May 20 b/Huge increase in inventory of 8.92 tonnes at the GLD/ A good sized deposit of 951,000 oz in silver enters the SLV/Comex gold standing for delivery in May increases to 6.68 tonnes/It has been increasing all month!/The Central Bank of Japan throws a trial balloon that they are ready to take huge losses on their bonds once they stop QE: a huge story!/Protesters storm the Prime Minister office in the Green zone inside Baghdad/

Good evening Ladies and Gentlemen:

Gold:  $1,252.40 DOWN $1.80    (comex closing time)

Silver 16.52  UP 4 cents

 

In the access market 5:15 pm

Gold $1252.30

silver:  16.52

Today after a great start for gold and silver, the bankers thought in necessary to raid again. The gold/silver equity shares paid no attention to these antics and rose again today.

There is something really bothering them.

i)There was no question that the high open interest in gold for the entire complex, plus the high OI for June was one factor

ii) the continued high OI for silver and its refusal to melt with constant whacking

iii) the May gold contract is a non active contract.  Yet we started the month with 5.67 tonnes of gold standing and it has increased every single day and today sits at 6.68 tonnes of gold standing:

 

The amount standing for gold at the comex in May is simply outstanding at 6.6811 tonnes. The previous May 2015, we had only .08 tonnes standing so you can certainly witness the difference as the demand for gold by investors/sovereigns is on a torrid pace. This makes the excitement for June gold that much more intense as more players are refusing fiat and demanding only physical metal. I will be reporting daily as to how which is standing for delivery through the active month of June.  June is the second largest delivery month after December.

Let us have a look at the data for today

.

At the gold comex today we had a GOOD delivery day, registering 69 notices for 6900 ounces for gold,and for silver we had 72 notices for 360,000 oz for the non active May delivery month.

Several months ago the comex had 303 tonnes of total gold. Today, the total inventory rests at 240.39 tonnes for a loss of 63 tonnes over that period

.

In silver, the open interest FELL by 2,302 contracts DOWN to 202,627 as the price was silver was DOWN  by 64 cents with respect to yesterday’s trading. AGAIN TODAY, NOT NEARLY THE LIQUIDATION THAT THEY HAVE BEN LOOKING FOR. In ounces, the OI is still represented by just over 1 BILLION oz i.e. .1.013 BILLION TO BE EXACT or 144% of annual global silver production (ex Russia &ex China)

In silver we had 72 noticeS served upon for 360,000 oz.

In gold, the total comex gold OI fell by a CONSIDERABLE 17,504 contracts down to 573,196 as the price of gold was DOWN $19.50 with yesterday’s trading(at comex closing). They certainly got the liquidation in gold but not silver.  However our banker boys have another problem in gold which I will highlight below.

 

 

We had  a monster deposit  in gold inventory at the GLD to the tune of 8.92 tonnes. The inventory rests at 869.26 tonnes. I have no doubt whatsoever that this was a paper addition as they could not possibly find 10 tonnes in one day.We had a good sized deposit  in silver inventory at the SLV to the tune of 951,000 oz . Inventory rests at 336.024 million oz.

.

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

1. Today, we had the open interest in silver fall by 2,302 contracts down to 202,627 as the price of silver was DOWN by 64 cents with yesterday’s trading. The gold open interest FELL by 17,504 contracts as  gold was down $19.50 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.I also believe that for the first time we are witnessing players wishing to stand for real physical in gold.  Gold investors, in the May contract month are refusing the tempting fiat offer as they want only physical.

(report Harvey).

 

2 a) Gold trading overnight, Goldcore

(Mark OByrne/off today

2b)  Gold trading earlier this morning;

(Mark O’byrne)

2c) COT report

Harvey

3. ASIAN AFFAIRS

i)Late  THURSDAY night/ FRIDAY morning: Shanghai closed UP  BY 18.56 PTS OR 0.66%  /  Hang Sang closed UP 157.87 OR 0.80%. The Nikkei closed UP 89.69 POINTS OR 0.54% . Australia’s all ordinaires  CLOSED UP 0.53% Chinese yuan (ONSHORE) closed DOWN at 6.5471 .  Oil FELL to 48.24 dollars per barrel for WTI and 48.81 for Brent. Stocks in Europe  ALL IN THE GREEN . Offshore yuan trades  6.5649 yuan to the dollar vs 6.5471 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.

 

REPORT ON JAPAN  SOUTH KOREA AND CHINA

 

a) REPORT ON JAPAN

wow!! late this afternoon, the central bank of Japan threw a huge trial balloon for the markets over here.  This was released after midnight i.e. early Saturday morning for them.

Basically they are starting to prepare for losses on its huge debt holdings once QE ends.

They will have two problems:

i)as rates rise, bonds sink and thus huge losses

ii) a soaring yen, being unwound by everybody will kill the country’s exports

(courtesy zero hedge)

 

b) REPORT ON CHINA

 

China sends a strong message to the USA to cease immediately spy plane missions near its borders.  If the USA does not respond, then China would devalue the yuan greatly!!

( zero hedge)

 

 

 

 4.EUROPEAN AFFAIRS

We now have an investigation of the Greek banks being investigated for funding politicians in Greece

 

( zero hedge)

 

5.RUSSIAN AND MIDDLE EASTERN AFFAIRS

 

Protesters have stormed Baghdad’s Green zone and now have entered the Prime Minister’s office..looks precarious to me

(courtesy zerohedge)

6.GLOBAL ISSUES

none

7. OIL ISSUES

 

i)The huge disruptions that we have had with respect to oil has now faded away as Canada, Libya and Nigera resume their production

 

( zero hedge)

 

ii)Just take a look at the idle tankers off the coast of Singapore:

( zero hedge)

iii)Oil falls a bit after the rig count declines have finally stalled:

( zero hedge)

 

8.PHYSICAL MARKETS

i)An extremely important read.

Commodity prices are rising, not because of increased activity but because the dollar is losing purchasing power.  This will in turn cause bond yields to rise.

And where is trouble going to manifest itself?  Alasdair explains that the Eurozone will be in deep trouble and no doubt Italy will be in the forefront.

Italy has a Debt to GDP of 130%  (and probably higher) .  It also has non performing loans of 360 billion euros which represents 40% of all private loans. The author correctly believes that Italian sovereign bonds yields must rise from the ridiculous 1.5% level to more realistic 7%.  That is when everything blows up

 

(Alasdair Macleod)

 

USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD AND SILVER

i) a  Insolvent Illinois has it’s state workers demanding wage increases of up to 29%. These guys also have gravy train health benefits that would make the envy of anybody in the USA

( Mish Shedlock)

 

ib)Chicago’s pension liabilities jump by 168% and understated by a huge 11.5 billion.

It sure looks like Chicago is the next Detroit:
( Mish Shedlock)

 

ii)Consumer loan delinquencies have been hanging in there but it is business loan soaring that is causing much grief for the Fed:

( Wolf Richter/WolfStreet)
iii)Existing homes sales tumble in the south and the west regions of the USA.  However what saved the day is condo sales
(zero hedge)

Let us head over to the comex:

The total gold comex open interest FELL to an OI level of 573,196 for a CONSIDERABLE LOSS of 17,504 contracts AS  THE PRICE OF GOLD WAS DOWN $19.50 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. IT SURE SEEMS THAT THE LATER HAS STOPPED. ACTUALLY WE HAVE WITNESSING A GRADUAL RISE IN AMOUNT STANDING THROUGH THE MONTH.  THE MONTH OF May saw its OI RISE 53 contracts UP to 164. We had 0 notices filed YESTERDAY so we GAINED 53 gold contract or an additional 5300 oz will stand for delivery. The next big active gold contract is June and here the OI FELL by 38,399 contracts DOWN to 266,284 as those paper players that wished to stay in the game rolled to August AND THE REST EITHER STAYED PUT FOR NOW OR LEFT PERMANENTLY. The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was excellent at297,222. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was EXCELLENT at 336,279 contracts. The comex is not in backwardation. We are LESS THAN 2 weeks away from first day notice for the huge June contract.(8 trading sessions)

Today we had 69 notices filed for 6900 oz in gold.

 

And now for the wild silver comex results. Silver OI FELL by A SMALL 2,302 contracts from204,929 DOWN to 202,627 as the price of silver was DOWN BY 64 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 55 contracts DOWN to 627. We had 3 notices filed yesterday so we LOST 52 contract or an additional 260,000 oz of silver will NOT stand in this non-active delivery month of May. The next non active month of June saw its OI FALL by 189 contracts DOWN to 660 OI. The next big delivery month is July and here the OI FELL by 2654 contracts down to 135,136. The volume on the comex today (just comex) came in at 36,522 which is good. The confirmed volume YESTERDAY (comex + globex) was huge at 81,426. Silver is  in backwardation up to June. London is in backwardation for several months.
 
We had 72 notices filed for 360,000 oz.
 

MAY contract month:

INITIAL standings for MAY

May 20.
Gold
Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  nil  192.900 OZ

MANFRA,

6  KILOBARS

Deposits to the Dealer Inventory in oz 28,356.300 oz

882 kilobars

Brinks

Deposits to the Customer Inventory, in oz    3793.700 oz

118 kilobars

Brinks

No of oz served (contracts) today 69 contracts
(6900 oz)
No of oz to be served (notices) 99 CONTRACTS

9900 OZ

Total monthly oz gold served (contracts) so far this month 2049 contracts (204,900 oz)
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil
Total accumulative withdrawal of gold from the Customer inventory this month  282,465.5 OZ

Today we had 1 dealer deposits

i) Into Brinks:  28,356.300 oz  (882 kilobars)

Today we had 0 dealer withdrawals:

total dealer withdrawals:  nil oz

Today we had 1 customer deposit:

i) Into brinks:  3793.700 oz or 118 kilobars

Total customer deposits;3793.700 OZ

Thus Brinks through dealer and customer brought in 31,150.000 oz or 1,000 kilobars

Ladies and Gentlemen:  the comex is one big fraud.

Today we had 1 customer withdrawals:

i) Out of Manfra:  192.900 oz  6 KILOBARS

total customer withdrawals: 192.900 OZ  (6 kilobars)

Today we had 0 adjustment:

Today, 0 notices was issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 69 contracts 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 (2049) x 100 oz  or 204,900 oz , to which we  add the difference between the open interest for the front month of MAY (164 CONTRACTS) minus the number of notices served upon today (69) x 100 oz   x 100 oz per contract equals 214,800 oz, the number of ounces standing in this non active month.  This number is huge for May. IT NOW SEEMS THAT THE AMOUNT STANDING FOR GOLD IN MAY WILL HOLD AND WITH THAT IT WILL BRING MUCH EXCITEMENT TO JUNE 
 
Thus the initial standings for gold for the MAY. contract month:
No of notices served so far (2049) x 100 oz  or ounces + {OI for the front month (164) minus the number of  notices served upon today (69) x 100 oz which equals 214,800 oz standing in this non  active delivery month of MAY(6.6811 tonnes).
WE  gained 53 contracts or an additional 5300 oz will stand for delivery in this non non active month of May.  It is this continual increase in gold ounces standing that is driving our bankers crazy and the reason today for another raid on gold/silver.
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 6.6811 tonnes of gold standing for MAY and 19.595 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 6.6811 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 + May 5:  3.799 and May 6: 1.607 tonnes – MAY 12  .0003- May 18: 1.5635 tonnes-May 19/   2.535 tonnes  = 17.029 tonnes still standing against 19.595 tonnes available.
 
Total dealer inventor 658,361.132 tonnes or 20.477 tonnes
Total gold inventory (dealer and customer) =7,760,598.488 or 241.387 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 241.39 tonnes for a loss of 62 tonnes over that period. 
 
JPMorgan has only 22.79 tonnes of gold total (both dealer and customer)
JPMorgan now has only .900 tonnes left in its dealer account.
May is not a very good delivery month and yet 6.6811 tonnes of gold is standing.  What is different from other months is that the bankers cannot offer any fiat to those standing. They want the real stuff. We are extremely close to the all time highs in both gold and silver OI.
 
 end
And now for silver
 

MAY INITIAL standings

 May 20.2016

Silver
Ounces
Withdrawals from Dealers Inventory nl oz
Withdrawals from Customer Inventory  172,888.530 oz

Delaware,HSBC

Scotia

Deposits to the Dealer Inventory 363,692.650 oz

Brinks

Deposits to the Customer Inventory  837,485.783 oz

Brinks, CNT

No of oz served today (contracts) 72 CONTRACTS 

360,000 OZ

No of oz to be served (notices) 600 contracts

3,000,000 oz

Total monthly oz silver served (contracts) 2128 contracts (10,640,000 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  7,867,598.6 oz

today we had 1 deposit into the dealer account

i) Into Brinks: 363,692.650 oz

total dealer deposit:363,692.650 oz

we had 0 dealer withdrawals:

total dealer withdrawals:  nil

 

we had 2 customer deposits:

i) Into Brinks: 600,732.310 oz

ii) Into CNT: 236,753.473

Total customer deposits: 837,485.783 oz.

