-appetite in the region, following a well-received 5yr bond auction in which the b/c rose to 4.36 vs. Prey. 3.59 and tail in price narrowed 0.02 vs. Prey. 0.05.

Asian top news

  • It’s All Suddenly Going Wrong in China’s $3 Trillion Bond Market: Corporate borrowing costs are jumping from lowest since 2007
  • China Said to Seek Control of $8 Billion Yum! Brands Unit: CIC, KKR, Baring group interested in China’s biggest chain
  • BlackRock Asks Hong Kong to Stop Listed Companies Hoarding Cash: G-Resources is selling its biggest asset and keeping proceeds
  • Bank of Korea Holds Key Rate at Record Low, Cuts Growth Forecast: 17 of 20 economists forecast no rate change; 3 saw a cut
  • 1MDB Says There’s 5-Day Grace Period on Bond Interest Payment: 1MDB believes IPIC will make interest payment that was due April 18
  • Japan Picks FX Expert to Help Oversee BOJ’s Negative-Rate Plunge: Masai to replace Ishida, who opposed rate policy

European equities are climbing higher this morning, following the strong lead from Wall Street amid the resurgence in crude prices largely dictating the current state-of-play. Allied with this, a strong batch of earnings/production updates from the likes of L’Oreal and Rio Tinto have bolstered sentiment, while miners also gained on the back of sharp appreciation in the precious metals complex. German paper has come under some modest selling pressure since the European open amid a spill-over of weakness from USTs. Downside in Bunds has been somewhat curtailed after meeting support at the morning lows of 163.31, while analysts at IFR note possible sell stops situated at last week’s low (163.16). Alongside this, the long-end was weighed by the sale of Italy’s 20-yr bond, which has subsequently seen peripheral yields widen.

European top news

  • AB InBev Accepts Asahi’s Offer for European Beer Brands: Asahi had offered to buy premium brands for $2.9b
  • Roche’s First-Quarter Sales Fueled by Breast Cancer Trio: sales of newcomer Esbriet for lungs almost double in quarter
  • Rio Cuts Pilbara Ore Forecast as Auto Train System Delayed: co. continues to see volatility in prices across all markets
  • Danone First-Quarter Sales Top Estimates on Yogurt Pricing: co. reiterates 2016 targets, sees dairy sales stabilizing
  • VW Cheating Code Words Said to Complicate Emissions Probe: about 450 investigators screened 102 terabytes of data
  • ECB Says Lending Conditions for Companies Ease Amid Stimulus: competitive pressures main driver, Bank Lending Survey shows
  • Carney’s Brexit Options Cover Everything From QE to Rate Hikes: economists say BOE should intervene if U.K. leaves EU
  • L’Oreal Leaps in Paris as Sales Beat Estimates on Make-Up Growth: CEO sees sales growth accelerating from 2Q
  • Publicis Revenue Exceeds Estimates on North American Growth: client ad accounts won last year lifted revenue 8.9%

The early London session started off with USD selling all round, with the commodity currencies leading the way. AUD/USD ticked over .7800 after NY and Sydney saw a steady grind higher, but decent selling above the latest big figure level seems to have contained the latest moves for now. NZD/USD had already taken out .7000, but has continued through to .7026/7 before the market pauses for breath ahead of the GDT auction later today. Oil prices were recovering, but WTI has been held off $42.0 (Jun contract) to stem CAD gains ahead of 1.2700. Recent highs stretched, but marginally so as yet.

Only a minor dip seen in USD/JPY, which has been digging in in recent sessions. Players now focusing on the BoJ meeting next week, and after brief slip under 109.00 this morning, the lead spot rate has pushed through the Asia highs to print 109.35. Cross/JPY also bid with EUR/JPY eyeing 124.00 and GBP/JPY hitting 156.60 — up 3 JPY from yesterday, 4 JPY from the lows — UK polls supportive of the ‘remain’ camp to keep Cable bid near term. EUR/USD treading cautiously through the early 1.1300’s. German ZEW expectations better than current conditions.

The euro rose 0.2 percent to $1.1335, after climbing 0.3 percent on Monday amid speculation the European Central Bank will refrain from further monetary easing at an April 21 policy meeting. The ZEW Center for European Economic Research in Mannheim said its index of investor and analyst expectations, which aims to predict economic developments six months ahead, advanced to 11.2 in April, the highest since December.

Energy prices (WTI Jun’16 future +USD 0.42) continue to remain elevated in European trade in a continuation of the move seen in the US yesterday and Asia overnight. In terms of newsflow, various OPEC and non-OPEC bodies continue to speak about the fallout of Sunday’s failed meeting in an attempt to reassure markets that a deal is not out of sight, while Kuwait have also downplayed the ramifications of the strikes that have hit the nation.

Crude oil climbed 1.1 percent to $43.40 a barrel in London, after sliding almost 7 percent intraday on Monday after the world’s biggest producers failed to reach an agreement to limit supplies. A labor strike that started Sunday in Kuwait, OPEC’s fourth-biggest member, reduced the nation’s output by 60 percent to 1.1 million barrels a day.

Silver soared 3 percent to $16.7055 per ounce, the highest since June 2. The metal has gained 21 percent this year, the best performing asset in the Bloomberg Commodity Index. Money managers are the most bullish on silver since at least 2006, Commodity Futures Trading Commission data show. Gold rose 0.8 percent.

In metals markets, Silver has been ripping higher for much of the morning, with prices currently trading near an internal trend line which originated in Aug’15 and making a key break of the Oct’15 high (USD 16.33/oz). Elsewhere, copper and iron ore prices were marginally lower after the latter reclaimed the USD 60/ton level with a mild pull-back seen following reports that China agreed to address its steel sector glut.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European equities enter the US crossover in positive territory as energy prices lifts sentiment in the region
  • FX markets saw USD selling all round during the early London session with the commodity currencies leading the way
  • Looking ahead, highlights include US Housing Starts, Building Permits, API Crude Oil Inventories, and comments from BoE’s Governor Carney (Neutral)
  • Treasuries fall during overnight session amid rally in global equities and crude oil rose above $40/barrel.
  • After 15 years of being shut out of global credit markets, Argentina is returning with a bang as the country wants to sell as much as $15 billion in bonds Tuesday, which would be a single-day record for a developing country
  • The unprecedented boom in China’s $3 trillion corporate bond market is starting to unravel as investors in China’s yuan- denominated company notes have driven up yields for nine of the past 10 days, while local issuers have canceled 61.9 billion yuan ($9.6 billion) of bond sales in April alone
  • German investor confidence climbed for a second month, the highest level this year, as concerns about China’s economy have eased and ECB ramped up euro-area stimulus
  • ECB’s record-low rates have cost Germans 125 billion euros ($141 billion) in interest income since Draghi took over in 2011, according to analysis by Deutsche Postbank AG
  • The ECB said euro-area lending conditions continued to improve for companies last quarter, backing its case that its unprecedented stimulus combined with a stronger banking system is aiding the region’s recovery
  • Prime Minister Matteo Renzi and Italian banking authorities are racing to shore up a financial system burdened by 360 billion euros of doubtful loans, an amount equivalent to almost 25% of the nation’s GDP
  • Federal Reserve Bank of Boston President Eric Rosengren says that “I don’t think the financial markets have it right”; “We will be raising rates faster than what’s reflected in the financial markets”
  • Sovereign 10Y bond yields higher; European, Asian equity markets higher; U.S. equity-index futures rise. WTI crude oil, gold also higher

 

DB’s Jim Reid concludes the overnight wrap

Oil has been the main focus over the last 24 hours here in the real world. Having initially opened over 7% lower yesterday in Asia and crashing below $38/bbl, prices swiftly reversed over the course of the day and came close to wiping out the entire early loss, before settling a shade under $40/bbl and down ‘just’ -1.44% on the day. That meant WTI rose nearly $2.50 from the early low mark, while Brent also swung around to the tune of nearly $3 during the session. The Kuwait strike news which we highlighted yesterday was cited as a big factor in the changing tune and it appears that the strike is set to continue into today, although it feels like the ‘big if’ for markets now will be the duration of the strike and how much Kuwait can compensate some of that lost production elsewhere to get back closer to normal levels. Oil is fairly flat overnight and hovering just below $40.

