May 3/Another raid today as the OI on gold was just too high for our crooks/Silver OI is declining/EU slashes growth and that forces all of European stocks southbound/Chinese pMI in contractionary phase as it falls below 50/USA/Yen falls into the 105 column today being the catalyst for stocks faltering/

Good evening Ladies and Gentlemen:

Gold:  $1,290.70 down $4.00    (comex closing time)

Silver 17.47  down 19 cents

 

In the access market 5:15 pm

Gold $1286.50

silver:  17.40

Let us have a look at the data for today

.

At the gold comex today we had a GOOD delivery day, registering 26 notices for 2600 ounces for gold,and for silver we had 174 notices for 870,000 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 228.04 tonnes for a loss of 75 tonnes over that period

.

In silver, the open interest fell by 1911 contracts down to 199,259 despite the fact that the price was silver was down only by  13 cents with respect to yesterday’s trading. In ounces, the OI is still represented by just under 1 BILLLION oz i.e. .996 BILLION TO BE EXACT or 142% of annual global silver production (exRussia &ex China) We are now within spitting distance of all time highs for OI with respect to silver

In silver we had 174 notices served upon for 870,000 oz.

In gold, the total comex gold OI FELL by a TINY 1019 contracts, DOWN to 548,501 contracts DESPITE THE FACT THAT THE PRICE OF GOLD WAS UP $5.90 with YESTERDAY’S TRADING(at comex closing).

We had no change  in tonnes of gold inventory at the GLD; thus the inventory rests tonight at 824.94 tonnes.  This is an absolute fraud as there is noway these guys can locate 20 tonnes of gold in 24 hrs.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’s SLV,we had no change in silver inventory.  Thus the inventory rests at 335.580 million oz.

.

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

1. Today, we had the open interest in silver fall by  1911 contracts down to 199,259 despite the fact that the price of silver was DOWN by ONLY 13 cents with YESTERDAY’S trading. The gold open interest FELL by A TINY 1,019 contracts DESPITE THE FACT THAT  gold ROSE by $5.90 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. Also the bankers are resolute in supplying non backed gold paper but they do not want to supply more silver paper. It sure looks like the bankers are getting scared with respect to silver as it looks like they are capitulating as the start to cover their shortfall.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;  Gold pierces 1300 dollars again before the bankers try their raid

 

2c) FRBNY gold movement report

(Harvey)

3. ASIAN AFFAIRS

i)i)Late  MONDAY night/ TUESDAY morning: Shanghai closed UP 54.32 PTS OR 1.85%  /  Hang Sang closed DOWN 390.11 OR 1.85%. The Nikkei closed FOR HOLIDAY  . Australia’s all ordinaires  CLOSED UP 2.11% AS RESOURCE STOCKS DOING WELL. Chinese yuan (ONSHORE) closed UP at 6.4795.  Oil FELL  to 44.30 dollars per barrel for WTI and 44.49 for Brent. Stocks in Europe DEEPLY IN THE RED . Offshore yuan trades  6.4915 yuan to the dollar vs 6.4795 for onshore yuan.

REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) REPORT ON JAPAN

Last night the USA/Yen penetrated the 105 barrier for the first time in 18 months as it seems Kuroda has no power left to intervene.  The surprise move by the Aussies in lowering its discount rate also contributed to the strength in the yen.This sent most bourses deeply into the red this morning

( zero hedge)

b) REPORT ON CHINA

i)Again Chinese manufacturing PMI disappoints as it has now fallen for the 14th straight month.  April’s PMI tumbled to 49.4  (contractionary) from 49.8 last month.

( zero hedge)

 

ii)The following is why you just cannot believe any data coming out of mg Mainland China

( zero hedge)

4.EUROPEAN AFFAIRS

European stocks tumble after the EU slashes growth and their determination of “inflation” falls.  However what is extremely worrisome to the EU area is the Italian banks which have a huge 360 billion euros of non performing loans to deal with.

( zero hedge)

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)The Saudi foreign minister repeats his warning to the USA not to publish those famous 28 pages.  He states that Saudi Arabia will sell all of its 750 billion in the USA treasuries:

( zero hedge)

6.GLOBAL ISSUES

i)For 3 months the Aussie has rebounded northbound as commodity prices rose with much of that stimulus coming from China’s 1 trillion dollar bonanza.  However inflation in Australia cooled and as such, they had to lower their discount rate last night. However it was not baked into dealer calculations.  This sent the Aussie dollar crashing to .7537 on the uSA dollar from .77.  This is another big win for gold/silver.

( zero hedge)

ii)A terrific commentary from David Stockman has he circles the globe to tell us that all exporting nations are seeing their exports collapse. The big 1 trillion dollar Chinese binge into commodities is a fleeting affair and the resultant effect will be chaos when this wears off in a few months

( David Stockman ContraCorner)

7.OIL ISSUES

i)Oil tumbles to the$43.00 handle:

( zero hedge)

 

ii)Then rises to around the 44 handle

(zero hedge)

8.PHYSICAL MARKETS

i)The Australian Financial Review distinguishes between paper gold and real gold
(Trevor Sykes/Australian Financial Review/Sydney)
ii)Robert Appel: are we on the brink of an economic collapse? And if so how did it happen?

(Robert Appel/Profit Confidential/GATA)

iii)Bill Murphy of GATA interviewed)

(GATA/Goldseek)

iv)A terrific commentary from Chris Powell on our turncoat Dan Norcini

( Chris Powell/GATA)

 

v)Ken Rogoff now states that it would be good for emerging nations to put their reserves in gold instead of other hard currencies

( Ken Rogoff)

 

vi)Dave Kranzler sets the record straight as to when we were at net record short interest as a percentage of total OI in silver.  It was in April  2005 at 82%

( Dave Kranzler/IRD)

9. your more important USA stories which will influence the price of gold/silver

i)Bond yields plummet by 9 basis points on the 10 yr bond as the economy sinks:

( zero hedge)

ii)In the USA expect double digit increases in their premiums and this will occur precisely around one week before the election on November 1

( zero hedge)

Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 548,501 for a LOSS of 1019 contracts DESPITE THE FACT THAT the price of gold UP $5.90 with respect to YESTERDAY’S TRADING. We are now entering the NON active delivery month of MAY. For the past two years, we have strangely witnessed two interesting developments and we have generally seen two phenomena happen respect to the gold open interest:  1) total gold comex collapses in OI as we enter any delivery month  and 2) a continual drop in the amount of gold standing in that month as that month progresses . The month of May saw its OI fall by 14 contracts down to 1782. We had 1 notice filed  YESTERDAY so we lost 13 contracts or 1300 oz will not stand for delivery.The next big active gold contract is June and here the OI FELL by 6010 contracts DOWN to 399,302. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was good at 221,802. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was good at 231,429 contracts. The comex is not in backwardation.

Today we had 26 notices filed for 2600 oz in gold.

 

And now for the wild silver comex results. Silver OI FELL by 1911 contracts from201,170 DOWN to 199,299 DESPITE THE FACT THAT the price of silver was DOWN BY ONLY 13 cents with YESTERDAY’S TRADING. For the first time in over 2 years, we have not witnessed a liquidation of open interest as we ENTERED first day notice .  The next active contract month is May and here the OI FELL by 793 contracts DOWN to 2171. We had 270 notices filed YESTERDAY so we lost 523 contracts or 2,615,000 oz of silver will not stand for delivery in this active month of May. The next non active month of June saw its OI FALL by 89 contracts DOWN to 619  OI.The next big delivery month is July and here the OI fell by 1471 contracts up to 138,396. The volume on the comex today (just comex) came in at 64,373 which is extremely high. The confirmed volume ON FRIDAY (comex + globex) was AGAIN HUGE AT 65,430. 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  174 notices filed for 870,000 oz.
 

MAY contract month:

INITIAL standings for MAY

Initial Standings for MAY
May 3.
Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  1,473.087 OZ

SCOTIA

Deposits to the Dealer Inventory in oz 2599.93 OZ

BRINKS

Deposits to the Customer Inventory, in oz  80,375.000 OZ

2500 KILOBARS

BRINKS

SCOTIA

No of oz served (contracts) today 26 contract
(100 oz)
No of oz to be served (notices) 1756 contracts175,600 oz
Total monthly oz gold served (contracts) so far this month 52 contracts (5200 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month  1573.10 OZ

Today we had 1 dealer deposit

i) Into the dealer Brinks:  2,599.93 oz

total dealer deposit:  2599.93 oz

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

 

Today we had 2 customer deposits:

i) Into Brinks:  48,225.000 oz  1500 kilobars

ii) Into Scotia:  32,150.000 oz  1000 kilobars

total customer deposit:  80,375.000 oz  2500 kilobars

Today we had 1 customer withdrawal:

i) Out of Scotia; 1473.087 oz

Total customer withdrawals:  1473.087 oz

Today we had 0 adjustments:

 

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 26 contract of which 7 notices was stopped (received) by JPMorgan dealer and 0 notices were stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the MAY contract month, we take the total number of notices filed so far for the month (52) x 100 oz  or 2600 oz , to which we  add the difference between the open interest for the front month of MAY (1752 CONTRACTS) minus the number of notices served upon today (26) x 100 oz   x 100 oz per contract equals 180,800 oz, the number of ounces standing in this non active month.  This number is huge for May. Let us see if this number remains constant throughout themonth
 
Thus the initial standings for gold for the MAY. contract month:
No of notices served so far (52) x 100 oz  or ounces + {OI for the front month (1782) minus the number of  notices served upon today (26) x 100 oz which equals 180,800 oz standing in this non  active delivery month of MAY(5.6236 tonnes).
WE LOST 13 CONTRACTS OR 1300 OZ WILL NOT STAND AND NO DOUBT THESE WERE CASH SETTLED.
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 5.6236 tonnes of gold standing for MAY and 16.50 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 5.6236 TONNES FOR MAY + 12.3917 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  and last week April 16 .3203 and April 22 .(0009 tonnes) + april 29  .205 tonnes  = 24.521 tonnes still standing against 16.50 tonnes available.  .
 
Total dealer inventor 530,483,783 or 16.500 tonnes
Total gold inventory (dealer and customer) =7,331,771.725 or 228.04 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 228.04 tonnes for a loss of 75 tonnes over that period. 
 
JPMorgan has only 21.15 tonnes of gold total (both dealer and customer)
 end
And now for silver
 

MAY INITIAL standings

 May 3.2016

Silver
Ounces
Withdrawals from Dealers Inventory nil
Withdrawals from Customer Inventory  101,372.587 oz

CNT,Delaware

Deposits to the Dealer Inventory nil
Deposits to the Customer Inventory 449,913.32 oz

Scotia

No of oz served today (contracts) 174  CONTRACTS

870,000 OZ

No of oz to be served (notices) 1953 contracts

9,765,000 oz

Total monthly oz silver served (contracts) 1227 contracts (6,135,000 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  810,255.4 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 Scotia:  449,913.32 oz

 

Total customer deposits: 449,913.32 oz.

We had 2 customer withdrawals

i) Out of CNT  100,383.687

ii) Out of Delaware:  988.900 oz

:

total customer withdrawals:  101,372.587  oz

 
 

 

 we had 0 adjustments

The total number of notices filed today for the MAY contract month is represented by 174 contracts for 870,000 oz. To calculate the number of silver ounces that will stand for delivery in May., we take the total number of notices filed for the month so far at (1227) x 5,000 oz  = 6,135,000 oz to which we add the difference between the open interest for the front month of MAY (2127) and the number of notices served upon today (174) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the MAY contract month:  1227 (notices served so far)x 5000 oz +(2127{ OI for front month of MAY ) -number of notices served upon today (174)x 5000 oz  equals 15,900,000 oz of silver standing for the MaY contract month.
WE LOST ANOTHER ASTRONOMICAL 523 CONTRACTS OR 2,150,000 OZ WILL NOT STAND AS THEY WERE CASH SETTLED.
 