We had 3 customer withdrawals

i) out of Delaware: 4931.100 oz

ii) Out of HSBC: 107,615.740

iii) Out of Scotia; 60,340.690 oz

:

total customer withdrawals:  172,888.530  oz

 
 

 

 we had 0 adjustment

The total number of notices filed today for the MAY contract month is represented by 72 contracts for 360,000 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 (2128) x 5,000 oz  = 10,640000 oz to which we add the difference between the open interest for the front month of MAY (672) and the number of notices served upon today (72) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the MAY contract month:  2128 (notices served so far)x 5000 oz +(672{ OI for front month of MAY ) -number of notices served upon today (72)x 5000 oz  equals 13,640,000 oz of silver standing for the MAY contract month.
WE LOST 52  SILVER CONTRACTS TODAY OR AN ADDITIONAL 260,000 OZ WILL NOT STAND FOR DELIVERY IN THIS ACTIVE MONTH OF MAY.
 
Total dealer silver:  30.034 million
Total number of dealer and customer silver:   154/565 million oz
The open interest on silver is NOW AT CLOSE an all time high with the record of 207,394 being set May 18.2016. The registered silver (dealer silver) is close to multi year lows as silver is being drawn out and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver.
end
And now the Gold inventory at the GLD
May 20/what!!!A MONSTER DEPOSIT OF :8.92 TONNES OF GOLD INTO THE GLD INVENTORY/AND WITH GOLD DOWN $2.80??/INVENTORY RESTS AT 869.26
May 19/ANOTHER HUGE DEPOSIT OF 4.46 TONNES OF GOLD INTO THE GLD/iNVENTORY RESTS AT 860.34 TONNES
May 18 /no changes in inventory at the GLD/Inventory rests at 855.89 tonnes.
May 17/ we had a huge deposit of 4.76 tonnes of gold into the GLD/Inventory rests tonight at 855.89 tonnes/in the last two and 1/2 weeks we have added 50 tonnes of gold and this most likely was all paper gold addition..
May 16./ today we had no changes in inventory at the GLD/Inventory rests at 851.13 tonnes
May 13./another addition of 5.94 tonnes of gold into the GLD/Inventory rests at 851.13 tonnes
May 12/another huge deposit of 3.27 tonnes in gold inventory at the GLD/inventory rests at 845.19 tonnes
May 11/another huge deposit of 2.67 tonnes in gold inventory at the GLD/Inventory rests at 841.92 tonnes
May 10/Another huge deposit of 2.38 tonnes in gold inventory at the GLD/Inventory rests at 839.25 tonnes
May 9/Surprisingly we had another deposit of 2.68 tonnes of gold into the GLD with gold down!! Inventory 836.87 tonnes
May 6 SURPRISINGLY WE HAD ANOTHER HUGE DEPOSIT OF 8.65 TONNES OF GOLD INTO THE GLD/ INVENTORY RESTS AT 834.19 TONNES
May 5/SURPRISINGLY WE HAD A HUGE DEPOSIT OF 3.90 TONNES OF GOLD WITH THE PRICE OF GOLD DOWN???
May 4/ we had a small deposit of .6 tonnes of gold into the GLD/inventory rests at 825.54 tonnes
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 GLD/Inventory rests at 804.14
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

May 20.:  inventory rests tonight at 869.26 tonnes

end

Now the SLV Inventory
May 20/WE HAD A GOOD SIZED DEPOSIT OF 951,000 OZ INTO THE SLV/INVENTORY RESTS AT 336.024 MILLION OZ
May 19/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz
May 18/no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz/
May 17/no change in silver inventory at the SLV/Inventory rests at 335.073 million oz/
May 16./no changes in silver inventory at the SLV/Inventory rests at 335.073 million oz
May 13./no change in silver inventory at the SLV/inventory rests at 335.073 million oz
May 12/no change in silver inventory/rests tonight at 335.073 million oz/
 May 11.2016/no change in silver inventory/rests tonight at 335.073 million oz/
May 10.2016/we had a huge withdrawal of 1.046 million oz in silver leaving the SLV,no doubt for Shanghai which lately has been gobbling up whatever inventory it could lay its hands on/Inventory rests at 335.073 million oz.
May 9. no change in silver inventory/rests at 336.119 million oz.
May 6/ SURPRISINGLY WE HAD A WITHDDRAWAL OF 1.142 MILLLION OZ FROM THE SLV
INVENTORY RESTS AT 336.119 MILLION OZ
MAY 5.2016: NO CHANGE IN INVENTORY/rests tonight at 337.261 million oz
May 4/we had a good size withdrawal of 1.553 million oz from the SLV/Inventory rests at 337.261 million oz
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
.
May 20.2016: Inventory 336.024 million oz
end

COT report

At 3:30 pm we receive the COT report.  Let us see what damage the bankers did this week:

First Gold COT:

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
340,748 74,460 79,137 122,477 412,720 542,362 566,317
Change from Prior Reporting Period
3,497 2,107 11,532 -734 4,513 14,295 18,152
Traders
194 102 102 49 62 296 221
 
Small Speculators  
Long Short Open Interest  
52,715 28,760 595,077  
1,005 -2,852 15,300  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, May 17, 2016

Our large specs:

Those large specs that have been long in gold added 3497 contracts to their long side’
Those large specs that have been short in gold added 2107 contracts to their short side.
Our commercials:
Those commercials that have been long in gold pitched 734 contracts from their long side
Those commercials that have been short from the beginning of time added another 4513 contracts to their short side.

Our small specs

Those small specs that have been long in gold added 1005 contracts to their long side
Those small specs that have been short in gold covered 2852 contracts from their short side
Conclusions:
Commercials go net short by : 4679 and thus bearish. However i strongly believe that the data is compromised.
And now for our silver COT:
Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
105,988 28,786 18,897 54,759 144,654
-1,856 1,213 2,233 889 -948
Traders
112 62 41 35 41
Small Speculators Open Interest Total
Long Short 207,394 Long Short
27,750 15,057 179,644 192,337
737 -495 2,003 1,266 2,498
non reportable positions Positions as of: 169 126
Tuesday, May 17, 2016   © SilverS
Our large specs:
Those large specs that have been long in silver pitched 2030 contracts from their long side??
Those large specs that have been short in silver added another 1131 contracts to their short side.
Our commercials:
Those commercials that have been long in silver added 1370 contracts to their long side??
Those commercials that have been short in silver covered 548 contracts from their short side??
Our small specs;
Those small specs that have been long in silver added 721 contracts to their long side
Those small specs that have been short in silver covered 522 contracts from their short side.
Conclusions; 
commercials go net long by 1918 contracts.
however I believe that the data is compromised.

 NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 4.1 percent to NAV usa funds and Negative 4.0% to NAV for Cdn funds!!!!
Percentage of fund in gold 61.7%
Percentage of fund in silver:36.9%
cash .+1.4%( May 20/2016).
2. Sprott silver fund (PSLV): Premium rises   to +.04%!!!! NAV (MAY 20.2016) 
3. Sprott gold fund (PHYS): premium to NAV  FALLS TO 1.07% to NAV  ( MAY 20.2016)
Note: Sprott silver trust back  into POSITIVE territory at +04% /Sprott physical gold trust is back into positive territory at +1.07%/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 +.04%.  Remember that Eric is to get 75 million dollars worth of silver in a new offering.
 
 
 

END

 

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

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

Buy Silver – “Best Precious Metals Trade”

“Buy silver, sell gold” is the bold call of currency and money analyst Dominic Frisbyin the latest edition of best selling Money Week.

Gold/silver ratio chart

Frisby looks at the relative value of silver to gold and comes to the conclusion that silver is a better buy right now. We share his bullish view on silver and hence our current campaign regarding VAT free silver coins.

From the article:

“Today we consider gold and silver.

We suggest that you should buy one and sell the other.

We then advise walking away for a couple of years…

Silver and Mother Nature’s ratio

There is, say the wise old men of geological lore, something like 15 times as much silver in the Earth’s crust as there is gold. Received wisdom is that in days gone by, the value of silver relative to gold reflected the amount of metal Mother Nature has given us: gold was, for hundreds of years, about 15 times the price of silver.

Last year 27,579 tonnes of silver were produced (according to my most reliable of precious metal data sources, Nick Laird of Sharelynx) and about 3,000 tonnes of gold. In other words, just over nine times as much as silver as gold was produced.

However, the gold price – about $1,270 an ounce – is about 75 times silver’s price of $17 an ounce. What gives?”

Dominic kindly mentions us as a bullion dealer who will buy gold bullion from you and sell silver coins and bars to you:

“If you want to buy physical silver, our friends in Dublin, the precious metals dealers GoldCore, have a new scheme whereby you can buy silver coins VAT-free. They’ll also, as most dealers will, buy your gold”.

We make a market in all popular bullion formats from small gold sovereigns to large 400 ounce gold bars and at the risk of doing ourselves out of business, we would caution against selling gold bullion right now.

Sell paper and digital gold, like Bullion Vault, maybe but not physical gold coins and bars. Rather both physical gold and silver bullion should be owned as financial insurance and hedges against currency debasement, bail ins, systemic and counter party risks and the myriad other risks today.

There is the possibility that gold continues to outperform silver in the short term. This is quite likely if we get another bout of severe deflation and the next stage of the global financial crisis. There is also the real chance of the currency reset where gold prices are revalued by the global monetary authorities to $5,000 to $10,000 per ounce. This could see silver underperform in the short term.

Silver remains severely undervalued versus gold but more particularly versus stocks, bonds and other financial – digital and paper – assets and we believe will outperform most assets in the coming years. Allocations to both depend on risk appetite and motivations for buying.

Read the full article by Dominic Frisby on MoneyWeek here.

Gold and Silver Prices and News
Gold down 1.4% for week on Fed rate views – Reuters
Asian shares set for weekly loss, Fed talk lifts dollar – Reuters
Gold Takes ‘Brunt of the Selling’ as Fed Primes Markets for Hike – Bloomberg
Philly Fed index dips to negative 1.8 in May – Morning Star
Gold jewelry is getting pricier – CNN Money

Warning signs everywhere that the British housing bubble is about to go POP! – This Is Money
English Farm Prices Fall Most Since 2008 on Brexit Fears – Bloomberg
Rating agencies highlight the gloomy Brexit scenarios – Irish Times
Market Impact of Brexit Is Key Concern for G-7 Finance Chiefs – Bloomberg
George Soros Takes Massive Gold Position, Fears of a Crisis Grow – Value Walk

Gold Prices (LBMA AM)
20 May: USD 1,256.50, EUR 1,120.18 and GBP 862.75 per ounce
19 May: USD 1,253.75, EUR 1,117.74 and GBP 857.37 per ounce
18 May: USD 1,270.90, EUR 1,127.21 and GBP 882.05 per ounce
17 May: USD 1,270.10, EUR 1,121.43 and GBP 877.50 per ounce
16 May: USD 1,281.00, EUR 1,132.04 and GBP 892.87 per ounce

Silver Prices (LBMA)
20 May: USD 16.60, EUR 14.81 and GBP 11.35 per ounce
19 May: USD 16.60, EUR 14.81 and GBP 11.35 per ounce
18 May: USD 17.05, EUR 15.13 and GBP 11.77 per ounce
17 May: USD 17.08, EUR 15.09 and GBP 11.80 per ounce
16 May: USD 17.32, EUR 15.30 and GBP 12.07 per ounce

Protecting_Your_Savings_in_the_Coming_Bail_In_Era_-_Copy-3.jpg Storing_Gold_in_Switzerland 7_Key_Storage_Must_Haves.png

Read Our Most Popular Guides in Recent Months

Mark O’Byrne
Executive Director

END

 

Alasdair Macleod’s weekly commentary: This one is a dandy!!

