July 28/Silver comex has a new record 223,201 total open interest. The front gold comex OI for August is 42,275 which is extremely high and indicates a huge amount of gold will stand/July gold officially stands at 21.452 tonnes/Big announcement tonight on the stimulus plan in Japan. If a failure all markets will tank tomorrow/Also tomorrow is last day for a reprieve for Monte de Paschi in Italy/Erdogan is at it again by arresting all the major media outlets: TV, Newspapers and Magazine companies/

Gold:1332.30 up $5.60

Silver 20.17  up 20 cents

In the access market 5:15 pm

Gold: 1336.00

Silver: 20.15


For the July gold contract month,  we had  0 notices served upon for nil ounces. The total number of notices filed so far for delivery:  6897 for 689,700 oz or 21.452 tonnes

In silver we had 112 notices served upon for 560,000 oz.  The total number of notices filed so far this month for delivery:  2471 for 12,355,000 oz

We are now entering options expiry month for gold and silver:


ii)The OTC options in London expire Friday at noon July 29.

We have a huge 42,275 contracts standing so far for gold. On the last day before first day notice we had 39,000 contracts outstanding and then on first day notice 36 tonnes of gold stood. Throughout the month of June the amount standing increased and we ended up with 49 tonnes of eventual gold standing. I believe we may have higher amounts standing for August.

Let us have a look at the data for today




In silver, the total open interest ROSE BY A HUGE 4902 contracts UP to 223,201 AND  AN NEW ALL TIME RECORD AS THE  PRICE OF SILVER ROSE  BY 31 CENTS IN YESTERDAY’S TRADING.In ounces, the OI is still represented by just over 1 BILLION oz i.e. 1.116 BILLION TO BE EXACT or 159% of annual global silver production (ex Russia &ex China).

In silver we had 112 notices served upon for 560,000 oz.

In gold, the total comex gold fell BY A CONSIDERABLE 7655 contracts despite the fact that the price of gold ROSE by $5.90 yesterday. The total gold OI stands at 568,670 contracts.What is more earthshattering is the high OI for August still standing at 42,275 contracts with one reading day before first day notice tomorrow.


With respect to our two criminal funds, the GLD and the SLV:


we had NO CHANGES in gold inventory . /

Total gold inventory rest tonight at: 954.23 tonnes


we had a big change, a deposit of 1.14 million oz into the SILVER INVENTORY TO THE SLV

Inventory rests at 349.720 million oz.

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

1. Today, we had the open interest in silver ROSE by 4902 contracts UP to 223,201, as the price of silver ROSE BY 31 cents with YESTERDAY’S trading. The gold open interest FELL by A CONSIDERABLE  7655 contracts DOWN to 568,670 despite the fact that  the price of gold ROSE by $5.90 IN YESTERDAY’S TRADING.

(report Harvey).


2 a) Gold/silver trading overnight Europe, Goldcore

(Mark OByrne/zerohedge


i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed UP 2.32 POINTS OR 0.08%/ /Hang Sang closed DOWN 44.65 OR .20%. The Nikkei closed DOWN 187.98 POINTS OR 1.13% Australia’s all ordinaires  CLOSED up 0.30% Chinese yuan (ONSHORE) closed UP at 6.6573/Oil fell to 41.73 dollars per barrel for WTI and 42.99 for Brent. Stocks in Europe ALL IN THERED . Offshore yuan trades  6.6653 yuan to the dollar vs 6.6573 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS SLIGHTLY AS CHINA TRIES TO STOP MORE USA DOLLARS LEAVING THEIR SHORES  



i)Another false headline late this afternoon sends the USA/JPY surging on a pending stimulus and then Bloomberg denies the claim

( zero hedge)


ii)All eyes will be on the Bank of Japan’s announcement tonight:  will Koroda provide an huge 28 trillion yen emergency spending measure or temper it by saying the spending will be spread out over several years.  Will he announce any helicopter money?

I will report on this tomorrow:
( zero hedge)

The risk on the USA/Yen cross exploded to the highest level since Lehman as the entire world is worried that the Bank of Japan will not provide the necessary stimulation:

( zero hedge)


none today



i)It took awhile but now Germany admits that they are at war against Islamist terror as they set to deploy an army in “crisis” situations:

( zero hedge)

ii)German special forces raided a mosque and apartments home to many radical Salafists who are  flaunting European rules:  It is about time they cracked down on these people!

( zero hedge)





Erdogan closes down 130 media organizations including television radio stations newspapers and magazine companies.  No doubt that confidence in their economy will crumble as foreigners take their capital out of the country:

( zero hedge)


none today


i)Arthur Berman describes that the current oil price rally is now over and that we are going to be many  casualties

( Art Berman)

ii)Crude crashes into the 40 dollar column:

( zerohedge)


none today


i)Barrick in trouble again as it needs to lower its debt by 2 billion dollars.  It’s African operation is up for sale and they will take a huge loss on it.

( Reuters/GATA)

ii)Barrick in trouble again as it needs to lower its debt by 2 billion dollars.  It’s African operation is up for sale and they will take a huge loss on it.

( Reuters/GATA)

iii)Barrick is better in geology than operating a business:

( Chris Powell/GATA)


i)Atlanta Fed just slashes its Q2 estimate of GDP down to 1.8% form 2.4%.

( zero hedge)

ii)The following is meant for all our naysayers who look at the stock market and think everything is wonderful!!

( Michael Snyder)

iii)Ford sees what guys in our camp see: no growth anywhere!

( zero hedge)

Let us head over to the comex:

The total gold comex open interest  WAS OBLITERATED TO AN OI level of 568,670 for a LOSS of 7655 contracts DESPITE THE FACT THAT  THE PRICE OF GOLD ROSE BY $5.90 with YESTERDAY’S TRADING..  We have been witnessing for the past two years, the OI obliterates rather than roll into a future month. We are now in the non active month of July. As I stated yesterday: “Somebody big is continually standing for the gold metal even though July is  generally a poor delivery month. The open interest for the front July contract stands at 0 . We had 0 notices filed on yesterday, so we lost 0 contracts or no additional  gold ounces that will stand for delivery in this non active month of July. We  are again witnessing the same scenario as in May and June whereby the front delivery month increases in OI standing for metal or a slight contraction.  The next big active contract month is August and here the OI FELL by 45,901 contracts down to 42,275 as this month continues its wind down until first day notice for the August contract, Friday,July 29/2016:with only 1 more reading day.  The estimated volume today (which is just comex sales during regular business hours of 8:20 until 1:30 pm est) was  GOOD at 234,696. The confirmed volume  yesterday (which includes the volume during regular business hours + access market sales the previous day was VERY GOOD at 423,193 contracts.The comex is not in backwardation.
Today, we had  0 notices filed for nil oz in gold
And now for the wild silver comex results. Total silver OI ROSE by A HUGE 4,902 contracts from 218,299 UP TO 223,201 .  We are now at  an all time record high for silver open interest set ON THURSDAY jULY 28.: (223,201). The front active delivery month is now off the board BUT WE STILL HAVE ABOUT 3 NOTICES LEFT TO BE FILED UPON. THEY HAVE UNTIL TOMORROW NIGHT TO FILE.  The next non active month of August saw it’s OI fell by 15 contracts down to 424. The next big active month is September and here the OI ROSE by 2,829 contracts UP to 158,599. The volume on the comex today (just comex) came in at74,850 which is HUGE. The confirmed volume yesterday (comex + globex) was huge at 76,571 with no rollovers.. Silver is not in backwardation. London is in backwardation for several months.
We had 112 notices filed for 560,000 oz. in silver JULY contract month
FINAL standings for JULY
July 28.
Withdrawals from Dealers Inventory in oz   nil OZ
Withdrawals from Customer Inventory in oz  nil
 160,005.113 OZ
96.07 BRINKS
Deposits to the Dealer Inventory in oz  NIL
Deposits to the Customer Inventory, in oz 
 160,005.113 OZ
No of oz served (contracts) today
0 notices 
nil oz
No of oz to be served (notices)
0 contracts
nil oz
Total monthly oz gold served (contracts) so far this month
6897 contracts (689,700 oz)
(21.452 tonnes)
Total accumulative withdrawals  of gold from the Dealers inventory this month   NIL
Total accumulative withdrawal of gold from the Customer inventory this month   829,692.9 OZ
My goodness we had aNOTHER huge amount of gold enter the vaults of the comex.
Today we had 0 dealer DEPOSITS
total dealer deposit:NIL   0z
Today we had  0 dealer withdrawals:
total dealer withdrawals:  nil oz
We had 2 customer deposits:
i) Into Brinks: 64,002.413 oz
ii) into HSBC: 96,002.720 oz
Total customer deposits:160,005.133 oz  (4.976 tonnes )
Today we had 1 TINY customer withdrawals:????
i) Out of Brinks:  96.07 oz
Total customer withdrawals 96.07  oz ???
Today we had 1 adjustment:
i) Out of the HSBC vault:  289.359 oz was adjusted out of the DEALER and this landed into the CUSTOMER account of HSBC and will be deemed a delivery settlement  (
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 17 contracts of which 0 notices was stopped (received) by JPMorgan dealer and 0 notices was stopped (received)  by JPMorgan customer account. 
To calculate the initial total number of gold ounces standing for the JULY contract month, we take the total number of notices filed so far for the month (6897) x 100 oz  or 689,700 oz , to which we  add the difference between the open interest for the front month of JULY  (0 CONTRACTS) minus the number of notices served upon today (0) x 100 oz   x 100 oz per contract equals 689,700 oz, the number of ounces standing in this active month. 
Thus the FINAL standings for gold for the JULY. contract month:
No of notices served so far (6897) x 100 oz  or ounces + {OI for the front month (17) minus the number of  notices served upon today (17) x 100 oz which equals 689,700 oz standing in this non   active delivery month of JULY  (21.452 tonnes).
Since the comex allows GLD shares to be used for settling, it may take quite a while for the physical gold to enter the comex vaults.  So far I have seen little evidence of any settling of contracts but I will continue to monitor it for you. 
We now have partial evidence of gold settling for last months deliveries We now have  +  6.889 TONNES FOR MAY + 49.09 TONNES FOR JUNE +  21.452 TONNES FOR JULY + 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-May 27 .0185 – .024 TONNES MAY 31 -jUNE 4: .5044 ; june 10 -.0008 / June 22:0.48 tonnes /June 23: 0489 tonnes, June 24..018; june 29 .036 tonnes; JUNE 30 2.49 /july 1 1778 tonnes, JULY 28 .089 TONNES = 51.570 tonnes still standing against 63.10 tonnes available.
 Total dealer inventor 2,028,694.625 oz or 63.10 tonnes
Total gold inventory (dealer and customer) =10,414,467.437 or 323.93 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 328.91 tonnes for a  gain of 26  tonnes over that period. 


To me, the only thing that makes sense is the fact that “kilobars” are entries or hypothecated gold sent to other jurisdictions so that they will not be short in their derivatives like in England.  This would be similar to the gold used by Jon Corzine. If this is the case, this would be the greatest fraud perpetrated on USA soil.