Total dealer silver:  27.975 million
Total number of dealer and customer silver:   152.067 million oz
The open interest on silver is now close an all time high with the record of 206,748 being set in the last week of April. The registered silver (dealer silver) is now at multi year lows as silver is being drawn out and heading to China and other destinations. 
The total dealer amount of silver is now at a multi year low of 27.975 million oz.
end
And now the Gold inventory at the GLD
May 3/no change in gold inventory at the GLD/Inventory  rests at 824.94 tonnes
May 2/a hugechange in gold inventory at the GLD a deposit of 20.80/Inventory rests at 824.94 tonnes
April 29/no change in gold inventory at the GLD/Inventory rests at 804.14 tonnes
April 28/we gained 1.49 tonnes of gold at the GL/Inventory rests at 804.14
April 27/no change in gold inventory at the GLD/rests at 802.65 tonnes
aPRIL 26/ a withdrawal of 2.38 tonnes of gold/inventory rests at 802.65 tonnes
April 25.2016: no change in gold inventory/rests tonight at 805.03 tonnes
April 22/ no changes in gold inventory/rests tonight at 805.03 tonnes
April 21/no change in gold inventory/rests tonight at 805.03 tonnes
April 20/no change in gold inventory/rests tonight at 805.03 tonnes
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
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 2.:  inventory rests tonight at 824.94 tonnes

end

Now the SLV Inventory
May 3: we had another huge deposit of 1.807 million oz/inventory rests at 338.814 million oz
May 2/a huge in silver inventory at the SLV/a deposit of 1.49 million oz/Inventory rests at 337.007 million oz
April 29.2016/no change in silver inventory at the SLV/Inventory rests at 335.580
April 28/no change in silver inventory at the SLV/Inventory rests at 335.580 million oz
April 27/we had another addition of 856,000 oz into the SLV/Inventory rests at 335.580
aPRIL 26/no change in silver inventory at the SLV/Inventory rests at 334.724 million oz.
April 25.2016/ No change in silver inventory/rests tonight at 334.724 million oz.
April 22/ no changes in silver inventory/rests tonight at 334.724 million oz
April 21/no change in silver inventory/rests at 334.724 million oz/
April 20/no change in inventory/rests at 334.724 million oz
April 19./we had a huge inventory deposit of 1.437 million oz/inventory rests at 334.724
.
May 3.2016: Inventory 338.814 million oz
end
 
 
1. Central Fund of Canada: traded at Negative 6.4 percent to NAV usa funds and Negative 6.4% to NAV for Cdn funds!!!!
Percentage of fund in gold 61.2%
Percentage of fund in silver:37.4%
cash .+1.4%( May 3.2016).
2. Sprott silver fund (PSLV): Premium to  FALLS to -.56%!!!! NAV (MAY 3.2016) 
3. Sprott gold fund (PHYS): premium to NAV  falls.0.59% to NAV  ( MAY 3.2016)
Note: Sprott silver trust back  into NEGATIVE territory at -.560%% /Sprott physical gold trust is back into positive territory at +0.59%/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 -.56%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.
 
 
 end
FEDERAL RESERVE BANK OF NEW YORK GOLD REPORT
Federal Reserve bank of NY:  amount of earmarked gold shipped out:
We just received the FRBNY figures for gold:
March FRBNY earmarked gold:  7995 million dollars worth of gold at $42.22 dollars per oz
April FRBNY earmarked gold:  7981 million dollars worth of gold at $42.22 dollars per oz
Total amount of gold shipped out:  14 million dollars @ 42.22 per oz
Thus $14 million divided by $42.22 =  331,596 oz of gold or 10.314 tonnes of gold shipped
Obviously this is headed for Germany.  This is the first shipment of gold since Nov 2015:

END

 

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

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

 

Is Craig Wright The Creator Of Bitcoin? Frisby and Matonis On ‘Satoshi Nakamoto’

Craig Steven Wright, an Australian computer scientist, self-declared cyber security expert and entrepreneur, has claimed to be the creator of Bitcoin, the elusive ‘Satoshi Nakamoto’.

Bitcoin

Yesterday, he published a blog post offering what was claimed to be cryptographic proof, backed up by other information, to make his case. Along with the BBC and GQ, The Economist had access to Mr Wright before the publication of his post. The BBC are definitively saying that Wright is Nakamoto. The Economist is being more cautious and their conclusion is that he could well be Mr Nakamoto,“but that nagging questions remain.”

“In fact, it may never be possible to prove beyond reasonable doubt who really created bitcoin. Whether people, particularly bitcoin cognoscenti, actually believe Mr Wright will depend greatly on what he does next, after going public.”

Wright penned his own blog post claiming to be Nakamoto but also of importance is the fact that Bitcoin Foundation chief scientist Gavin Andresen — a man that used to be the bitcoin project lead and one of the most respected experts in the bitcoin community — wrote that he, too, believed Wright was the elusive bitcoin creator.

There are other very well informed people who believe that Wright is in fact the creator of bitcoin. These include Jon Matonis, Founding Director at Bitcoin Foundation, who blogged about it yesterday here.  Matonis had a “private proof session” in March and said that  he “had the opportunity to review the relevant data along three distinct lines: cryptographic, social, and technical. Based on what I witnessed, it is my firm belief that Craig Steven Wright satisfies all three categories.” 

Our friend Dominic Frisby, the author of  Bitcoin: The Future of Money? also thinks that Wright, with others, may be Satoshi and shared his thoughts with us this morning:

“Anybody who had ever had any interest in bitcoin, has been intrigued by the mystery of Satoshi Nakamoto. 

It has spawned a plethora of online sleuths – your truly included –  but Craig Wright’s name had never really been thrown into the mix. But when the Wired story came out last December – broken by Andy Greenberg – who has his finger on the pulse of the cyber punks more than any journalist and Gwern who I worked with on my own book and know the be extremely thorough, you have to sit up and take notice.

Satoshi Nakamoto appears to have been the work of Wright but also of internet forensics expert, Dave Kleiman who sadly died in 2013.

From what I can deduce, Kleiman did the writing and Wright did the coding. Wrights appears to have been the ideas man and Kleiman the “heavy lifter”. If you read Wrights ‘s prose it is not as error free as Satoshi’s was which confirms my believe that Satoshi was a partnership.

In my book, I outlined how Nick Szabo was likely Satoshi but the story has moved on. Bitcoin and the blockchain are both landmark inventions and enormous credit should go to all those that made it happen. Bitcoin was and is a collaborative effort.”

Bitcoins are now accepted as payment for a vast variety of goods and services – everything from international money transfers to ransoms for data encrypted by computer viruses. There are currently about 15.5 million bitcoins in circulation. Each one is worth about $449.

Satoshi Nakamoto is believed to have amassed about one million Bitcoins which would give him a net worth, if all were converted to cash, of about $450 million.

Jon Matonis sums up the importance of bitcoin and the blockchain on his blog thus:

I believe that the massive tidal wave of decentralisation and future Bitcoin advancements will start to occur more rapidly now, setting the stage for society to realize the plethora of currently imagined innovations. However, at the center of all of this incredible progress will be the unwavering and critical value of the humble digital bearer token known as bitcoin.


Week’s Market Updates
Gold “Chart of The Decade” – Maths Suggest $10,000 Per Ounce Says Rickards

Property Bubble In Ireland Developing Again

Silver Bullion “Momentum Building” As “Supply Trouble Brewing”

Cyber Fraud At SWIFT – $81 Million Stolen From Central Bank

Gold In London Vaults Beneath Bank of England Worth $248 Billion – BBC

Silver Prices Up 6% This Week and 25% YTD; Gold Up 1% This Week

Gold News and Commentary
Gold Passes $1,300 as Investors See Rates Remaining Low Longer (Bloomberg)
Gold Futures Rally Above $1,300 an Ounce (Video) (Bloomberg)
Gold tops $1,300, hits 15-month high (CNN)
Gold eyes $1,300 again as weaker dollar, fund inflows support (Reuters)
Gold prices gain in Asia as Caixin manufacturing PMI drops (Investing.com)

Gold Keeps Shining as Funds Miss Out on Best Rally in Two Months (Bloomberg)
Gold’s surge is making it feel a lot like late 2007 (CNBC)
Even the Australian Financial Review warns about paper gold (AFR)
Without Price Suppression Gold Would be $5,000 to $10,000 – Holter (Youtube)
Gold Crosses $1,300 Threshold as Rates Outlook Undermines Dollar (Bloomberg)
Read More Here

Gold Prices (LBMA)
03 May: USD 1,296.50, EUR 1,118.15 and GBP 881.32 per ounce
29 April: USD 1,274.50, EUR 1,119.45 and GBP 873.80 per ounce
28 April: USD 1,256.60, EUR 1,106.45 and GBP 861.43 per ounce
27 April: USD 1,244.75, EUR 1,100.79 and GBP 853.58 per ounce
26 April: USD 1,234.50, EUR 1,093.46 and GBP 847.28 per ounce

Silver Prices (LBMA)
03 May: USD 17.85, EUR 15.29 and GBP 11.92 per ounce  (To be updated)
29 April: USD 17.85, EUR 15.29 and GBP 11.92 per ounce
28 April: USD 17.35, EUR 15.29 and GBP 11.92 per ounce
27 April: USD 17.34, EUR 15.34 and GBP 11.87 per ounce
26 April: USD 16.95, EUR 15.02 and GBP 11.64 per ounce

Mark O’Byrne
Executive Director
END
Dave Kranzler sets the record straight as to when we were at net record short interest as a percentage of total OI in silver.  It was in April  2005 at 82%
(courtesy Dave Kranzler/IRD)

The Silver Market And Inaccurate Analysis

Commentary was posted on Zerohedge today about the silver market that needs to be swatted out of the air. Some investment advisor who for some reason gets air-time on Zerohedge posted an analysis which asserted that commercial hedgers hit their most “extreme net short position ever in silver futures” LINK.  This is at least the fifth “analyst” I’ve come across who’s written, incorrectly, about this topic.

While it’s true that the open interest in silver hit a high as of LAST Tuesday (April 26), the “net short position” by the Commercial trader Bullion Bank segment, the trader segment to which Dana Lyons refers to as “smart money,” did not come close its most “extreme net short position ever.”

Since that COT report was released showing April 26th’s open interest, the open interest in silver futures has declined to 199k.  As of the date of that COT report,  the bullion bank short interest as a percentage of total open interest in silver is 71%.   But the highest this ratio has been going back to April 2005 is 82%.  The average short interest as percentage of total o/i over the time period is 63%.   In fact, from the week ending December 9, 2005 to the week ending January 27, 2006, the short interest as a percentage of total o/i ranged between 78% and 82%, which is quite a bit higher than it is currently

During that week – which was the most extreme net short position taken by the bullion banks – the price of silver actually rose.  More interestingly, that extreme net short interest in silver preceded a huge move that took silver from $9 in early December to  an intra-day high of $15 (futures basis) the week of May 12, 2006.

There’s been plethora of repetitive precious metals market analysis that has proliferated recently.  Many of these so-called “analysts” have not been around the precious metals market very long.   The trader category which Dana Lyons references as “smart” money did not look so smart when its true net short positioning in the context of total silver futures open interest outstanding (Dec 2005 – Jan 2006) is assessed.  And the trader category to which he labels “dumb” money made out like bandits.

Too be sure, there have been several periods in which the short term direction of gold and silver can be anticipated  with better than 50% probability based on assessing the relative long/short distribution across the COT trade classifications.   But a superficial analysis of the nominal open interest positioning is not the right tool to use in analyzing the driver of the gold and silver markets.  And furthermore, the Comex is a small part of the overall global market equation.