I have outlined the key passages in red

(courtesy Alasdair Macleod)

 

Alasdair Macleod: The eurozone is the greatest danger

Submitted by cpowell on Fri, 2016-05-20 01:00. Section: 

By Alasdair Macleod
GoldMoney.com, St. Helier, Jersey, Channel Islands
Thursday, May 19, 2016

Worldwide, markets are horribly distorted, which spells danger not only to investors, but to businesses and their employees as well, because it is impossible to allocate capital efficiently in this financial environment.

With markets everywhere disrupted by interventions from central banks, governments, and their sovereign wealth funds, economic progress is being badly hampered, and therefore so is the ability of anyone to earn the profits required to pay down the highs levels of debt we see today. Money that is invested in bonds and deposited in banks may already be on the way to money heaven, without complacent investors and depositors realizing it.

It should become clear in the coming weeks that price inflation in the dollar, and therefore the currencies that align with it, will exceed the Fed’s 2 percent target by a significant amount by the end of this year. This is because falling commodity prices last year, which subdued price inflation to under 1 percent, will be replaced by rising commodity prices this year. That being the case, CPI inflation should pick up significantly in the coming months, already reflected in the most recent estimate of core price inflation in the US, which exceeded 2 percent. Therefore, interest rates should rise far more than the small amount the market has already factored into current price levels. …

… For the remainder of the analysis:

https://www.goldmoney.com/the-eurozone-is-the-greatest-danger?gmrefcode=…

 

An extremely important read.

Commodity prices are rising, not because of increased activity but because the dollar is losing purchasing power.  This will in turn cause bond yields to rise.

 

And where is trouble going to manifest itself?  Alasdair explains that the Eurozone will be in deep trouble and no doubt Italy will be in the forefront.

Italy has a Debt to GDP of 130%  (and probably higher) .  It also has non performing loans of 360 billion euros which represents 40% of all private loans. The author correctly believes that Italian sovereign bonds yields must rise from the ridiculous 1.5% level to more realistic 7%.  That is when everything blows up

(courtesy Alasdair Macleod)

 

 

The Eurozone is the greatest danger

World-wide, markets are horribly distorted, which spells danger not only to investors, but to businesses and their employees as well, because it is impossible to allocate capital efficiently in this financial environment.

With markets everywhere disrupted by interventions from central banks, governments, and their sovereign wealth funds, economic progress is being badly hampered, and therefore so is the ability of anyone to earn the profits required to pay down the highs levels of debt we see today. Money that is invested in bonds and deposited in banks may already be on the way to money-heaven, without complacent investors and depositors realising it.

It should become clear in the coming weeks that price inflation in the dollar, and therefore the currencies that align with it, will exceed the Fed’s 2% target by a significant amount by the end of this year. This is because falling commodity prices last year, which subdued price inflation to under one per cent, will be replaced by rising commodity prices this year. That being the case, CPI inflation should pick up significantly in the coming months, already reflected in the most recent estimate of core price inflation in the US, which exceeded two per cent. Therefore, interest rates should rise far more than the small amount the market has already factored into current price levels.

Most analysts ignore the danger, because they are not convinced that there is the underlying demand to sustain higher commodity prices. But in their analysis, they miss the point. It is not commodity prices rising, so much as the purchasing power of the dollar falling. The likelihood of stagflationary conditions is becoming more obvious by the day, resulting in higher interest rates at a time of subdued economic activity.

A trend of rising interest rates, which will have to be considerably more aggressive than anything currently discounted in the markets, is bound to undermine asset values, starting with government bonds. Rising bond yields lead to falling equity markets as well, which together will reduce the banks’ willingness to lend. In this new stagnant environment, the most overvalued markets today will be the ones to suffer the greatest falls.

Therefore, prices of financial assets everywhere can be expected to weaken in the coming months to reflect this new reality. However, the Eurozone is likely to be the greatest victim of a change in interest rate direction. The litany of potential problems for the Eurozone makes Chidiock Titchborne’s Elegy, written on the eve of his execution, sound comparatively upbeat. Negative yields on government debt will have to be quickly reversed if the euro itself is to be prevented from sliding sharply lower against the dollar. Bankrupt Eurozone governments are surviving only because of the ECB’s money-printing, which will have to restricted, and government borrowing exposed to the mercy of global markets. Key Eurozone banks are undercapitalised compared with the risks they face from higher interest rates, so they will do well to survive without failing. There is also a growing undercurrent of political unrest throughout Europe, fuelled by persistent austerity and not helped by the refugee problem. Lastly, if the British electorate votes for Brexit, it will almost certainly be Chidiock’s grisly end for the European project.

We know the powers-that-be are very worried, because the IMF warned Germany to back off from forcing yet more austerity on Greece, which is due to make some €11bn in debt repayments in the coming months. The only way Greece can pay is for Greece’s creditors to extend the money as part of a “restructuring”, which then goes directly to the Troika, for back-distribution. It will be extend-and-pretend, yet again, with Greece seeing none of the money. Greece will be forced to promise some more spending cuts, and pay some more interest, so the fiction of Greek solvency can be kept alive for just a little longer.

One cannot be sure, but the IMF’s overriding concern may be the negative effect Germany’s tough line might have on the British electorate, ahead of the referendum on 23rd of June. That is the one outlier everyone seems to be frightened about, with President Obama, NATO chiefs, the IMF itself, and even the supposedly neutral Bank of England, promising dire consequences if the Brits are uncooperative enough to vote Leave.

All this places Germany under considerable pressure. After all, her banks, acting on behalf of the government and Germany’s populace, have parted with the money and cannot afford to write it off. Greece is bad enough, but Germany must be even more worried about the effect that a Greek compromise will set for Italy, which is a far larger problem.

Officially, the Italian government’s debt-to-GDP ratio stands at 130%, and since the public sector is 50% of GDP, government debt is 260% of the Italian tax base. It is also the nature of these things that these official numbers probably understate the true position.

If the Eurozone is the greatest risk to global financial and systemic stability, Italy looks like being the trigger at its core. The virtuous circle of Italian banks, pension funds and insurance companies, funding ever-increasing quantities of debt for the government, is failing. Pension funds and insurers cannot match their liabilities at current interest rates, and importantly, the banks are under water with non-performing loans to the tune of €360bn, about 18% of all their lending. It also represents 19.4% of GDP, or because the NPLs are all in the private sector, it is 39% of private sector GDP.

Within the private sector, NPLs are more prevalent in firms than in households. And that is the underlying problem: not only are the banks undercapitalised, but Italian industry is in dire straits as well. The Banca D’Italia’s Financial Stability Report puts a brave gloss on these figures, telling us that the firms’ financial situation is improving, when an objective independent analysis would probably be much more cautious.1

All financial prices in the Eurozone are badly skewed, most obviously by the ECB, which will be increasing its monthly bond purchases from next month to as much as €80bn. So far, the price inflation environment has been benign, doubtless encouraging the ECB to think the inflationary consequences of monetary policy are nothing to worry about. But from the beginning of this year, things have been changing.

Because the recent pick-up in commodity prices will begin to show in the dollar’s inflation statistics, markets will begin to smell the end of negative euro rates, in which case Eurozone bond yields seem sure to rise steeply. Given their extreme overvaluations, price volatility should be considerably greater than that of the US Treasury market. Imagine, if instead of yielding 1.5%, Italian ten-year bond yields more accurately reflected Italy’s finances, by moving to the 7-10% band.

This would result in write-downs of between 40% and 50% on these bonds. The effect on Eurozone bank balance sheets would be obvious, with many banks in the PIGS2 needing to be rescued. Less obvious perhaps would be the effect on the ECB’s own balance sheet, requiring it to be recapitalised by its shareholders. This can be easily engineered, but the political ramifications would be a complication at the worst possible moment, bearing in mind all EU non-Eurozone central banks, such as the Bank of England, are also shareholders and would be part of the whip-round.

Assuming it survives the embarrassment of its own rescue, the ECB will eventually face a policy choice. It can continue to buy up all loose sovereign and corporate debt to stop yields rising, in which case the ECB will be signalling it has chosen to save the banks and member governments’ finances in preference to the currency. Alternatively, it can try to save the currency by raising interest rates, giving a new and darker meaning to Mario Draghi’s “whatever it takes”. In this case insolvent banks, businesses and the PIGS governments could go to the wall. The choice is somewhat black or white, because any compromise risks both a systemic failure and a collapse in the euro. And there is no guarantee that if the banks fail, the euro will survive anyway.

The ECB is likely to opt for supporting the banks and over-indebted governments, partly because that is the mandate it has set for itself, and partly because experience after the Lehman crisis showed it could expand money supply without destabilising price inflation. The danger, once it dawns on growing numbers of investors and bank depositors, is stagflation. In other words, rising goods prices, falling asset prices, and interest rates not being allowed to rise enough to break the cycle, all combining to further undermine the euro’s purchasing power.

Financial and economic prospects for the Eurozone have many similarities to the 1972-75 period in the UK, which this writer remembers vividly. Equity markets lost 70% between May 1972 and December 1974, cost of funding was reflected in a 15-year maturity UK Treasury bond with a 15.25% coupon, and monthly price inflation peaked at 27%. There was a banking crisis, with a number of property-lending banks failing, and sterling went through a bad time. The atmosphere became so gloomy, that there was even talk of insurrection.3

This time, the prospects facing the Eurozone potentially could be worse. The obvious difference is the far higher levels of debt, which will never allow the ECB to run interest rates up sufficiently to kill price inflation. More likely, positive rates of only one or two per cent would be enough to destabilise the Eurozone’s financial system.

Let us hope that these dangers are exaggerated, and the final outcome will not be systemically destabilising, not just for Europe, but globally as well. A wise man, faced with the unknown, believes nothing, expects the worst, and takes precautions.

 

end

Your early FRIDAY 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 6.5471 ( DEVALUATION AGAIN BUT TINY/CHINA STILL FIRES SHOT ACROSS THE USA BOW ) / Shanghai bourse  CLOSED UP 18.56 OR 0.66%  / HANG SANG CLOSED UP 157.87 OR 0.80%

2 Nikkei closed UP 89.69 OR 0.54% /USA: YEN FALLS TO 110.35

3. Europe stocks opened ALL IN THE GREEN  /USA dollar index DOWN to 95.30/Euro UP to 1.1214

3b Japan 10 year bond yield: FALLS   TO -.099%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 110.35

3c Nikkei now WELL BELOW 17,000

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

3e WTI::  48.18  and Brent: 48.64

3f Gold UP  /Yen UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS to 0.182%   German bunds in negative yields from 8 years out

 Greece  sees its 2 year rate RISE to 9.53%/: 

3j Greek 10 year bond yield RISE to  : 7.43%   (YIELD CURVE NOW DEEPLY INVERTED)

3k Gold at $1255.25/silver $16.54(7:45 am est) BROKE RESISTANCE AT 16.52 

3l USA vs Russian rouble; (Russian rouble DOWN 9 in  roubles/dollar) 66.86-

3m oil into the 47 dollar handle for WTI and 47 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 TRADES TO 109.08 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 .9913 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.1117 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 IN LAST LEG OF ITS CAMPAIGN AS TO WHETHER EXIT THE EU.

3r the 8 Year German bund now  in negative territory with the 10 year FALLS to  + .182%

/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 1.859% early this morning. Thirty year rate  at 2.651% /POLICY ERROR)

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

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

end

Futures Rise As Fed Fears Subside; Global Stocks Rebound From Six Week Lows

It will be fitting, not to mention symmetric, if stocks which yesterday closed at 7 weeks lows and red for the year, end the week the same way they started it: with a rally on no news, just more hopes that oil (which as recently as two years ago none other than Chair Yellen said said would be be “unambiguously good” if lower) will continue rising. While US markets ended yesterday’s trading on a sour note, that weakness has failed to spread to the rest of the world, and global shares rebounded from a six-week low as crude and commodity prices recovered, while the yen weakened on reduced demand for haven assets.

And just like on Monday, the rebound was once led by the commodity sector, where raw-materials producers and energy companies outperformed on the Stoxx Europe 600 Index as shares in the region rebounded from their biggest decline in two weeks. Crude rose toward a seven-month high and copper rebounded from levels last seen in February.

Concerns remained about the Fed’s June/July hike although the goalseeked narrative has bifurcated.

According to some, such as Thorsten Engelmann, a Frankfurt-based trader at Equinet Bank, the market has now priced in a summer hike: “After the losses of the last few days, bargain hunters are re-entering the market. The market seems to be able to deal with the Fed raising rates, and next week should be quieter now that the earnings season is over.”