And now for silver
JULY INITIAL standings
 July 28.2016
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
60,585.090 oz
Deposits to the Dealer Inventory
Deposits to the Customer Inventory
1973.000   oz
No of oz served today (contracts)
(560,000 OZ)
No of oz to be served (notices)
3 contracts
15,000 oz)
Total monthly oz silver served (contracts) 2471 contracts (12,355,000 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  6,615,805.4 oz
today we had 0 deposit into the dealer account:
total dealer deposit nil oz
we had 0 dealer withdrawal:
total dealer withdrawals:  NIL oz
we had 1 customer withdrawals:
i) Out of Scotia: 60,585.090 oz
Total customer withdrawals: 60,585.090 oz
We had 1 customer deposit:
i) Into CNT: 1973.000 oz ????
total customer withdrawals:1973.000. oz
 we had 0 adjustments
The total number of notices filed today for the JULY contract month is represented by 71 contracts for 355,000  oz. To calculate the number of silver ounces that will stand for delivery in JULY., we take the total number of notices filed for the month so far at (2471) x 5,000 oz  = 12,355,000 oz to which we add the difference between the open interest for the front month of JULY (115) and the number of notices served upon today (112) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the JULY contract month:  2471(notices served so far)x 5000 oz +(115 OI for front month of JULY ) -number of notices served upon today (112)x 5000 oz  equals  12,370,000 oz  of silver standing for the JULY contract month.
Total dealer silver:  29.293 million (close to record low inventory  
Total number of dealer and customer silver:   155.045 million oz (close to a record low)
The total open interest on silver is NOW AT its all time high with the record of 223,201 being set July 28.2016.  The registered silver (dealer silver) is NOW NEAR  multi year lows as silver is being drawn out at both dealer and customer levels 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.
And now the Gold inventory at the GLD
July 28/no changes in gold inventory at the GLD/Inventory rests at 954.23 tonnes
July 22/ no change in gold inventory at the GLD/Inventory rests at 963.14 tonnes
July 21/ a large withdrawal of gold inventory to the tune of 2.08 tonnes/Inventory rests at 963.14 tonnes
July 20./no changes in gold inventory at the GLD/Inventory rests at 965.22 tonese
July 19/no change in gold inventory at the GLD/Inventory rests at 965.22 tonnes
July 18./ a good sized deposit of 2.37 tonnes of gld into GLD/this is a paper gold entry/inventory rests at 965.22 tonnese
July 15./no change in gold inventory at the GLD/Inventory rests at 962.85 tonnes
July 14/a good sized withdrawal of 2.37 tonnes from the GLD/this would be a “paper withdrawal”/inventory rests tonight at 962.85 tonnes..
July 13/ we had a huge paper withdrawal of 15.98 tonnes of gold from the GLD/inventory rests at 965.22 tonnes.
July 12/we had no changes in gold inventory at the GLD/Inventory rests at 981.20 tonnes
July 11/no changes in gold inventory at the GLS/Inventory rests at 981.20 tonnes
JULY 8/ A  good sized deposit of 2.91 tonnes into the GLD/Inventory rests at 981.20
July 7/a good sized withdrawal of 4.15 tonnes from the GLD/Inventory rests at 978.29 tonnes (this was nothing but a paper entry/no physical moved)
July 5/no change in inventory/rests tonight at 982.44
July 28 / Inventory rests tonight at 954.23  tonnes


Now the SLV Inventory
July 28/we had 1.14 million oz of additional silver added to the SLV/Inventory rests at 349.720 million oz
July 22/we had no change in silver inventory at the SLV.Inventory rests at 348.580 million oz/
July 21/no change in silver inventory at the SLV/Inventory rests at 348.580 million oz
July 20/no change in silver inventory at the SLV/Inventory rests at 348.580 million oz
July 19/no change in silver inventory at the SLV/Inventory rests at 348.580 million oz
July 18/no change in silver inventory at he SLV/inventory restss at 348.580 million oz
July 15/ no change in  silver inventory at the SLV/Inventory rests at 348.580 million oz
July 14/no changes in silver inventory at the SLV/Inventory rests at 348.580 million oz/
July 13./ a huge addition of 5.187 million oz into silver inventory at the SLV/ this is a paper addition as inventory rests at 348.580 million oz
July 12/ a huge addition of 1.94 million oz into silver inventory at the SLV/a “paper” addition/inventory rests at 343.393 million oz
July 11/no changes in silver inventory/rests tonight at 341.453 million oz
JULY 8/no change in silver inventory/rests tonight at 341.453 million oz
July 7./no change in silver inventory/inventory rests at 341.453 million oz
july 5/no change in silver inventory/inventory rests at 333.554 milllion oz
July 28.2016: Inventory 349.720 million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6.3 percent to NAV usa funds and Negative 6.4% to NAV for Cdn funds!!!!  (the discount is starting to disappear)
Percentage of fund in gold 58.5%
Percentage of fund in silver:40.3%
cash .+1.2%( July 28/2016). 
2. Sprott silver fund (PSLV): Premium rises  to +0.46%!!!! NAV (July28/2016) 
3. Sprott gold fund (PHYS): premium to NAV  rises TO  0.91% to NAV  ( July 28/2016)
Note: Sprott silver trust back  into POSITIVE territory at +.46% /Sprott physical gold trust is back into positive territory at +0.91%/Central fund of Canada’s is still in jail.


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

Trading in gold and silver overnight in Asia and Europe
Mark O’Byrne/David Russell

Gold Bullion Up 1.6%, Silver Surges 3.7% After Poor U.S. Data and Dovish Fed

Gold bullion was up 1.6% and silver surged 3.7% yesterday, their second consecutive day of gains, after U.S. durable-goods orders dropped sharply, adding to speculation that Federal Reserve policy makers will maintain ultra loose monetary policies. Gold and silver consolidated on those gains in Asia and in early European trading.

Silver_Gold_Bullion_July_20162016 YTD Relative Performance

Both precious metals are set for further gains in July consolidating on the gains in the first two quarters. This is bullish from a technical, momentum and sentiment perspective.

Bookings for durable goods, goods meant to last at least three years, fell a very sharp 4 per cent in June, a bigger fall than forecast and the most since August 2014.

Gold moved higher as the Fed concluded a two-day meeting, where policy makers left interest rates unchanged claiming risks to the U.S. economy have subsided.  This means there is still the possibility of very small rate increases this year. The durable goods number though shows that the U.S. recovery remains fragile at best.

Gold has climbed 26 percent this year in dollars terms and silver by 46%. Both have seen even bigger gains in most currencies and especially sterling. This is largely due to continuing ultra loose monetary policies globally and growing concerns about the financial and economic outlook.

The Fed has indicated it will hold interest rates lower for longer. Central banks have pledged even more monetary easing amid concerns over the fallout from the U.K.’s vote to leave the European Union and geopolitical risk globally. Japan Prime Minister Shinzo Abe announced plans for even more QE – 28 trillion yen ($265 billion) to help prop up the very weak Japanese economy.

Platinum surged 3.1 percent to $1,125.80 per ounce, the highest in nearly 14 months, extending gains after the Fed statement. Palladium has risen every day this week, following five straight weeks of gains. On Wednesday, palladium climbed to a 9 and a 1/2 month high, firming by as much as 2.3 percent to $702.50 an ounce.

Gold and Silver Bullion – News and Commentary

Hong Kong’s new gold rush: ‘Big Mother’ investors from mainland China buy big (SCMP)

Gold extends gains after Fed holds interest rates steady (Reuters)

Gold Moves Higher After Fed Statement (Nasdaq)

Gold Gains as U.S. Durable Goods Data Underscore Growth Concerns (Bloomberg)

Dollar Extends Decline as European Stocks Slip; Metals Advance (Bloomberg)

Why gold prices spiked after the Fed decision (Marketwatch)

‘Impending gold production cliff’ may deliver a jolt to prices (Marketwatch)

Gold Flood Consolidates After Record Fund Inflows: Chart (Bloomberg)

European banks prepare for possible shockwaves from stress test results (TheGuardian)

Is this the beginning of the end for cash?(MoneyWeek)

Gold Prices (LBMA AM)

28 July: USD 1,341.30, EUR 1,208.78 & GBP 1,017.64 per ounce
27 July: USD 1,320.80, EUR 1,200.21 & GBP 1,007.77 per ounce
26 July: USD 1,321.25, EUR 1,199.56 & GBP 1,006.40 per ounce
25 July: USD 1,315.00, EUR 1,196.91 & GBP 1,000.32 per ounce
22 July: USD 1,323.20, EUR 1,199.22 & GBP 1,005.10 per ounce
21 July: USD 1,322.00, EUR 1,199.32 & GBP 1,000.75 per ounce
20 July: USD 1,325.60, EUR 1,204.31 & GBP 1,005.86 per ounce

Silver Prices (LBMA)

28 July: USD 20.41, EUR 18.41 & GBP 15.51 per ounce
27 July: USD 19.58, EUR 17.81 & GBP 14.95 per ounce
26 July: USD 19.68, EUR 17.89 & GBP 15.00 per ounce
25 July: USD 19.41, EUR 17.66 & GBP 14.77 per ounce
22 July: USD 19.70, EUR 17.87 & GBP 15.03 per ounce
21 July: USD 19.34, EUR 17.55 & GBP 14.66 per ounce
20 July: USD 19.70, EUR 17.88 & GBP 14.95 per ounce

Recent Market Updates

– Marc Faber: Invest 25% Of Investment Portfolios In Gold Bullion
– “Could Not Invent A More Bullish Story For Gold Bullion”
– Gold In Bull Market – “Every Reason For It To Continue” – Frisby In Money Week
– Is Gold Set To Hit $1,500 Per Ounce?
– Why Italy’s bank crisis could be a ‘ticking time bomb’
– Gold Holds Near Two-Week Low as Risk Appetite Rises on U.S. Data
– IMF Scraps Forecast for Global-Growth Pickup on Brexit Fallout
– Gold, Trump and Rates: Bank That Foresaw Rally Flags $1,500
– Gold Lower After Central Bank’s Surprise Move
– “We Are On the Cusp of an Explosion in the Silver Price” – John Embry

– Stocks Rally – Is Brexit Systemic Risks Contained?
– Britain has a new prime minister – here’s what that means for you
– Metals Caught Between Global Gloom, U.S. Job Gains as Gold Slips

Mark O’Byrne
Executive D


Barrick in trouble again as it needs to lower its debt by 2 billion dollars.  It’s African operation is up for sale and they will take a huge loss on it.

(courtesy Reuters/GATA)

Barrick weighs sale of $1.9 billion Acacia stake, sources tell Reuters


By John Tilak and Nicole Mordant
Tuesday, July 28, 2016

Barrick Gold Corp, the world’s largest gold producer, is weighing a sale of its majority stake in African unit Acacia Mining and has approached several South African miners, according to sources familiar with the situation.

The potential sale would be part of Barrick’s broader strategy of selling non-core assets to reduce its debt load. The Toronto-based company offloaded stakes in several mines last year.

The talks are at an early stage and there is no assurance a deal will be done, the sources said.

Barrick owns 64 percent of Acacia, a London-listed miner with three producing gold mines in Tanzania: Bulyanhulu, Buzwagi, and North Mara. Much of the remainder of Acacia is widely held. …

… For the remainder of the report:



Barrick is better in geology than operating a business:

(courtesy Chris Powell/GATA)

K92 Mining may show that Barrick is much better at geology than business


3:55p ET Wednesday, July 27, 2016

Dear Friend of GATA and Gold:

Reuters reported today that, continuing efforts to reduce its huge debt, Barrick Gold is negotiating to sell another $1.9 billion in gold-mining interests in Africa:


Meanwhile Business News Network in Canada reports this week that another cast-off Barrick project, the Kainantu mine in Papua New Guinea, on which Barrick spent more than $240 million, only to unload it two years ago to K92 Mining for a mere $2 million —


— is just two months from resuming production and is enjoying a rising share price.