The reality is that many of us believe, based on well over a decade – and in some cases several decades – of precious metals market assessment and participation that purveyors of paper derivative silver face a potentially bigger problem than with gold of finding enough actual physical silver to deliver into those paper promises should the “dumb” money in any unexpected quantities decide to stand still with their paper longs and demand physical delivery.   And this why you get long term graph that looks like this:

Untitled

end
The Australian Financial Review distinguishes between paper gold and real gold
(Trevor Sykes/Australian Financial Review/Sydney)

Even the Australian Financial Review warns about paper gold

Submitted by cpowell on Mon, 2016-05-02 12:18. Section: 

Why Gold Is Still the Pick of the Precious Metals

By Trevor Sykes
Australian Financial Review, Sydney
Monday, May 2, 2016

One of the strongest arguments against investing in gold was that the metal yielded no interest while you were holding it so it stands to reason that the environment of low interest rates should be friendly for investors in precious metals.

That argument, while valid, has lost significant merit, because investors don’t get much of an interest rate holding government bonds or bank deposits. Indeed in several countries interest rates have gone negative, which means that investors are paying governments for the privilege of holding their bonds. …

The price is set every night in derivative trading on Comex in New York. The gold price is also nominally fixed in London. The London market is theoretically a physical market, but in practice it is really a derivative market with very few physical deliveries.

The big holders of gold are in China and other Asian countries. So the price is being set by derivative traders who hold little or no gold, while Asians are continually amassing the physical metal.

If, one day somewhere in the future, the physical holders decide to start setting the price, it will rise quite sharply. So it’s not a bad strategy to buy gold whenever it dips. …

… For the remainder of the commentary:

http://www.afr.com/personal-finance/why-gold-is-still-the-pick-of-the-pr…

END

 

Robert Appel: are we on the brink of an economic collapse? And if so how did it happen?

(courtesy Robert Appel/Profit Confidential/GATA)

Robert Appel: The brink of economic collapse — How did this happen?

Submitted by cpowell on Tue, 2016-05-03 01:39. Section: 

9:38p ET Monday, May 2, 2016

Dear Friend of GATA and Gold:

Profit Confidential’s Robert Appel’s commentary today is headlined “The Brink of Economic Collapse? How Did This Happen?” His answer is the ever-intensifying manipulation and distortion of markets by central banks and their agents. Appel’s commentary is posted at Profit Confidential here:

http://www.profitconfidential.com/economy/the-brink-of-economic-collapse…

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

 

END

 

Bill Murphy of GATA interviewed)

(courtesy GATA/Goldseek)

GoldSeek Radio interviews GATA Chairman Bill Murphy

Submitted by cpowell on Mon, 2016-05-02 19:03. Section: 

3p ET Monday, May 2, 2016

Dear Friend of GATA and Gold:

GoldSeek Radio’s Chris Waltzek interviews GATA Chairman Bill Murphy, discussing, among other things, the refusal of the president of the Federal Reserve Bank of New York, William Dudley, to answer whether the bank is involved in gold swaps; the increasing accumulation of gold by central banks in China and Russia; and the recent strength in monetary metals prices. The interview is 12 minutes long and begins at the 32:07 mark at GoldSeek Radio here:

http://news.goldseek.com/radio/1462213502.php

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

 

END

 

A terrific commentary from Chris Powell on our turncoat Dan Norcini

(courtesy Chris Powell/GATA)

Question for Dan Norcini et al.: Are central banks rigging gold or not?

Submitted by cpowell on Tue, 2016-05-03 04:47. Section: 

12:56a ET Tuesday, May 3, 2016

Dear Friend of GATA and Gold:

Replying to your secretary/treasurer’s speculation last night that central banks lately may have moved from gold price suppression to allowing gold to rise to help devalue currencies and debt -–

http://www.gata.org/node/16427

— market analyst Dan Norcini asserts that GATA has come over to his position:

http://news.goldseek.com/DanNorcini/1462284120.php

Not at all.

In the first place, Norcini had just written that rather than helping central banks avert deflation, a dramatically rising gold price would actually signify the end of the world:

http://news.goldseek.com/DanNorcini/1462129200.php

That is, Norcini wrote: “I still cannot stomach so many of these gold cult members who seem not to understand that when they are cheering predictions of $5,000, $50,000, etc., gold prices, they are cheering the ruin of everything around them.”

Your secretary/treasurer’s speculation had explicitly contradicted Norcini’s assertion. So there’s no agreement there.

Now Norcini writes: “I had been saying for some time that the Fed was not behind weakness in the gold price ever since the dollar embarked on its bull run back in 2014.”

Huh — 2014? But GATA began complaining of gold market manipulation and suppression 15 years earlier, and Norcini goes on to concede that during much of that time he subscribed to GATA’s views.

So do GATA and Norcini disagree only as to exactly when in the last few years central banks generally or the Federal Reserve particularly may have discontinued gold price suppression?

Once again, not really.

In the first place, your secretary/treasurer’s commentary last night was admittedly only speculation. GATA doesn’t know that Federal Reserve policy has changed from gold price suppression to dollar devaluation. Indeed, that speculation arose in large part from suspicion that central banks may not have lost control of the gold market and that, if gold is rising again, it is only because that is what central banks now want it to do and how they are guiding the market with their surreptitious trading.

That the Fed to this day remains up to its neck in gold market manipulation was confirmed at the central bank’s highest levels just a few weeks ago when the president of the Federal Reserve Bank of New York, William Dudley, taking questions at a public forum in Virginia, clumsily refused to answer one about whether the Fed is involved in gold swaps. Then his press spokesman refused even to acknowledge GATA’s follow-up question on the subject:

http://www.gata.org/node/16341

Anyone who doubts that U.S. government policy toward gold prior to 2014 was a policy of suppression is implored to dispute, specifically, document by document, the official records compiled here —

http://www.gata.org/node/14839

— and here:

http://www.gata.org/node/16377

Norcini has not done that, though of course no one else who disparages GATA has done so either. In the absence of such dispute, it may be assumed that the records are genuine and that they are fairly construed as GATA has construed them.

Just as GATA doesn’t care much about price predictions for gold, positive or negative, it doesn’t care much about the “technical analysis” offered by Norcini and other gold market commentators, “technical analysis” of rigged markets being mere hallucination.

Rather, GATA cares mainly about free markets and limited, transparent, and accountable government, and so agreement or disagreement with GATA rests on the answers to these questions:

— Are central banks involved in the gold market surreptitiously or not?

— If central banks are involved in the gold market surreptitiously, is it just for fun — for example, to see which central bank’s trading desk can make the most money by cheating the most investors — or is it for policy purposes?

— If central banks are surreptitiously in the gold market for policy purposes, are these the traditional purposes of defeating a potentially competitive world reserve currency? Or have these purposes lately expanded to include purposes like devaluing currencies and debt to avert a catastrophic worldwide debt deflation, the emergency policy anticipated in 2006 by the Scottish economist Peter Millar, whose study of gold revaluation often has been publicized by GATA?:

http://www.gata.org/node/4843

— If central banks, creators of infinite money, are surreptitiously trading a market, how can it be considered a market at all, and how can any country or the world ever enjoy a market economy again?

Just as Norcini has not challenged GATA’s documentation of gold market rigging, he also seems not to have addressed those questions. But then no other critic of GATA has addressed them either. For as Chesterton wrote a hundred years ago, “As is common in most modern discussions, the unmentionable thing is the pivot of the whole discussion.”

If central banks are surreptitiously trading markets, Norcini’s “technical analysis” is the least of the casualties. In that case markets and even democracy itself are finished.

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

 

END

 

Ken Rogoff now states that it would be good for emerging nations to put their reserves in gold instead of other hard currencies

 

(courtesy Ken Rogoff)

 

Ken Rogoff’s Shockingly Simple Advice To Emerging Markets: Hoard Gold

Authored by Kenneth Rogoff, originally posted at Project Syndicate,

Are emerging-market central banks overweight in dollars and underweight in gold? Given a slowing global economy, in which emerging markets are probably very grateful for any reserves they retain, this might seem an ill-timed question. But there is a good case to be made that a shift in emerging markets toward accumulating gold would help the international financial system function more smoothly and benefit everyone.

Just to be clear, I am not siding with those – usually American far-right crackpots – who favor a return to the gold standard, in which countries fix the value of their currencies in terms of gold. After all, the gold standard’s last reign ended disastrously in the 1930s, and there is no reason to believe that a return to it would turn out any differently.

No, I am just proposing that emerging markets shift a significant share of the trillions of dollars in foreign-currency reserves that they now hold (China alone has official reserves of $3.3 trillion) into gold. Even shifting, say, up to 10% of their reserves into gold would not bring them anywhere near the many rich countries that hold 60-70% of their (admittedly smaller) official reserves in gold.

For some time, the rich countries have argued that it is in everyone’s collective interest to demonetize gold. Sure, we hold a lot of gold, these countries say, but that is a vestige of the pre-World War II gold standard, when central banks needed a stockpile.

Indeed, back in 1999, European central banks, seeing no reason to keep holding so much gold, entered a pact to start reducing their stocks in an orderly fashion. The sales made sense at the time for most of the participating countries: The real backing for their debt was the tax reach of their governments, their high levels of institutional development, and their relative political stability. The 1999 pact has been revisited periodically, though since the most recent edition in 2014, most rich countries have taken a long pause, still leaving them with extremely high gold reserves.

Emerging markets have remained buyers of gold, but at a snail’s pace compared to their voracious appetite for US Treasury bonds and other rich-country debt. As of March 2016, China held just over 2% of its reserves in gold, and the share for India was 5%. Russia is really the only major emerging market to increase its gold purchases significantly, in no small part due to Western sanctions, with holdings now amounting to almost 15% of reserves.

Emerging markets hold reserves because they do not have the luxury of being able to inflate their way out of a financial crunch or a government debt crisis. Simply put, they live in a world where a large fraction of international debt – and an even larger share of global trade – is still denominated in hard currency. So they hold reserves of such currencies as a backstop against fiscal and financial catastrophe. Yes, in principle, it would be a much better world if emerging markets could somehow pool their resources, perhaps through an International Monetary Fund facility; but the trust required to make such an arrangement work simply is not yet there.

Why would the system work better with a larger share of gold reserves? The problem with the status quo is that emerging markets as a group are competing for rich-country bonds, which is helping to drive down the interest rates they receive. With interest rates stuck near zero, rich-country bond prices cannot drop much more than they already have, while the supply of advanced-country debt is limited by tax capacity and risk tolerance.

Gold, despite being in nearly fixed supply, does not have this problem, because there is no limit on its price. Moreover, there is a case to be made that gold is an extremely low-risk asset with average real returns comparable to very short-term debt. And, because gold is a highly liquid asset – a key criterion for a reserve asset – central banks can afford to look past its short-term volatility to longer-run average returns.

True, gold does not pay interest, and there are costs associated with storage. But these costs can be managed relatively efficiently by holding gold offshore if necessary (many countries hold gold at the New York Federal Reserve); and, over time, the price can go up. It is for this reason that the system as a whole can never run out of monetary gold.

I don’t want to create the impression that by shifting into gold, emerging markets would somehow benefit at the expense of advanced economies. After all, the status quo is that advanced-economy central banks and treasuries hold vastly more gold than emerging markets do, and a systematic shift by emerging markets will bid up its price. But this is not a systemic problem; and, in fact, a rise in gold prices would close part of the gap between demand and supply for safe assets that has emerged due to the zero lower bound on interest rates.

There has never been a compelling reason for emerging markets to buy into the rich-country case for completely demonetizing gold. And there isn’t one now.