Others, like David Gaud, a fund manager at Edmond de Rothschild Asset Management, told Bloomberg TV in Hong Kong, that there simply won’t be a rate hike in the first place: “There will be no rate hike in June, it’s probably a bit too early. The Fed will further prepare the markets for a hike probably in September and maybe a second one in December. That’s going to create more volatility, but more than anything that’s going to be a positive in the end for the markets.”

Meanwhile, the levitation in oil continues, even if WTI trades little changed as of this moment after paring earlier gain with focus moving to supply disruption. June contract expires today. “Supply disruptions” are back in focus, “the market has fairly quickly shrugged off the dollar strength that caused a bit of a stir yesterday and triggered some profit- taking,” says Saxo Bank head of commodity strategy Ole Hansen. “If we had supply disruptions from places like Canada, Nigeria, Venezuela and Libya like this 5 years ago we wouldn’t be up $5, we’d be up $25 – that is probably a testament to the oversupply still in the market.”

The MSCI All-Country World Index of shares rose 0.4 percent as of 10:57 a.m. London time, climbing for the first time in four days. In Europe, the Stoxx 600 climbed 1 percent and futures on the S&P 500 added 0.2 percent. The MSCI Emerging Markets Index rose 0.4 percent, paring its weekly decline to 1.4 percent. The gauge is headed for its fifth weekly drop in the longest run of losses since August. The Hang Seng China Enterprises Index of mainland companies listed in Hong Kong rose 0.7 percent.

Market Snapshot

  • S&P 500 futures up 0.3% to 2044
  • Stoxx 600 up 0.8% to 337
  • FTSE 100 up 1.3% to 6132
  • DAX up 0.7% to 9864
  • German 10Yr yield down less than 1bp to 0.17%
  • Italian 10Yr yield down 2bps to 1.48%
  • Spanish 10Yr yield down 2bps to 1.57%
  • S&P GSCI Index up 0.3% to 368
  • MSCI Asia Pacific up 0.3% to 126
  • Nikkei 225 up 0.5% to 16736
  • Hang Seng up 0.8% to 19852
  • Shanghai Composite up 0.7% to 2825
  • S&P/ASX 200 up 0.5% to 5351
  • US 10-yr yield down less than 1bp to 1.85%
  • Dollar Index down less than 0.01% to 95.28
  • WTI Crude futures up 0.3% to $48.29
  • Brent Futures up 0.1% to $48.86
  • Gold spot up 0.3% to $1,258
  • Silver spot up 0.5% to $16.58

Top Global News

  • Yahoo Bids May Fall Short of $4b-$8b Expected Range: WSJ
  • Gameloft Rises as Vivendi Ups Hostile Bid Through Stake Purchase
  • Total, Oil Search Divvy InterOil Assets in $2.2 Billion Deal
  • Vale Blending Optimism With Caution on Iron’s Biggest Tie-Up

Looking at regional markets, we start in Asia which managed to put the US concerns about a Fed rate behind it with risk-appetite improving alongside the gains in the energy complex. ASX 200 (+0.5%) traded higher as the index coat-tailed on oil after WTI crude futures rose above USD 49/bbl, while Nikkei 225 (+0.5%) was underpinned following a rebound in USD/JPY which edged above 110.00. Hang Seng (+0.8%) and the Shanghai Comp (+0.7%) conformed to the improving sentiment in the region after the PBoC returned to a net weekly injection of CNY 50bIn from the recent consecutive weekly net drains, with retailer earnings also boosting optimism. 10yr JGBs traded higher despite the risk-on sentiment seen in Japanese equities with the BoJ in the market to acquire around JPY1.2trl in government debt.

Top Asian News:

  • Japan Lawmakers Discuss Big Stimulus to Accompany 2017 Tax Hike: Debate may now shift to size, shape of fiscal packages
  • Hong Kong’s SFC Said to Survey Participants on Investor Codes: Brokers seek clarity on how identity codes would be assigned
  • Morgan Stanley Said to Move 75 Shanghai Jobs to Hong Kong, India: Co. seeks to improve back-office efficiency
  • Hotel Lotte’s $4.8 Billion IPO Is Big But Comes With Baggage: Sale comes in wake of power struggle atop Lotte Group
  • Total, Oil Search Divvy InterOil Assets in $2.2 Billion Deal: Total to buy ~60% of InterOil’s assets from Oil Search
  • Taiwan’s New President Resists China ’One-Country’ Pressure: Tsai focused on domestic agenda in first presidential address

Like in Asia, risk-on sentiment has dominated the state of play in Europe with the Eurostoxx (+1.3%) firmly in the green underpinned by upside in commodity prices. As such, energy names outperform this morning as both WTI and Brent break back above USD 49/bbl. In stock specific news, Richemont underperforms following their earnings update in which FY operating profit missed expectations subsequently dragging related consumer discretionary names lower. However, some selling pressure has crept in to price action in recent trade ahead of the North American crossover.

Top European News:

  • Deutsche Bank May Punish Employees for Personal Trade With Firm: halted bonus payments to a group of employees while examining whether they improperly traded with the firm
  • Richemont Sees Challenging Market After April Sales Plunge: Full-year operating profit falls more than analysts expected. Cartier owner forecast difficult comparisons in first half
  • Monsanto’s #Monsatan Factor and What Bayer Needs to Do About It: if the takeover succeeds, Bayer will likely find itself in the crosshairs of Monsanto’s army of critics

In FX, a mostly consolidative trading session in FX this morning, though GBP has come back a little, with Cable testing the mid 1.4500’s , but the fall-back initially led by a ramp up in EUR/GBP. Despite taking out some support levels yesterday, alongside EUR/USD, the cross rate found buyers at .7650, and from there, we have seen a spike up to .7700+, but the move since running out of steam. M&A flow may have contributed to the random hit on GBP, with reports in the papers suggesting a Reckitt Benckiser takeover bid for Church and Dwight. Similarly EUR/USD falters ahead of 1.1230, where USD bulls continue to press for a deeper decline through yesterday’s 1.1180 level.

The overnight session was once again all about commodities, where WTI and Brent have just started to fall off after trying to attack the USD 50.00/bbl level and falling short. Of note we are still seeing some refinery closures in Nigeria. Crude oil rose 0.3 percent to $48.30 a barrel in New York, headed for a weekly advance of about 4.5 percent. Prices were boosted this week as data showed U.S. output slid to the lowest since September 2014 and wildfires in Canada expanded. “We’ve got U.S. demand picking up and combining with bullish supply news filtering through the market,” said Jonathan Barratt, the chief investment officer at Ayers Alliance Securities in Sydney. “Unless there is a clear new fundamental reason to buy oil, I think $50 is a hard psychological level to break through.”

Gold and Silver have been bullish in European trade after selling off in in the Asian session and spot Gold currently resides around the USD 1258.00/oz level. Elsewhere copper and iron ore traded higher reflecting the improved risk appetite in China.  Copper rose 1.3 percent in London, while nickel rebounded from a six-week low. Gold was headed for a third weekly decline, its longest losing streak of the year. Soybeans in Chicago were set for a sixth weekly advance, the longest run of gains since 2013. The U.S. Department of Agriculture estimated last week that global inventories will fall 8.1 percent by the end of September next year.

Bulletin Headline Summary From RanSquawk and Bloomberg

  • European equities enter the North American crossover in positive territory as energy prices help guide price action
  • A predominantly consolidative trading session in FX this morning, though GBP has come back a little, with Cable testing the mid 1.4500’s
  • Looking ahead, highlights include Canadian Retail Sales, CPI, US Existing Home Sales, ECB’s Draghi and Coeure

DB’s Jim reid completes the overnight wrap

A more hawkish tone from the Fed and subsequent repricing of interest rate risk as a result is dictating much of what’s going on at the moment. That’s putting pressure on risk assets and equities suffered again yesterday with the S&P 500 closing -0.37% and in the process falling to the lowest level in seven weeks, as well as slipping back into negative territory year-to-date. Treasuries were actually little changed yesterday with the 10y benchmark stalling around 1.850% seemingly with the latest soft manufacturing data giving some food for thought. More on that shortly. It was comments from the NY Fed President Dudley which was arguably the biggest event yesterday though. Seen as having views closely aligned to those of Fed Chair Yellen and usually leaning towards slightly dovish of centre in nature, Dudley opined in the Q&A session that ‘if I’m convinced that my own forecast is on track, then I think a tightening in the summer, the June-July time frame, is a reasonable expectation’. He did cite risks from the timing of the UK EU referendum in the context of the meeting next month but the overall takeaway was one of a feeling of continuing the recent party line of talking up market expectations closer to that of the Fed.

On that, the June probability did actually slip slightly yesterday to 28% from 32% post minutes although that is still a marked re-pricing compared to the 4% earlier this week. The July probability is unchanged at 47% while December is hovering around 74% and also little changed from the post minutes level. While a move in June still feels like a stretch there’s no doubt that the meeting is still going to be hugely important in terms of table setting expectations for July and beyond.

One sector that will see a possible rate rising environment with a bit more hope is banks. Although you often hear that equity multiples in general can go up when 10y yields go down, the opposite seems to be true for banks at the moment with European banks perhaps the most sensitive. In the PDF today we show a graph of 10y Treasuries and Euro Bank stocks YTD. The correlation has been very strong in 2016. When yields go down stocks fall and visa-versa as yields seem to be a proxy for net interest margins. It is a double edged sword though as if higher yields destabilise global markets that can’t be good for bank equities. Obviously if higher yields represent a move closer towards normality in the rates market and the global economy then that would be very supportive for banks. Unfortunately we suspect that this is not a big move towards normalisation. Abnormal remains the new normal.

Changing tack now and refreshing our screens quickly, bourses in Asia did initially open in the red after reflecting those losses on Wall Street last night, but sentiment has quickly swung back the other way with the majority of markets looking like they’re closing the week on a positive footing. Indeed it’s the Hang Seng (+1.14%) which is leading the way, followed by the ASX (+0.64%), Shanghai Comp (+0.25%) and the Nikkei (+0.19%). A bounce back in Oil since the Europe close yesterday has continued this morning with WTI currently up just over 1% and that appears to be helping sentiment generally.  One thing worth noting is that despite markets in China being up, the Shanghai Comp is still on course for its fifth consecutive weekly decline which is the most since 2012.

Moving on, yesterday’s economic data flow in the US was mainly focused on the labour market and manufacturing sector. Initial jobless rebounded last week, declining 16k to 278k after that sharp spike higher that we’d seen in the week prior. The four-week average did however rise 8k to 276k. Meanwhile the Philly Fed manufacturing survey largely backed up that soft NY Fed survey from earlier in the week. The print declined another 0.2pts to -1.8 after expectations had been for a rebound to +3.0. The details of the report were also soft with new orders, shipments, employment and inventories all remaining in contractionary territory. Our US economists noted that their ISMadjusted manufacturing survey is currently suggesting a slip back below 50 for the manufacturing ISM for this month when we get the data on June 1st. Meanwhile the other data of note across the pond later in the session was the Conference Board’s leading index which was a touch above expectations at +0.6% mom (vs. +0.4% expected).

Meanwhile there was also some Fedspeak from Richmond Fed President Lacker to mention yesterday too. A non-voter this year and seen as someone who sits right at the hawkish end of the scale, Lacker said that ‘I certainly supported a rate increase at the April meeting’ and that ‘I think the case would be very strong for raising rates in June’. Lacker also said that ‘I see risks from global and financial developments having virtually entirely dissipated’ and that ‘markets took the wrong signal from us pausing in March and April’ and so ‘overestimated how likely we were to pause for the rest of the year’. Given his hawkish reputation there wasn’t a great deal of surprise in his comments yesterday.

Prior to this in Europe the main data release was out of the UK where after some earlier disappointment this week in the inflation and weekly earnings data, retail sales proved to be a positive surprise last month. Excluding fuel sales we saw a +1.5% rise mom last month, far exceeding the +0.6% expectation and resulting in the YoY rate moving up to +4.2% from +2.6%. Including fuel last month the +1.3% mom reading was also far better than expected (+0.6% expected) with the YoY rate at a similar +4.3%. Away from that we also got the latest ECB minutes although in truth they didn’t offer a whole lot of new information. The text revealed that there was a ‘broad agreement’ that ‘patience was needed for the measures to fully unfold over time in terms of output and inflation’.