The BNN report is an interview with K92 Mining President Bryan Slusarchuk and it can be watched at the BNN Internet site here:


The lesson seems to be that the Barrick people are much better geologists than business strategists.

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




DRD gold sees a physical shortage even as paper gold increases in quantity:

(courtesy DRD gold/GATA)

DRD Gold CEO sees metal shortage as ‘paper gold’ increases


4:16p ET Wednesday, July 27, 2016

Dear Friend of GATA and Gold:

Mining Weekly this week quotes DRD Gold CEO Niel Pretorius as recognizing a growing problem with “paper gold,” with the supply expanding while gold production declines.

“There’s a shortage of real gold to cover the paper gold position that’s out there,” Pretorius says.

Of course there’s no guarantee that investors will not continue to prefer “paper gold” over real metal, thereby allowing central banks to inflate the supply of the former and in effect lock the exits from their fiat currency system. But it’s nice to see a gold mining executive willing to acknowledge what’s really going on.

The Mining Weekly report is headlined “World Heading for Shortage of Physical Gold — DRDGold” and it’s posted here:


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




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




2 Nikkei closed DOWN 187.98  OR 1.13% /USA: YEN FALLS TO 104.71

3. Europe stocks opened ALL IN THE RED    /USA dollar index DOWN to 96.52/Euro UP to 1.1091

3b Japan 10 year bond yield: RISES TO  -.269%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 104.71

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  41.73  and Brent: 42.99

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./“HELICOPTER MONEY” ON THE TABLE 

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to -.091%   German bunds BASICALLY negative yields from  10+ years out

 Greece  sees its 2 year rate FALL to 8.07%/: 

3j Greek 10 year bond yield FALL to  : 7.33%   (YIELD CURVE NOW  FLAT TO INVERTED)

3k Gold at $1340.25/silver $20.33(6:45 am est)   SILVER FINAL RESISTANCE AT $18.50 BROKEN 

3l USA vs Russian rouble; (Russian rouble DOWN 72/100 in  roubles/dollar) 66.42-

3m oil into the 41 dollar handle for WTI and 42 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/GOT a SMALL REVALUATION UPWARD from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9840 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0915 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 10 Year German bund now NEGATIVE territory with the 10 year FALLS to  -0.0910%

/German 10+ year rate BASICALLY  negative%!!!


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 1.502% early this morning. Thirty year rate  at 2.215% /POLICY ERROR)

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

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


US Futures Rise With All Eyes On Kuroda As Global Stocks Tread Water

Following yesterday’s Fed decision and ahead of tonight’s far more important BOJ announcement, European stocks have posted modest declines, Asian shares rise toward 9-month highs, while U.S. equity index futures are fractionally in the green in the aftermath of Facebook’s blowout earnings. The dollar has extended on losses after Yellen reiterated a gradual approach to raising interest rates, with the BBDXY down 0.5% in early trading after slipping 0.4% over the previous two sessions.

A re-read of the Fed statement by traders, initially seen a hawkish, suggested no guidance for a September hike and as such the US currency weakened against all but two of its 16 major peers as bets on a rate hike in 2016 first rose but ultimately dropped below 50%. “We’re seeing broad dollar weakness,” said Yuji Kameoka, chief foreign exchange strategist at Daiwa. “Even though the Fed did note some improvements in the economy, a rate hike in September still isn’t certain.”

“The Fed detailed that they see near-term risks diminished, but read between the lines and they still see medium- and long-term risks,” said Chris Weston, chief market strategist at IG. Japan has “the fiscal spending package out of the way and that seems to be in line with the sort of upper end of expectations, but we don’t see it being a huge catalyst for markets to move materially higher.”

Janet Yellen has repeatedly stated that the Fed is likely to raise borrowing costs gradually, though market volatility and an unexpected dip in job gains have delayed such plans. In Japan, traders are looking ahead to Friday’s monetary policy review, after Prime Minister Shinzo Abe announced a fiscal-stimulus package exceeding 28 trillion yen ($267 billion) on Wednesday in a bid to jump-start the economy.

And with the Fed now off the table, all eyes turn to Kuroda in anticipation of just what stimulus program the BOJ will announce tonight, and whether it will unveil the first case of helicopter money – in whatever form – in recent history. “The Fed’s decisions were expected,” said Mitsushige Akino of Ichiyoshi Asset Management Co. “There’ll be a tug of war between selling on expectations the BOJ will disappoint, and short covering for individual shares that will push the market up.” That indeed about sums up the market action over the past 6 months: central banks on one side, and short covering on the other.

Elsewhere, Facebook soared to new all time highs after reporting a 59% jump in sales, and miners led gains in European equities after Anglo American’s first half revenue and profit surpassed analysts forecasts.  As Bloomberg once again reminds us, positive corporate earnings and signs central banks will step in to support economic growth have helped lift global equities to their biggest monthly gain since March. While admitting risks to the U.S. economy had subsided, the Fed left interest rates unchanged on Wednesday as policy makers take stock in the wake of the U.K.’s vote to leave the European Union.

Oil continues to trade near the lowest close in more than 3 months as data showed U.S. crude stockpiles unexpectedly rose, despite the following brilliant piece of insight by Citi’s Ed Morse this morning on Bloomberg TV: “We’re going to rebound, the question is timing”.  Nickel led base metals higher.

Rates on Japanese notes climbed by two basis points to minus 0.275 percent. Ten-year U.S. Treasuries were little changed following last session’s six basis-point slide. And moments ago the yield British 10Y Gilts dropped to a new record low below 0.7%.

Today sees another busy session in terms of US earnings, with the likes of Mastercard and Ford announcing pre market, while after the Wall St. close, large caps Amazon and Alphabet take centre stage as another 65 S&P companies report results.

Market Snapshot

  • S&P 500 futures up 0.2% to 2165
  • Stoxx 600 down 0.4% to 342
  • FTSE 100 down 0.1% to 6742
  • DAX up less than 0.1% to 10322
  • German 10Yr yield down less than 1bp to -0.08%
  • Italian 10Yr yield up less than 1bp to 1.21%
  • Spanish 10Yr yield up less than 1bp to 1.11%
  • S&P GSCI Index up 0.3% to 340.3
  • MSCI Asia Pacific up 0.1% to 135
  • Nikkei 225 down 1.1% to 16477
  • Hang Seng down 0.2% to 22174
  • Shanghai Composite up less than 0.1% to 2994
  • S&P/ASX 200 up 0.3% to 5557
  • U.S. 10-yr yield up less than 1bp to 1.5%
  • Dollar Index down 0.63% to 96.44
  • WTI Crude futures up 0.3% to $42.03
  • Brent Futures down 0.2% to $43.40
  • Gold spot up 0.1% to $1,342
  • Silver spot down less than 0.1% to $20.35

Top Global News

  • Credit Suisse Returns to Surprise Profit in 2Q: CET1 ratio rises 40 basis points to 11.8% from 1Q
  • GoPro Beats Estimates and Forecasts Return to Profitability: co. benefited from renewed demand for action cameras ahead of introduction of a new model later this year
  • Obama, Biden Say Hillary Clinton Is Only Choice: party heavyweights draw contrast between Clinton, Trump
  • Obama Passes Torch to Clinton and Prepares to Run for Legacy
  • Facebook Revenue, Users Top Estimates as Mobile Ads Surge: sales climb 59%, with mobile bringing in 84% of ad revenue
  • Lloyds to Cut 3,000 Jobs in Expense Push After Brexit Vote: bank’s 1H underlying profit topped analyst estimates
  • Suncor Swings to Loss as Alberta Wildfires Lower Production: wildfires prompted shutdown of as much as 40% of Canada supply
  • Euro-Area Economic Confidence Unexpectedly Improves After Brexit:
  • China Said to Legalize Uber, Didi Ride-Hailing as War Rages: Regulations to take effect November
  • Adidas Raises Full-Year Forecast Amid Chelsea Payment Boost: CEO Hainer points to momentum in 2H and beyond
  • AstraZeneca Profit Drops as Focus Shifts to Newer Medicines: co. reiterates 2016 forecast with minimal currency impact
  • Shell Earnings Tumble to 11-Year Low on Oil, Weaker Refining: profit misses analyst estimates by more than $1b
  • Cnooc Expects 1H Net Loss of About 8b Yuan
  • BHP to Book Charge of as Much as $1.3b on Samarco: restart of Samarco operations now seen unlikely in 2016

* * *

Looking at regional markets, Asia stocks traded mostly lower following a mildly cautious Fed and as participants look ahead to the BOJ decision. Nikkei 225 (-1.1%) was the laggard amid profit taking and a firmer JPY as the BoJ kick-started its 2-day policy meeting in which there are mixed calls on further easing. ASX 200 (+0.3%) outperformed as continued gains in iron ore underpinned the materials sector, while Shanghai Comp (+0.1%) pared its losses despite the securities regulator tightened rules for major shareholders regarding purchasing additional stakes in an attempt to restrict hostile takeovers. 10yr JGBs traded lower with a lack of demand seen ahead of the BoJ meeting, while today’s 2yr auction was also uninspiring with the lowest expected price missing expectations, while tail in price widened and bid/cover declined from prior.

Top Asian News

  • Abe Fiscal Plan Is Said to Include About $67b in Spending: A further 6t yen seen as funds for state-run firms
  • Nomura’s 1Q Profit Declines Less-Than-Estimated 32%: Higher trading income tempers slump in brokerage commissions
  • Nissan Profit Declines on Yen, Mitsubishi Motors Posts Loss: Mitsubishi selling stake to Nissan after mileage scandal
  • SoftBank Profit Climbs on Proceeds From Alibaba Stake Sale: 1Q profit rises 19%
  • Samsung Profit Tops Estimates on S7, Lower Marketing Costs: Co. to buy back, cancel 1.79t won of shares
  • GIC Warns of Muted Market Returns as Fund Performance Slumps: 20-year annualized real rate of return falls to 4%
  • OCBC Profit Slumps 15% as Loans, Insurance Income Decline: Smaller rival UOB separately reports 5% gain in net income

In Europe, today sees yet another session dictated by the latest slate of earnings, with most European equities in the red, albeit with no significant losses (Eurostoxx 50: -0.11 %). This also follows suit from US and Asian bourses which were subdued post the FOMC meeting in which the central bank highlighted that although near term risks have diminished, inflation expectations remain low. In terms of the breakdown for individual indices, the CAC 40 outperforms (+0.2%) with earnings from banking heavyweight BNP Paribas (+0.9%) helping to support the index. Elsewhere, the FTSE 100 (-0.2%) has been dragged lower by likes of Lloyds (-3%) and Shell (-4%). In credit markets, Bunds have spent the morning trading in a tight range, residing below 167.50 heading into the North American open, while the yield curve has seen some notable flattening.