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 DOWN to 6.4795 / Shanghai bourse  CLOSED  UP 54.32 OR 1.85%  / HANG SANG CLOSED DOWN 390.11 OR 1.85%

2 Nikkei closed FOR HOLIDAY /USA: YEN FALLS TO 105.88

3. Europe stocks opened ALL IN THE RED  /USA dollar index DOWN to 92.25/Euro UP to 1.1577

3b Japan 10 year bond yield: FALLS   TO -.124%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 107.04

3c Nikkei now WELLBELOW 17,000

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

3e WTI::  44.30  and Brent: 45.49

3f Gold DOWN  /Yen UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to 0.274%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 10.32%/: 

3j Greek 10 year bond yield RISE to  : 8.67%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1295.00/silver $17.55 (7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble DOWN 1 in  roubles/dollar) 66.25

3m oil into the 44 dollar handle for WTI and 45 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 .9480 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0975 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 RISES to  + .274%

/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 1.80% early this morning. Thirty year rate  at 2.66% /POLICY ERROR)

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

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

“Unexpected” Australian Rate Cut To Record Low Unleashes FX Havoc, Global “Risk Off”

Three months ago, when Australia unexpectedly revealed that its recent “stellar” job numbers had in fact been cooked we asked, rhetorically, why the sudden admission it was all a lie? Simple: weakness in commodity prices “is far greater than people had been expecting,” the nation’s top economist said. Australia is now “swimming against the tide” because of uncertainties in the global economy, he added. Which we translated as follows: “we need more easing, and to do that, the economy has to go from strong to crap.” And with the Australian economy suddenly desperate for lower rates from the RBA, one can ignore the propaganda lies, and focus once again on the far uglier truth.

Overnight this was finally confirmed when in a surprise move, Australia’s central bank cut its benchmark interest rate for the first time in a year to a record low and left the door open for further easing to counter a wave of disinflation that’s swept over the developed world. The move sent the local currency tumbling and local stocks climbing.

Reserve Bank of Australia Governor Glenn Stevens and his board lowered the cash rate by 25 basis points to 1.75 percent Tuesday, a move predicted by just 12 of 27 economists surveyed by Bloomberg. The rest had seen no change. Data last week showed quarterly deflation in the consumer price index and the weakest annual pace on record for core inflation, which the RBA aims to keep between 2 percent and 3 percent on average.

“Inflation has been quite low for some time and recent data were unexpectedly low,” Stevens said in a statement. “These results, together with ongoing very subdued growth in labor costs and very low cost pressures elsewhere in the world, point to a lower outlook for inflation than previously forecast.”

As Bloomberg reminds us, Australia’s central bank acted after two regional neighbors stood pat last week – New Zealand and Japan. Illustrating the impact of central bank decisions on exchange rates, the Aussie has the weakest performance among the G-10 since last Wednesday, a day before the Bank of Japan and Reserve Bank of New Zealand meetings. The announcement sent the AUDUSD plunging.

 

“They’re saying that there’s no point in messing around, let’s get in and do this, cut the cash rate and get some of the speculative money out of the Australian dollar,” said Chris Weston, chief market strategist at IG Ltd. in Melbourne.

In some way’s Australia rate cut had been telegraphed earlier in the aftermath of last night’s latest disappointing Chinese Manufacturing PMI number, which as we reported contracted for the 14th straight month, and not only missed but dropped to 49.4 after a brief March bounceback from February lows.

 

Perhaps more importantly, the plunge in the AUD caused havoc across other key carry trades, and following a nearly 200 pip plunge in the AUDJPY, the Yen soared once more, this time surging to the highest against the dollar since August 2014, pushing the pair as lows at 105.600, and dragging risk assets lower with it.

As a result, the dollar fell to its weakest level in almost a year and stocks declined while Treasuries rose as evidence of limp economic growth around the world permeated through global financial markets. It also meant that gold once again jumped above $1300, while oil has traded on the backfoot near $45 a barrel despite the accelerating dollar weakness, ahead of weekly U.S. government data forecast to show rising stockpiles.

“We’ve started to take a little bit of money off the table,” said Sean Darby, chief global equity strategist in Hong Kong at Jefferies. “There’s quite a bit for investors to digest now after quite a big run-up in markets, particularly after the disappointment from the Bank of Japan last week.”

It wasn’t just central banks: commercial banks were also responsible for today’s weakness. UBS Group AG fell 5.8% after reporting worse-than-forecast first-quarter net income. Commerzbank AG lost 6% after its profit more than halved. HSBC Holdings Plc erased gains to fall 0.7 percent after posting a drop in profit.

“Weak earnings and a strong euro are the main triggers for the market being down today,” said Heinz-Gerd Sonnenschein, a strategist at Deutsche Postbank in Bonn, Germany. “What markets need most right now is to see better numbers from the economic indicators in Europe and a better view from companies on their future earnings.”

So far it has not seen that, and making matters worse, the European Commission said hours ago that growth in the Eurozone and the wider European Union will be slightly weaker this year than previously forecast, as it warned that the economic slowdown in China and other emerging markets, geopolitical tensions and uncertainty ahead of the U.K. referendum on EU membership could weigh on the economy.

The EU’s economists also cautioned that the strength of factors that have been supporting growth in the region, such as low oil prices and a weaker euro, could start to fade, while fundamental problems in many of the bloc’s economies, including high levels of private debt and unemployment, continue to hold back the economic recovery. The commission now expects the rate of inflation in the eurozone to be just 0.2% this year, down from the 0.5% previously forecast. In 2017, inflation in the currency union is now seen at 1.4%, down from the 1.5% predicted earlier and still below the close-to-2% targeted by the ECB.

“We’re into the May doldrums where people are starting to reconsider portfolios and will probably not do too much,” said Sean Darby, chief global equity strategist in Hong Kong at Jefferies Group LLC. “They’ve either missed the rally from the first quarter or they’re getting a little bit too concerned about some of the weakness in the global data.”

Market snapshot

  • S&P 500 futures down 0.7% to 2059
  • Stoxx 600 down 1.3% to 337
  • FTSE 100 down 0.7% to 6196
  • DAX down 1.6% to 9957
  • German 10Yr yield down 2bps to 0.24%
  • Italian 10Yr yield down less than 1bp to 1.47%
  • Spanish 10Yr yieldunchanged at 1.58%
  • S&P GSCI Index down 0.7% to 352.7
  • MSCI Asia Pacific up less than 0.1% to 130
  • Nikkei 225 closed
  • Hang Seng down 1.9% to 20677
  • Shanghai Composite up 1.8% to 2993
  • S&P/ASX 200 up 2.1% to 5354
  • US 10-yr yield down 5bps to 1.82%
  • Dollar Index down 0.54% to 92.12
  • WTI Crude futures down 1% to $44.33
  • Brent Futures down 1% to $45.37
  • Gold spot up 0.5% to $1,298
  • Silver spot up 0.4% to $17.61

Top Global News

  • Australia Cuts Key Rate to Record Low, Pulling Down Currency: Australian dollar slumps as much as 1.5% following decision
  • UBS Profit Misses Estimates on Lower Wealth, Trading Income: Investment-banking unit sees profit slump 67% in first quarter
  • HSBC’s Quarterly Profit Beats Estimates as Costs Contained: Operating expenses fell 6.6% in quarter from year earlier
  • Fairway Group Files for Bankruptcy as Competition Revs Up: Gourmet grocer lists $387m in debt, $230m assets
  • J&J Faces 1,000 More Talc-Cancer Suits After Verdict Loss: Jury awards $55m to woman who blamed talc for cancer
  • Einhorn’s Greenlight Buys Yelp, Takes Macro Bet on Natural Gas: Hedge fund says mobile app company can double revenue by 2019
  • Mylan Sees Profit Rising About 16%, Generic Prices to Drop: CEO committed to closing Meda acquisition
  • Apple CEO Says He ‘Could Not Be More Optimistic About China’: Tim Cook spoke in interview on CNBC
  • Aeropostale Prepares to File for Bankruptcy This Week: WSJ
  • EU Commission Doubts Trade Deal With U.S. Possible: Sueddeutsche
  • U.S. Grain Cos. Plan to Reject New Monsanto GM Soybeans: WSJ
  • ADM, Bunge Not Accepting Soybeans W/ Unapproved Monsanto Trait

Looking at regional markets, Asian equity markets traded mostly positive with ASX 200 (+0.8%) among the leaders, following an RBA rate cut, while poor China PMI figures increase stimulus hopes. ASX 200 was led by financials after Big-4 bank ANZ recovered from opening losses on optimism regarding the bank’s direction, while a 25bps rate cut by the RBA further boosted sentiment. Elsewhere, Chinese markets were mixed with the Shanghai Comp (-1.68%) was weighed by further poor data in which Caixin Manufacturing PMI failed to meet estimates and posted a 14th consecutive month in contraction territory, as the recent data misses increased hopes for additional easing. As a reminder Japanese markets were shut due to Constitution Day and will next re-open on Friday.

Top Asian News

  • China’s Caixin PMI Slips in April as Pockets of Weakness Remain: PMI from Caixin Media and Markit Economics fell to 49.4 vs est. 49.8
  • Short Sellers Under Fire in Australia as RBA Spurs Stock Rally: Banks lead gains after interest-rate cut, ANZ results
  • Yuan Gains After PBOC Sets Strongest Fixing Rate Since December: PBOC raised daily fixing by 0.04% to 6.4565/dollar
  • China Swap Rate Drops Most in Year as Bond Income Escapes Tax: Policy bank bond yields, benchmark repo rates decline
  • PLDT Profit Falls 34% as Losses From Rocket Internet Persist: 1Q net drops to 6.2b pesos
  • ANZ Rallies as Low-Yield Business Cuts Offset Profit Drop: 1H cash profit A$2.782b vs est. A$3.577b
  • DBS First-Quarter Profit Rises 6 Percent, Beats Estimates: 1Q net income S$1.2b vs est. S$1.04b

European equities have also seen significant downside so far this morning (Euro Stoxx: -1.6%), with the DAX slipping back below the 10000 level. While yesterday’s decline in energy prices have helped lead energy names lower today, focus has been some of the high profile earnings from across Europe, with the likes of BMW, UBS, Commerzbank and Lufthansa all seeing downside in the wake of their updates. Bunds have seen upside today, with prices back above 162.00, while peripheral debt markets have seen Portuguese paper lifted by the latest sovereign update from DBRS, which has abated some of fears from last week as this would mean that Portuguese bonds are still eligible for ECB QE. Meanwhile, analysts at Informa note that BTP/Bonos are lower by around 1.5bps in the wake of soft demand for the BP Vicenza IPO, whereas for Spain the EU extension for the nation and their deficit goals has offset some of the concerns following the countries inability to form a government.

Top European News

  • European Commission Sees U.K. Referendum Risks as Forecasts Cut: Predicts 2016 growth will slow to 1.8%, 2017 will be 1.9%
  • U.K. Manufacturing Unexpectedly Shrinks as Firms Hemorrhage Jobs: Markit PMI drops to 49.2 from 50.7 in March
  • BMW First-Quarter Profit Falls 2.5% on Self-Driving Shift: BMW sticks to forecast for slight earnings growth in 2016
  • Commerzbank Profit Halves as Market Turmoil Hurts Revenue: Earnings beat analysts’ estimates even as revenue declined
  • BNP Paribas Profit Unexpectedly Rises on Lower Provisions: Pretax profit at corporate and institutional bank falls 55%
  • Lufthansa Fares Under Pressure as It Grapples With Restructuring: Carrier says revamp is beginning to deliver cost turnaround
  • Philips to List Lighting Unit After Failing to Find Buyer: Dutch manufacturer to list at least 25% stake, will seek to sell remaining shares in coming years

in FX, it has been a lively start to the European session, with the RBA rate turning AUD lower after attaining .7700+ levels vs the USD. Elsewhere though, fresh USD selling has been the early theme against the rest of the majors, led by EUR/USD through the 1.1500’s, tipping 1.1600 by some 15 ticks so far. USD/JPY took out support ahead of 106.00 to extend losses through to 105.55, but some nervousness at these levels sees us some 20 ticks or so higher since. Cable made strong gains through to 1.4770, but a weak UK manufacturing PMI number, below the 50.0 pivot (49.2) has sent GBP reeling, with the EUR/GBP rate through .7870 extending Cable losses to just below 1.4700, though tentatively so as yet. USD/CAD finally took out 1.2500 to trip stops down to 1.2460/61, but we are back above 1.2500 again as Oil takes a hit. Oil prices have already been on the wane, but clearly preceded by stock market weakness, which looks set to impact on FX today. Swedish industrial production much better than expected, knocking USD/SEK down to just under 7.9000.