The S&P 500 lasted in the red for all of 30 minutes at the open before a surge in energy stocks took the index to a +0.65% gain. The Dow was up a similar +0.60% by the end of play and notably closed over the 18,000 level for the first time since July last year. Prior to this European equity markets staged a late surge to drive back into the positive territory, with the Stoxx 600 finishing +0.41%. Credit indices on both sides of the pond closed tighter (CDX IG and Main both -2bps) while on the cash side US HY energy spreads finished the session unchanged.

As well as oil, earnings played their part too with Hasbro being a notable beat. Morgan Stanley also became the latest bank to report, beating earnings and revenue expectations with better than expected cost-cutting measures being attributed. It’s worth putting into perspective however the huge downward revisions to earnings expectations through the year so far heading into this reporting season. Yesterday’s results from Morgan Stanley were case in point. The Q1 EPS of 55c for the Bank was relative to the street expectation of 47c, however expectations at the end of March, February and January were actually 62c, 77c and 85c respectively. DB’s US equity strategist David Bianco made the point on Friday that while the weighted average EPS beat so far (as of Friday’s close) is +0.2%, bottom up Q1 EPS growth on a year on year basis is now actually -7.8%. For the banks alone EPS growth is in fact -12% yoy. We’ll be providing further detail on some of these trends as earnings season ramps up.

Earnings and oil will no doubt continue to be a key focus again for markets today, however also worth keeping an eye on is the ECB’s Bank Lending Survey, due out at 9.00am BST this morning. As we noted yesterday, the survey may offer clues about how Q1 volatility and especially the weak performance from bank equities has impacted their expected lending, if at all.

Before we get there though, switching our focus over to the latest in Asia this morning, the stabilisation in oil this morning (WTI currently still hovering around $40/bbl) is helping to support gains for the bulk of bourses. It’s the Nikkei which is standing out (a slightly weaker Yen also helping), currently posting a +3.48% rally and in turn wiping out yesterday’s heavy loss. Elsewhere the Hang Seng (+0.83%), ASX (+1.02%), Shanghai Comp (+0.17%) and Kospi (+0.08%) are also up. Credit indices across Asia and Australia have also bounced back, while US equity index futures are a bit more mixed, in part reflecting some aftermarket earnings reports last night from IBM and Netflix.

Moving on. The latest The House View titled “A delicate balance” came out overnight. The team notes that the global macro backdrop has improved, but the growth outlook remains sluggish. After dovish shifts by central banks earlier this year supported macro and markets, they expect little significant additional news from the ECB and Fed this month, and while they don’t expect further easing by the BoJ either, this is where the biggest upside risk is. This backdrop leaves markets in a delicate balance, with risks on both sides.

Away from the oil focus yesterday, there wasn’t a whole lot else to highlight on the macro side of things. The only data of note was reserved for the afternoon with the NAHB housing market index which showed no change for this month after printing at 58 (and slightly below the 59 expected). We also got the last of the Fedspeak prior to the blackout period kicking in, with the overall tone relatively upbeat. NY Fed President Dudley made mention to the fact that economic news out of the US has been ‘most favourable’, as well as citing confidence in the Fed hitting their 2% inflation objective and also sounding positive on recent improvement in Europe’s growth outlook. Dudley did however reiterate the well versed rhetoric that ‘policy adjustments are likely to be gradual and cautious, as we continue to face uncertainties and the headwinds to growth’. Meanwhile and speaking late last night, Boston Fed President Rosengren reiterated his view that futures markets pricing is currently implying too dovish a scenario and that ‘the very shallow path of rate increases implied by financial futures market pricing would likely result in an overheating that necessitates the Fed eventually raising interest rates more quickly than is desirable, which could endanger the ongoing recovery and continued growth’.

Taking a look at the day ahead now, along with the release of the aforementioned ECB bank lending survey this morning, another important release worth keeping an eye on will be the German ZEW survey for April where expectations are for little change in the current situations index. In the US this afternoon there’s more housing market data due to be released with the March data for housing starts and building permits. The BoE’s Carney, speaking this afternoon at parliament, might be worth keeping an eye too. Meanwhile, the earnings calendar will see 19 S&P 500 companies report with the highlights being Goldman Sachs, Yahoo and Intel.

END

ASIAN AFFAIRS

i)Late  MONDAY night/ TUESDAY morning: Shanghai closed UP 9.16 POINTS OR 0.30%  /  Hang Sang closed UP 270.00 OR 1.28%. The Nikkei closed UP 452.50 POINTS OR 2.73% . Australia’s all ordinaires  CLOSED UP 0.48%. Chinese yuan (ONSHORE) closed UP at 6.4680.  Oil ROSE  to 40.39 dollars per barrel for WTI and 43.77for Brent. Stocks in Europe ALL IN THE GREEN . Offshore yuan trades  6.4733 yuan to the dollar vs 6.4680 for onshore yuan.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

 

b) CHINA ISSUES

end

EUROPEAN AFFAIRS

The following is the true cost of borderless travel in Europe’s economy:  $530 billion

(courtesy zero hedge/Bertlesmann)

$530 Billion Over Ten Years – How The End Of Border-less Travel Threatens Europe’s Economy

As a result of incorporating the Schengen Agreement (initially signed in 1985 between just five countries) into the Treaty of Amsterdam (signed in 1997, effective in 1999), Europeans and European businesses enjoy border-less travel in most countries that are part of the European Union.

 

Or, at least they did.

In an effort to slow Syrian, Afghan, and Iraqi migrants traveling to Europe, many countries are now implementing border controls, a decision that could prove to have significant negative consequences for Europe’s economy.

As Bloomberg notes, the open border economy supports more than 400 million people, with 24 million business trips, and 57 million cross-border freight transfers happening every single year. Research by the Bertelsmann Foundation asserts that a permanent return to border controls could cost $530 billion of GDP growth from the European economy over the next decade.

 

The complexity introduced by creating a bottleneck at the border is what drives the above number. People have gotten used to living in one country and commuting to another for work, and companies have built their business models around having multiple plants in different countries, and using just-in-time supply chain arrangements that require cross border travel on a daily basis. Delays caused by the new checkpoints and stricter travel requirements have real costs for businesses and individuals alike.

Bloomberg has more on this dynamic.

Firms in Germany’s industrial heartland rely on elaborate, just-in-time supply chains that take advantage of lower costs in Hungary and Poland. French supermarket chains are supplied with fresh produce that speeds north from Spain and Portugal. And trans-national commutes have become commonplace since Europeans can easily choose to, say, live in Belgium and work in France.

 

Permanent controls would destroy the business model of German industry, says Rainer Hundsdoerfer, chairman of EBM-Papst.

 

“You get the products you need for assembly here in Germany just in time,” he said by phone. “That’s why the trucks go nonstop. They come here, they unload, they load, and off they go. The cost isn’t the only prime issue” in reinstating border checks. “It’s that we couldn’t even do it.”

 

Nor could anyone else, he adds: “Nothing in German industry, regardless of whether it’s automotives or appliances or ventilators, could exist without the extended workbenches in eastern Europe.” Based in Mulfingen in central Germany, Hundsdoerfer’s company has been making electric motors and fans since it was founded in 1963, and has factories in countries including Hungary, Slovakia and the Czech Republic.

 

German auto-parts manufacturer Continental AG, for instance, has 15 to 20 trucks running across Europe on a typical day. Their longest trips take about 1 1/2 to 2 days and cross multiple borders. If full customs and immigration checks were restored, leading to average waits of four hours at each frontier, that could mean another 160 hours of extra journey time a day across 20 trucks, said supply-chain head Juergen Braunstetter: “Over a year, you can imagine the cost.”

Here is the area that the Schengen Agreement covers, and the member states that participate.

 

Still – as long as Turkey is happy, it should all work out fine. And besides, George Soros has the final solution for all this – increase taxes, borrow more, or face European extinction.