Wrapping up the price action yesterday, markets in Europe were playing catch up somewhat from the post-Fed minutes moves with the end result being a broad sell off across risk assets in the region. The Stoxx 600 closed -1.09% with energy stocks being hardest hit while in credit markets we saw Main and Crossover end 2bps and 9bps wider respectively. Oil had actually been particularly weak for much of the day with WTI at one stage dipping as low as $46.73/bbl (down 3% on the day) with the strengthening US Dollar a big  factor, before rallying late into the close to actually finish little changed around $48/bbl after more news filtered through about supply disruptions in Nigeria.

 

end

ASIAN AFFAIRS

i)Late  THURSDAY night/ FRIDAY morning: Shanghai closed UP  BY 18.56 PTS OR 0.66%  /  Hang Sang closed UP 157.87 OR 0.80%. The Nikkei closed UP 89.69 POINTS OR 0.54% . Australia’s all ordinaires  CLOSED UP 0.53% Chinese yuan (ONSHORE) closed DOWN at 6.5471 .  Oil FELL to 48.24 dollars per barrel for WTI and 48.81 for Brent. Stocks in Europe  ALL IN THE GREEN . Offshore yuan trades  6.5649 yuan to the dollar vs 6.5471 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS.

FIRST  REPORT ON JAPAN  SOUTH KOREA AND CHINA

a) JAPAN ISSUES

wow!! late this afternoon, the central bank of Japan threw a huge trial balloon for the markets over here.  This was released after midnight i.e. early Saturday morning for them.

Basically they are starting to prepare for losses on its huge debt holdings once QE ends.

They will have two problems:

a)as rates rise, bonds sink and thus huge losses

b) a soaring yen, being unwound by everybody will kill the country’s exports

(courtesy zero hedge)

 

Bank Of Japan Said To Start Preparing For Losses On Its “Huge” Debt Holdings Once QE Ends

While it most likely is just the usual Friday (past) midnight trial balloon by the Nikkei, a media outlet that has promptly become the BOJ’s mouthpiece (recall a week ago the new owner of the FT reported that Abe would delay his 2017 sales tax increase, only to see the premier backpedal when the reaction in the USDJPY was not quite as desired), moments ago the Japanese publication reported that the Bank of Japan will “likely set aside funds for the first time to prepare for losses on its huge holdings of Japanese government bonds should the central bank end its monetary easing policy in the future.”

Nikkei reports that the BOJ has reserved 450 billion yen ($4.07 billion) for the year ended in March. The amount will become known when the BOJ releases financial statements as early as next week. The way the BOJ is preparing for losses is amusing: it is accruing the interest income from the bonds it owns so it can reserve for capital losses on those same bonds once rates spike, to wit:

The BOJ created a framework last fiscal year that permits it to set aside part of the interest income from its JGB holdings, which have ballooned through the bank’s massive monetary easing program. Interest income likely grew about 30% from the prior year to around 1.3 trillion yen in fiscal 2015.

 

Though BOJ Gov. Haruhiko Kuroda has indicated that the bank could expand easing if it faces difficulty achieving its inflation target, the creation of the reserves is a move to prepare for an exit from monetary easing.

 

The central bank’s JGB holdings totaled 349 trillion yen as of March 31, up about 180% in three years. Long-term interest rates, currently in negative territory, will rise and bond prices will fall should the BOJ end its monetary easing once it is sure that Japan is finally breaking free of deflation.

According to Nikkei, the bank estimates that a 1 percentage-point rise in long-term rates lowers the value of its JGB holdings by 21 trillion yen, or about $200 billion, which incidentally is about 50x more than the BOJ is said to be reserving, which implies that the BOJ is expecting only a tiny increase in rates.

There will be a problem however if interest rates spike far more than just 1%.. or even 10%. After all, with the BOJ out of the picture, there will be no backstopped buyer of marginal issuance (and deficit funding), which means that the BOJ will almost certainly never be able to get out of the market at all.

Which however explains the trial balloon: the BOJ is merely curious to see how the market will react to the hint that BOJ buying may eventually end (even if it never will).

Meanwhile, just like in the case of the US, the BOJ pays most of its net income to the government, and this payment will decline if the bank sets aside reserves. Furthermore, the central bank’s profits have suffered from the lower value of foreign-currency assets due to a stronger yen. As a result, payments to the government are estimated at 400 billion yen for fiscal 2015, down sharply from 756.7 billion yen in the prior year.

Fiscal 2010 was the last time the BOJ paid less than 500 billion yen to the government. “The reserves are meant to even out swings in profit so payments to the government will not change over the long term,” a BOJ official said.

 

But from a short-term perspective, the lower payment to the government means that taxpayers will shoulder a heavier burden. So while the BOJ’s monetary easing may be propping up the economy and consumer prices, taxpayers essentially are picking up the tab.

If and when the BOJ does withdraw from the market, it will therefore face a double whammy of risks: the threat of soaring bond yields and a just as soaring Yen, in a global risk off move. At least initially: once the BOJ loses all credibility, the Yen will disintegrate as has been the long-running thesis of Kyle Bass and Dylan Grice, as Japan finally unleashes hyperinflation to deal with its massive debt overhang.

It’s a different matter entirely if the BOJ will ever actually follow up with “ending monetary easing policy.” If the past 8 years have demonstrated something very vividly, it is that central banks simply can not escape the vortex of QE, ZIRP and now NIRP. If anything, more easing will have to be added in the coming years as global rates turn ever more negative.

In fact, according to many observers, far from reducing QE, Japan’s next move will be one of terminal easing in the form of helicopter money.

For now, however, let the latest Nikkei trial balloon play out.

end

b) CHINA ISSUES

China sends a strong message to the USA to cease immediately spy plane missions near its borders.  If the USA does not respond, then China would devalue the yuan greatly!!

(courtesy zero hedge)

 

China Demands US “Cease Immediately” Provocative Spy Plane Missions Near Its Borders

Just days after a report that two Chinese J-11 fighter jets buzzed a US spy plane above the South China Sea, Beijing has officially escalated its displeasure at US surveillance up the chain of command and asReuters reports, Beijing has demanded an end to all U.S. surveillance near China. 

As a reminder, a U.S. Defense official said two Chinese J-11 fighter jets flew within 50 feet (15 meters) of the U.S. EP-3 aircraft in what the Pentagon deemed an “unsafe” intercept. And, just like Russia, China has had enough and demands US provocations end.

Stock footage of a Chinese J-11 fighter

“It must be pointed out that U.S. military planes frequently carry out reconnaissance in Chinese coastal waters, seriously endangering Chinese maritime security,” China’s Foreign Ministry spokesman Hong Lei Hong told reporters, adding that  “we demand that the United States immediately cease this type of close reconnaissance activity to avoid having this sort of incident happening again.”

Speaking at a regular press briefing, he described the Pentagon statement as “not true” and said the actions of the Chinese aircraft were “completely in keeping with safety and professional standards.” “They maintained safe behavior and did not engage in any dangerous action,” Hong said.

The encounter comes a week after China scrambled fighter jets as a U.S. Navy ship sailed close to a disputed reef in the South China Sea. Another Chinese intercept took place in 2014 when a Chinese fighter pilot flew acrobatic maneuvers around a U.S. spy plane.

We are confident Russia will echo China’s concerns. As we summarized earlier this week, in just the past month there have been at least four close fly-bys involved Russian fighter jets following close US incursions:

First a Russian Su-24 “buzzed” the US missile destroyer USS Donald Cook in the Baltic Sea allegedly over Russian territorial waters; then just days later another Russian fighter jet flew within 50 feet of a US recon plane also flying over the Baltic Sea; this was followed by a third close encounter when a little over a week later a Russian Mig-31s flew within 50 feet of a US spy plane flying over a Russian naval base in the Kamchatka peninsula; the fourth provocation took place just days later when as a Russian SU-27 conducted a barrel roll over a U.S. Air Force RC-135 reconnaissance plane flying over the Baltic sea.

The Chinese intercept occurred days before President Barack Obama travels to parts of Asia from May 21-28, including a Group of Seven summit in Japan and his first trip to Vietnam.

Washington has accused Beijing of militarizing the South China Sea after creating artificial islands, while Beijing, in turn, has criticized increased U.S. naval patrols and exercises in Asia. In 2015, the United States and China announced agreements on a military hotline and rules of behavior to govern air-to-air encounters called the Code for Unplanned Encounters at Sea (CUES).

“This is exactly the type of irresponsible and dangerous intercepts that the air-to-air annex to CUES is supposed to prevent,” said Greg Poling, director of the Asia Maritime Transparency Initiative at Washington’s Center for Strategic and International Studies think-tank.

China has fired back that there would be no need for the “irresponsible” intercepts if the US did not launch recon missions in the first place.

However Poling pressed on and said that either some part of China’s air force “hadn’t gotten the message,” or it was meant as a signal of displeasure with recent U.S. freedom of navigation actions in the South China Sea. “If the latter, it would be very disappointing to find China sacrificing the CUES annex for political gamesmanship.”

Zhang Baohui, a security expert at Hong Kong’s Lingnan University, said he believed the encounter highlighted the limitation of CUES, and shows that Chinese pilots would still fly close to U.S. surveillance planes if needed. “Frankly, we’re always going to see these kinds of incidents as China will always put the priority on national security over something like CUES whenever it feels its interests are directly threatened,” he said.

The latest encounter took place in international airspace about 100 nautical miles south of mainland China and about 50 nautical miles east of Hainan island, a Pentagon spokesman said in a statement issued later on Thursday.

Why is the US spying on Hainan? Because China’s submarine bases on Hainan are home to an expanding fleet of nuclear-armed submarines and a big target for on-going Western surveillance operations. The Guangdong coast is also believed to be home to some of China’s most advanced missiles, including the DF-21D anti-ship weapon.

And that is why US espionage in the region will continue, even as the Pentagon tries to put the blame on Beijing for any and all such future “close encounters” until eventually there is an “unexpected” incident.end

EUROPEAN ISSUES

We now have an investigation of the Greek banks being investigated for funding politicians in Greece

 

(courtesy zero hedge)

 

First Italy, Now Greek Banks Being Investigated For ‘Funding’ Politicians, Media

With Trump going after billionaire-funded media in America, and Italy facing probes over its banking-system-controlled media, it is perhaps no surprise that yet another generally corrupt nation – Greece – is facing a parliamentary committee investigation into spuriously large ‘bank loans’ and highly-concentrated advertising spend made to various political parties and media groups in 2015.

The Parliamentary Inquiry Commission decided on Wednesday to investigate the advertising expenditure of Greek banks to the media over a period of the last 10 years. As KeepTalking Greece reports,the Commission investigates in general the legality of  bank loans to political parties as well as loans to mass media groups. The extension of mandate to investigate also the bank advertisement to media was submitted by SYRIZA MP Annetta Kavvadia, a former journalist.

According to Kavvadia, “70% of the bank advertising expenditure was distributed among five media and media groups in 2015″ and that the citizens had a right to know that while the banks were stopping loans to Small & Medium Enterprises they were profusely posting ads in the same media that had taken loans from them.”

“It is interesting to see what amounts of money were given by the banks to particular media companies that allegedly had taken loans form the same banks and were unable to service these loans, ” Kavvadia said.

New Democracy representative at the Committee rejected Kavvadias’ proposal claiming that it went beyond the Committee’s mandate and did not support the proposal.

The representatives of SYRIZA, Independent Greeks, Golden Dawn, KKE, Centrists’ Union, voted in favor, GD asked an investigation ever since 2002. PASOK and To Potami voted “present”.

The Committee decided unanimously to give a deadline to banks until the end of May in order to provide data for the repayment of loans in euros by the media as well as data about loans to regional press.

The Committee Chairman said that “we will investigate whether the requirements of advertising rules were met the bank had also another relation (loan) with the media.”

Last month, four Greek systemic banks had published their expenditure on advertisement for 2015. Yes, it was striking to see that certain media groups had received large amount of money, something like half a million euro by one bank over the period of one year.

Will the Parliamentary Committee be able to shed a light into dark corridors of the famous Greek political and media scene?

The general rule was that political parties would give as guarantee for the loans the funding they would receive from the state. Too bad, the economic crash since 2010 brought the political system upside down. As for the big “systemic” media groups, well… they often got new loans in order to help them pay back their old loans and they sank in debts as Greece with the bailouts.

Excerpt from Giorgos Pleios Interview about “The Greek media, the oligarchs and the new Media Law.”

Greece is one of those countries in southern Europe where there is a close relationship and interdependence between media and political power – economic as well as political- both on an institutional and an ideological level.  The model describing the relationship between mass media, the state and political elites is that of vested interests as often described in the political discourse and scientific research. This practically means that mass media owners in Greece – also owners of other businesses (eg construction and shipping companies, new technologies and health services firms, etc.) tend to provide political support to political parties, especially those at power or likely to form  a new government.