In commodities, WTI and Brent have shaken off some of their recent gains after the continuation of the fallout from the Genscape report which noted a build in cushing stockpiles, Gold has still be rising after a week USD is helping boost safe haven demand. Silver has been trading sideways after reaching the USD 18.00/oz level yesterday and is currently just shy of that level. Elsewhere, copper and Dalian iron ore futures were weaker following the recent discouraging Chinese PMI releases, with the latter declining by nearly 6% intraday as increasing stockpiles also weigh.

On today’s US calendar, highlights include Redbook weekly sales, the ISM New York, US IBD/TIPP Economic Optimism, API Crude Oil Inventories and earnings from Pfizer and CVS Health.

Bulletin Headline Summary from Bloomberg and RanSquawk

  • European bourses slump with sentiment dampened from soft Chinese Caixin Manufacturing PMI figures alongside a slew of weak earnings updates.
  • USD-index briefly slips below 92.00, subsequently lifting EUR/USD above 1.1600, while gains in GBP are capped as Manufacturing PMI figures fall into contractionary territory.
  • Highlights include US IBD/TIPP Economic Optimism, API Crude Oil Inventories and earnings from Pfizer and CVS Health.
  • Treasuries rally in overnight trading amid drop in global equities and oil as evidence of limp economic growth around the world permeated through global financial markets.
  • The European Commission told the euro area’s largest economies to reduce debt and modernize labor markets as it again slashed its inflation forecast and warned of slower- than-predicted growth across the 19-nation bloc;  ECB publishes indicative calendar for TLTRO-II operations
  • U.K. manufacturing unexpectedly shrank for the first time in three years in April, dealing a shock blow to the economy after growth slowed in 1Q. Markit Economics said its factory Purchasing Managers Index dropped to 49.2 from 50.7 in March
  • Australia’s central bank cut its benchmark interest rate to a record low and left the door open for further easing to counter a wave of disinflation that’s swept over the developed world
  • Australia injected a double-dose of stimulus as the government handed down an expansionary budget hours after the central bank eased policy for the first time in a year
  • A private gauge of Chinese manufacturing slipped in April, underscoring pockets of weakness in an economy weighed by overcapacity and weak external demand
  • The Federal Reserve is set to propose so-called stays on derivative contracts that would prevent counterparties from immediately pulling collateral from a failed bank. The plan is meant to give authorities ample time to unwind a firm
  • UBS Group AG said 1Q profit dropped 64%, missing analyst estimates, as market turbulence eroded earnings at the wealth-management and securities units. The shares plunged
  • Commerzbank AG fell as much as 9.4 percent in Frankfurt, the most in almost three months, after market turmoil and a squeeze to margins hurt sales and halved first-quarter profit
  • BNP Paribas SA, France’s largest bank, posted a surprise increase in first-quarter profit as a decline in provisions for bad loans helped outweigh a slump in trading revenue. The shares rose
  • Sovereign 10Y bond yields mostly lower; European equity markets drop, Asian markets lower (Japan closed); U.S. equity-index futures fall. WTI crude oil drops, metals higher

 

DB’s Jim Reid concludes the overnight wrap

 

Over in the markets and much like how the last week of April played out, the first day of May was a poor one for the US Dollar which saw the Dollar index fall another half a percent to mark a fresh year-to-date low. In fact the index has now fallen for six consecutive sessions and is now over 7% off its January highs. The weakness in the Greenback did however help to kick start US equities on a strong footing in May with the S&P 500 returning +0.78% and so wiping out over half of last week’s loss. The Bank Holiday in the UK meant trading volumes were thin in Europe and price action relatively benign. The Stoxx 600 (-0.07%) finished with a very modest loss with peripheral markets generally being the underperformer there.

The main focus yesterday and a contributor to that weakness for the Dollar was the ISM manufacturing data. The reading printed at 50.8 in April which is down a full point from March and more than what the market had expected (consensus expectation was for 51.4). The print also matched the manufacturing PMI after there was no change in the final revision. In terms of the details, the new orders component declined 2.5pts to 55.8 although that is still well above where it printed in December at 48.8. Employment rebounded 0.9pts to 49.2 but still remains in contractionary territory, while inventories declined 1.5pts to 45.5. A positive aspect of the data was the second consecutive print above 50 for new export orders (+0.5pts to 52.5) and in turn marking the best level since November 2014, indicating some stabilisation and positive feed through from the weakness in the currency. We’ll get the ISM non-manufacturing data tomorrow but it’s worth mentioning that the spread between the two series got back to 2.7pts last month which was the least since December 2014. The current market consensus for this month’s non-manufacturing print is 54.8 which implies a spread of 4pts however. If correct, that will be the most since January.

Onto the latest in Asia this morning where bourses in Hong Kong aside it’s actually been a relatively positive start for markets in the region. Gains are being led out of China where the Shanghai Comp and CSI 300 are +1.44% and +1.62% respectively. The Kospi (+0.43%) and ASX (+1.58%) are also in positive territory, but the Hang Seng (-1.19%) has reopened on the back foot after markets were closed for a public holiday yesterday. Markets in Japan are shut for a public holiday of their own today (and will remain shut until Friday) although that hasn’t stopped the Yen from rallying further this morning. It’s close to +0.30% firmer and closing in on breaking though the 106 level.

There’s been some data released overnight too and it’s come in China where the non-official Caixin manufacturing PMI revealed a 0.3pt decline to 49.4 (vs. 49.8 expected). Meanwhile as we go to print the other main news overnight is out of the RBA have who have announced a 25bps cut in the benchmark rate to a new all time low of 1.75%. The move was only expected by 12 of 27 economists according to Bloomberg and has resulted in the Aussie Dollar falling nearly 2% from its pre-decision highs.

Yesterday also saw the release of the Fed’s Senior Loan Officer Opinion Survey. The April survey results showed that on balance, banks tightened lending standards on commercial and industrial loans during Q1, but that lending standards on loans to households were said to have eased. A modest net fraction of banks were also reported as easing standards on credit cards and consumer loans, while there was little change in standards for auto loans. With regards to the energy sector specifically, banks were reported as saying that they expect delinquency and charge-off rates on loans to firms to deteriorate over the reminder of the year and that the majority of banks have taken a variety of actions to mitigate loan losses over the past year, including tightening lending policies on new lines of credit, restructuring outstanding loans or requiring additional collateral.

There was also some Fedspeak for us to digest last night. San Francisco Fed President Williams reiterated that he expects the Fed to move interest rates ‘gradually back to a more normal level over the next couple of years’ but highlighted that the new long-term normal rate could be significantly lower than what the Fed’s dot plots imply.

Switching to the micro and in terms of the corporate earnings results yesterday, of the 12 S&P 500 companies to report 8 exceeded EPS expectations. That’s below the run rate for the year which is unchanged at 77%, while sales beats continue to hover around 57%. Weakness in Oil prices did little to dent moves for the energy sector. WTI (-2.48%) defied the move lower for the US Dollar and declined back below $45/bbl following some bearish OPEC output numbers and also rising oil stockpiles in the latest Genscape data. Elsewhere moves for rates markets were headlined by further weakness for US Treasuries, with 10y yields up another 4bps yesterday and hovering around 1.873%.

The only other remaining data in the US yesterday was the March construction spending numbers (+0.3% mom vs. +0.5% expected). In Europe the main data flow centered on the April manufacturing PMI’s. The Euro area reading was revised up a modest 0.2pts to 51.7 while on a regional basis there were actually downward revisions to both Germany (-0.1pts to 51.8) and France (-0.3pts to 48.0) while the peripherals generally exceeded expectations. Italy printed at 53.9 (vs. 53.0 expected), a rise of 0.4pts, while Spain printed at 53.5 (vs. 53.0 expected), a rise of 0.1pts.

 

END

 

ASIAN AFFAIRS

i)Late  MONDAY night/ TUESDAY morning: Shanghai closed UP 54.32 PTS OR 1.85%  /  Hang Sang closed DOWN 390.11 OR 1.85%. The Nikkei closed FOR HOLIDAY  . Australia’s all ordinaires  CLOSED UP 2.11% AS RESOURCE STOCKS DOING WELL. Chinese yuan (ONSHORE) closed UP at 6.4795.  Oil FELL  to 44.30 dollars per barrel for WTI and 44.49 for Brent. Stocks in Europe DEEPLY IN THE RED . Offshore yuan trades  6.4915 yuan to the dollar vs 6.4795 for onshore yuan.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

Last night the USA/Yen penetrated the 105 barrier for the first time in 18 months as it seems Kuroda has no power left to intervene.  The surprise move by the Aussies in lowering its discount rate also contributed to the strength in the yen.This sent most bourses deeply into the red this morning

 

(courtesy zero hedge)

 

Yentertainment Tonight – Kuroda Kollapse Kontinues As USDJPY Nears 105 Handle

Either The BoJ steps in soon and intervenes (even by just “checking levels”) or Kuroda-san is truly terrified of The G-20. USDJPY has now crashed 7 handles since last Thursday’s shock BoJ disappointment crashing to within 5 pips of a 105 handle tonight for the first time in 18 months…

 

 

Erasing the entire devaluation post-Fed, post QQE2…

 

Perhaps Jack Lew’s “currency manipulation” report was enough to stall the Japanese currency war for now? Or is China greatly rotating its Yuan devaluation pressure against another member of its basket…?

 

Charts: Bloomberg

 

end

b) CHINA ISSUES

Again Chinese manufacturing PMI disappoints as it has now fallen for the 14th straight month.  April’s PMI tumbled to 49.4  (contractionary) from 49.8 last month.

China Manufacturing PMI Disappoints – In Contraction For 14th Straight Month

Despite a trillion dollars of credit spewed into the Chinese ‘economy’ speculative finance channels, Manufacturing remains in a slump as April’s China PMI tumbled to 49.4 after a brief bounce back up to 49.8 (from the 48.0 low in Feb). This is the 14th month in a row of contraction.

As Caixin reports, relatively weak market conditions and muted client demand contributed to a further solid decline in staff numbers, which seems to put a nail in the coffin of anyone who believes recent price action in industrial commodities is anything but speculative fervor.

 

Commenting on the China General Manufacturing PMI data, Dr. He Fan, Chief Economist at Caixin Insight Group said:

“The Caixin China General Manufacturing PMI for April came in at 49.4, down 0.3 points from March’s reading. All of the index’s categories indicated conditions worsened month-on-month, with output slipping back below the 50-point neutral level. The fluctuations indicate the economy lacks a solid foundation for recovery and is still in the process of bottoming out. The government needs to keep a close watch on the risk of a further economic downturn.”

end
The following is why you just cannot believe any data coming out of mg Mainland China
(courtesy zero hedge)

China Threatens Its Economists And Analysts To Only Write Bullish Reports, Or Else

 

When it comes to dealing with the mass media and its impact on public confidence, China has a long and illustrious history of not beating around the bush.  Last summer around the time its stock market bubble started to crack, Beijing banned the use of such terms as “equity disaster” and “rescue the market.” Then earlier this year, China’s president Xi Jingping visited the country’s three big state news organizations, Xinhua, the People’s Daily and China Central Television, to lecture them on the need to toe the party line, “tell China’s stories well” and enhance the nation’s influence in the world.

After all, hinting that not all is as it appears in official propaganda soundbites would merely instill further lack of confidence in the economy and accelerate the stealthy capital outflows from the country (while making the Vancouver real estate market even more entertaining).

Now, according to the WSJ, Chinese authorities have set their sights on a new set of targets: “economists, analysts and business reporters with gloomy views on China’s economy.”