 END

RUSSIAN AND MIDDLE EASTERN AFFAIRS

as expected, Obama, succumbing to Saudi pressure is to veto the release of the redacted 28 pages on the 9/11 attack

(courtesy zero hedge)

Obama Succumbs To Saudi Pressure, Will Veto Sept 11 Lawsuit Bill

following Saudi threats to destabilize the financial system if the US were to enact a Bill that would allow an investigation into Saudi Arabia’s support of September 11 terrorist attacks, many were watching closely how Obama would react. The president made it clear last night when as CNN reports, the White House threatened to veto the bipartisan bill to let families victimized by the 9/11 terrorist attacks sue Saudi Arabia while a GOP senator privately sought to block the measure.

The White House and State Department are bluntly warning lawmakers not to proceed with the legislation due to “fears” it could have dramatic ramifications for the United States and citizens living abroad to retaliatory lawsuits.

The President lands in Riyadh Wednesday for talks with Saudi Arabia over ISIS and Iran at a time of strained relations between the countries, making the bill’s timing that much more sensitive.

The move comes as presidential candidates from both parties are seizing on the legislation to score points with New York voters ahead of Tuesday’s critical primary there.

As reported over the weekend, one of the biggest supporters of the bill is none other than New York democrat Chuck Schumer, the likely next Senate Democratic leader, who has found himself pitted squarely against the Obama administration.

As CNN adds, the stepped-up lobbying against the legislation comes as it faces fresh roadblocks on Capitol Hill, with party leaders learning that a GOP senator is objecting to taking up the bill, according to a source familiar with the legislation. The senator’s identity has not yet been revealed publicly.

Proponents of the measure, for their part, are intensifying their pressure campaign.

“If Saudi Arabia participated in terrorism, of course they should be able to be sued,” Schumer said Monday. “This bill would allow a suit to go forward and victims of terrorism to go to court to determine if the Saudi government participated in terrorist acts. If the Saudis did, they should pay a price.”

Obama, however, disagrees for whatever reasons.

As we reported yesterday, White House spokesman Josh Earnest fired back, warning that it would jeopardize international sovereignty and put the U.S. at “significant risk” if other countries adopted a similar law. “It’s difficult to imagine a scenario where the President would sign it,” Earnest said.

And that’s the problem because to most Americans it is incomprehensible why Obama would roadblock something that is so critical to getting to the bottom of the worst terrorist attack on US soil.

As a reminder, the proposed Bipartisan Bill, which Schumer and Senate Majority Whip John Cornyn of Texas are pushing, would prevent Saudi Arabia and other countries alleged to have terrorist ties from invoking their sovereign immunity in federal court.

Saudi Arabia has long denied any role in the 9/11 attacks, but victims’ families have repeatedly sought to bring the matter to court, only to be rebuffed after the country has invoked legal immunity allowed under current law. However, as the White House itself admitted yesterday, it was the Saudis who were the source of Al Qaeda’s seed funding.

“It makes minor adjustments to our laws that would clarify the ability of Americans attacked on U.S. soil to get justice from those who have sponsored that terrorist attack,” Cornyn said of the bill, which is entitled the Justice Against Sponsors of Terrorism Act.

Not Just Obama

It’s not just Obama who is holding back the Bill: a GOP senator is privately holding up the bill, an obstacle that would require Senate Majority Leader Mitch McConnell to file time-consuming procedural motions to move past. He would need 60 votes to overcome the objection, but it is uncertain whether he will move on the measure before his colleague’s issues are ironed out. Not surprisingly, the objector has yet to step up: “no senator has yet claimed responsibility for privately voicing the objection.”

Under the rules of the Senate, any one senator can privately inform his or her party leadership of plans to place a “hold” to block legislation. His or her name would not become public unless a senator took to the Senate floor and tried to advance the bill, forcing the opponent to object. That scenario has not yet occurred as negotiations to find a way forward continue behind the scenes. Cornyn said that while several senators originally had placed holds on the measure, they had all relented save one.

Cornyn added that “part of the concern is that somehow this is a thumb in the eye to Saudi Arabia, a valuable ally,” he said. So because it is a valuable ally its support of terrorism on US soil should be ignored.

* * *

While Saudi Arabia has not been directly and officially implicated in the 9/11 attacks – yet – 15 of the 19 hijackers were of Saudi descent. Moreover, there has long been suspicion about ties between the royal family of Saudi Arabia to al Qaeda, speculation that has only intensified as 28 pages of a congressional investigation into the 9/11 attacks remains classified. As pressure grows on Congress to let 9/11 victims’ families pursue their claims against Saudi Arabia in federal court, Saudi officials are quickly pushing back.

Following the Saudi threat to dump its US denominated assets, including billions in US Treasurys, Cornyn was quick to dismiss the threat: “It’s seems overly defensive to me and I doubt they can do it,”he said in response. “I don’t think we should let foreign countries dictate the domestic policy of the United States so, no, it doesn’t bother me at all.”

Presidential Candidates Get On The Action

Presidential candidates were also unmoved. Ahead of the New York primary, both Hillary Clinton and Bernie Sanders voiced muted support to align themselves with the Cornyn-Schumer bill. Or rather Bernie did: Hillary appears to be on the fence, and while she said in a Sunday appearance on ABC that she had to study the bill and would not take a position, a spokesman later said she backs the bill.

Sanders, in a statement Sunday night, announced that he supports the bill and called on the Obama administration to declassify the 28 pages of the 9/11 report that could implicate Saudi Arabia.

Meanwhile, Trump evinced no concern about Saudi Arabia’s threat to sell off U.S. assets. “Let ’em sell ’em,” Trump said. “No big deal.”

Trump added: “Hey, look, we protect Saudi Arabia. We protect them for peanuts. If we weren’t protecting them, they wouldn’t be there for a week.”

However, for now just one person’s opinion matters: the one shown on the left.

END

GLOBAL ISSUES

Malyasia’s CDS spike higher after Abu Dhabi puts the Malaysian sovereign wealth fund , 1 MDB into default:

 

Malaysia CDS Spike After Abu Dhabi Puts Scandal-Ridden 1MDB In Default

Over the better part of the past year, we’ve documented the curious case of 1MDB, Malaysia’s government investment fund founded in 2009.

It’s a long and exceptionally convoluted story that doesn’t exactly lend itself to a concise summary but suffice to say that the development bank was something of a black box right from the beginning and in 2013, some $680 million allegedly tied to 1MDB ended up in Malaysian PM Najib Razak’s personal bank account just prior to an election.

There are any number of twists and turns in the 1MDB story including two bond offerings facilitated by a Goldman banker with ties to Najib and his wife, some shenanigans with a subsidiary of an Abu Dhabi sovereign wealth fund, a questionable Cayman Islands account or two, a dispute with KPMG, and an Australian firm that specialized in Malaysian penny stocks, but at the end of the day, Malaysians just want to know what exactly will come of an investigation into how Najib ended up with nearly three quarters of a billion dollars.

A quick reminder on the Abu Dhabi connection. Back in September, as the WSJ reported, the corruption scandal around 1MDB spilled beyond the country’s borders, as officials at a United Arab Emirates state investment vehicle rose questions about more than a billion dollars in money that they said is missing.

Abu Dhabi had long been a source of support for the fund, 1Malaysia Development Bhd., which was set up six years ago by Malaysian Prime Minister Najib Razak to develop new industries in the Southeast Asian country. Then, in September, as 1MDB tries to fend off a cash crunch, its backers in Abu Dhabi are asking what happened to a $1.4 billion payment the fund said it made but which they never received, two people familiar with the matter said.

The disputed payments were related to the purchase of power plants around the world by the Malaysian fund in 2012. A state investment fund in Abu Dhabi, the International Petroleum Investment Co., or IPIC, guaranteed the $3.5 billion in bonds that 1MDB issued to finance the purchase, according to the bond offering documents. In return, IPIC was to receive options to buy a 49% stake in the power plants as well as collateral for the bond.

According to 1MDB’s financial statements, the Malaysian fund made a collateral payment of $1.4 billion. A draft report into 1MDB’s activities by Malaysia’s auditor general said the payment went to a subsidiary of IPIC called Aabar Investments PJS.

The problem is that IPIC’s consolidated financial statements contain no reference to the receipt of the payment. Two people familiar with the matter said IPIC and Aabar never received the money. It isn’t clear what happened to the funds. 1MDB didn’t respond to requests for comment.