On the other hand, the political parties in Greece tend to provide financial and administrative support to media owners and the companies owned by the so called “oligarchs”, in exchange for their political support. This is done through the assignment of public works (i.e roads and government buildings construction etc.) as well as government advertising, public property management, etc at scandalously profitable terms and in return for political support.”

George Pleios is Head of the Department of Communication and Media Studies at the National and Kapodestrian University of Athens.

full interview in English here.

Odd that all the media that received the large amounts of advertisement were also pro Bailout- and Austerity-supporters ever since 2010. Odd? Hardly…

END

RUSSIAN AND MIDDLE EASTERN AFFAIRS

Protesters have stormed Baghdad’s Green zone and now have entered the Prime Minister’s office..looks precarious to me

 

(courtesy zerohedge)

Tear Gas, Bullets Fired As Anti-Government Protesters Storm Baghdad Green Zone, Enter PM’s Office

Update: curek imposed in Baghdad

 

The situation in Iraq had already become very dangerous, as we reported in earlier in the month, after the Iraq PM ordered arrests in order to disband Green Zone protests.

As Reuters reports, Anti-government protesters are back at it, and have stormed into Baghdad’s Green Zone, allegedly reaching the Council of Ministers building.

Protesters enter Iraqi PM’s office: AFP photographer

BREAKING: Anti-government protesters storm into Baghdad’s green zone as security forces shoot tear gas, live bullets: witness

 

 

 

 

end

OIL ISSUES

The huge disruptions that we have had with respect to oil has now faded away as Canada, Libya and Nigera resume their production

 

(courtesy zero hedge)

Oil Supply Disruptions Quickly Fading As Canada, Libya, And Nigeria Resume Production

Earlier this week, Goldman unleashed the latest oil rally when it admitted that while the oil market will take far longer to rebalance due to rising low-cost oil production, it said that material supply disruptions are providing a boost to near-term prices. Goldman provided the following visualization of unplanned ongoing outages …

 

… where it highlighted the recent stoppages in Canada, Nigeria and Libya as the most prominent.

In a surprising twist, it appears that virtually all three of the main disruptions choke points are being resolved far quicker than expected.

First on Canada and its ongoing wildfire, the WSJ reported that the threat from forest fires in northern Alberta receded further on Thursday with the blazes moving away from oil-sands production facilities and a nearby evacuated town as cooler, wetter weather aided firefighting efforts, provincial officials said. The out-of-control wildfire spread to more than 1.25 million acres, up from just over one million acres on Wednesday, but the front line moved away from critical infrastructure to a remote area on the border of neighboring Saskatchewan province, the officials said.

Firefighters kept blazes away from two major oil-sands production complexes threatened earlier in the week, helped by lower temperatures and trace amounts of rain, said Chad Morrison, the Alberta forest ministry’s chief wildfire official.

 

The threat definitely has diminished around the communities and the oil-sands facilities,” Mr. Morrison said at a news conference in Edmonton. “We held the fire yesterday in all critical areas.”

This means that oilsands production is gradually coming back online and full capacity will likely be fully restored in the coming days:

No production facilities have been damaged by wildfires, but the threat has forced several large oil sands producers to shut down mining and well sites for more than two weeks, reducing Canadian oil production by at least one million barrels a day, or about 40% of the country’s total oil-sands output. The spread of fires forced some operators to abandon plans laid last week to restart. Late Thursday, Exxon Mobil Corp.’s Canadian unit Imperial Oil Ltd. said it had partially restarted operations at its Kearl oil sands mine about 47 miles northeast of Fort McMurray.

Just as important is that the long-running export crisis in Libya also appears to be on the verge of a solution. According to Bloomberg, oil exports are set to resume Thursday from the port of Hariga in eastern Libya, easing a bottleneck and allowing for crude production to increase after competing administrations of the state-run National Oil Corp. reached an agreement in the divided country.

The tanker Seachance is loading 650,000 barrels of crude at Hariga for the U.K., Omran al-Zwai, a spokesman for NOC unit Arabian Gulf Oil Co. known as Agoco, said by phone on Thursday. The cargo would be the first international shipment from Hariga since the United Nations blacklisted a tanker last month following complaints from authorities in the west of the country. NOC’s competing leaderships reached an agreement to resume exports from Hariga earlier this week. Agoco will be able to boost crude output to 120,000 barrels a day from 90,000 before the shipment, Al-Zwai said, as the company’s production has been limited by a lack of storage at the port. Libya produced a total of 310,000 barrels a day in April, data compiled by Bloomberg show.

The competing NOC administrations agreed to restart shipments from Hariga after holding talks in Vienna earlier this week, Elmagrabi said Monday. Officials at the western NOC administration in Tripoli couldn’t immediately be reached for comment. The shipment from Hariga comes after Agoco reached an agreement on Wednesday with the NOC’s eastern administration to restart international exports from the port, said Nagi Elmagrabi, chairman of the eastern NOC.

 

Libya pumped about 1.6 million barrels a day of crude before the 2011 rebellion that ended Moammar Al Qaddafi’s 42-year rule. It’s now the smallest producer in the Organization of Petroleum Exporting Countries. Since Qaddafi’s ouster and death, armed militias have also competed for control of the nation’s oil facilities.

Finally, and perhaps most importantly, is Nigeria, whose offline high quality bonny light crude has been seen as a major catalyst for the recent spike in prices due to the actions of such groups as the Niger Delta Avengers, and where Bloomberg notes that an oil tanker was said to have finally loaded up Nigeria’s Qua Iboe crude today, when a shipment was made on the SCF Khibiny, a 1 million bbl carrying Suezmax. It adds that the ship signals today that its status is “under way” having previously been anchored.

The reason: “people who had blocked bridge access to Qua Iboe terminal no longer there” according to Bloomberg.

In summary, after oil disruptions were represented by Goldman as a catalyst for higher oil prices, it now appears that the three major bottlenecks are being eliminated, and from a supply shortage, the oil market will now re-enter near-term glut as all of these mothballed operations scramble to restore recent production capacity. Meanwhile, the organization formerly known as OPEC continues to produce oil at an unprecedented pace as previously documented.

We are curious how long it will take the upward momentum-chasing oil algos to realize that the near-term supply picture has just changed dramatically.

end
Just take a look at the idle tankers off the coast of Singapore:
(courtesy zero hedge)

Something Stunning Is Taking Place Off The Coast Of Singapore

on: “And the paper market seems blissfully unaware of it.”

He is right… for now. Because all that will take for even the algos to give up their relentless upward momentum, is for some of these tens of millions of barrels to finally come onshore, which now that contango is no longer profitable, is just a matter of time.

In the meantime, just keep track of the unprecedented parking lot of ships off the coast of Singapore: the larger it gets, the more violent the price drop will be once banks say “no more” to funding money losing charters.

end
Oil falls a bit after the rig count declines have finally stalled:
(courtesy zero hedge)

Oil Price Slips After Rig Count Decline Stalls

For 20 of the last 21 weeks, US oil rig count has declined as it tracked the lagged oil price lower. That changed today as oil rigs were unchanged week-over-week perfectly syncing with the lagged lows in oil. Total rigs dropped 2 (thanks to gas rigs) to a new record low but even that pace has slowed dramatically. Oil prices are fading modestly on the news…

 

 

And oil prices are giving up earlier gains…

end:

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

Euro/USA   1.1214 up .0014 ( STILL REACTING TO USA FAILED POLICY

USA/JAPAN YEN 110.35 UP .440 (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 1.4579 DOWN.0019 (LESS OF A THREAT OF BREXIT)

USA/CAN 1.3116 UP .0028

Early THIS FRIDAY morning in Europe, the Euro ROSE by 12 basis points, trading now WELL above the important 1.08 level FALLING to 1.1367; 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  CLOSED UP BY 18.56 PTS OR 0.66% / Hang Sang CLOSED UP 157.87 OR  0.80%   / AUSTRALIA IS HIGHER BY 0.53%(RESOURCE STOCKS DOING POORLY / ALL EUROPEAN BOURSES ARE ALL IN THE GREEN   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 FRIDAY morning: closed UP 89.69 OR 0.54% 

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 157.87 PTS OR 0.80% . ,Shanghai CLOSED  UP 18.56 OR 0.66%/ Australia BOURSE IN THE GREEN: /Nikkei (Japan) CLOSED IN THE GREEN /India’s Sensex IN THE GREEN

Gold very early morning trading: $1256.20

silver:$16.55

Early FRIDAY morning USA 10 year bond yield: 1.859% !!! UP 1 in basis points from THURSDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield RISES to 2.65 UP 1 in basis points from THURSDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early FRIDAY morning: 95.30 UP 1/3 CENT from THURSDAY’s close.(Now below resistance at a DXY of 100.)

This ends early morning numbers FRIDAY MORNING

END

 

And now your closing FRIDAY NUMBERS

Portuguese 10 year bond yield:  3.09% PAR in basis points from THURSDAY

JAPANESE BOND YIELD: -.065% UP 2 in   basis points from THURSDAY

SPANISH 10 YR BOND YIELD:1.59%  DOWN 1 IN basis points from THURSDAY

ITALIAN 10 YR BOND YIELD: 1.49  PAR IN basis points from THURSDAY

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

GERMAN 10 YR BOND YIELD: .168% UP 2  IN BASIS POINTS ON THE DAY

END

IMPORTANT CURRENCY CLOSES FOR FRIDAY

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

Euro/USA 1.1198 down .0021 (Euro =DOWN 21 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/reacting to dovish YELLEN/ANOTHER FALL IN USA;YEN CROSS TODAY

USA/Japan: 109.93 DOWN 0.238 (Yen UP 24 basis points )

Great Britain/USA 1.4621 UP .0028 Pound UP 28 basis points/

USA/Canada 1.3083 UP 0.0055 (Canadian dollar DOWN 55 basis points with OIL RISING a BIT(WTI AT $48.17).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 21 basis points to trade at 1.1198

The Yen FELL to 109.93 for a GAIN of 24 basis points as NIRP is STILL a big failure for the Japanese central bank/

The pound was UP 28 basis points, trading at 1.4621

The Canadian dollar FELL by 55 basis points to 1.3083, WITH WTI OIL AT:  $48.17

The USA/Yuan closed at 6.5450

the 10 yr Japanese bond yield closed at -.065% UP 2 IN BASIS  points in yield/

Your closing 10 yr USA bond yield: DOWN 2  IN basis points from THURSDAY at 1.847% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.64 DOWN 4 in basis points on the day ( HUGE POLICY ERROR)

BANKS NEED THE LONGER BOND HIGHER IN YIELD: INSTEAD THE SPREAD LESSENS.

Your closing USA dollar index, 95.27 UP 8 IN 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 THURSDAY

London:  CLOSED DOWN 112.45 OR 1.82%
German Dax :CLOSED DOWN 147.34 OR 1.48%
Paris Cac  CLOSED DOWN 36.76  OR 0.86%
Spain IBEX CLOSED DOWN 100.40 OR 1.14%
Italian MIB: CLOSED DOWN 168.06 OR 0.95%

The Dow was UP 65.54  points or 0.38%

NASDAQ UP 57.03 points or 1.21%
WTI Oil price; 48.19 at 4:30 pm;

Brent Oil: 48.80

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  66.71 (ROUBLE DOWN 52/100 ROUBLES PER DOLLAR FROM YESTERDAY) AS THE PRICE OF BRENT FELL AND WTI FELL

TODAY THE GERMAN YIELD ROSE TO .170  FOR THE 10 YR BOND

.

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:47.67

BRENT: 48.80

USA 10 YR BOND YIELD: 1.838%

USA DOLLAR INDEX: 95.27 down 4 cents

END

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

 

Trading Today in Graph form;  VERY IMPORTANT FOR YOU TO VIEW ALL THE CHARTS TODAY

Hawkish Fed Slams Stocks To Longest Losing Streak In 20 Months

With the stock markets vertical drops and pops this week, the following just seemed appropriate…

 

Since The FOMC Minutes, the long bond is leading the way with stocks, gold, and oil lower…

 

Post FOMC – Nasdaq and Small Caps led the gains with Dow the biggest loser…

 

Despite the best efforts to keep the S&P green for the week (with VIX slammed)…

 

The Dow closed red for the 4th week in a row – the longest losing streak since Oct 2014’s Bullard Bounce lows…

 

The Dow was the week’s underperformer as Trannies surged over 2%… Nasdaq broke its 5 week losing streak with AAPL up 5%!!