While in the US and the rest of the free world, anyone who holds a less than bullish view of things is simply marginalized as a conspiracy theorist, ridiculed by establishment economists and pundits, is the recipient of mainstream media hit pieces, or denigrated by the president as “peddling fiction”, China has decided to take a more blunt approach: “securities regulators, media censors and other government officials have issued verbal warnings to commentators whose public remarks on the economy are out of step with the government’s upbeat statements.”

Take the example of Lin Caiyi, chief economist at Guotai Junan Securities who has been outspoken about rising corporate debt and a glut of housing and the weakening Chinese currency. According to the WSJ, she received a warning in recent weeks, her second, from her state-owned firm’s compliance department, which instructed her to avoid making “overly bearish” remarks about the economy, particularly the currency.

For now it is just verbal warnings although if past is prologue we expect China will soon incarcerate at least a few of its “rogue” bearish economists to send a very clear signal that any lack of upbeat commentary will not be tolerated.

Meanwhile, China’s economy is doing so well, that as a result of “pressure” by financial regulators bent on stabilizing the market, stock analysts at brokerage firms are becoming wary of issuing critical reports on listed companies. At least one Chinese think tank  was told by propaganda officials not to cast doubt on a planned government program to help state companies reduce debt.

What China really wants is to make sure that every financial and economic expert is on the same page and reinforcing the same message as that uttered by the country’s political leaders.

The WSJ caveats that while evidence of the clampdown is anecdotal, it appears widespread. Government departments didn’t respond to requests for comment or declined to. Commentary about the economy and reporting on business, unlike on politics or many social policies, have been relatively unfettered in China in a tacit acknowledgment by officials that a freer flow of information serves economic vitality.

As noted above, Beijing openly moved to reassert control of the country’s economic story line after stumbles over the stock markets and exchange-rate policies last year fed doubts among investors about the government’s competence in navigating a hard-to-arrest slowdown in growth. During the past two months, the Communist Party leadership has taken to talking up the economy to try to reassure global markets, seemingly not realizing that such “full tilt” propaganda merely confirms everyone’s worries about the just how bad the underlying economy truly is.

“Vigorous debate among economists and public confidence in this conversation is critical if China is to successfully navigate the choppy economic waters,” said Scott Kennedy, a deputy director at the Center for Strategic and International Studies, a Washington think tank. “If the party and government only want to hear good news, then they’d be better off hearing nothing because the value of the words would be less than zero.”

None of this, however, trickles down to the politburo, which just cares about one thing: stopping the naysayers.

Some lower-level government officials describe a siege mentality taking hold among Chinese leaders and senior officials as international financiers like George Soros expressed gloom about the economic outlook early this year. At high-level meetings the past few months in the walled Zhongnanhai compound where the leaders work, some senior officials called for quashing any criticism that might encourage foreigners to “short China”—or bet against the prospects for growth—officials with knowledge of the discussions say.

 

“You can see they’re not happy when you tried to tell them foreign speculators are not your biggest problem,” said one of the officials who attended the meetings.

You can also see it during overnight CNH trading sessions when in its eagerness to destroy Yuan shorts, the PBOC unleashes the artillery to push the currency higher, even if it ultimately means more pain for China’s economy.

Meanwhile, “journalism” in China is now back to levels seen during the peak of the communist regime: non-existent.

“As a Chinese reporter, you can do anything but journalism these days,” said a senior editor at a state-owned media outlet. One colleague, the editor said, was forced by the outlet to take a leave of absence over what senior editors considered the reporter’s aggressive investigation into the causes of last summer’s stock market crash.

It was unclear if a major party mouthpiece had unleashed a hitpiece against the reporter first.

Still, the one aspect of the economy China is most worried about is its currency. In February,as reported here before, the central bank abruptly stopped releasing data on foreign-exchange purchases by commercial banks—long viewed by market analysts as a key snapshot of China’s capital flows—amid growing worries over more money leaving its shores. In a statement days later, the central bank said it took the step because the data were “no longer a true reflection of China’s capital flows.”

Ms. Lin, the economist at Guotai Junan, said she started getting guidance last fall to tone down her public remarks about the Chinese currency, the yuan or renminbi—something she acknowledged at an economic forum held at Shanghai’s Fudan University in October.

“I was told by regulators not to recommend shorting the renminbi,” Ms. Lin told the gathering, “so I’m just going to recommend buying the dollar.” Neither Ms. Lin nor her firm responded to inquiries for comment, nor did the regulator.

Or take the example of another ludicrous plan recently proposed by China: the intention to convert trillions of bad loans into equity, something we dubbed an “unprecedented nationalization of insolvent companies.” Here too Beijing wants to make it clear that no domestic opposition to this “plan” will be accepted:

In the financial hub of Shanghai, the city’s propaganda department recently instructed a local think tank to stop researching a planned debt-for-equity swap program aimed at helping big state companies reduce debt, according to economists familiar with the matter. The reason, these economists said, is that officials don’t want the research to turn up unfavorable evidence after Premier Li Keqiang and others have endorsed the swaps.  The information office of the Shanghai government didn’t respond to requests for comment.

Many analysts have said the plan, which would allow banks to exchange bad loans for equity in companies they lend to, could risk keeping companies afloat when they should sink while leaving banks more strapped for capital. Given the climate, some are changing their tone.

Then, in mid-April, a well-known Chinese economist gave investors in Hong Kong a grim assessment of the economy. It was not meant to last.

Despite recent signs of a rebound, Gao Shanwen, chief economist at brokerage Essence Securities Co., told investors that “a lot of the official data aren’t reliable” and the economy still faces “big problems,” according to people who attended the closed-door event.

 

Words of those remarks crackled across social media. Two days later, Mr. Gao issued a clarification on his public account in the popular Chinese messaging app, WeChat, saying those remarks were “made up.” He then released a report on the economy shorn of critical commentary. Mr. Gao and representatives at his firm didn’t return requests for comment.

And just like that not only is all Chinese “economic data” rubbish and a completely goalseeked fabrication, but henceforth any domestic commentary on said “data” will be just as credible.

Meanwhile, while in the US while the government is not directly threatening anyone who dares to criticize the economy – yet – there are more tacit ways of pressuring critics and contrarians, the most simple of which of course is to simply pay much more to those who do comply with the tacit propaganda line. This, sooner or later, is sufficient to get even the most bearish naysayers to change their tune. After all they have to eat too.

Incidentally, when that fails and when bullish US propaganda has to be as leakproof as that of China, we are confident that any naysayers will get comparable treatment.

Average:

5

.EUROPEAN AFFAIRS

European stocks tumble after the EU slashes growth and their determination of “inflation” falls.  However what is extremely worrisome to the EU area is the Italian banks which have a huge 360 billion euros of non performing loans to deal with.

(courtesy zero hedge)

European Stocks Tumble After EU Slashes Growth, Inflation Guesses

Despite unleashing his bazooka, Mario Draghi – like his colleagues at The BoJ – appears to have hit the limit of his impotence as the European Commission cut its outlook for growth and inflation across the Union for 2016 and 2017. Citing the economic slowdown in China and other emerging markets, geopolitical tensions and uncertainty ahead of the U.K. referendum on EU membershipWSJ reports EU’s economists also cautioned that the strength of factors that have been supporting growth in the region, such as low oil prices and a weaker euro, could start to fade. This sparked modest Euro weakness (after a non-stop surge in the last week) dragging down European stocks and darkening the outlook for the banking system further.

As The Wall Street Journal reports,

According to the forecasts by the European Commission, the EU’s executive arm, the economy of the 19-country eurozone is expected to grow 1.6% this year. This is slightly below the 1.7% expansion the commission had forecast in February, and the 1.7% it expanded in 2015.

In 2017, the eurozone economy will expand by 1.8%, the commission said, slightly lower than earlier predictions which saw it growing 1.9%.

Growth in the 28-country EU is seen at 1.8% this year, down slightly from the commission’s February forecast and lower than the 2% it recorded in 2015. The EU’s economic output will likely expand 1.9% next year, also below the 2.0% forecast earlier this year.

The new, slightly lower forecasts highlight how Europe’s scars from the financial crisis, and the debt crisis that followed, continue to dampen its recovery.

In its forecasts, the commission said that while cheaper oil and easy monetary policy by the European Central Bank have boosted consumption and exports, the pace of growth across the 28-country bloc and the euro area remains relatively moderate.

This sparked a modest drop in EURUSD…

And European stocks continue to tumble…

Led by Italy and Spain to the downside…

As Italian banks collapse again… which should be no surprise one third of the bailout fund has already been depleted…

So having told “savers” to pile a third of their assets into stocks, Draghi apperars powerless to create ‘wealth’ for the repressed as realisation dawns across global investors that it’s all smoke and mirrors.

But don;t worry they are on it…

“Growth in Europe is holding up despite a more difficult global environment,” said Pierre Moscovici, the EU commissioner for economic and financial affairs.

“The recovery in the euro area remains uneven, both between Member States and between the weakest and the strongest in society. That is unacceptable and requires determined action from governments, both individually and collectively,” he added.

end

 RUSSIAN AND MIDDLE EASTERN AFFAIRS

The Saudi foreign minister repeats his warning to the USA not to publish those famous 28 pages.  He states that Saudi Arabia will sell all of its 750 billion in the USA treasuries:

(courtesy zero hedge)

Saudi Foreign Minister Repeats Warning To US Over Sept 11 Law

The biggest financial and geopolitical story from mid-April was Saudi Arabia’s threat that should the US pass a bipartisan law which would take away immunity from foreign governments in cases arising from a “terrorist attack that kills an American on American soil” and specifically could hold the Saudi kingdom responsible for its role in the Sept 11, 2001 attacks, then the Saudis would retaliate by selling up to $750 billion in American assets.

Today, the Saudi foreign minister Adel al-Jubeir, while speaking to reporters in Geneva after talks with U.S. Secretary of State John Kerry which mainly focused on Syria, admitted this threat saying passage of the law would “erode global investor confidence in America” by which he was, of course, referring only to Saudi Arabia. However, to avoid another slap in the face of US foreign policy on the record, he denied that Saudi Arabia had “threatened” to withdraw investment from its close ally and instead called it a mere “warning.”

“We say a law like this would cause an erosion of investor confidence. But then to kind of say, ‘My God the Saudis are threatening us’ – ridiculous,” Jubeir hedged according to Reuters.

Saudi Foreign Minister Adel al-Jubeir talks to the media in
Geneva, May 2, 2016

“We don’t use monetary policy and we don’t use energy policy and we don’t use economic policy for political purposes. When we invest, we invest as investors. When we sell oil, we sell oil as traders.”

That said we are confident that Jubeir realizes very well that everyone else uses monetary and energy policy for political purposes – hence the Trasury’s brand new Friday watchlist for currency manipulators – which is why when he calls it “erosion of investor confidence” the world reads clearly between the lines.

When he was pressed whether the Saudia Arabia had suggested the law could affect its investment policies, the Saudi foreign minister said: “I say you can warn. What has happened is that people are saying we threatened. We said that a law like this is going to cause investor confidence to shrink. And so not just for Saudi Arabia, but for everybody.

Ah, so now it is “warn”, not “threaten”… gradually getting warmer. He continued: “In fact what they are doing is stripping the principle of sovereign immunities which would turn the world for international law into the law of the jungle,” Jubeir said.

“That’s why the administration is opposed to it, and that’s why every country in the world is opposed to it.

Well, China not only isn’t opposed to it but China could care less… and China has a little over $1 trillion in US Treasuries. Which implies that all the Saudi was doing was merely trying to avoid a diplomatic threat to its close political ally, one which not even Obama would be able to diffuse.

And then, just to emphasize that Saudi Arabia was not “threatening” the US, he repeated it for the third time: “And then people say ‘Saudi Arabia is threatening the U.S. by pulling our investments’. Nonsense.

No matter how one calls the Saudi threat or warning or gentle nudge, however, the reality is that it has no chance of passing in Congress. Not only at the bill’s sponsors gradually trying to prevent its passage, but Obama himself has lobbied Congress to block passage of the bill, which passed the Senate Judiciary Committee earlier this year. For those Americans who are confused just whose interests Obama is representing in this matter, those of America’s citizens or Saudi Arabia’s, we have a few words of advice: don’t overthink it.