Since then, even as more news revealed just how extensive the embezzlement and corruption surrounding 1MDB truly were with the explicit involvement of Malaysian PM Najib Razak, the Abu Dhabi money was never found.

* * *

Fast forward to today, when 6 months later, the question of Abu Dhabi’s missing money has resurfaced with a bang, and suddenly threatens to drag down not only 1MDB but the entire Malaysian state.

As the FT reports, the dispute between an Abu Dhabi sovereign fund and Malaysia’s troubled state fund 1MDB over more than $1bn in missing payments hit a crescendo on Monday when the Emirates investment vehicle said its Malaysian counterpart was “in default” on an agreement between the two and terminated the deal.

The catalyst was a filing on the LSE made on Monday according to which the Gulf emirate’s abovementioned International Petroleum Investment Company (IPIC) ended its relationship with its Southeast Asian counterpart.

The Abu Dhabi fund said 1MDB and Malaysia’s ministry of finance were in default on the deal, including an obligation to pay $1.1bn plus interest, and that 1MDB continued to be bound by its commitments under the agreement.

In short, Abu Dhabi wants its money and is willing to push 1MDB in default to get it.

Ipic was now considering options to remedy the alleged default, including referring the matter to the appropriate dispute resolution forum, it added in its regulatory filing.

Furthermore, Ipic and its Aabar subsidiary issued a London Stock Exchange statement last week in which they denied ownership of Aabar Investments PJS Ltd, a company that received billions of dollars in payments from 1MDB.  Ipic and Aabar said in the filing that they were aware of reports that “substantial payments” were made to that company, which is incorporated in the British Virgin Islands, another offshore tax haven. They also said they had received no payments from the company and received no liabilities on its behalf.

* * *

The move is the latest twist in an affair that has buffeted Malaysia’s government and prompted investigations in at least five countries including the US and Switzerland.

To be sure, the case shouldn’t be very difficult to prosecute since Malaysia appears to have run out of goodwill with another critical counterparty, Switzerland after Swiss authorities said they have found “serious indications” that about $4bn has been misappropriated from Malaysian state companies. They widened their investigation last week to look at the roles of two former officials with responsibility for Abu Dhabi sovereign funds.

For its part, the FT adds, 1MDB said in a that interest was payable on Monday on its $1.75bn 2022 bonds. The Malaysian fund said that a “dispute has recently arisen” between the two funds and that Ipic had not paid the interest.

The 1MDB statement went on: “1MDB wishes to make clear that it and its group entities will meet all of their other obligations under any other financing arrangements and have ample liquidity to do so.”

 

Malaysia’s finance ministry said in a statement on Monday that it would “continue to honour all of its outstanding commitments in the financial markets”.

In short, nobody really knows what is going on as Christian de Guzman, a credit analyst at Moody’s in Singapore, confirmed. “There’s a lot of uncertainty about what’s going on, but one thing is clear — progress on 1MDB’s debt rationalisation has been cast into doubt.”

Alas, the situation will only deteriorate from here.

As a reminder, it is none other than Najib Razak, Malaysia’s prime minister, who heads 1MDB’s advisory board. The PM has battled allegations centred on $681m transferred to his personal bank account, which critics claim is linked to 1MDB. Both Mr Najib and 1MDB deny wrongdoing and the prime minister has been cleared by Malaysia’s attorney-general. Which means that for any resolution to be reached on the missing funds it would involve the implication of the prime minister, which would therefore mean that creditors of 1MDB have an awkward choice: write off their exposure, or pursue the funds with the risk of unleashing another political crisis.

To get a sense of just how deep the Malaysian corruption rabit hole goes, consider that Nazir Razak, Najib’s brother, announced on Monday that he was taking a voluntary leave of absence from his role as chairman of CIMB, Malaysia’s second-biggest bank by assets, while a review took place into transfers into his own personal account. The move follows reports that he received $7m ahead of the 2013 elections in Malaysia.

In other words, everyone was stealing, the only question is how much, and whether those who actually owe the money will come looking for it.

And while bankers in Kuala Lumpur say that while the alleged default is unlikely to threaten Malaysia’s sovereign rating, as the risk from 1MDB is already factored in, it will hamper efforts to contain the political scandal around the affair.

Markets, however, beg to differ and following the news of 1MDB’s alleged default, Malaysia 5 year CDS spiked by 11 bps, the most since March 21, to 163 bps as the market starts to quietly ask whether this ongoing scandal may just drag down the entire Malaysian state.

END

EMERGING MARKETS

Brazil is now close to a social collapse.  Pensions owed to seniors have not been paid in March and now the Summer Olympics looks to be in jeopardy!!

 

(courtesy zero hedge)

 

As Olympics Looms, Officials Warn Rio Is “Close To Social Collapse”

With feces-infested waterways, Zika-carrying mosquitoes, a collapsing economy, and political corruption that runs from top to bottom, Brazil is in trouble. But just a few short weeks ahead of The Olympics, the people are revolting as Sao Paulo state governor Geraldo Alckmin warns “Rio de Janeiro is close to social collapse” after state payments to retirees have not been made. Of course, none of this matters as long as Ibovespa is soaring and Real is strengthening…

  • *RIO DE JANEIRO STATE CHIEF OF STAFF LEONARDO ESPINDOLA SPEAKS
  • *ESPINDOLA:RIO DE JANEIRO HASN’T MADE MARCH PAYMENTS TO RETIREES

To which Governor Alckmin adds…

  • *BRAZIL’S RIO DE JANEIRO ‘CLOSE TO SOCIAL COLLAPSE’: OFFICIAL
  • *BRAZIL’S RIO DE JANEIRO STATE OWES BRL52B: OFFICIAL
  • *BRAZI’S SAO PAULO STATE OWES BRL224B: GOVERNOR ALCKMIN

Which does not look like being solved any time soon:

  • *BARBOSA: BRAZIL FED. GOVT HAS TROUBLE MEETING FISCAL GOAL
  • *BARBOSA: FED. GOVT. IS AWARE, CONCERNED ABOUT STATE SITUATION

Which seems like exactly what you want to hear to buy the F**king dip in Ibovespa…

Still on the bright side…

END

OIL ISSUES

there seems to be a secret Shanghai agreement to push the dollar down.  That means, no rate hikes :  in other words, one and done sort of affair.  The lower dollar is pushing up asset prices among which is oil

(courtesy zero hedge)

Oil Surges As Dollar Tumbles To June Lows; Financial Conditions “Easiest” Since Last Summer

Whether or not there was a secret “Shanghai Accord” to push the dollar lower, the outcome has been clear: moments ago, the USD as measured by the Bloomberg Dollar spot index just dropped to the lowest level since June 22, long before the Fed commenced its rate hikes, indicating that the market is, at least for now, convinced that the Fed is “one and done” and that Eric Rosengren’s warning that rate hikes will accelerate from here is nothing but a hollow threat.

This was perhaps to be expected: just one month ago Goldman was pounding the table on how there was “no central bank conspiracy” to push the dollar lower, and how clients should keep buying the USD because “Goldman is right, and the market is wrong.”

Once again, Goldman was wrong and the market is right. It also suggests that Goldman was wrong about the “central bank conspiracy.”

And as has been the case over the past year, a weaker dollar means stronger oil, and sure enough moments ago WTI spiked to new post-Doha highs, above $41/barrel even as production continues unabated and as Kuwait is slowly resolving its supply cut as a result of this weekend’s oil worker strike.

But the most important outcome of the collapsing dollar is that as Goldman writes, this time correctly, the company’s own Financial Conditions Index “is now at the easiest level since August 2015, when China devalued the CNY. Each of the key components—long rates, the dollar, equity prices, and credit spreads—has retraced most or all of its prior deterioration.”

Following Monday’s equity and credit rally, we estimate that our GS Financial Conditions Index (GSFCI) is now at the easiest level since August 2015. Exhibit 1 shows that the index has eased 115bp since the January 20 peak. Each of the key components—long rates, the dollar, equity prices, and credit spreads—has retraced most or all of the prior deterioration.

To Goldman the easier conditions arising from the weaker dollar “equates to an underlying growth pace of about 2¾%. With an FCI impulse of about zero in the second half of 2016 and +¼pp in 2017, this simple calculation would imply growth in the 2¾%-3% range in coming quarters, well above our current 2-2¼% forecast.”