Top European News

  • VW Brand Profit Falls as Cost Cuts Can’t Outweigh Crisis Fallout: 2Q VW brand profit margin drops to 2.9% of sales
  • BNP Rises After Beating Estimates Amid Surge in Bond Trading: CFO says investment bank to grab share from retreating rivals
  • German Unemployment Declines as Companies Shrug Off Brexit Woes: jobless rate unchanged at 6.1%, lowest since reunification
  • Spanish Jobless Falls to Almost 6-Year Low Amid Recovery: unemployment rate drops to 20% as economy pushes ahead
  • Total Profit Beats Estimates as Cost Cuts Deepen Amid Slump: co. will surpass $2.4b cost-reduction target
  • Anglo’s Year of the Turnaround Puts Debt Targets Within Reach: Anglo is selling assets and focusing on copper, diamonds; shares gain 5.9% in London, adding to a 183% rally this year
  • Danone 1H Earnings Top Estimates on Price Increases: higher prices drove revenue advance as volume misses consensus
  • Telefonica Earnings Drop as Currencies Hurt Latin America Sales: Spain sales recovering, South America revenue declining

In FX, the Bloomberg Dollar Spot Index, a gauge of the greenback against 10 major peers, lost 0.5% in early trading after slipping 0.4 percent over the previous two sessions. South Korea’s won rose to a nine-month high, leading the charge along with Malaysia’s ringgit and the New Zealand dollar.“We’re seeing broad dollar weakness,” said Yuji Kameoka, the chief foreign exchange strategist at Daiwa Securities Co. in Tokyo. “Even though the Fed did note some improvements in the economy, a rate hike in September still isn’t certain.” The yen climbed 0.6 percent to 104.73 per dollar after dropping 0.7 percent on Wednesday. A majority of economists polled by Bloomberg predict Bank of Japan Governor Haruhiko Kuroda will boost asset purchases on Friday and lower the already negative key rate. The pound slipped 0.1 percent to $1.3207 as swaps trading indicates the Bank of England is certain to cut its key rate on Aug. 4.

In commodities, WTI rose 0.1% to $41.95 a barrel after sinking almost 7 percent over the past five sessions and reaching its lowest settlement price since April 19. Crude inventories climbed by 1.67 million barrels last week as production increased, the Energy Information Administration reported, after analysts surveyed by Bloomberg had forecast a 2 million-barrel decline. Gasoline stockpiles also expanded amid the U.S. summer driving season, which is set to end Sept. 5 on Labor Day. “There is still a surplus and the oil price is going to have difficulty sustaining any rally because of that,” David Lennox, an analyst at Fat Prophets in Sydney, said by phone. “We’re now heading toward the end of the drive season and the market is probably going to weaken further. The $40 a barrel level looks like the base at the moment.” Gold for immediate delivery rose 0.1 percent to $1,341.28 an ounce after gaining 1.9 percent over the previous two sessions. Nickel rose 1.8 percent in London, while copper in New York rebounded
1.1 percent from the lowest close in more than two weeks. A weakening
dollar lends support to commodities priced in the greenback.

Looking at today’s calendar, today we get the June advance goods trade balance reading, initial jobless claims and finally the Kansas City Fed’s manufacturing survey. The US Census Bureau is also due to release a new ‘advance economic indicators report’ this afternoon which will combine the advance goods trades balance data with new estimates of retail and wholesale inventories for June. This means that forecasters will now have more complete information on the Bureau of Economic Analysis’ inventories assumptions for the final month of the quarter prior to tomorrow’s Q2 real GDP release. Away from the data it’s another busy day on the earnings front. 68 S&P companies are due to report including Alphabet. ConocoPhillips, Amazon and Ford Motor. A number of European banks also report today including Credit Suisse, BNP Paribas and Lloyds.

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg

  • Newsflow remains dicated by earnings in Europe, with large caps such as Shell, Total and Credit Suisse all reporting today
  • Elsewhere, markets remain relatively subdued ahead of the key risk event in the form of BoJ rate decision
  • Highlights today include German national CPI, US Initial Jobless Claims, ECB’s Coeure and Earnings from Alphabet and Amazon
  • Treasuries little changed in overnight trading after rallying 4bp-7bp post-FOMC decision yday, global equities mostly lower; week’s auctions conclude with $28b 7Y notes, WI yield 1.35%, compares with 1.497% awarded in June, lowest 7Y auction stop since 1.496% in May 2013
  • About one quarter of Japanese Prime Minister Shinzo Abe’s new 28 trillion yen ($267 billion) economic stimulus includes actual spending, according to a person familiar with the matter
  • Credit Suisse unexpectedly returned to profit in the second quarter, with all operating units contributing to earnings, as Chief Executive Officer Tidjane Thiam eliminated hundreds of jobs and cut costs
  • Lloyds Banking Group will cut a further 3,000 jobs as it warned Britain’s vote to leave the European Union would hurt its ability to boost dividend payments
  • Nomura first-quarter profit fell less than analysts estimated as an increase in trading income and a rebound abroad damped the impact of a slump in brokerage commissions
  • Euro-area economic confidence unexpectedly improved in July in a sign that the immediate impact on growth of Britain’s surprise vote to leave the European Union may be muted
  • German unemployment extended its decline in July, in a sign that Europe’s largest economy is showing resilience to uncertainty unleashed by Britain’s vote to leave the European Union
  • Spanish unemployment fell to the lowest in almost six years in a fresh sign the economy is pushing ahead even as lawmakers struggle to form a government that can end an unprecedented seven-month political deadlock
  • When all else fails, lend. That’s the strategy of some of the biggest U.S. insurers as they seek higher returns in an investment universe where buying bonds sometimes means guaranteed losses
  • Turkey’s post-putsch purge of dissent reached deeper into the economy as authorities shuttered scores of media outlets, detained the head of a major company and banned the chief strategist of a leading brokerage

DB’s Jim Reid concludes the overnight wrap

There is also an element of torture to the FOMC cycle in recent years. The pattern for the Fed is that you slowly talk up the prospects of an imminent hike, you then get closer to it, build it up even more and then just before you pull the trigger something invariably happens in this broken global financial system to force you to pull back and start from scratch. Last night’s statement from the Fed hinted that they are starting this process again though. As we expected it was slightly more hawkish (i.e. leaving the door ajar for September) but it’s clear that there’s a way to go yet before they feel they can safely pull the trigger.

The big takeaway from the statement was the observation that ‘near term risks to the economic outlook have diminished’. Much of that will likely reflect much calmer markets post Brexit and also the bounce back in employment data since that weak May payrolls print. On that the statement showed that committee members viewed recent job gains as being ‘strong’ and also that labour utilization has shown ‘some increase’. Also noted was the observation that household spending has ‘been growing strongly’. On the inflation side of things, there wasn’t really much of a change in view with the statement revealing that ‘market-based measures of inflation compensation remain low’ and that ‘most survey-based measures of longer-term inflation expectations are little changed, on balance in recent months’.

Unsurprisingly there was no guidance as to when the Fed might next hike and market probabilities based on futures pricing were actually fairly little moved. The odds of a September hike are hovering around 26% this morning, while December is at 45%. That compares to 28% and 49% prior to the statement. The biggest reaction in markets has probably come in FX where interestingly the US Dollar is down -0.75% or so relative to just prior to the statement release. Treasury yields also dipped lower although were given a helping hand by the soft durable goods orders data earlier in the day (more on that shortly). The benchmark 10y yield ended 6bps lower at 1.498% while 2y yields were nearly 4bps lower. Credit was slightly stronger, with CDX IG closing 1.1bps tighter while equity markets ended up little changed. The S&P 500 closed -0.12%, notwithstanding a very modest post statement bounce, before retreating again into the close. The Dow (-0.01%) was also close to unchanged although the Nasdaq was +0.58%. Gold rallied +1.50% and WTI Oil (-2.33%) extended its slide below $42/bbl. More bearish inventory data didn’t help matters there.

In fairness equity markets also had to contend with a raft of earnings reports. Coca-Cola shares weakened 3% or so after just beating on earnings, but missing sales expectations and also guiding towards further earnings declines in the rest of the year ahead with management citing a tougher environment outside the US. Boeing shares were a shade higher after the company reported a smaller than expected loss, although guidance for the full year was trimmed following a write-down. Facebook then reported after the close and saw a decent beat relative to both earnings and revenue consensus forecasts on surging advertising revenues (jumping a fairly incredible 63% yoy). This sent shares up 5% in extended trading.

This morning in Asia the tone for the most part is slightly weaker. Japanese bourses in particular have retreated following those big gains yesterday post the fiscal stimulus news below. The Nikkei and Topic are -0.81% and -0.69% respectively. In China the Shanghai Comp is -0.62%, while the Hang Seng (-0.34%) and Kospi (-0.41%) are both in the red. Only the ASX (+0.40%) is up this morning.
After we went to print yesterday Japan’s PM Shinzo Abe unveiled the government’s plans for an economic stimulus package worth over ¥28tn. The Cabinet is expected to approve the package on August 2nd. The PM highlighted that the package would include ¥13tn in fiscal measures. Our Japan economists estimate that the fiscal measures include about ¥6tn in national and regional fiscal spending and ¥6tn for the Fiscal Investment and Loan Program (FILP). The remaining ¥15tn, in conjunction with government subsidies, is expected to include lending by the private sector as well as loans provided by government financial institutions unrelated to FILP, and would not likely provide much of a direct boost to GDP.

It’ll be interesting to see how that impacts the BoJ tomorrow which alongside the results of the EBA Stress Test results tomorrow night at 9pm BST will make for a high impact end to the week. These tests are widely considered to be a catalyst for at least some action to address the NPL problem for Italian banks. At the very least, it is expected that a solution for Monte Paschi (which publishes its half-yearly report on the same day) will be known before next week.

In terms of yesterday’s data, headline durable goods orders in the US in June were a fair bit weaker than expected at -4.0% mom (vs. -1.4% expected) which is the biggest fall since August 2014, weighed down primarily by a big decline for aircraft and parts. Core capex orders did however rise +0.2% mom as expected, while core shipments (-0.4% mom vs. +0.4% expected) declined unexpectedly. As a result of all that the Atlanta Fed trimmed their Q2 GDP forecast to 2.3% from 2.4%. It’s worth noting that the street is at 2.6% for tomorrow’s GDP report. Pending home sales data yesterday covering June did little to move the dial (+0.3% mom vs. +3.0%) despite sales increasing less than expected.

Prior to this in Europe we learned that both Germany (-0.1pts to 10.0; 9.9 expected) and France (-1pt to 96; 96 expected) consumer confidence readings for August and July remained resilient post Brexit. In the UK Q2 GDP printed at a slightly above market +0.6% qoq (vs. +0.5% expected) which had the effect of lifting the YoY rate by two-tenths to +2.2% yoy which is the highest since Q2 last year. Clearly though the post Brexit PMI’s paint the UK in a slightly different light. Finally the ECB released its M3 money supply growth data which showed the growth rate as rising one-tenth to +5.0% yoy. Our European economists also highlighted that lending to households grew in June, along with lending to corporates. They highlight that credit to households and corporate is currently growing at +1.7% yoy. European equity markets edged higher yesterday (+0.43%) with Banco Santander, LVMH and Telecom Italia earnings reports all helping matters.