END

GLOBAL ISSUES

For 3 months the Aussie has rebounded northbound as commodity prices rose with much of that stimulus coming from China’s 1 trillion dollar bonanza.  However inflation in Australia cooled and as such, they had to lower their discount rate last night. However it was not baked into dealer calculations.  This sent the Aussie dollar crashing to .7537 on the uSA dollar from .77.  This is another big win for gold/silver.

(courtesy zero hedge)

Aussie Dollar Crashes Through Key Support After “Surprise” Rate Cut

As a major leg of many carry trades, the collapse of the Aussie Dollar in the last week has sent ripples through many risk-on positions. Following last week’s plunge in inflation to record lows, one would have assumed that expectations for a ‘stimulating’ rate-cut were baked in to some extent (as AUD plunged then), but this morning’s surprise RBA move has sparked another leg down in the commodity currency, breaking below a crucial uptrend off the January lows as the commodity currency decouples from exuberance in Chinese metals…

Just last week this happened… record low inflation

Which triggered this…

  • *RBA MAY RATE CUT ODDS RISE TO 40% FROM 14% YDAY, FUTURES SHOW

“A pre-emptive May cut is surely now a real possibility,” said Gareth
Berry, a foreign-exchange and rates strategist in Singapore at
Macquarie Bank Ltd. “At the latest, an August cut is now
inevitable. That spells the end of this three-month old Australian
dollar rebound, and the downtrend can now resume in earnest.”

But apparently that was not priced in…

Breaking AUD below a key uptrend…

end
A terrific commentary from David Stockman has he circles the globe to tell us that all exporting nations are seeing their exports collapse. The big 1 trillion dollar Chinese binge into commodities is a fleeting affair and the resultant effect will be chaos when this wears off in a few months
(courtesy David Stockman ContraCorner)

It’s Not Random——The Global Economy’s At Stall Speed, Rapidly Loosing Lift

by  • May 2, 2016

South Korea’s exports tumbled to $41 billion in April, marking the 16th consecutive month of declining foreign sales. Last month’s result represented a 11.2% decline from prior year, and an 18% drop from April 2014. Moreover, within that shrinking total, exports to China were down by 18.4% last month, following a 12.2% drop in March.

South Korea Exports

The Korean export slump is no aberration. The same pattern is evident in the entire East Asia export belt. That’s because the Red Ponzi is in its last innings. Beijing is furiously pumping on the credit accelerator, but to no avail.

As can’t be emphasized enough, printing GDP by means of wanton credit expansion does not create wealth or growth; it just results in an eventual day of reckoning when the speculative excesses inherent in central bank money printing collapse in upon themselves.

Surely, China is close to that kind of implosion. During Q1 total credit, or what Beijing is please to call “social financing”, expanded at a $4 trillion annualized rate. This was up 57% over prior year and represented debt growth at a 38% of GDP annual rate.

Stated differently, during the first 90 days of 2016 China piled another $1 trillion of debt on its existing $30 trillion debt  mountain, while its nominal GDP expanded by less than $175 billion.

That’s right. The Red Ponzi is generating barely $1 of GDP for every $6 of new debt. And much of the “GDP” purportedly generated during Q1 reflected new construction of empty apartments and redundant public infrastructure.

By now it ought to be evident that the Chinese economy is brobdingnagian freak of nature that is destined for a collapse, and that its economic statistics are a tissue of fabrications and delusions. Even its export figures, which are constrained toward minimum honesty because they can be checked against Chinese imports reported by the rest of the world, are padded to some considerable degree by phony export invoicing designed to hide illegal capital flight.

Still, the implication of its export trends are unmistakable. When you aside the statistical razzmatazz of the Chinese New Year’s timing noise in the data, exports were down by 10% in Q1 as a whole. That is the worst quarterly drop since 2009 amidst the global Great Recession, and was nearlytwice the rate of  decline during Q4 and Q3 2015.

China Exports

Here’s the thing. China can’t be growing at 6.7% when its export machine has run out of gas, as is so starkly evident in the graph below. That’s because the whole Red Ponzi was built on subsidized exports via the massive currency pegging operations of the People’s Bank of China. But now that the DM world is at peak debt, the jig is up.

To wit, western consumers are out of borrowing capacity—–so China’s exporters are out of runway. It is maintaining the appearance of GDP growth, in essence, by building pyramids and playing a bad joke on the west.

After all, China’s GDP accounts may be doctored and reported in a crooked manner, but they were gifted to the comrades in Beijing by the same style of Keynesian economic reasoning that lead the Great Thinker to advocate digging holes and then refilling them again as an economic curative. His modern day followers on Wall Street apparently believe the same thing.

ABOOK Apr 2016 China Trade Exports

The latter are also peddling the myth of China’s smooth transition to domestic consumption and services. But when the central bank has exhausted the nation’s balance sheets, as is rapidly occurring in China, consumption growth perforce reverts to the growth rate of production and income. In China’s case, that vector will be heading south as its great construction binge and capital investment spree grinds to a halt.

In short, China is at nearly a 300% debt-to-GDP ratio already. What’s more, the denominator of that ratio is rotten to the core, representing as it does massive malinvestment and redundant public infrastructure that will one day be written off or abandoned as a dead weight loss to China’s economy.

More importantly, laid off construction and industrial workers and shrunken or closed business operations in the boom time sectors of its economy face drastic reductions in current cash flow and increasingly limited capacity to borrow—even in the Red Ponzi. So they will reduce spending, not recycle it, as Wall Street sell-side propagandists constantly proclaim.

That is, China is plunging into deflation and liquidation, not some grand transition to a US style shopping mall and services mecca.   The US got to that dubious condition by borrowing from the rest of the world so that American consumers could live well beyond their means. Alas, China has already used up its national credit card, and there is no one left on the planet to borrow from, anyway.

Indeed, there is plenty of evidence already for the coming round of economic compression as opposed to theoretically recycling. China is a great materials conversion machines that takes imports raw material and intermediate goods and converts them into final assemblies and consumer products for export. Accordingly, when import volumes are falling, it is a another telltale warning that China’s credit ponzi is failing.

Thus, Q1 imports as a whole fell 13.3% from prior year, and represented a worsening of Q4’s decline of 11.8% . As Jeff Snider demonstrated in the chart below, China’s import trend has transitioned from a slowdown mode to sustained decline.

ABOOK Apr 2016 China Trade Imports

If China were experiencing a smooth transition to domestic consumption and services, imports would not be falling at the rates depicted above. After all, the two largest sectors of its services economy are construction and retail—-both of which depend upon the flow-through of imports: raw materials in the former case, and luxury goods from the DM economies in the case of the latter sector.

Needless to say, the ongoing production slump in China is taking its toll far and wide among the export economies that prospered during the boom phase of the Red Ponzi.

Singapore, which is the hub of the system, has dropped even more. March exports were down 14% from prior year and nearly 21% from March 2014.

Singapore Exports

Likewise, Hong Kong’s exports are down nearly 9% in the last two years, while Taiwan’s exports have been reduced by 19% during that period. In both cases, the plunge in shipments to China has led the erosion. During the last year, for example,  Hong Kong’s exports to China have dropped by 11% or well more than its to total export drop.

Taiwan Exports

Hong Kong Exports

Similarly, Indonesian export shipments have dropped 21%. In these case of Brazil, which was essentially an export satellite of China, the dollar value of its export shipments is down by 24% since 2013.

Indonesia Exports

Brazil Exports

During the last two months, of course, the Red Ponzi has experienced another speculative mini-bubble. It seems that last year’s raging horde of gamblers, which at one point had opened 387 million stock trading accounts, had piled into the commodity pits. While this latest outbreak did fuel a completely phony 50-70% rebound in the price of iron ore, cotton and rebar futures, it was not evidence of a sustainable economic revival.

In fact, during Q1 China consumed 332 million tons of petroleum fuels (gasoline and distillates) compared to just under 339 million tons during Q1 of 2015. That 2% reduction not only negates the China recovery meme, but also represents a sharp inflection point in the underlying trend of petroleum consumption.

To wit, between 2011 and 2015 China’s Q1 domestic petroleum fuel use, as measured by shipments of its two giant state companies, rose from 271 million tons to 339 million tons or by 5.5% per annum.  By contrast, it is now shrinking, and that is a sign of an unfolding deflation, not a return to boom times in another venue.

There is a reason why CapEx is plunging all over the world, Japan is slipping into recession, Europe is sputtering and the US has hit the flat line. Namely, the central bank fueled crack-up boom is doing exactly what Mises foretold; its cracking up.

 

END

OIL ISSUES

Oil tumbles to the$43.00 handle:

(courtesy zero hedge)

WTI Crude Tumbles To $43 Handle As Demand Fears Grow

Remember when the low oil price was an “over-supply” issue and nothing at all to do with the other side of the same coin – dwindling demand? Well it appears that reality is dawning that a record glut combined with tumbling global growth (confirmed by weakness in China PMI, US PMI, and now EU growth expectations) is sending crude prices lower, back to a $43 handle for the June contract…

end
Then crude jumps on smaller than expected Cushing OK build
(courtesy zero hedge)

WTI Crude Jumps Above $44 After Smaller Than Expected Cushing Build

Notable weakness in oil prices amid growth/demand concerns today, following Genscape’s (+821k) Cushing’s big build report yesterday, and expectations for continued builds in overall crude and Cushing levels set up trades ahead of API’s report with oil below $44 heading in. An overall crude inventory rise of 1.3mm barrels (almost double the 750k expectation)was not enough to trump a smaller than expected Cushing build of just 382k barrels (1.3m exp) which seemed to please the machines which ripped WTI back above $44 instantly.

As Bloomberg reports, Crude inventories +1.3m, gasoline -1.2m, distillates -2.6m, according to person familiar and reports on Twitter. Cushing crude inventories +382k

API:

  • Crude +1.265m (+750k exp)
  • Cushing +382k (+1.3m exp.. Genscape +821k)
  • Gasoline -1.17m
  • Distillates -2.6m

Cushing’s lower than expected build is the biggest driver for now…

“The reality is that gasoline inventories remain healthy and the runup had a lot to do with the seasonal trade and fear of ongoing production issues,” says Eric Rosenfeldt, vp of supply, trading at Papco

And the reaction in crude, after jumping higher after the NYMEX Close…

“The price of crude got ahead of itself,” Michael Corcelli, chief investment officer of hedge fund Alexander Alternative Capital in Miami, says. “The supply issue is definitely there. That’s not something that is going to change. Now people are starting to get worried about demand.”

 

Charts: Bloomberg

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

 

euro  1.1577 UP .0054 ( STILL REACTING TO USA FAILED POLICY)

USA/JAPAN YEN 105.88 DOWN 0.525 (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 1.4669 UP .0007 (STILL THREAT OF BREXIT)

USA/CAN 1.2567 UP .0035

Early THIS TUESDAY morning in Europe, the Euro ROSE by 54 basis points, trading now WELL above the important 1.08 level RISING to 1.1281; Europe is still reacting to deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite was CLOSED UP 54.32 PTS OR 1.85% / Hang Sang CLOSED DOWN 390.11  1.85%   / AUSTRALIA IS HIGHER BY 2.11% (RESOURCE STOCKS DOING WELL / ALL EUROPEAN BOURSES ARE ALL IN THE RED  as they start their morning/

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

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

2, the Nikkei average vs gold carry trade ( NIKKEI 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 FOR HOLIDAY 

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 390.11 PTS OR 1.85% . ,Shanghai CLOSED  UP 54.32 OR 1.85%/ Australia BOURSE IN THE GREEN: /Nikkei (Japan) CLOSED FOR HOLIDAY/India’s Sensex IN THE RED

Gold very early morning trading: $1292.30. (AFTER PIERCING 1300 DOLLARS PER OZ AGAIN LAST NIGHT)

silver:$17.49

Early TUESDAY morning USA 10 year bond yield: 1.80% !!! DOWN 6 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 RISES to 2.66 DOWN 6 in basis points from MONDAY night.