Maybe Goldman will be correct about this, but where it certainly remains wrong is in its forecast for three more rate hikes in 2016. This is what it said:

Although the risks to our three-hike forecast in 2016 are clearly on the downside, we expect the FOMC to tighten monetary policy by significantly more than discounted in the bond market. All else equal, this should lead to a renewed tightening of the FCI if we are right about the Fed. Nevertheless, we think financial conditions have turned from a significant downside risk to our growth forecast in early 2016 to a moderate upside risk at present.

What does the market think? That Goldman is dead wrong. As the following table shows,the probability of a rate hike at the June meeting is only 17.6% and barely rises to above 50% by the December meeting. In other words, the market is saying just one more rate hike by the Fed in 2016, most likely at the December meeting.

END
Iran wishes to flood the world with oil but they have only one problem, they have no ships to put it on.  Iran has used up its fleet to store and no foreign ship wants to bring on Iranian oil with the threat of angering the Saudis
(courtesy zero hedge)

Iran Is Ready To Flood The World With Oil… It Just Has No Ships To Deliver It

Late last week, just ahead of the Doha meeting, we showed that Iran’s existing oil tanker armada which until recently had been on anchor next to the Iranian coast and which according to Windward data was storing as much as 50 million barrels offshore…

…  had finally started to move.

The reason, as Bloomberg reported, was that tankers carrying about 28.8 million barrels of crude, or more than 2 million a day, left the Persian Gulf country’s ports in the first 14 days of April. That compares with a rate of about 1.45 million barrels a day in March. As a result, Iran’s crude shipments have soared by more than 600,000 barrels a day this month, and offsetting the entire production decline by US producers with just half a month’s incremental production.

However, now that the shipping armada has sailed to its various (most Asian) destinations, it may be difficult to repeat this in the near term.

According to Reuters, Iran is struggling to increase oil exports because many of its tankers are tied up storing crude, some are not seaworthy, and foreign shipowners are clearly reluctant to carry its cargoes.

The math: Iran has 55-60 oil tankers in its fleet, a senior Iranian government official told Reuters. He declined to say how many were being used to store unsold cargoes, but industry sources said 25-27 tankers were parked in sea lanes close to terminals including Assaluyeh and Kharg Island for this purpose.

Asked how many tankers were not seaworthy and needed to go to dry docks for refits to meet international shipping standards, the senior official said: “Around 20 large tankers … need to be modernised.” A further 11 Iranian tankers from the fleet were carrying oil to Asian buyers on Tuesday, according to Reuters shipping data and a source who tracks tanker movements. That was broadly in line with the number consistently committed to Asian runs since sanctions were lifted in January, putting more strain on the remaining available fleet.

So as increasingly more of Iran’s tanker fleet is currently utilized or is otherwise out of commission, Iran desperately needs foreign ships to execute its plans for a big export push to Europe and elsewhere and meet its target of reaching pre-sanctions sales levels this year.

There is just one problem: nobody wants to give their spare tanker capacity to Iran.

According to Reuters ship owners, who are not short of business in a booming tanker market, are unwilling to take Iranian cargoes.

One stumbling block is residual U.S. restrictions on Tehran which are still in place and prohibit any trade in dollars or the involvement of U.S. firms including banks – a major hurdle for the oil and tanker trades, which are priced in dollars.

As a result only eight foreign tankers, carrying a total of around 8 million barrels of oil, have shipped Iranian crude to European destinations since sanctions were lifted in January, according to data from the tanker-tracking source and ship brokers.

That equates to only around 10 days’ worth of sales at the levels of pre-2012, when European buyers were purchasing as much as 800,000 barrels per day (bpd) from the OPEC producer. So far no Iranian tankers have made deliveries to Europe, according to data from the tanker-tracking source.

Whether it is due to politics or simple business precaautions, Paddy Rodgers, chief executive of leading international oil tanker company Euronav, said at present there was “no great urgency to do business in Iran”.

There is not a premium to do business in Iran and there is plenty of other business – the markets are busy, rates are good. So there is no stress on wanting to do it,” he told Reuters. “I don’t really want to set up a euro bank account in Dubai in order to trade with Iran – that would crazy.”

Michele White, general counsel with Intertanko , an association which represents the majority of the world’s tanker fleet, said: “We have witnessed a reluctance by our members generally to return to Iranian trade given the prohibition on use of the U.S. financial system – essentially no U.S. dollars.”

One can almost smell Saudi intervention here, which we first described two weeks ago when we reported that not only has Saudi Arabia banned Iranfrom sailing in its territorial waters, but has taken proactive steps to slow Iran’s efforts at increasing oil exports, interfering with third parties and making Iran’s procurement of vessels virtually impossible. As the abovementioned oil tanker association Intertanko and other industry participants said then, while no formal notice has been given by Saudi Arabia, uncertainty is making some charterers less willing to lift Iranian crude.

It’s seen as an unknown risk,” said one shipbroker. “No one wants to disrupt their relationship with the Saudis.”

Iran admits as much.

A senior Iranian government official, who declined to be named due to the sensitivity of the matter, acknowledged his country was finding it difficult to hire foreign tankers.

We are working on the problems. There are various issues involved, financial, banking and even insurance. It has improved a little bit since the lifting of sanctions but we still face serious problems.”

Asked if this and the need to modernise some of the domestic fleet was holding back exports, he said: “Of course it does.”

Iran’s problems may not be resolved any time soon. Reuters adds that two other sources with other leading oil tanker operators echoed the above concerns and said they were not doing Iran deals at the moment.

One of the two sources said with a new U.S. president to take office in January, tanker owners were unsure whether there could be any change to the nuclear deal Washington and other world powers agreed with Iran which led to the end of sanctions.

“It does not appeal to them to take on the risk and the uncertainty of the U.S. connection and future U.S. political policy that would come into play,” said the source, who declined to be named, citing sensitivity over potential Iranian trade.

Angering Uncle Sam aside, the tanker industry has cited other problems posed by Iranian business. Ship insurers have plugged a shortfall in cover that had been caused by U.S. reinsurers being restrained by Washington’s sanctions, although tanker owners say it comes with risks and it could also be withdrawn if, for instance, wider sanctions are reimposed. “Shipping insurance is still a problem. We see many buyers in the market still avoid buying from Iran,” Fereidun Fesharaki, founder of energy consultancy FGE, wrote in a note.

Finally, Saudi antagonism toward Iran is starting to spread. The kingdom’s close ally Bahrain had imposed a comparable ban on any vessels that visited Iran as one of its last three port calls, as the one noted two weeks ago.

“Any spread of the Bahrain-style ban on foreign ships that have recently called Iran can only fuel this hesitancy for owners who trade in the Middle East region,” said Interatnko’s White.

In other words, Iran may be pumping record amounts of oil, and may be eager to flood the world with its newly allowed exports, it just has no way of delivering it… just how Saudi Arabia wants it, whose implicit warning that it may boost production by 1 million barrels overnight may soon be tested.

The flipside, of course, is that the longer Iran is unable to recover its pre-sanction level of oil production, and really exports, the longer OPEC will be unable to reach a “freeze deal” due to Saudi insistence that Iran also joins said deal.

Which, incidentally, is also just how Saudi Arabia wants it.

 

end

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

Euro/USA 1.1330 UP .0023 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 109.44 UP 0.349 (Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER

GBP/USA 1.4360 UP .0077 (STILL THREAT OF BREXIT)

USA/CAN 1.2712 down .0056

Early THIS TUESDAY morning in Europe, the Euro ROSE by 23 basis points, trading now WELL above the important 1.08 level RISING to 1.1318; 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 the Shanghai composite was UP 9.16 POINTS OR 0.30%/ Hang Sang UP 270 OR  1.28%   / AUSTRALIA IS LHIGHER BY 0.48% / ALL EUROPEAN BOURSES ARE  IN THE  GREEN as they start their morning/ WITH THE EXCEPTION OF GERMANY’S DAX.