Looking at today’s calendar, we’re kicking off this morning in Europe with UK house price data for July shortly after this hits your emails, closely followed by the unemployment rate print for Germany, confidence indicators for the Euro area in July and the flash July CPI for Germany. This afternoon in the US we’ve got the June advance goods trade balance reading, initial jobless claims and finally the Kansas City Fed’s manufacturing survey. The US Census Bureau is also due to release a new ‘advance economic indicators report’ this afternoon which will combine the advance goods trades balance data with new estimates of retail and wholesale inventories for June. As our US economists note, this means that forecasters will now have more complete information on the Bureau of Economic Analysis’ inventories assumptions for the final month of the quarter prior to tomorrow’s Q2 real GDP release. Away from the data it’s another busy day on the earnings front. 68 S&P companies are due to report including Alphabet. ConocoPhillips, Amazon and Ford Motor. A number of European banks also report today including Credit Suisse, BNP Paribas and Lloyds.




i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed UP 2.32 POINTS OR 0.08%/ /Hang Sang closed DOWN 44.65 OR .20%. The Nikkei closed DOWN 187.98 POINTS OR 1.13% Australia’s all ordinaires  CLOSED up 0.30% Chinese yuan (ONSHORE) closed UP at 6.6573/Oil fell to 41.73 dollars per barrel for WTI and 42.99 for Brent. Stocks in Europe ALL IN THERED . Offshore yuan trades  6.6653 yuan to the dollar vs 6.6573 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS SLIGHTLY AS CHINA TRIES TO STOP MORE USA DOLLARS LEAVING THEIR SHORES  



Another false headline late this afternoon sends the USA/JPY surging on a pending stimulus and then Bloomberg denies the claim

(courtesy zero hedge)

USDJPY Surges On Headline Government Pressuring BOJ To Boost Stimulus; Bloomberg Denies

Update: Looks like we may have a lost in translation moment here, because shortly after the Reuters report (which recall is first and foremost an FX dealer and so loves USDJPY volatility), bloomberg reports that the “MOF draft statement cited by Reuters simply affirms that govt still plans a package.” Hardly the dramatic “pressuring” of the BOJ Reuters would have its FX trading clients believe.

As Bloomberg paraphrases the Reuters piece, the BOJ is considering specific steps for expanding monetary stimulus Friday to address signs of weakness in inflation, Reuters reports, citing people familiar.

  • BOJ would aim to maximize boost of its measures by timing its action with the govt’s big spending package: sources
  • Ministry of Finance lobbying hard for BOJ to ease further and has prepared a statement it’ll publish if BOJ eases
  • “We welcome the BOJ’s decision and will deploy all necessary policy steps including a scheduled big stimulus package,” says a draft statement seen by Reuters

Bloomberg adds the following:

USD/JPY little changed at 105.35 vs 104.49/105.43 range, rose back above 105.00 as traders responded to Reuters report that MOF has prepared a statement for release if BOJ eases policy; move over 105.00 may have tripped intraday shorts, trader in New York said.

* * *

Another spurious headline, this time from Reuters: “Japan’s MOF has prepared a draft statement in the event of BOJ action,” has sparked another vertical ramp, stop run in USDJPY…

Full Reuters headline:


So much for an “independent” central bank,


As we noted,

BOJ’s favorite tactic: use media “leaks” to take out upside stops ahead of major events

Strongly suggesting Kuroda will get back to work tonight.

All eyes will be on the Bank of Japan’s announcement tonight:  will Koroda provide an huge 28 trillion yen emergency spending measure or temper it by saying the spending will be spread out over several years.  Will he announce any helicopter money?
I will report on this tomorrow:
(courtesy zero hedge)

With All Eyes On Tonight’s BOJ Announcement, A “Minor” Snag Emerges

With all eyes on the BOJ’s decision in several hours, an announcement which is expected to contain some component of government deficit funding attached to it, or helicopter-lite, a “minor” snag has emerged in what Japan has affectionately titled the “emergency, peace of mind realization, overall spending measures” fiscal package…

Best name ever for a stimulus package


emergency, peace of mind realization, overall spending measures

via @JDMayger


… namely that only about a quarter of the total JPY 28 trillion in new stimulus is in the form of actual spending… assuming of course one would call JPY 7 trillion “minor.”

As Bloomberg reports, “about one quarter of Japanese Prime Minister Shinzo Abe’s new 28 trillion yen ($267 billion) economic stimulus includes actual spending, according to a person familiar with the matter.”

The person, who asked not to be named as the discussions are private, didn’t specify the period of time over which the 7 trillion yen would be spent. The money will be part of 13 trillion yen of “fiscal measures,” with the rest of that sum covered by so-called zaito financing that’s used to raise money for projects at state-run companies, according to the person. The remaining 15 trillion yen in Abe’s total package is unclear; he has yet to offer a breakdown on the plan.

An Abe has aggressively talked up the upcoming stimulus, investors have been looking for details of what it will actually contain and, more imporantly, how much of it will be new spending ahead of tonight’s BOJ policy meeting, with economists expecting further monetary stimulus. The Nikkei newspaper reported earlier on Thursday that more than 6 trillion yen will be actual spending. Abe said the cabinet will review the overall plan next week.

Such a small spending component means that any matched component to tonights BOJ’s announcement will likely lead to disappointment. That is what Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities in Tokyo, believes. According to him Abe’s plans for more than
28 trillion yen ($265 billion) in stimulus may have a limited impact on
the economy.

“The point is how much real spending the government will have, and it looks the real fiscal spending could be about 5-6 trillion yen over several years,” he said. Or 7 trillion according to the latest disclosure. Maruyama said because “actual spending” may not be as large as the 28T yen number,“there may be limited impact on boosting the economy.” He concludes that “the size of the package looks magnified.”

Others agreed.

Cited by Bloomberg, Yasunari Ueno, the chief market economist at Mizuho Securities in Tokyo said the package is “all padding.”

“Tax revenues aren’t rising, and the funds for an extra budget are limited,” Ueno said. “This is all padding,” with the government pretending it has resources even though it doesn’t, he said. Ueno also said he doesn’t think this is the right time for such a spending package, given the nation’s high debt burden.

In short, Abe wants his cake and to eat it too, as he realizes that any dramatic increase in Japan’s debt load may be frowned upon by the rest of the world, and certainly by rating agencies. However, he also wants to crush the Yen and send the Nikkei soaring with another “shocking” liqudity injection.

Finally, the FT summarizes all the various points of tension as follows:

Haruhiko Kuroda is set to dash market hopes for ”helicopter money” on Friday but there is a high chance the Bank of Japan governor will deliver more stimulus as he battles with falling inflation. According to surveys conducted by Bloomberg and TV Tokyo, about 80 per cent of analysts expect easing at the BoJ’s July meeting, although they are widely split on what form it will take.

A ¥28tn package would be 5.6 per cent of gross domestic product, a massive stimulus, but analysts said it will be spread over several years and much of it will not be “fresh water”, or actual new spending.

Currency traders have driven the yen down from ¥100 to ¥107 against the dollar in recent weeks, with a recent visit by former US Federal Reserve chairman Ben Bernanke fuelling speculation about a radical shift in Japan’s monetary policy.


But while the odds of easing are higher than at any time since the adoption of negative interest rates in January, BoJ officials say there is no chance of helicopter money, leaving them with a dilemma: they fear whatever they do will now disappoint markets.

And that is the punchline, because having soared as much as 700 pips from its recent pre “helicopter money” rumor lows, the Yen has now priced in far more than the BOJ will be able to deliver tonight. It is also why, according to Reuters, the Ministry of Finance is lobbying hard for BOJ to ease further and has prepared a statement it’ll publish if BOJ eases.

The worst case for Yen shorts would be if the BOJ simply does what both the ECB and the Fed did in recent days and punts to September:

From the BoJ’s point of view, the fiscal stimulus should boost growth and inflation. That gives it less reason to act itself and also argues for waiting until September, when the size of the package will be clear. But the BoJ also wants to show that monetary and fiscal policy are working together.

Alas, absent helicopter money, and assuming only 7 trilion yen, or $67 billion, in actual spending spread over several years will be unveiled, that will hardly allow the BOJ to substantially boost the amount of bonds it purchases any given month without hitting the biggest limitation of all: running out of securities to purchase and/or willing sellers.

Here is the FT’s conclusion:

Leaving helicopter money aside, the options in the central bank’s toolkit are deeper cuts in interest rates to below minus 0.1 per cent; an increase in the pace of asset purchases from ¥80tn a year; or buying more equity and real estate funds.


Although the BoJ still believes its move to negative interest rates was highly effective, it is yet to overcome a strong backlash from the public and the financial sector, making another cut less tempting for now.


Buying more exchange-traded equity funds is an easy option but would be likely to disappoint markets by itself. That leaves the possibility of upping government bond purchases to ¥90tn or ¥100tn a year.


Buying more assets at the same time that the government mounts a new fiscal stimulus would show co-operation from the BoJ and look, on the surface, quite similar to helicopter money.


The BoJ thinks such a policy is completely different — it is already buying more bonds than the government issues every year — but if purchasing still more assets can convince markets of its determination to drive inflation to 2 per cent, it may be an attractive choice.

 In any case, it is difficult to envision an announcement by the central bank that does not disappoint a market which as recently as a week ago was expecting for money to literally fly out of helicopters.




The risk on the USA/Yen cross exploded to the highest level since Lehman as the entire world is worried that the Bank of Japan will not provide the necessary stimulation:

(courtesy zero hedge)


BoJ Turmoil: USDJPY Risk Explodes To Highest Since Lehman

Despite 32 of 41 economists predicting BoJ Governor Kuroda will unleash moar monetray stimulus tonight (and Abe will keep promising larger and larger money drops), FX traders have rarely been this concerned about what happens next. The cost of protecting against overnight volatility in the yen has exploded to its highest since Lehman (Oct 2008). At a time when the balance sheet of The BoJ is as big as The Fed’s, there is a lot hanging on the hope that Kuroda continues his voyage into the surreal and repeats the same mistakes to save the world.

The Bank of Japan’s unprecedented asset-purchase program – put in place to try to end decades of deflation – has increased its balance sheet almost to the size of the Federal Reserve’s (upper pane below)…


And while USDJPY overshot to the upside (yen weakness), as the lower pane above shows, the recent yen strength has recoupled USDJPY to the ratio of Fed/BOJ balance sheets (in USD terms). Without further asset purchases, rather obviously, USDJPY will tumble (yen strength) and possibly create a vicious cycle.

But as Bloomberg notes, Bank of Japan Governor Haruhiko Kuroda has never been one to be swayed by market expectation. But this week, investors are leaving him very little room for maneuver.

Four in five economists predict additional stimulus Friday — the most since Kuroda presided over his first policy meeting in April 2013 — with an increase in purchases of exchange-traded funds the most likely option, followed by a deeper cut in the negative deposit rate. After inaction at the previous two policy meetings sparked yen rallies, Citigroup Inc. warns the currency could surge about 5 percent toward the 2 1/2-year high of 99.02 per dollar it hit after the U.K. voted to leave the European Union.


“If Governor Kuroda sticks to the same optimistic economic scenario he’s presented in the past, there’s a risk dollar-yen will break 100,” said Osamu Takashima, a Tokyo-based strategist at Citigroup, the world’s biggest currency trader. “Expectations have built up so much, the yen will eventually strengthen against the dollar whether the BOJ acts or not.”

Expectations for swings in the currency over one week surged the most since 1995 last Friday, as the BOJ’s decision day entered the time horizon. The difference between implied and realized volatility reached the widest since the 2008 financial crisis.

“Market pricing has never been so certain of more easing, so if the BOJ doesn’t act, it’ll be a really big disappointment,” said Daisaku Ueno, the chief currency strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo. “It depends on the starting level, but the yen could get back to the cusp of 100 per dollar.”

The intensity of the speculation around a direct underwriting of government spending speaks to Japan’s struggle in stoking consumer prices, which economists forecast declined in June for a fourth month.Investors and former government watchers have expressed doubts about the sustainability of the central bank’s bond purchase program, and people familiar with the matter have told Bloomberg that an increasing number of officials at the BOJ are similarly concerned.