 

But Futures shows the chaos of the week…

 

Massive redemptions hit high yield credit markets again (yesterday was the largest daily HYG outflow ever!)

 

Treasury yields rose across the complex this week but 30Y notably outperformed…

 

With 30Y outperforming post-FOMC…

 

With 2s30s flattening a dramatic 5bps…

 

The USD Index flatlined today but ended the week up 0.7%…

 

 

The strong dollar weighed on commodities but crude rallied on the week.

 

Don’t forget – it’s OPEX!

 

Charts: Bloomberg

END

 

Insolvent Illinois has it’s state workers demanding wage increases of up to 29%. These guys also have gravy train health benefits that would make the envy of anybody in the USA

 

(courtesy Mish Shedlock)

Illinois State Workers, Highest Paid In Nation, Demand Up To 29% Wage Hikes

Submitted by Michael Shedlock via MishTalk.com,

Illinois state workers, are the highest paid in the nation.

Yet, despite the fact that Illinois is for all practical purposes insolvent, the AFSCME union demands four-year raises ranging from 11.5 to 29 percent, overtime after 37.5 hours of work per week, five weeks of vacation and enhanced health care coverage.

AFSCME workers already get platinum healthcare benefits that would make nearly everyone in the country green with envy.

This is a guest post from Ted Dabrowski at the Illinois Policy Institute, of which I am a senior fellow.

For years, Illinois taxpayers haven’t been represented at the bargaining table between Illinois’ largest government union and the state. Illinois’ former governors cared more about appeasing the American Federation of State, County and Municipal Employees than protecting the taxpayers the governors were supposed to represent. That’s how AFSCME workers have become some the highest-compensated state workers in the nation.

IPI Dab1

Now the union is working overtime to remove Gov. Bruce Rauner – who actually represents taxpayers’ interests – from labor contract negotiations. The union supports House Bill 580, which would strip the governor of his ability to negotiate. AFSCME wants the current contract dealings turned over to unelected arbitrators who are likelier to decide in the union’s favor.

AFSCME wants to remove the governor from contract negotiations because union officials know Rauner will not agree to outrageous demands. Union leaders are demanding $3 billion in additional salary and benefits for union members in a new contract. They’re seeking four-year raises ranging from 11.5 to 29 percent, overtime after 37.5 hours of work per week, five weeks of vacation and enhanced health care coverage. Those additional demands would come on top of the costly benefits that AFSCME workers already receive.

Here are four facts about state-worker compensation the union doesn’t want taxpayers to know:

1. Illinois state workers are the highest-paid state workers in the country

Illinois state workers are the highest-paid state workers in the country when adjusted for cost of living. Illinois pays its state workers more than $59,000 a year, far more than its neighbors and nearly $10,000 more than the national average.

Moreover, state AFSCME workers have received salary increases not matched in Illinois’ private sector.

Median AFSCME worker salaries increased more than 40 percent from 2005 to 2014, reaching more than $62,800. During that same period, median private-sector earnings in Illinois remained virtually flat.

IPI Dab2

2. AFSCME workers receive Cadillac health care benefits

In addition to paying state workers the highest salaries in the nation, Illinois taxpayers also subsidize a majority of AFSCME workers’ Cadillac health care benefits.

The average AFSCME worker receives the ObamaCare equivalent of platinum-level benefits, but only pays the equivalent of bronze-level insurance premiums. That forces a vast share of AFSCME workers’ health care costs onto state taxpayers.

AFSCME workers pay for just 23 percent of their health care costs, or $4,452 a year. State taxpayers pay the remaining 77 percent, or an average of $14,880 per worker.

IPI Dab3

3. Most state workers receive free retiree health insurance

The state also subsidizes 100 percent of the health insurance costs for state retirees who spent 20 or more years working for the state. Such a benefit is almost unheard of in the private sector.

This benefit costs taxpayers $200,000 to $500,000 per state retiree. An ordinary worker in the private sector thus would need to have $200,000 to $500,000 in the bank before retirement to purchase the insurance most retired state workers get for free.

IPI Dab4

4. Career state retirees on average receive $1.6 million in pension benefits

Thanks to unrealistic pension rules, career state workers – meaning those who work 30 or more years – will average $1.6 million in benefits over the course of their retirements.

That’s on top of Social Security benefits, which nearly all state workers receive. In addition, over half of state workers end up retiring in their 50s.

IPI Dab5

It’s not fair that Illinois residents, struggling with stagnant incomes in one of the nation’s weakest economies, continue to subsidize AFSCME benefits to such an extent.

Many other unions that contract with the state have recognized that taxpayers can’t afford higher taxes to fund even greater pay and benefits for state workers. Officials from more than 17 unions, including the Teamsters, understood the depth of Illinois’ fiscal crisis and agreed to affordable contracts with the state.

AFSCME, which represents a mere 0.5 percent of Illinois’ total labor force (35,000 state workers out of a total 6.5 million workers), is putting undue pressure on the state and its finances.

The General Assembly needs to allow the governor’s veto of HB 580 to stand.

Instead of increasing benefits as AFSCME has demanded, the state should work to bring its employees’ total compensation more in line with what the private sector can afford.

Ted Dabrowski
Vice President of Policy

Question of Fairness

The AFSCME seeks “fairness”. I wholeheartedly agree. Here is my eight-point proposal.

  1. Cut AFSCME salaries an average of 40%
  2. Make AFSCME employees contribute 50% to health care plans.
  3. Drop AFSCME retiree health benefits entirely. Put them on Medicare.
  4. Put caps on pension pay.
  5. Kill defined benefit pension plans entirely for new hires.
  6. Pass right-to-work legislation.
  7. Allow municipalities to go bankrupt.
  8. Kill all prevailing wage laws,
end
Chicago’s pension liabilities jump by 168% and understated by a huge 11.5 billion.
It sure looks like Chicago is the next Detroit:
(courtesy Mish Shedlock)

Chicago Pension Liabilities Jump 168%, Understated By $11.5 Billion

Submitted by Michael Shedlock via MishTalk.com,

New accounting rules show Chicago has understated its pension liabilities by $11.5 billion.

At the end of 2015 the stated liability was $7.1 billion. Today it’s $18.6 billion. That’s a jump in net liabilities of 168%.

Mayor Rahm Emanuel has hopes pinned on union concessions and help from the state legislature. Neither is likely.

Out of Money in 10 Years

Bloomberg reports Chicago’s Pension-Fund Troubles Just Became $11.5 Billion Bigger.

Thanks to the defeat of the city’s retirement-fund overhaul by the Illinois Supreme Court and new accounting rules, Chicago’s so-called net pension liability to its Municipal Employees’ Annuity and Benefit Fund soared to $18.6 billion by the end of 2015 from $7.1 billion a year earlier, according to an annual report presented to the fund’s board on Thursday. The fund serves some 70,000 workers and retirees.

 

Decisions that are now adding hundreds of millions of dollars to its annual bills have left Chicago with a lower credit rating than any big U.S. city but once-bankrupt Detroit.

 

The latest estimate for the municipal fund, one of Chicago’s four pensions, will add to what had been an unfunded liability estimated at $20 billion.

 

A key driver was the court ruling striking down Mayor Rahm Emanuel’s plan that cut benefits and boosted city and employee contributions. Without it in place, the fund is now set to run out of money within 10 years.

 

That triggered another change. New accounting rules, adopted to keep governments from using overly optimistic investment-return forecasts to mask the scale of their liabilities, require them to use more modest assumptions once pension plans go broke. As a result, the reported liabilities jump.

 

Under the traditional way of estimating the municipal fund’s obligations, which is how annual contributions are set, the shortfall rose to $9.9 billion as of Dec. 31, based on market value of its assets, according to the actuaries report. That’s up from $7.1 billion a year earlier. The pension is only 32 percent funded — meaning it has 32 cents for every dollar it owes — compared to 42 percent last year, according to the actuaries.

“Very Good Discussions”

Emanuel claims to have “very good discussions” with the unions. That means one of two things.

  1. Emanuel’s mind has gone to mush.
  2. Emanuel is telling the unions he will hike taxes again, and again, and again.

In retrospect, those are the same thing.

Fluidity

Meanwhile, Jim Mohler, executive director of the fund, told board members on Thursday that it’s a “fluid situation.”

Mohler cited pending legislation in the Illinois legislature to bail out Chicago.

The only thing fluid is the exact timing of the bill followed by Governor Bruce Rauner’s immediate veto.

Super-Majority Theory and Practice

The Democrat controlled legislature has a super-majority that could in theory override Rauner’s veto. However, the legislature could have passed anything they wanted all year long. Yet, Illinois still does not have a budget.

In practice, there are a few “blue dog Democrats” that have a bit of fiscal sense.

And in this case, add in a bunch of downstate legislators who won’t relish hiking taxes to bail out bankrupt Chicago pensions.

Pension Shortages

Chicago Pension Shortages

Will downstate legislators and “blue dog” Democrats vote to bail out that mess?

It’s possible, but color me skeptical. Is Emanuel going to get union concession?

That idea sounds even sillier.

Stock Market Valuations and Assumptions

The Chicago pensions are 32% funded despite the biggest bull market in history. What happens if the market has negative returns for even a few years?

The answer is the pension plans will go bust before 10 years pass.

The sorry state of affairs is stock and bonds have such lofty valuations that negative returns are likely not for a few years, bit seven to ten years.

“One Big Worldwide Bubble”: Cusp of 30-Year Bear Market in Stocks and Bonds

I side with Milton Berg, founder and CEO of MB advisors says “One Big Worldwide Bubble”: Cusp of 30-Year Bear Market in Stocks and Bonds.

 

Milton Berg

Please click on the above link for a fantastic interview with Berg.

Tax Hikes Not the Solution

The pension mess and the Chicago public school mess cannot be placed on the backs of Illinois taxpayer.

Mayor Emanuel already passed the biggest tax hike in history. Here are some links for discussion:

Solution is Bankruptcy

If Mayor Emanuel really wanted to do something for the city and city taxpayers, he would be begging House Speaker Michael Madigan for the one and only thing that can help the city: legislation that would allow Illinois municipal bankruptcies.

Let’s stop pretending there is another solution, because there isn’t.

end
Consumer loan delinquencies have been hanging in there but it is business loan soaring that is causing much grief for the Fed:
(courtesy Wolf Richter/WolfStreet)

Business Loan Delinquencies Spike To Lehman Moment Level

Submitted by Wolf Richter via WolfStreet.com,

A leading indicator of big trouble.

This could not have come at a more perfect time, with the Fed once again flip-flopping about raising rates. After appearing to wipe rate hikes off the table earlier this year, the Fed put them back on the table, perhaps as soon as June, according to the Fed minutes. A coterie of Fed heads was paraded in front of the media today and yesterday to make sure everyone got that point, pending further flip-flopping.

Drowned out by this hullabaloo, the Board of Governors of the Federal Reserve released itsdelinquency and charge-off data for all commercial banks in the first quarter – very sobering data.

So here a few nuggets.

Consumer loans and credit card loans have been hanging in there so far. Credit card delinquencies rose in the second half of 2015, but in Q1 2016, they ticked down a little. And mortgage delinquencies are low and falling. When home prices are soaring, no one defaults for long; you can sell the home and pay off your mortgage. Mortgage delinquencies rise after home prices have been falling for a while. They’re a lagging indicator.

But on the business side, delinquencies are spiking!

Deli

nquencies of commercial and industrial loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have begun to balloon (they’re delinquent when they’re 30 days or more past due). Initially, this was due to the oil & gas fiasco, but increasingly it’s due to trouble in many other sectors, including retail.

Between Q4 2014 and Q1 2016, delinquencies spiked 137% to $27.8 billion. They’re halfway toward to the all-time peak during the Financial Crisis in Q3 2009 of $53.7 billion. And they’re higher than they’d been in Q3 2008, just as Lehman Brothers had its moment.

Note how, in this chart by the Board of Governors of the Fed, delinquencies of C&I loans start rising before recessions (shaded areas). I added the red marks to point out where we stand in relationship to the Lehman moment:

US-delinquencies-commercial-industrial-loans-2016-q1

Business loan delinquencies are a leading indicator of big economic trouble. They begin to rise at the end of the credit cycle, on loans that were made in good times by over-eager loan officers with the encouragement of the Fed. But suddenly, the weight of this debt poses a major problem for borrowers whose sales, instead of soaring as projected during good times, may be shrinking, and whose expenses may be rising, and there’s no money left to service the loan.