USA dollar index early TUESDAY morning: 92.25 DOWN 38 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:  3.09% DOWN 1 in basis points from MONDAY

JAPANESE BOND YIELD: -0.124% DOWN 1/10 in   basis points from MONDAY

SPANISH 10 YR BOND YIELD:1.56% DOWN 2 IN basis points from MONDAY

ITALIAN 10 YR BOND YIELD: 1.46  DOWN 1 IN basis points from MONDAY

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

GERMAN 10 YR BOND YIELD: .200% (DOWN 17 IN BASIS POINTS 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 1.1577 DOWN .0016 (Euro =DOWN 16  basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 106.39 DOWN 0.013 (Yen UP 2 basis points As MARKETS TANK BADLY

Great Britain/USA 1.4539  DOWN .0123 Pound DOWN 123 basis points/

USA/CanadA 1.2717 UP 0.0187 (Canadian dollar DOWN 187 basis points with OIL FALLING(WTI AT $43.76)

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 16 basis points to trade at 1.1507

The Yen ROSE to 106.39 for a GAIN of 2 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was DOWN 123 basis points, trading at 1.4539

The Canadian dollar FELL by 187 basis points to 1.2717, WITH WTI OIL AT:  $43.76

The USA/Yuan closed at 6.4832

the 10 yr Japanese bond yield closed at -.124% DOWN 1/10 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 7  basis points from MONDAY at 1.79% //trading well below the resistance level of 2.27-2.32%) HUGE policy error

USA 30 yr bond yield: 2.65 DOWN 7 in basis points on the day ( HUGE POLICY ERROR)

 

Your closing USA dollar index, 92.93 UP 35 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  DOWN 56.30 OR .90%
German Dax :CLOSED DOWN 196.50 OR 1.94%
Paris Cac  CLOSED DOWN 70.77  OR 1.59%
Spain IBEX CLOSED DOWN 257.20 OR 2.85%
Italian MIB: CLOSED DOWN 453.41 OR 2.46% (BANKING CRISIS)

The Dow was down 140.25  points or 0.78%

NASDAQ down 54.37 points or 1.13%
WTI Oil price; 43.76 at 4:30 pm;

Brent Oil: 45.07

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.54 (ROUBLE DOWN 1 AND 35 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT FELL AND WTI FELL

.

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:  $43.98

BRENT: 45.24

USA 10 YR BOND YIELD: 1.79%

USA DOLLAR INDEX:92.96 up 38 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

Dollar’s Best Day In 6 Months Sparks Stock Slump, Bond Jump

 

For those anxiously Buying in May…

 

The machines giveth (in low volume meltup) and the data (Global PMI plunged to cycle lows following China’s update overnight, not helped by EU’s downgraded growth and inflation outlook) taketh away..

 

From Friday, Trannies and Small Caps are the biggest losers and Nasdaq danced at unchanged…

 

AAPL broke its longest losing streak since 1998… (thank you Jim Cramer and Buybacks)

 

VIX jockeyed with 16 all day…

 

As “Most Shorted” stocks plunged the most in 2 months…

 

HY bonds (HYG) had their worst day in 2 months as HY spreads spiked notably more than stocks…

 

Treasury yields collapsed today by the most in 3 months…

 

As The USD Index surged on EUR and AUD (RBA rate cut) weakness…

 

Today was the Bloomberg Dollar Index’s best day since Nov 2015…

 

Post-European open dollar strength took the shine off commodities, though PMs were the least impacted…

 

Crude slid back to a $43 handle befopre tonight’s inventory data…

 

Charts: Bloomberg

Bond yields plummet by 9 basis points on the 10 yr bond as the economy sinks:

(courtesy zero hedge)

Treasury Yields Tumble Most In 3 Months Despite Fed’s Williams Warning

Having pushed higher yesterday, it appears ‘investors’ have had a sudden change of heart and are panic-buying bonds today, despite Fed’s Williams warning that:

  • WILLIAMS SAYS U.S. TREASURIES ARE PRICED EXTRAORDINARILY HIGH.

Treasury yields are down 5bps (2Y) to 9bps (10Y) with non-stop buying since Europe opened.

30Y yield’s 7.5bps drop is the biggest since Feb 18th, pushing the yield back to its 20-day moving average.

 end

In the USA expect double digit increases in their premiums and this will occur precisely around one week before the election on November 1

( zero hedge)

Obamacare To Unveil “Price Shock” One Week Before The Elections

The writing was on the wall long before the largest US insurer, UnitedHealth, decided to pull the plug on Obamacare in mid April.  Then, just a week later, Aetna’s CEO said Thursday that his company expects to break even, but legislative fixes are needed to make the marketplace sustainable.

“I think a lot of insurance carriers expected red ink, but they didn’t expect this much red ink,” said Greg Scott, who oversees Deloitte’s health plans practice. “… A number of carriers need double-digit increases.”

It gets better.

One week ago Marilyn Tavenner, who until January 2015 ran the federal Centers for Medicare and Medicaid Services, aka the massive Federal agency that oversaw the rollout of Obamacare and the disastrous implementation of HealthCare.gov and who is now as an insurance lobbyist,said she sees big jumps in Obamacare insurance premiums.

Translation: insurers are not making money, and they need to make money or Obamacare is doomed. Which means even more dramatic rate hikes are about to be unveiled. However, it’s not the what but rather the when that is the shock. And, as Politico reports, the timing could not possibly come at a worse time for Democrats.

“Proposed rate hikes are just starting to dribble out, setting up a battle over health insurance costs in a tumultuous presidential election year that will decide the fate of Obamacare.”

The headlines are likely to keep coming right up to Election Day since many consumers won’t see actual rates until the insurance marketplaces open Nov. 1 — a week before they go to the polls.

That’s right: just one week before the election date, Americans will be served with what now appears will be double (if not more) digit increases in their insurance premiums. Politico is spot on in saying that “the last thing Democrats want to contend with just a week before the 2016 presidential election is an outcry over double-digit insurance hikes as millions of Americans begin signing up for Obamacare.

They will have no choice: following years of actual delays to avoid a major public backlash on the critical mandate, this time the hammer is set to fall and it will do so at the worst possible time for Hillary Clinton.

“Any reports of premium increases will immediately become talking points on the campaign trail,” said Larry Levitt, senior vice president for special initiatives at the nonprofit Kaiser Family Foundation. “We’re in an election where the very future of the law will be debated.” Democrats say they will mount a vigorous defense of a law that has provided 20 million people with coverage — and point to Republicans’ failure to propose any coherent alternative to Obamacare.

Which is another way to say Democrats are near panic.

“The Republicans will try to make Clinton own the higher prices, but the problem is that Republicans have no alternative or answer,” said Anna Greenberg, a Democratic pollster. “They are in the position of taking away insurance if they repeal Obamacare.”

Somehow we doubt that would be such terrible news for all those millions of Americans whose mandatory “tax” (thank you Supreme Court) subsidies keep the program alive. We also doubt that anyone among America’s middle class will shed a tear if Obamacare is gone.

Which brings us to the key question: just how much of a shocker will be unveiled days before the election? According to Politico, and here we disagree as we have seen price increases in the high double digit ragne, “average rate hikes have been modest in the past despite apocalyptic predictions: premiums increased by an average of 8 percent this year, according to an administration analysis. That report “debunks the myth” that Obamacare customers experienced double-digit rate hikes, said Department of Health and Human Services spokesman Ben Wakana.”

Where we do agree with Politico is that “there are reasons to think the next round may be different.” Blue Cross and Blue Shield plans, which dominate many state exchanges, saw profits plummet by 75 percent between 2013 and 2015, according to an analysis by A.M. Best Co. A chief reason for the financial woes: “the intensity of losses in the exchange segment.”

“I have to raise prices because I have to assume the worst,” said Martin Hickey, CEO of New Mexico Health Connections, one of the surviving co-ops, which expects to increase prices by roughly a third for 2017. “Whether it stabilizes or not, we can’t take the risk.”

Even New York-based Oscar, the much ballyhooed, tech-savvy startup bankrolled with billions in venture capital dollar, is sputtering. Medical costs for Oscar’s individual customers in New York, where it has the most customers, outstripped premiums by nearly 50 percent last year, according to financial filings.

“In some cases the hole is getting deeper rather than getting better,” said Deloitte’s Scott.

In short: expect majour double-digit percent increases in premium prices, and not just because Obamacare is fatally flawed, but for two key reasons we warned about years ago when Obamacare was being rolled out: i) not enough participants to make it economically scalable and ii) those who did sign up are so sick that they promptly soaked up all the externalities.

From Politico:

One big reason is lower-than-expected enrollment of younger, often healthier people who balance the costs of those who require more costly care. Roughly 12.7 million Americans signed up for Obamacare plans during the most recent open enrollment period. That’s far below the 22 million projected by the Congressional Budget Office, and it’s certain to decline as some drop out.

 

The pool is far less healthy than we forecast,” said Brad Wilson, CEO of Blue Cross Blue Shield of North Carolina, which says it lost $400 million on its exchange business during the first two years and is weighing whether to compete for Obamacare customers in 2017. “That’s an issue not just here in North Carolina, but all over. … We need more healthy people in the pool.”

Then again, the healthy people have no incentive to sign up and would rather pay the penalty charge instead of spending far more to subsidize those who are not healthy. Sure enough, as with all epically flawed government projects, the cracks in Obamacare became apparent with time.

There’s a growing realization the financial penalty for failing to obtain coverage is an insufficient cudgel to convince younger Americans to enroll. The fee for 2016 is $695, or 2.5 percent of income, whichever is higher. Just 28 percent of HealthCare.gov customers for 2016 were between the ages of 18 and 34, significantly below the 35 percent threshold typically considered necessary for a balanced marketplace.

 

“It wasn’t enough of a hammer,” said Kevin Fitzgerald, an insurance lawyer with Foley & Lardner. “You need a lot of healthy people to sign up to make the numbers work. Obviously that didn’t happen.”

Ah, we get it now: only Obamacare had “enough of a hammer” it would work like a charm.

And then there was the timing arbitrage. Health plans have complained that Obamacare’s enrollment rules are too loose, allowing people to wait until they need medical care to sign up for coverage, and then to halt payments once they’ve received treatment.

This may work for Netflix, but it is an absolute disaster when it affects a mandatory tax program that is supposed to benefit everyone.

The Obama administration is addressing some of these concerns: It has eliminated some reasons Obamacare customers can use to sign up outside the standard enrollment season. And it plans to require proof from exchange customers that they’re eligible to sign up outside the normal window because, say, they’ve moved or had a kid, which are among the most common reasons.

Alas, such “real time fixes” also never work and end up being gamed by the consumers every step of the way. Which is why health plan officials say more needs to be done to stabilize the markets, for instance, by giving them greater flexibility to sell different kinds of policies. “We have real concerns about the next year or two based on the experience so far,” said Ceci Connolly, CEO of the Alliance of Community Health Plans, which represents 22 plans. “Even for our members that are getting close to breaking even on this, they say that it’s a really challenging and unpredictable environment.”

Most health plans remain optimistic the markets will eventually stabilize. Security Health Plan, which does business in 41 Wisconsin counties, attracted three times as many exchange customers as anticipated during its first year of Obamacare business.

Was it a financial winner? No,” said John Kelly, the health plan’s chief marketing and operations officer. “We expected to take losses and we did.”

But no more, which is why literally in the days heading up to the general election, the US population will be served a very unpleasant reminder of what happens when big state goes out of control, and that there is no such thing as “free healthcare.”

Just how much of a hit to Hillary’s election chances the “Obamacare shock” will be, we will find out on November 8.

end

Well that about does it for tonight

I will see you tomorrow night

Harvey

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