For Mizuho Securities Co., the weight of expectation may be too heavy for the BOJ to ignore, even though there is a view in the market that the current yen level means the central bank doesn’t need to rush to add stimulus.

“There’s the idea that the BOJ has to act now because putting it off risks a sharp surge in the yen,” said Kenji Yoshii, a Tokyo-based currency strategist at the brokerage.“It means that whichever option they take, it’s going to be a surprise for markets.”





It took awhile but now Germany admits that they are at war against Islamist terror as they set to deploy an army in “crisis” situations:

(courtesy zero hedge)

Germany Admits “Islamist Terror Has Arrived” As It Prepares To Deploy Army In “Crisis” Situations

In the aftermath of last week’s latest tragic killing in Munich, in an attempt to redirect mounting public anger away from the perpetrator in particular, and from refugees in general, Germany’s Interior Minister Thomas de Maiziere said, incredulously, that the recent attacks in Germany “are unrelated to Merkel’s refugee policy.” That this speech took place just before an ISIS suicide bomber blew himself up also in Germany was awkward. But what was worse is that while Maiziere urged people not to panic, adding “naturally people are concerned and are questioning whether they should change their routines”, he hinted at the next step, stating that the “German army could play a domestic role in special cases.”

It now appears that whether accidentally or intentionally, obtaining tacit approval to roll out the army during a “crisis”, is precisely what Germany was pursuing.

As RT reports, officials in Germany are considering deploying the army inside the country in the wake of multiple attacks, while the governor of Bavaria says Islamic terror has already “arrived.”

Why the dramatic change in tone, and the admission the radical Islam has arrived, something Merkel would not even consider as recently as a few months ago? The answer: to push the “unexpected” army agenda.

“Each attack, each act of terrorism, is one too many. Islamist terrorism has arrived in Germany,” Horst Seehofer, the governor of the German state of Bavaria, told reporters on Tuesday. The official gave a joint news conference with Bavaria’s interior minister, Joachim Hermann, following a summit of the local government, where security issues dominated the agenda.

Last week, the country’s southern regions, including Bavaria, were shaken by four assaults, three of which were perpetrated by migrants. Officials in Germany are investigating two of the incidents as potentially linked to or inspired by Islamist extremism. Others confirmed that the Islamist threat has officially arrived.

Earlier, following the violence, Bavaria’s justice minister, Winfried Bausback, also claimed that Islamist terror has “arrived in Germany,” stressing that the country should “take that into account.”

During Tuesday’s press conference, Seehofer said Germany is facing “a new dimension of terror,” while Bavaria’s interior minister announced that the state’s police ranks would be increased. Hermann also suggested that Germany’s army (Bundeswehr) could be used to aid police in dealing with major terror threats. The debate over whether to deploy the Bundeswehr domestically should not wait “until the next attack happens,” he stressed, as quoted by General-Anzeiger. Lawmakers in Berlin are also discussing the possibility of establishing “troops of reservists” to aid police during internal crisis situations, German media outlet Bild reported, citing its own sources.

Suddenly, a pattern emerges: more attacks, more admissions that militant Islam has penetrated Italy, more calls for army deployment. Almost as if on schedule.

It gets better.

In July, Germany approved its new military roadmap, the White Paper, which allows for the use of the German army inside the country in cases of large-scale terror attacks.

Officials in Germany are now also pushing for greater controls and screenings for asylum seekers. “We need to know who is in our country,” Seehofer said on Tuesday, insisting that the authorities should now consider various ways dealing with refugees that commit crimes.

Well that’s odd, next thing you know Germany will hire Trump as a immigration consultant.

“You have to seriously consider how such people should be treated if they violate laws or pose a threat,” he told Suddeutsche Zeitung, adding that the country cannot retreat from terror out of a sense of “prudence.”

Meanwhile, Bavaria’s interior minister went a step further, suggesting that refugees lacking ID’s must be “stopped at the border,” while migrants already in the country should be re-checked. “A deportation into a war zone should not be taboo as well,” Hermann said, referring to criminal refugees.

Bavaria’s governor and interior minister are now waiting for the German government to take action, stating that the “people’s concerns” should be addressed.

As noted above, Thomas de Maiziere tried to calm emotions somewhat (even if also hinting at the use of the army) following the attacks, saying that refugees “should not be put under general suspicion.”

In reaction, German MP Armin Schuster said: “We need a deportation culture,” as quoted by Stuttgarter Zeitung. “Some people get a feeling they can do whatever they want,” he added, slamming Chancellor Angela Merkel’s open-door policy towards migrants.

In the meantime, another MP and member of Merkel’s Christian Democratic Party (CDU), Volker Kauder, has also advocated for deportation processes to be sped up. “Criminals should be convicted faster and, where there is a legal possibility, deported,” he said, as quoted by Die Zeit.

Regulating the migrant influx was flagged as a “major task” for Germany in the latest poll conducted by market research company GFK, in which 83% of respondents said they are “concerned” by the number of refugees in Germany – double the figure from last year’s report.

It was unclear how many respondents were willing to concede their civil rights and allow the government to roll out the army during any event it considers a crisis, however we are confident that with more such attacks, the number will rise.


German special forces raided a mosque and apartments home to many radical Salafists who are  flaunting European rules:  It is about time they cracked down on these people!

(courtesy zero hedge)

German Special Forces Raid Mosque, Apartments In Crackdown On Salafists

In a pro– instead of reactive move that many will say was long overdue, if quite ironic considering it was Germany’s lax immigration policy for most of 2015 that is the reason for Europe’s soaring “radical Islam” crisis, overnight German police and special forces raided a mosque and eight apartments in Hildesheim, said to be a hotbed of a radical Salafist community, the interior minister of the northern state of Lower Saxony said on Thursday.

Interior Minister Boris Pistorius said in a statement that up to 400 police – including mobile squads and a special forces police commando – were involved in the raids on Wednesday in the Hildesheim area, which is a short drive south of Hanover.

The raid came as part of a crackdown on the radical German-speaking Muslim
group DIK, which was branded a ‘hot spot of radical Muslims’

Raid: German armed police officers launched a raid on a mosque and eight
private apartments in Hildesheim

As the Mail adds, armed police officers launched a raid on a mosque and several homes belonging to a group believed to be radicalising Muslims in Germany.

Apartments belonging to eight board members of the radical German-speaking Islamic group DIK were searched by officers in Hildesheim, Lower Saxony.

It comes as part of a crackdown on the group, which is thought to have been encouraging people to travel to Syria and Iraq to join ISIS.

The group ran sermons, seminars and lectures entitled ‘the hatred of infidels’, according to German media.

“The German-speaking Islamic circle (DIK) in Hildesheim is a nationwide hot-spot of the radical Salafist scene that Lower Saxony security authorities have been monitoring for a long time,” the state official said. Pistorius said the search followed months of planning and was an important step toward banning the association, which security authorities say has radicalized Muslims and encouraged them to take part in jihad in combat zones.

Moments ago, even Angela Merkel, ostensibly the person most responsible for Europe’s refugee crisis, slammed terrorist immigrants, accusing them of “mocking the country that let them in.”

BREAKING: German Chancellor Angela Merkel says refugees carrying out attacks ‘mock the country that took them in’

Well, not so much the country, as the person who made the decision to let them in. As expected, Germany’s AfD, which is sure to benefit from Merkel’s admission was quick to attack the German Chancellor, demanding she “admit her mistakes.”

Meanwhile, back to Lower Saxony where Reuters reports that numerous members of the mosque were said to have traveled to Syria and Iraq to join Islamic State, while sermons, seminars and speeches call for “hate against non-believers,” the ministry said.

Germany has seen sharp increases in the number of ultra-conservative Islamists known as Salafists in recent years, with the total number of sympathizers now seen at 8,900, up from 7,000 at the end of 2014, German officials have said.  Security authorities say the DIK in Hildesheim is believed to have become the focal point of Salafist activities in Lower Saxony, the second-largest of Germany’s 16 states after Bavaria.

“We will not put up with Salafist associations and their backers flouting our rules and bringing our rule of law into question and convincing young people that they want to join the so-called IS,” Pistorius said.

“I’m convinced that our freedom is stronger than the inhuman ideology of the extremists,” he added.

Germany remains on high alert after a spate of attacks since July 18 left 15 people dead – including four attackers – and dozens injured. Two assailants, a Syrian asylum seeker and a refugee from either Pakistan or Afghanistan, had links to Islamist militancy, officials say.

That said, we find it somewhat troubling that these crackdowns begin just days after Germany unveiled plans to use the army during upcoming terrorist attacks. Overnight we reported that Bavaria’s interior minister Joachim Hermann suggested that Germany’s army (Bundeswehr) could be used to aid police in dealing with major terror threats, adding that “the debate over whether to deploy the Bundeswehr domestically should not wait “until the next attack happens.” Additionally, German lawmakers are also discussing the possibility of establishing “troops of reservists” to aid police during internal crisis situations.


Erdogan closes down 130 media organizations including television radio stations newspapers and magazine companies.  No doubt that confidence in their economy will crumble as foreigners take their capital out of the country:

(courtesy zero hedge)

Erdogan Closes 130 Media Organizations, Arrests CEO Of Oil Company

As Europe’s “democratic institutions” continue to stick their collective heads in the sand, pretending to ignore Erdogan’s unprecedented crackdown against every political opponent as well as tens of thousands of people who have nothing to do with politics, Turkey’s post-putsch purge of dissent reached deeper into the economy as authorities shuttered scores of media outlets, detained the head of a major oil company and banned the chief strategist of a leading brokerage.

More than 130 media organizations, including 16 television broadcasters, 23 radio stations, 45 newspapers, 15 magazines and 29 publishers were ordered to shut down in a decree published late Wednesday. The Cihan news agency, which has more than 500 employees, and the newspapers Taraf, Zaman and its English-language Today’s Zaman were among them.

This is in addition to the almost 16,000 Turks who have been detained in the post-coup sweep, about half of whom are awaiting trial. Turkey has also suspended or removed at least 60,000 people from jobs in the military, security services, judiciary, Finance Ministry and academia since the failed July 15-16 coup.

It did not give the names of the media outlets to be closed, but according to a list obtained by the CNN-Turk channel they include mainly provincial titles as well as some well-known national media. These include the Cihan news agency, the pro-Kurdish IMC TV and the opposition daily newspaper Taraf.

Also to be shut are the Zaman newspaper and its Today’s Zaman English language sister publication which, like Cihan, were part of a holding linked to Gulen until being put into state administration earlier this year. Authorities handed out arrest warrants for 42 journalists earlier this week and on Wednesday issued another 47 for former Zaman staff.

Additionally, 87 land army generals, 30 air force generals, and 32 admirals have been dishonourably discharged over their complicity, a Turkish official said, confirming a government decree, while 1,099 officers and 436 junior officers have received a dishonourable discharge, according to the decree.

In the wake of the coup the military has already lost control of the coastguard and gendarmerie, which will now be the responsibility of the interior ministry.

The Supreme Military Council is scheduled to meet Thursday to replace the dismissed military officers and debate further purges. Erdogan, who’s said he’d sign a bill bringing back the death penalty for crimes including treason, announced a three-month state of emergency last week, giving the cabinet the power to issue decrees with the force of law. According to AFP, the council is due to start at 0800 GMT after paying homage to Turkey’s modern founder Mustafa Kemal Ataturk at his mausoleum in what many will see as delightful irony by a country taking a sharp turn to returning to authoritarian rule.