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

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

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

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

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

The NIKKEI: this TUESDAY morning: closed UP 452.50 OR 2.73%

Trading from Europe and Asia:
1. Europe stocks ALL IN THE GREEN AS THEY START THEIR DAY

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

Gold very early morning trading: $1242.25

silver:$16.65

Early TUESDAY morning USA 10 year bond yield: 1.79% !!! UP 1 in basis points from MONDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.59 PAR in basis points from MONDAY night.

USA dollar index early TUESDAY morning: 94.30 DOWN 19 cents from MONDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers TUESDAY MORNING

end

 

And now your closing TUESDAY NUMBERS

 

Portuguese 10 year bond yield:  3.13% PAR in basis points from MONDAY

JAPANESE BOND YIELD: .1183% DOWN 1/2 in   basis points from MONDAY

SPANISH 10 YR BOND YIELD:1.54% UP 5 IN basis points from MONDAY

ITALIAN 10 YR BOND YIELD: 1.40  UP 5 IN basis points from MONDAY

the Italian 10 yr bond yield is trading 14 points lower than Spain.

GERMAN 10 YR BOND YIELD: .169% (UP 1 IN BASIS POINT ON THE DAY)

end

 

IMPORTANT CURRENCY CLOSES FOR TUESDAY

 

Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM

 

Euro/USA 1.1378 UP .0070 (Euro UP 70 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 109.11 up .026 (Yen DOWN 3 basis points)

Great Britain/USA 1.4405  UP .0122 Pound UP 122 basis points/

USA/Canad 1.2637 DOWN 0.0134 (Canadian dollar UP 134 basis points with OIL (WTI AT $40.97

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This afternoon, the Euro was UP by 70 basis points to trade at 1.1378

The Yen fell to 109.11 for a loss of 3 basis points as NIRP is STILL a big failure for the Japanese central bank/also all our yen carry traders are being fried!!.

The pound was UP 122 basis points, trading at 1.4405

The Canadian dollar rose by 134 basis points to 1.2637, WITH WTI OIL AT:  $41.02

The USA/Yuan closed at 6.4620

the 10 yr Japanese bond yield closed at -.1182% up 3/4 BASIS  points in yield/AND THIS IS GETTING DANGEROUS!~!

Your closing 10 yr USA bond yield: PAR IN basis points from MONDAY at 1.78% //trading well below the resistance level of 2.27-2.32%) HUGE policy error

USA 30 yr bond yield: 2.59 PAR in basis points on the day ( HUGE POLICY ERROR)

Your closing USA dollar index, 93.96 DOWN 49 CENTS ON THE DAY/4 PM

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

London:  CLOSED UP 51.83 POINTS OR 0.82%
German Dax :CLOSED UP 229.28 OR 2.27%
Paris Cac  CLOSED UP 59.64  OR 1.32%
Spain IBEX CLOSED UP 89.70 OR 1.01`%
Italian MIB: CLOSED UP 89.73 OR 0.49%

The Dow was up 49.44 points or 0.27%

NASDAQ down 19.68 points or 0.40%
WTI Oil price; 40.96 at 3:30 pm;

Brent Oil: 44.05

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  65.87 (ROUBLE UP 0.21 ROUBLES PER DOLLAR FROM MONDAY) AS THE PRICE OF BRENT ROSE AND WTI ROSE

.

END

 

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:

 

WTI CRUDE OIL PRICE 5 PM:  $40..96

BRENT: 44.05

USA 10 YR BOND YIELD: 1.785%

USA DOLLAR INDEX:94.09 down 37 cents on the day

END

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

Trading Today in Graph form:

Stocks Stumble As Silver Soars Into Bull Market, Dollar Hits 10-Month Lows

We get the clear impression today that we heard this from the depths of The Eccles Building…

 

As earnings offer little to no support whatever here….

 

This was the worst day for FANG stocks in 6 weeks – NFLX was crushed on weak growth expectations, (and non-FANG TSLA tanked on Consumer Reports questioning quality of Model X)…

 

Which explains Nasdaq’s considerable underperformance… (back into the red for the week)

 

It was all about S&P 2,100 and Dow 18,000 again today…

 

Energy and Financials onc again popped at the open…

 

As perhaps the best example of the reality under the surface of stock trading, XOM traded in a 2c range for over 90 minutes today…

 

Treasury yields rose on the day with some volatility around the dismal housing data early on…

 

The USD Index continued to slump as commodity currencies strengthened (JPY was slightly weaker on the day)

 

Pushing the USD Index (Bloomberg Spot) to 10-month lows

 

Silver soared on the day as did most commodities amid the USD weakness…

 

The Gold/Silver ratio continues to plunge…to 5-month lows

 

As Silver enters a bull market off the Jan lows (toppiong $17 and up over 25% at the highs today)…

 

Finally there is this…

 

Charts: Bloomberg

end
Our favourite banker as just recorded a lousy quarter as earnings plummet by 55%. Our poor employees will now expect lower worker compensation and it will be the lowest since the financial crisis.  Pay attention to the revenue side:  absolutely disastrous!
(courtesy zero hedge)

Goldman Earnings Plunge 55% In Worst Quarter Since 2011; Average Worker Comp Lowest Since Financial Crisis

There was some hope that after a better than expected result from JPM and, to a lesser extent MS and WFC, that Goldman would surprise to the upside. That did not happen even though the company moments ago reported EPS of $2.68 beating expectations of $2.48, which nonetheless was a 55% plunge in earnings from a year ago.

But the real story was in the company’s revenue which printing at $6.4 billion was not only a huge miss to expectations of $6.7 billion, but a massive slide of 40% from Q1 2015 driven by top-line weakness across the board. This was the worst revenue quarter for Goldman since Q4 2011.

 

As the chart below shows, revenues declined in virtually all groups, with the all important FICC plunging 47% to $1.663 billion, Investment Banking down 23% to $1.46 billion, Equity trading down 23% to $1.78 billion, but the biggest surprise was Goldman’s prop trading group, “Investment and Lending”, which plummeted 95% from $1.7 billion to just $87 million as Goldman wrote down the values of securities held on its books.

 

This is how Lloyd explained the abysmal results:

“The operating environment this quarter presented a broad range of challenges, resulting in headwinds across virtually every one of our businesses,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “Looking ahead, we will continue to focus on delivering superior service to our clients and managing our business efficiently, which remain essential to generating shareholder value over the long term.”

And he quickly took it out on his employees: Goldman accrued only $2.7 billion in comp for Q1, down from $4.4 billion a year ago, which meant that the average compensation for Goldman employee (which declined once again from 36.8K to 36.5K) dropped below $300k, or $298,110 to be precise, for the first time since the crisis.

END

March housing starts as well as permits plunge.  We look forward to lower amount of rental units and thus expect high rents in the future in the USA

(courtesy zero hedge)

March Housing Starts, Permits Plunge As Single-family Units Crash

US Housing Starts tumbled 8.8% in March (missing -1.1% expectations by the most since Feb 2015) as both single-family (-9.2%) and multi-family units (-7.9%) tumbled. The biggest drop was in The West (-16% overall with a 26.9% MoM plunge in single-family units). Worst still, Permits (forward-looking), plunged 7.7% (agsinst expectations of 2% rise) – this is the 2nd biggest MoM crash since Jan 2011. As the Spring-selling season starts, the housing ‘recovery’ appears to be stalling.

Regionallyu it was very mixed:

Permits in Northeast declined 17.9%, Midwest down 3.1%, South down 3.2%, West down 15.4%

Starts in Northeast rose 61.3%, Midwest down 25.4%, South down 8.4%, West down 15.7%

As both Single- and Multi-family starts tumbled…

And it’s not going to get any better as multi-family permits continue to plunge (but single-family dropped more MoM)…

All suggesting higher rents and less affordability is coming – just in time for The Fed to hike rates as Rosengren said was looming faster than the market expected.

end
The following is a must read as Stockman describes the lunacy of earnings in the USA, the printing of money in Europe to get inflation well above 2% and the huge problems in Italy with government spending equal to 51% of GDP and debt to GDP hovering pretty close to 140%
(courtesy David Stockman/ContraCorner)

Institutionalized Lying—— Why Central Bankers Never See Bubbles

Every day there is more confirmation that the casino is an exceedingly dangerous place and that exposure to the stock, bond and related markets is to be avoided at all hazards. In essence the whole shebang is based on institutionalized lying, meaning that prouncements of central bankers, Wall Street brokers and big company executives are a tissue of misdirection, obfuscation and outright deceit.