The loan officer, feeling the hot breath of regulators on his neck, and seeing the Fed fiddle with the rate button, refuses to “extend and pretend,” as the time-honored banking practice is called of kicking the can down the road in good times.

If delinquencies are not cured within a specified time, they’re removed from the delinquency basket and dropped into the default basket. When defaults are not cured within a specified time, the bank deems a portion or all of the loan balance uncollectible and writes it off, therefore moving it out of the default basket into the write-off basket. That’s why the delinquency basket doesn’t get very large – loans don’t stay in it very long.

And farmers are having trouble.

Slumping prices of agricultural commodities have done a job on farmers, many of whom are good-sized enterprises. Farmland is also owned by investors, including hedge funds, who’ve piled into it during the boom, powered by the meme that land prices would soar for all times because humans will always need food. Then they leased the land to growers.

Now there are reports that farmland, in Illinois for example, goes through auctions at prices that are 20% or even 30% below where they’d been a year ago. Land prices are adjusting to lower farm incomes, which are lower because commodity prices have plunged. (However, top farmland still fetches a good price.)

Now delinquencies of farmland loans and agricultural loans are sending serious warning signals. These delinquencies don’t hit the megabanks. They hit smaller specialized farm lenders.

Delinquencies of farmland loans jumped 37% from $1.19 billion in Q3 2015 to $1.64 billion in Q1 this year, the vast majority of it in the last quarter (chart by the Board of Governors of the Fed):

US-delinquencies-farmland-loans-2016-q1

Delinquencies of agricultural loans spiked 108% in just two quarters to $1.05 billion in Q1. On the way up during the financial crisis, they’d shot past that level during Q1 2009:

US-delinquencies-agricultural-loans-2016-q1

Bad loans are made in good times — the oldest banking rule. “Good times” may not be a good economy, but one when rates are low and commercial loan officers are desperate to bring in some interest income. With a wink and a nod, they extend loans to businesses that look good for the moment. That has been the case ever since the Fed repressed interest rates during the Financial Crisis. A lot of bad loans were made during those “good times,” precisely as the Fed had encouraged them to do. And these loans are now coming home to roost.

One of the big indicators of the end of the “credit cycle” is the number of bankruptcies. During good times, so earlier in the credit cycle, companies borrow money. Lured by low interest rates and rosy-scenario rhetoric, they borrow even more. Then reality sets in.

Read… US Commercial Bankruptcies Skyrocket

 

Existing homes sales tumble in the south and the west regions of the USA.  However what saved the day is condo sales.

Existing Home Sales Tumble In South, West Regions; Condo Sales Soar

Single-family existing home sales rose just 0.6% MoM in April with The South and The West regions seeing notable declines in sales (down 2.7% and down 1.7% respectively). What saved the headline print was a 10.3% surge in Condo sales – among the best monthly spikes since the crisis helped by a spike in sales in The Midwest – where prices are most affordable.

Condos saved the day:

 

While supply of single-family homes is rising, the demand was again all on condos:

The median price of existing homes:

Single-family home sales inched forward 0.6 percent to a seasonally adjusted annual rate of 4.81 million in April from 4.78 million in March, and are now 6.2 percent higher than the 4.53 million pace a year ago. The median existing single-family home price was $233,700 in April, up 6.2 percent from April 2015.

 

Existing condominium and co-op sales jumped 10.3 percent to a seasonally adjusted annual rate of 640,000 units in April from 580,000 in March, and are now 4.9 percent above April 2015 (610,000 units). The median existing condo price was $223,300 in April, which is 6.8 percent above a year ago.

Lawrence Yun, NAR chief economist, says April’s sales increase signals slowly building momentum for the housing market this spring.

“Primarily driven by a convincing jump in the Midwest, where home prices are most affordable, sales activity overall was at a healthy pace last month as very low mortgage rates and modest seasonal inventory gains encouraged more households to search for and close on a home,” he said.

 

“Except for in the West — where supply shortages and stark price growth are hampering buyers the most — sales are meaningfully higher than a year ago in much of the country.”

Regionally, the story is very mixed…

  • April existing-home sales in the Northeast climbed 2.8 percent to an annual rate of 740,000, and are now 17.5 percent above a year ago. The median price in the Northeast was $263,600, which is 4.1 percent above April 2015.
  • In the Midwest, existing-home sales soared 12.1 percent to an annual rate of 1.39 million in April, and are now 12.1 percent above April 2015. The median price in the Midwest was $184,200, up 7.7 percent from a year ago.
  • Existing-home sales in the South declined 2.7 percent to an annual rate of 2.19 million in April, but are still 4.3 percent above April 2015. The median price in the South was $202,800, up 6.5 percent from a year ago.
  • Existing-home sales in the West decreased 1.7 percent to an annual rate of 1.13 million in April, and are 3.4 percent lower than a year ago. The median price in the West was $335,000, which is 6.5 percent above April 2015.

The West is exhibiting a notable trend with low-end sales plunging and higher-end rising…

 

Which price buckets saw the most transactions:

And Y/Y transactions by bucket:

The NAR’s chief economy Larry Yun warns again:

“The temporary relief from mortgage rates currently near three-year lows has helped preserve housing affordability this spring, but there’s growing concern a number of buyers will be unable to find homes at affordable prices if wages don’t rise and price growth doesn’t slow.”

Finally, it is worth noting that since the data was better than expected, there was no scapegoating of “weather” this time.

end

 

This is a huge problem:  Lake Mead water levels at 1080 feet and coming very close to the danger level of 1075.00 feet.  Lake Mead provides drinking water to Las Vegas, most of Nevada and parts of Arizona and parts of California.

Leaking Las Vegas: Lake Mead Plunges To Lowest Level Ever As “The Problem Is Not Going Away”

The hopes of an El Nino-driven refill from last summer’s plunging levels of the nation’s largest reservoir have been dashed as AP reportsLake Mead water levels drop to new record lows (since it was filled in the 1930s) leaving Las Vegas facing existential threats unless something is done. Las Vegas and its 2 million residents and 40 million tourists a year get almost all their drinking water from the Lake and at levels below 1075ft, the Interior Department will be forced to declare a “shortage,” which will lead to significant cutbacks for Arizona and Nevada. As one water research scientist warned, “this problem is not going away and it is likely to get worse, perhaps far worse, as climate change unfolds.”

As USA Today reports,the nation’s largest reservoir has broken a record, declining to the lowest level since it was filled in the 1930s.

Lake Mead reached the new all-time low on Wednesday night, slipping below a previous record set in June 2015.

 

The downward march of the reservoir near Las Vegas reflects enormous strains on the over-allocated Colorado River. Its flows have decreased during 16 years of drought, and climate change is adding to the stresses on the river.

 

As the levels of Lake Mead continue to fall, the odds are increasing for the federal government to declare a shortage in 2018, a step that would trigger cutbacks in the amounts flowing from the reservoir to Arizona and Nevada. With that threshold looming, political pressures are building for California, Arizona and Nevada to reach an agreement to share in the cutbacks in order to avert an even more severe shortage.

 

“This problem is not going away and it is likely to get worse, perhaps far worse, as climate change unfolds,” said Brad Udall, a senior water and climate research scientist at Colorado State University. “Unprecedented high temperatures in the basin are causing the flow of the river to decline. The good news is that we have time and the smarts to manage this, if all the states work together.”

 

He said that will require “making intelligent but difficult changes to how we have managed the river in the past.”

 

As of Thursday afternoon, the lake’s level stood at an elevation of about 1,074.6 feet.

Lake Mead water levels sink to a new record low – notably ahead of the seasonally-normal lows…

Under the federal guidelines that govern reservoir operations, the Interior Department would declare a shortage if Lake Mead’s level is projected to be below 1,075 feet as of the start of the following year. In its most recent projections, the Bureau of Reclamation calculated the odds of a shortage at 10 percent in 2017, while a higher likelihood – 59 percent – at the start of 2018.

But those estimates will likely change when the bureau releases a new study in August. Rose Davis, a public affairs officer for the Bureau of Reclamation, said if that study indicates the lake’s level is going to be below the threshold as of Dec. 31, a shortage would be declared for 2017.

That would lead to significant cutbacks for Arizona and Nevada. California, which holds the most privileged rights to water from the Colorado River, would not face reductions until the reservoir hits a lower trigger point.

http://c.brightcove.com/services/viewer/federated_f9?isSlim=1

 

As AP concludes,

Officials in Nevada, Arizona and California are working on a deal to keep water in the lake by giving up some of their Colorado River water.

 

The river serves about 40 million residents in seven Southwest states. Two key points are lakes Powell and Mead, the largest reservoir in the system.

 

Lake Mead’s high-water capacity is 1,225 feet above sea level. It reaches so-called “dead pool” at just under 900 feet, meaning nothing would flow downstream from Hoover Dam.

As population growth and heavy demand for water collide with hotter temperatures and reduced snowpack in the future, there will be an even greater mismatch between supply and demand, said Kelly Sanders, an assistant professor at the University of Southern California who specializes in water and energy issues.

“The question becomes how to resolve this mismatch across states that all depend on the river to support their economic growth,” Sanders said. She expects incentives and markets to help ease some of the strains on water supplies, “but it is going to be tricky to make the math work in the long term.”

 end

Let us wrap up the week with this commentary from Greg Hunter of USAWatchdog

(courtesy Greg Hunter/USAWatchdog)

Saudi Financial Trouble Means US Financial Trouble, Fed Rate Hike Fake-Out, Bernie Beats Clinton-Again

 

Saudi Arabia is in deep financial trouble, and that spells financial trouble for the U.S. Let’s connect the dots. Shall we?  The Senate just passed a bill that releases 28 secret pages from the 9/11 Report, and it also allows the families sue the Kingdom if it was involved in the attack.  Saudi has threatened to dump U.S. assets if this becomes law.  Some people say they would never do that because it would hurt them.  I say, they may be forced to sell U.S. Treasuries and other assets because they need the money.  This is against the backdrop of reports of Saudi Arabia paying workers and contractors with IOUs and mass layoffs in the Kingdom.  No wonder why Moody’s just downgraded Saudi debt.  This week, we also find out how much U.S. debt Saudi owns.  It’s $117 billion.  I would say this is on the top of the list to raise cash fast, and Saudi is not alone in the need for cash.  This headline from CNN says it all:“U.S. Debt Dump Deepens in 2016.”   China, Russia and Brazil are a few more of the many sellers of U.S. debt.  How long can this go on for without something breaking?  What if everybody holding U.S. debt sells?  Not for some punishing reason but just because they need the cash.

The Fed is faking us all out again or are they? Fed Presidents Lacker and Dudley are pitching the possibility of a Fed rate hike–again.  They are saying things such as “June is a live meeting.”  I say no way they hike rates unless they want to intentionally crash the economy.  Can’t see Fed Head Janet Yellen signing on to that less than 6 months before a Presidential election.  This is much like the story of the little boy who cried wolf.  The economy is terrible and no way is it getting better.

Is the global economy so bad that it is raising the specter of war? The U.S. just hit China with a more than 500% tariff on its steel exports.  Of course, China is pissed, but it is flooding the world with cheap steel, and it is basically causing damage to its global competitors.  Add that to the fact that thing are continuing to heat up in the South China Sea, and China continues to make military threats if the U.S. doesn’t back off.  Meanwhile, in Europe, the Guardian UK is reporting “West and Russia on course for war, says ex-Nato deputy commander.” This war scenario is laid out in a new book by Former British General Alexander Richard Shirreff.

Hillary Clinton just cannot put away Bernie Sanders in the race for the Democratic nomination. Best she could do was a virtual tie in Kentucky and got whipped again in Oregon.  Some of Bernie’s supporters call Hillary “Slillary.”  It is amazing how weak the Clinton campaign looks, especially when you consider that Bernie is competing not only with Clinton but the entire DNC, which gives out super delegates to rig the system in Clinton’s favor.  I think Sanders is going to win California, but that only adds to her problems.  Remember, there is still that ongoing FBI criminal investigation on Clinton and her private unprotected server.

 

Join Greg Hunter as he looks at these stories and more in the Weekly News Wrap-Up.

After the WNW:

 

 

 

end

 

Well that is all for today

I wish all my fellow Canadians a very happy Victoria  holiday weekend

I will see you all Monday evening

Harvey

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