In a symbol of the military’s waning power, the meeting will be held at the Cankaya Palace of the Turkish premier in Ankara and not, as is customary, at military headquarters.

And while we reported yesterday about a stunning, unprecedented escalation when Turkey stripped Mert Ulker, the head of research of one of the country’s largest brokerages, of his license over a report analyzing the impact of the putsch in a way that displeased Erdogan, shocking investors, overnight it turned from bad to worse when Turkey announced the first firing and detention of a head of a top 30 Turkish company, Petkim, a unit of Azerbaijan’s state oil company SOCAR. Pektim said its general manager, Sadettin Korkut, is among dozens of employees that have been fired since the Energy Market Regulatory Authority called on companies to dismiss Gulen supporters.

“If this environment persists, Turkey will reach a point where confidence in its financial sector and economy will crumble, as far as foreign investors are concerned,” Ghanem Nuseibeh, the founder of London-based risk consultancy Cornerstone Global Associates said quoted by Bloomberg.

Meanwhile, the economy is already starting to suffer. Tourist arrivals, a key source of foreign-currency revenue, dropped for the 11th straight month in June, the longest streak of declines on record, data released by the culture and tourism ministry showd Thursday. The government expects the economy to expand 4.5 percent this year, a full percentage point more than the consensus forecast of economists surveyed by Bloomberg.

Arthur Berman describes that the current oil price rally is now over and that we are going to be many  casualties

(courtesy Art Berman)

Oil Industry About To Be Burned Again By Fall In Oil Prices

Submitted by Arthur Berman via OilPrice.com,

The current oil-price rally is over.

U.S. rig counts have surged as oil prices sink. Capital is driving the oil markets and it enables bad behavior by producers. That is why oil prices will stay low.

The oil-price rally that began in February is over. Prices rose from $26 per barrel to $51 by early June and are now below $42 (Figure 1). If they fall through $40, the next likely support level is at $36 per barrel.

(Click to enlarge)

Figure 1. The current oil-price rally is over. Source: EIA, Wall Street Journal and Labyrinth Consulting Services, Inc.

Capital Drives The Oil Market and Prices

Most people think that fundamentals–supply and demand–drive the oil market but capital drives the market and oil prices.

More than anything, rig count reflects capital flow. Many believe that oil prices drive the rig count but it is really capital flow that drives rig count and production and that affects oil prices.

When oil prices fall and oil-price volatility increases, the floodgates of capital open. Every genius-investor wants to buy low and sell high. Rig count rises with fresh capital, production increases and oil prices fall (Figure 2). The weekly change in tight oil horizontal rig count is the leading indicator of capital expenditures. Price trends roughly follow the inverse path.

Figure 2. Capital flows drive the oil market. Source: EIA, CBOE, Bloomberg and Labyrinth Consulting Services, Inc.

When oil prices were around $100 per barrel in mid-2014, oil-price volatility was low. When prices fell below $90 per barrel in October 2014, oil-price volatility began to increase. When prices bottomed below $46 in January 2015, volatility peaked. Correctly believing that a price floor had been reached, investors poured capital into the markets and oil companies were flush with money to start drilling again. Prices rose to $60 per barrel by May 2015.

As drilling proceeded, oil-prices began to fall as market confidence in a price recovery faded. In July 2015, prices began to fall. As they fell to near $40 per barrel by late August, price volatility increased again. Investors saw another price floor and opened their wallets.

Prices rose 18 percent to more than $48 by early October but by then, confidence in a price recovery again faded with increased drilling and global economic concerns about Chinese growth and oil demand. Oil prices fell below $30 in late January 2016 and by mid-February, oil-price volatility reached its highest level since the Financial Collapse in November 2008.

Once again, investors saw a price floor and the floodgates of capital opened. Pioneer and Diamondback raised almost $1.5 billion in share offerings in January 2016, probably the darkest time for oil markets since 1998.

In the first half of 2016, more capital has flowed to E&P companies than during 2013, the previous record year when oil prices were more than $100 per barrel and the tight oil boom was in full bloom (Figure 3).

(Click to enlarge)

Figure 3. U.S. E&P companies have sold more stock so far this year than in the whole of the record year of 2013, when oil averaged almost $100 a barrel. Source: Bloomberg.

Rig Count Surges and Oil Prices Fall

During the current price rally, prices increased from $26 in mid-February to more than $51 per barrel by early June. Meanwhile, the rig count change rate has exploded (Figure 2). Predictably, oil prices have fallen below $42 per barrel as hopes for a price recovery fade once again. This repeating process qualifies under the standard definition of insanity – namely, continuing to do the same thing that got you in trouble before. Related: Oil Extends Losses As EIA Reports Filling Inventories

66 land rigs and 47 tight oil horizontal rigs have been added since early June (Figures 4 and 5). Last week, prices were crashing but 18 rigs were added, the biggest increase in almost 2 years.

(Click to enlarge)

Figure 4. Rig count has increased as oil prices have fallen. Source: Baker Hughes, EIA and Labyrinth Consulting Services, Inc.

Those added rigs, however, resulted from decisions and a process that began weeks or even months ago. After a company decides to add a rig, negotiations follow. More time passes between signing a contract and a rig showing up on location. Empirically, there is about a 5-week lag between changes in price trends and a response in rig count (Figure 5).

(Click to enlarge)

Figure 5. Changes in rig count lag price-trend changes by about five weeks. Source: Baker Hughes, EIA and Labyrinth Consulting Services, Inc.

Who Are Those Guys?

Which companies are adding rigs and do their financial results support more drilling at these oil prices?

About 60 percent of rigs added in the tight oil plays during the last few months are in the Permian basin where there are currently 145 rigs operating (Figure 6). The rest of the new drilling is fairly evenly spread among the Bakken, Eagle Ford, Niobrara, Mississippi Lime and Granite Wash plays.

(Click to enlarge)

Figure 6. Permian basin rig count: 145 rigs despite low oil prices. Source: Drilling Info and Labyrinth Consulting Services, Inc.

The most active operators in the 3 most-productive plays–the Permian, Bakken and Eagle Ford–are shown in the table below.

Table 1. Leading tight oil rig operators for the week ending July 22, 2016. Source: Drilling Info and Labyrinth Consulting Services, Inc.

In the Permian basin, Concho Oil & Gas currently operates 15 rigs, Pioneer Natural Resources operates 12 rigs, and Energen operates 8. Apache, Chevron and XTO each operate 6 rigs, and Anadarko and Endeavor each operate 5. Cimarex, Diamondback, EOG and Parsley all operate 4 rigs.

The most active operator in the Eagle Ford play is EOG with 5 rigs. EOG is followed by Chesapeake and Marathon each with 3 rigs. In the Bakken, Continental Resources is the leading operator with 5 rigs. Hess operates 4 rigs, Whiting operates 3 and Oasis, 2 rigs.

So how are these operators doing financially?

Terribly, despite preposterous stories of technology gains, costs approaching zero, and single-well EURs of 1 million barrels of oil equivalent.

Figure 7 shows the main rig operators in the Permian, Bakken and Eagle Ford plays. These companies spent an average of 4 times as much as they earned in the first quarter of 2016. And it’s been going on for years. Imagine doing that yourself.

Among Permian operators, Parsley spent more than 10 times cash flow and Energen, more than 6. Pioneer and Chevron spent 5 times more than they earned. Anadarko had negative cash from operations meaning that it didn’t even earn enough to pay for well operations.

(Click to enlarge)

Figure 7. Tight oil companies spend 4 times more than they earn. Source: Google Finance and Labyrinth Consulting Services, Inc.

EOG leads the drilling in the Eagle Ford play and only spends twice what it earns–among the best of a bad lot. Marathon, on the other hand, outspends earnings by more than 6-to-1 and ConocoPhillips is not much better at more than 4-to-1. Like Anadarko, Chesapeake has negative cash from operations and, therefore, does not appear in Figure 4.

In the Bakken play, Hess cannot even pay for well operations from its cash flow yet operates 5 rigs. Continental Resources leads Bakken drilling and has a respectable capex-to-cash flow ratio only spending $1.30 for every dollar it earns. Whiting outspends cash flow by almost 6-to-1 and Oasis has negative cash from operations.

The debt picture is equally grim.

It would take top tight oil rig operators an average of 10 years to pay off debt if all cash earned from oil and gas sales were exclusively for that purpose based on first quarter 2016 financial data–in other words, no drilling, no salaries, no nothing except debt payments (Figure 8). That’s way above standard tolerance for this critical measure of bank risk which is now about 4:1 but before 2012, it was closer to 2:1.

(Click to enlarge)

Figure 8. Tight oil companies would take 10 years to off debt using all cash from operations. Source: Google Finance and Labyrinth Consulting Services, Inc.

In the Permian basin, most operators have a debt-to-cash flow ratio of about 6:1 or 7:1. Chevron and Pioneer are much higher at 9.3:1 and 8.2:1, respectively. It would take Apache 8 years to pay off its debt and 7.4 years for Concho. Cimarex is somewhat lower at 4.4 years and not surprisingly XTO (ExxonMobil) is at 2.2 years.

In the Eagle Ford play, EOG has more debt than it could pay off in 6 years and Marathon has a stunning debt-to-cash flow ratio of almost 25! Conoco is not far behind at almost 18-to-one.

In the Bakken play, Continental would need 6 years to pay off its debt but Whiting leads all major tight oil players with a debt-to-cash flow ratio of 29-to-1!

Meanwhile, these companies tell investors tall tales of fantastic rates of return even at low oil prices that clearly do not pass even a superficial fact check using Google Finance or Yahoo Finance. Why would any rational investor give money to most of these companies?

Short-Term Price Spikes In a Few Years

There is an important difference between oil supply and reserves. Supply is available on demand and reserves require long-term, capital-intensive investment to develop.

Tight oil is really a supply project because reserves can become supply one well at a time. Tight oil development can be turned on or off at will as prices rise and fall because at-risk capital is incremental–basically the cost of the number of wells in a rig contract.

While tight oil supply has overwhelmed markets in recent years, remaining reserves are relatively small–a few tens of billions of barrels–compared with true reserve projects like conventional and deep-water oil or oil sands that involve hundreds of billions of barrels. True reserve projects have been largely deferred because of uncertainty about how long low prices will continue.

The insane cycling of oil prices will continue as long as tight oil production keeps the market in a supply surplus. At some time in the next few years, the market will go into deficit as deferred investment in reserve projects comes back to haunt us. Then, inventories will finally be drawn down to 5-year average levels and prices will probably spike.

If that happens, it is likely that prices may go well above $90 per barrel. This may last for a year or somewhat longer based on what occurred in 1979-1981 (27 months), 2007-2008 (13 months) and 2010-2014 (48 months) when prices were more than $90 per barrel. Then, demand destruction will set in and prices will fall. Because the global economy is so much weaker now than during those past periods of high oil prices, I suspect that it will only take a few months to a year before prices fall hard.

Lower Prices Ahead

The current oil-price rally led many to believe that a full price recovery was underway. But inventories have been too large for that to happen short of epic supply interruptions. Current OECD inventories stand at 3.1 billion barrelsand untold millions of barrels in places like China and Russia that do not report storage volumes.

In mid-April, I cautioned:

Two previous price rallies ended badly because they had little basis in market-balance fundamentals. The current rally will probably fail for the same reason.