And they are self-reinforcing, too. As we indicated in our post over the weekend (The Keynesian House Of Denial), it’s all definitional by the lights of today’s central bankers and their Wall Street camp followers. Since the former are busy “accommodating”, massaging and “stimulating” economies all around the world—- bad things like recessions and stock market busts just can’t happen.

At the same time, the narrative from the casino always points to opportunity today and even better prospects tomorrow (i.e. in the second half and next year). Thus, S&P 500 earnings on an ex-items basis for Q4 2016 are projected to come in at $32 per share or up by 39% from the $23 posted for Q4 2015; and by year-end 2017, the patented Wall Street hockey stick points to a gain of 57%.

At today’s market close of 2094, therefore, what’s not to like about valuation levels and PEs?  After all, the full-year hockey stick points to $119 per share in 2016 and $136 in 2017. The implied PE multiples are a modest 17.3X and 15.3X, respectively.

Except they aren’t even remotely so. S&P 500 earnings on a GAAP basis came in at $86.47 for the LTM period just ended, and the current quarter is already conceded to be down by upwards of 10%.

In fact, the stock market is now valued at 24.2X—in the nosebleed section of history—-at a time when the global growth cycle is reversing, the US business expansion at 82 months is long in the tooth and actual GAAP earnings that you don’t go to jail for reporting are down 18.5% from the September 2014 LTM peak, and heading lower.

Average Length of Recoveries

Inside that yawning gap lies the pattern and practice of institutionalized lying. And to start the week we had another batch of whoppers.

Over the weekend the money-printing lunatic who heads the ECB, Mario Draghi, pronounced that there are no bubbles in sight on his watch—-notwithstanding the obvious fact that  he has turned the European bond market into a monumental bubble.

Likewise, before the markets opened this morning we had two fine examples of the same delusional prevarication. Both PepsiCo and Morgan Stanley reported disastrous result for Q1, but in utterly shameless fashion these were spun by company spokesmen and reported by the media as “beats”. Naturally this caused their stock prices to shoot into the green, and in the case of Pepsi to nearly an all-time high.

As to Morgan Stanley, it’s hard to imagine how its results could have been much worse. Non-interest revenues were down 26% over prior year, including drops of 18% and 43% for its core business of investment banking and trading, respectively.  Overall, total revenues plunged by 21% versus prior year, and net income dropped by a staggering 54%.

That’s right.  Compared to net income of $2.4 billion last year, its bottom line for Q1 came in at just $1.1 billion, while return on common equity plummeted from 14.1% to just 6.2%.

In an honest free market, Morgan Stanley would have been sent deep into the penalty box, but not in today’s casino. It was actually up because reported income of 55 cents per share “beat” the consensus expectation of 46 cents.

But then again, the “consensus” was for earnings of $1.00 per share as recently as last October. In the interim, there was a frenetic lowering of estimates that did not stop—-as is evident in the red line below—–until the very eve of its Q1 release.

Pretending that this is a “beat” is not only an insult to 9th grade intelligence, but actually emblematic of the institutional lying that has become built into the fabric of reporting and communications in the casino.

Indeed, the whole “beat” syndrome has now reached a ludicrous extreme. The only rational meaning for “beat” would be to describe results that actually improved upon previous performance and came as a genuine upside surprise to investors. By when results have been blatantly manipulated lower by the trained seals who pose as equity analysts, the few pennies per share gain over the latest pre-release “consensus” is not a beat; its a scam!

So is the “earnings ex-items” gambit that logically has no other purpose than to make PE multiples look lower and over-priced shares more attractive than the actually are. In that regard, the claim that companies are attempting to remove “noise” owing to one-time charges from their reports doesn’t cut it.

For one thing, one-timers go both ways, as in the case of capital gains from the sale of an asset. Beyond that, corporate write-offs of soured goodwill from deals gone bad, charges for plant and store closures owing to the termination of loss-making operations and expenses for severance and stock options—-all represents the consumption of real corporate resources and value.

If CFOs really wanted to be helpful in “normalizing” their lumpy quarterly GAAP numbers there is a far better way to do it. To wit, they could pool their non-recurring charges and present “adjusted” numbers based on smoothing or averaging these recurrent “non-recurring”  losses over a mutli-quarter period. Or they could simple amortize the write-off pool into quarterly earnings over some reasonable span such as four or eight quarters.

But that would be a wholly different kettle of fish. Under the current deceptive procedure, adjusted or ex-items earnings are always higher—-and frequently much higher—–than GAAP profits. In fact, over 2007-2015, adjusted S&P 500 earnings were over-stated by more than $1.1 trillion!

By contrast, if adjustments to GAAP were based on an averaging or amortization of one-time and nonrecurring expenses, ex-items earnings would be no higher than GAAP on a trend basis.

We harp on this topic because PepsiCo’s approach this morning was a naked exercise in just the opposite. They had the nerve to present a tissue of lies as to their results and then put it in the form of the cartoon below.

To wit, PEP’s net profit plunged from $1.2 billion last year to $931 million or by 24%. But via the magic of share buybacks and ex-items earnings manipulation, it turned reported earnings per share of 64 cents compared to last year’s 81 cents into 89 cents per share of profit, thereby handily beating the consensus expectation by eight pennies.

The transformation of “down” into “up” is actually breathtaking. A sales decline of 3% was turned into a gain of 3.5%; an operating profit drop of 10% was adjusted to a gain of 12%; and the 24% plunge in net income was twisted into a 11% gain on a ex-items per share basis.

Here’s the thing. Why does Uncle Sam spend billions per year trying to enforce GAAP accounting, when the denizens of the casino are more than happy with whatever results can be shoe-horned into an ex-items cartoon?

 

Meanwhile, here’s what actually happened. With Q1 results, PepsiCo’s LTM net income came in at $5.16 billion. That’s the lowest rate since June 2009.

Yes, PEP’s market cap has doubled from $75 billion to $150 billion in the interim, but why wouldn’t you pay 29X for a company in the no growth soft drink and snacks business?
PEP Net Income (TTM) Chart

PEP Net Income (TTM) data by YCharts

At length, all of these scams will give way to the reality of a gathering global recession and a sustained slump in earnings. That is, the S&P 500 is heading through 1300 from above long before it ever again penetrates from below its old May 2015 high of 2130——even as the robo-machines play tag with the chart points.

But as indicated above, reported LTM profits as of year-end 2015 stood at just $86.47 per S&P 500 share. That particular number is a flat-out bull killer. At a plausible PE multiple of 15X, it does indeed imply 1300 on the S&P 500 index.

It also means that the robo-machines and hedge fund gamblers have painted a scarlet numeral of 24.2X on the casino’s front entrance. But it comes at a time when the so-called historical average PE ratios are way too high for present realities. That is, in a world sliding into a prolonged deflationary decline, capitalization rates should be falling into the sub-basement of history, not soaring into it’s nosebleed section.

Why? Because current earnings are worth far less than normal owing to the prospect that renewed earnings growth anytime soon is lodged somewhere between zero and none.

So when capitalization rates should be plunging the casino has them soaring, while pretending its all awesome on the earnings front through the process of institutionalized lying, as was on such pointed display today.

Indeed, for the third time this century, corporate earnings are already in free fall. Yet the Wall Street hockey sticks are still pointing archly to the upper right of the chart.

SP500-Earnings-GDP-Growth-030616

Yet this time the backstory is even sketchier. When reported S&P 500 earnings peaked at $84.92 per share in June 2007 (LTM basis), they had grown at a 6.8% annualized rate since the prior peak of about $54/share in Q3 2000. By contrast, at the reported $86.47 level for the LTM period ending in Q4 2015, the implied 8-year growth rate is…….well, nothing at all unless you prefer two digit precision. In that case, the CAGR is 0.22%.

That’s right. Based on the kind of real corporate earnings that CEOs and CFOs must certify on penalty of jail time, profits are now barely above the June 2007 level, and are once again heading down the slippery slope traced twice already during this era of central bank bubble finance.

Yes, as per today’s blatant legerdemain, the sell side stock peddlers insist these GAAP profits are to be ignored because they are chock-a-block with non-recurring items.

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

Supposedly, the $253 billion difference indicated for 2015 in the chart above didn’t amount to anything special when it comes to valuing stocks.
The latter always and everywhere trend from the lower left to the upper right of the charts. And that’s because, apparently, by the lights of Wall Street there can’t be another recession. Central banks are on the job and have ruled out the possibility by definition.

.GS-Profits-SP500-Targets-022316

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

Indeed, the yawning $253 billion gap between reported earnings and the Wall Street ex-items concoction for 2015 is nearly the same magnitude as the disconnect in the Great Recession cycle.

Thus, S&P 500 aggregate net income on an ex-items basis for 2007 was$730 billion—so the sell side pitchmen had no problem insisting that the stock market was “reasonably” priced.  During 2007 the S&P’s average capitalization was about $13 trillion, implying an 18X PE multiple.

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

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

Expressed in aggregate terms, the latter means that S&P profits plunged to$132 billion during 2008 after companies took a staggering $304 billion in write-downs for assets which were dramatically overvalued and business operations which had become hopelessly unprofitable. In short, during those two years alone—when the business and financial cycle was heading sharply southward—–the S&P 500 companies took nearly $450 billion in charges and losses that the Wall Street stock peddlers said to ignore. That amounted to full 37% of purported ex-items earnings for 2007-2008 combined.

Stated differently, the market is supposed to be a forward discounting agency. Yet at the stock index peak in October 2007 at a time when the subprime and credit markets were visibly fracturing——the Bear Stearns mortgage funds and Countrywide Financial had already blown up and Merrill Lynch and AIG were in evident distress—–the index was being valued at $13 trillion based on the goldilocks theory then prevalent on Wall Street.

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

So here we are again at the inflection point of an even more egregious central bank fostered financial bubble. Like back then, the massive one-timers recorded during 2015 consisted of real corporate cash and capital that was destroyed——more often than not owing to bad business decisions that had earlier resulted from central bank falsification of interest rates and the price of debt and equity securities.

For instance, during 2015 one part of the gap was accounted for by the fact that the energy sector of the S&P 500  reported actual losses of $45 billion collectively but on an ex-items basis claimed profits of $48 billion. Did that$93 billion difference amount to a financial nothing?

No it didn’t. Instead, it was comprised primarily of massive write-downs of the carrying value of oil and gas reserves. Yet it was the global credit boom enabled by central banks which first drove the price of oil above $100 per barrel and encouraged massive malinvestment in high cost and excessive reserves.

And then, to add insult to injury, it was the drastic post-crisis repression of interest rates under the ZIRP and NIRP regimes which ignited a massive scramble for yield among money managers and homegamers alike. This central bank caused deformation, in turn, encouraged E&P companies to borrow upwards of $400 billion on the junk bond and junk loan market to fund investments in shale and elsewhere which were never remotely economic.

Those giant write-downs may be construed by Wall Street as non-recurring irrelevances, but in fact they amount to dead weight losses of real capital.

The same is true with the other sectors analyzed by the WSJ investigation. Materials companies reported $13 billion in GAAP earnings compared with $30 billion in ex-items profits. And health-care companies earned $104 billion under GAAP versus $157 billion as imagined by Wall Street analysts. Yet once gain, the $70 billion difference in these two sectors wasn’t chump change, nor was it invisible fairy dust.

For the most part it represented asset write-offs and restructuring charges from uneconomic investments and failed M&A deals. That is, the very thing which central bank falsification of financial prices inevitably fosters.

Even in tech, the degree of earnings fudging by Wall Street last year was egregious. While the hockey stick brigade dutifully reported $218 billion of aggregate profits for the tech sector, the reports sent to the SEC showed only $176 billion. Among that $42 billion of invisible red ink was a lot of busted M&A deal write-offs and stock options costs that do absolutely dilute shareholder earnings.

Finally, as to the mad money printer who runs the ECB, perhaps he should look at the 10-year bonds of his quasi-bankrupt native land.  They closed today at a yield of 1.36%, and that means they are riding the mother of all bond bubbles.

Below is the eight year trend in core consumer inflation in the eurozone. It is up at a 2.1% rate during the period, and 1.0% even during the last 12 months of deflation mongering by Draghi and his henchman. You could well and truly ask, therefore, as to why the mass of Europeans are not better off with 1% as opposed to 2% inflation. The answer that 2% is better-indeed imperative—- is known only to a tiny cadre of central bankers and their acolytes. But they are not telling, just asserting.

Euro Area Core Consumer Prices

No bubbles, Mario?

For crying out loud. Italy’s government is paralyzed, meaning that its fiscal vital signs just keep deteriorating. The spending share of GDP is off the deep end at 51.1% and the debt burden just keeps on rising.

Italy Government Spending to GDP

 

Italy Government Debt to GDP

Here’s the thing. Italy is fast turning into a socialist old age colony with a birth rate of only 1.3. On that path, the last Italian will disappear in the next century. But an economy which has been shrinking since 2007 will tumble into national bankruptcy long before.

Italy GDP Constant Prices

When the last of the hedge fund front-runners have bought their fill and the Germans finally shutdown the printing presses in Frankfurt, there will indeed be a day of reckoning as the massive bubble under the Italian bond violently deflates.

They will surely christen it the Draghi Bubble—–a fit of insanity every bit as calamitous as that of John Law the French Revolution and 1929.

 

END

 

This is a bombshell to the Obamacare  (ACA): United Health is done and will exit most of the state exchanges:

(courtesy zero hedge)

 

Largest U.S. Health Insurer Is Done With Obamacare: UnitedHealth To Exit Most State Exchanges

As conclusion to our article yesterday reporting on the largest U.S. health insurer’s accelerating exodus from various Obamacare markets (it had already announced it was out of Georgia, Arkansas, Michigan and Oklahoma) we said that UnitedHealth “will likely announce more defections in the coming days.”

We didn’t have long to wait, and moments ago Bloomberg reported that in addition to the four states listed above, UnitedHealth has just announced it is departing the following “Affordable” Care Act state exchanges: Connecticut, North Carolina; Nebraska, Pennsylvania and Texas.

That, too, however, is just a preview of what’s to come, because earlier today UnitedHealth made its divorce with Obamacare complete when it announed plans to exit most of the Affordable Care Act state exchanges where it currently operates by 2017.

During a conference call with analysts Tuesday, CEO Stephen Hemsley noted that “next year we will remain in only a handful of states.

As CNN reports, CEO Stephen Hemsley explained that UnitedHealth will leave most states by 2017 because the markets for these exchanges are relatively small and also have higher risks for the company over the short-term. As such, he said UnitedHealth (UNH) could not serve these exchanges on an “effective and sustained basis.”

Said otherwise, the company is losing money by participating in Obamacare.

UnitedHealth’s president and chief financial officer David Wichmann added that the company served 795,000 people on public exchanges as of the end of the first quarter. It expects to have only 650,000 public exchange members by December.

As CNN politely notes, “this could be a blow to President Obama and his signature law to overhaul the nation’s healthcare system.”

More importantly, it could be a blow to taxpayers because as we observed yesterday, according to estimates from the Kaiser Family Foundation, the exodus will almost surely mean higher insurance premiums in several states – most notably Alabama, Arizona, Iowa, Nebraska and North Carolina. It will also mean even higher subsidies.

Still, some remain optimistic: Cynthia Cox, associate director of health reform and private insurance at Kaiser, said this won’t be the death of Obamacare. She noted that UnitedHealth has been more cautious about entering the ACA markets than its competitors. Hemsley had warned previously that claims tied to the Obamacare exchanges were costlier than expected. And other insurers that focus on Medicaid and Medicare pans, such as Centene (CNC), are more prominent players in the state exchanges.

Perhaps it’s not the end for Obamacare, but it means even greater sticker shock for Americans once they get their premiums for 2017.  Recall that as a result of the merger between Aetna and Humana, and that of Cigna and Anthem, the industry is about to shrink from five players to only three.

This means much higher premiums.

It also means that mandatory Obamacare tax payments will keep “healthcare” spending as the biggest contributor to US GDP for years to come.

end

Well that is all for today
I will see you tomorrow night
h.
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