You don’t have to be a genius to figure this stuff out. Attention to data and recent history is all it takes.

So, why do producers misread price signals so badly and act in ways that lower prices and hurt their own businesses?

They can’t help themselves. Give them money and they will spend it. That’s what E&P companies do.

The cost of credit dictates the precedence of cash flow over common sense even as more debt and the growing burden of debt service dictate even more production to meet new cash flow demands.

It is a vicious cycle that cannot be broken unless the capital stays away. That has not happened because other options for similar yields at acceptable levels of risk cannot be found. And so it continues.

The longer companies continue to produce at a loss and make absurd claims that they are making money at low prices, the more that investors believe them. The market graciously obliges by shorting oil prices.

I see no graceful way out of all of this.


Crude crashes into the 40 dollar column:

(courtesy zerohedge)

Crude Crashes Into Bear Market To April Doha Lows

WTI Crude (Sept 16) futures are within a hair of trading with a $40 handle – something that has not happened since the lows after the failed Doha talks in April. From the June highs at almost $53, oil is down 22% – a bear market -as inventories, rig counts, and production all rise.

The rally is over…

And while production is up in the US (along with rig counts and inventories), JPMorgan notes the global picture is not helping…

Overnight in Asia, weekly inventory data was reported in Singapore, with a build in both light and middle distillates stocks to 15,326kbbls (13,860kbbls last week) and 13,194kbbls (12,192kbbls last week), respectively. Last week’s data has been restated and now shows builds (+905kbbls in middle distillates and +327kbbls in light distillates) versus draws (-304kbbls in middle distillates and -610kbbls in light distillates) reported last week.

Middle distillate stocks are approaching the upper end of the 5-year range, while light distillate (i.e. gasoline) stocks are trending well above the 5-year highs after recent builds (see charts below). Also this morning, European (ARA) weekly inventory data reported a draw in both gasoline and gasoil inventories to 1,284ktonnes (1,354ktonnes last week) and 3,236ktonnes (3,381ktonnes last week), respectively. ARA gasoil stocks are at the high end of the five-year range (5-year average 2,523ktonnes), while gasoline stocks are still well above the 5- year seasonal range (5-year average 786ktonnes).

“We’re going to test support around $40,” said Kyle Cooper, director of research at IAF Advisors and Ion Energy in Houston. “Crude inventories are building. There’s still more supply than demand.”

This won’t end well…


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

Euro/USA   1.1091 UP .0025 (STILL  REACTING TO BREXIT/



USA/CAN 1.3154 UP .0015

Early THIS THURSDAY morning in Europe, the Euro ROSE by 25 basis points, trading now JUST above the important 1.08 level RISING to 1.1091; Europe is still reacting to Gr Britain BREXIT,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 UP 2.32 POINTS OR .08%   / Hang Sang CLOSED DOWN 44.65 POINTS OR .20%    /AUSTRALIA is HIGHER BY .30% / EUROPEAN BOURSES  ALL IN THE RED

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 THURSDAY morning CLOSED DOWN 187.98 POINTS OR 1.13%  

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 44.65 POINTS OR .20%  ,Shanghai CLOSED UP 2.32 OR .08%    / Australia bourse in the green: /Nikkei (Japan) closed DOWN 187.98 POINTS OR 1.13%/INDIA’S Sensex IN THE RED  

Gold very early morning trading: $1340.15


Early THURSDAY morning USA 10 year bond yield: 1.502% !!! DOWN 1  in basis points from WEDNESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield FALLS to 2.215 DOWN 2 in basis points from WEDNESDAY night. (SPREAD GOES AGAINST THE BANKS)

USA dollar index early THURSDAY morning: 96.52 DOWN 26 CENTS from WEDNESDAY’s close.

This ends early morning numbers THURSDAY MORNING



And now your closing THURSDAY NUMBERS

Portuguese 10 year bond yield:  2.97% DOWN 2 in basis points from WEDNESDAY  (does not buy the rally)

JAPANESE BOND YIELD: -0.272% DOWN 2  in   basis points from WEDNESDAY

SPANISH 10 YR BOND YIELD: 1.09% DOWN 2 IN basis points from WEDNESDAY( this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.20 DOWN 1 in basis points from WEDNESDAY (again totally nuts/)

the Italian 10 yr bond yield is trading 11 points HIGHER than Spain.





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


Euro/USA 1.1071 UP .0005 (Euro UP 5 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 105.45 UP .527(Yen down 53 basis points/HELICOPTER MONEY BACK ON THE TABLE )


USA/Canada 1.3167-UP 0.0028 (Canadian dollar DOWN 28 basis points AS OIL FELL (WTI AT $41.17). Canada keeps rate at 0.5% and does not cut!


This afternoon, the Euro was UP by 5 basis points to trade at 1.1071

The Yen FELL to 105.45 for a LOSS of 53 basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY NOW ON THE TABLE


The Canadian dollar FELL by 28 basis points to 1.3167, WITH WTI OIL AT:  $41.22


The USA/Yuan closed at 6.6538

the 10 yr Japanese bond yield closed at -.272% UP 2  IN BASIS  points in yield/

Your closing 10 yr USA bond yield: PAR IN basis points from WEDNESDAY at 1.513% //trading well below the resistance level of 2.27-2.32%)

USA 30 yr bond yield: 2.231 PAR  in basis points on the day /AND THE DOW RISES??


Your closing USA dollar index, 96.75 DOWN 3 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 29.37 OR 0.44%
German Dax :CLOSED DOWN 44.623 OR  0.43%
Paris Cac  CLOSED DOWN 26.38  OR 0.59%
Spain IBEX CLOSED DOWN 182.20 OR 2.10%
Italian MIB: CLOSED DOWN 340.37 OR 2.02%

The Dow was DOWN 15.82 points or 0.09%

NASDAQ  UP 15.17 points or 0.30%
WTI Oil price; 41.22 at 4:30 pm;

Brent Oil: 43.25




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

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


BRENT: 43.20

USA 10 YR BOND YIELD: 1.5061% 

USA DOLLAR INDEX: 96.67 DOWN 12 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.31718 UP .0053 or 53 basis pts.

German 10 yr bond yield at 5 pm: -.079%


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


Stocks Dump-n-Pump Amid Crude Carnage, Credit Crumble



Better to play with yourself…


Another day another v-shaped recovery…


As VIX was smashed again and S&P rangebound…Just a total meltup again…


From the moment Europe closed, stocks decided to rally, helped by a spurious headline from Japan that said nothing new at all but managed to spook JPY lower… Once overnight stops were run we closed ugly…


Small Caps (up almost 30% from feb lows) are up on the week but Nasdaq (AAPL, FB) is best; Trannies worst…




HY Credit is heading for its orst week in 3 months, decoupling from stocks…


Energy stocks are starting to catch down…


Treasury yields ended flat – after some rate-lock buying sent yields higher early but GDP expectations tumbling sent yields lower…


Notably it seems the brief recoupling of stocks and bonds today sparked some anti-correlation…


The USD ended the day modestly lower, supported in the afternoon by a headline drivenm yen dumping…


USDJPY was in charge today on another useless headline…


Commodities were mixed with copper up but PMs down modestly. Crude was a mess again…


Crude continued to collapse… down 22% from June highs…


Charts: Bloomberg



Atlanta Fed just slashes its Q2 estimate of GDP down to 1.8% form 2.4%.

(courtesy zero hedge)

Atlanta Fed Just Slashed its Q2 GDP Estimate To 1.8%, Cycle Low

Just hours before tomorrow’s official GDP print, the Atlanta Fed just took an axe to its GDPNow US economic growth forecast. Despite the record-breaking streak of positive economic surprises, following yesterday’s durable goods data and today’s advance economic indicators report, GDPNow has crashed from over 2.4% to 1.8% growth for Q2.

But, but, but all those positive ‘survey’ surprises said everything was awesome…

Chart: Bloomberg

It appears that hard data trumps soft-survey data once again: (via Atlanta fed)

The final GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2016 is 1.8 percent on July 28, down from 2.3 percent on July 27.

After the U.S. Census Bureau’s inaugural release of its advance economic indicators report, which covers retail and wholesale inventories and foreign trade in goods, the nowcast of the contribution of net exports to second-quarter real GDP growth declined from 0.17 percentage points to –0.10 percentage points and the nowcast of the contribution of inventory investment to growth declined from –0.63 percentage points to –0.79 percentage points.

Just don’t tell President Obama.



The following is meant for all our naysayers who look at the stock market and think everything is wonderful!!

(courtesy Michael Snyder)

If Everything Is So Great, Then Why Do Two-Thirds Of Americans Say The Country Is On The Wrong Track?



Ford sees what guys in our camp see: no growth anywhere!

(courtesy zero hedge)

Ford Plunges After Warning “We Don’t See Growth”, Warns US Auto Industry “Has Plateaued”

The reason Ford stock is plunging this morning is not so much the company’s earnings miss, when the US auto giant reported Q2 EPS of $0.52, below the $0.60 expected, but because in some startling language, CEO Mark Fields laid out a very gloomy picture of the future.

As the company reported in its press release, it told investors to “expect another strong year of results, and Ford committed to full year guidance of company pretax profit and operating margin equal to or better than last year;however, company now sees risks challenging achieving guidance. Entire Ford team working to mitigate the risks.”

A key part of the problem is one shown here repeatedly over the past year, namely the troubling increase in auto inventories, which are now at 5 year highs, and the inventory to sales ratio back to levels seen during the last recession.

Whether the pile up of autos at dealers is the main threat to future sales, is not certain, as the company was relative vague about the risks facing it. What it was not vague at all, about, however, is that the company which until recently was the stalwart of the only US manufacturing sector to be humming along while the rest of US non-service industries tumbled, is that the future is suddenly very unclear and full of risks.

To wit:

“We’re committed to meeting our guidance, but it is at risk,” Chief Financial Officer Bob Shanks told reporters Thursday. The company now says it’s unlikely that U.S. vehicle sales will break last year’s record, and Shanks predicted further contraction in 2017. “We don’t see growth, at least in the near term.”

“We do think the U.S. is coming down from what we expected,” Shanks said. “We saw higher U.S. incentives – that was for the industry and for us. The industry increased and we increased in line with the industry.”

“We are working, as we did in the first half, to deliver profit improvement actions,” Shanks said. “We do have risks. We’ve seen those risks. We’ve addressed those risks in the first half. We need to continue to do that in the second half and deliver the guidance that we’re committed to do.”

“What we’re seeing is that over time, particularly as the U.S. industry has started to plateau, we’ve seen a very gradual, modestly rising incentive level,” Shanks said later in a conference call with analysts.

Ford lowered its estimates for full-year industry sales in the U.S. saying second half sales will be “much weaker than normal” and said next year’s sales will be even weaker.

And while we know that there is a massive inventory build up, the question is why. One reason was presented here this Monday when we reported that “Subprime Snaps: Largest US Subprime Auto Lender Delays Earnings Due To “Accounting Matters.” And while we await Santander Commercial to file its delayed, and adjusted, earnings report, it appears that even without the hard data one can conclude that the subprime driven auto-boom, which propelled the auto industry over the past two years, has finally ended.

For confirmation look no further than Ford stock, which this morning is tumbling by 10% as the market is suddenly repricing risk in the US auto industry.



Well that about does it for tonight

I will see you on Saturday morning with the Friday night report.

all the best



  1. Mike Logsdon · · Reply

    we seem to have lost formatting in Firefox again.


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