Sept 9/Bond prices collapse globally as all yields rise hugely/USA passes bill allowing for lawsuits against Saudi Arabia: now up to Obama/Wells Fargo created millions of fake accounts and are now charged criminally with a fine of 185 million dollars and 5300 will lose their job/Gold and silver whacked/Massive drop in gold tonnage equal to 11.87 tonnes and yet nothing moves out of SLV vaults/

Gold:1330.10 down $6.70

Silver 19.28  down 32 cents

 

In the access market 5:15 pm

Gold: 1328.20

Silver: 19.06

THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON

.

The Shanghai fix is at 10:15 pm est and 2:15 am est

The fix for London is at 3 am est (first fix) and 10 am est (second fix)

Thus Shanghai’s second fix corresponds to 45 minutes before London’s first fix.

And now the fix recordings:

Shanghai morning fix Sept 9 (10:15 pm est last night): $1340.25

NY ACCESS PRICE: $1338.50 (AT THE EXACT SAME TIME)

Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$1341.18

NY ACCESS PRICE: 1337.90 (AT THE EXACT SAME TIME)

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

London Fix: Sept 9: 3: am est:  $1335.65   (NY: same time:  $1335.93:    3 AM)

London Second fix Sept 8: 10 am est:  $1330.85  (NY same time: $1331.30 ,    10 AM)

It seems that Shanghai pricing is higher than the other  two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex

For gold:The front September contract month we had 399 notices filed for 39,900 oz

For silver:  the month of September we have a total of 429 notices filed for 2,145,000 oz

 

The crooks were already preparing for today to raid gold and silver.  The COT report is so lopsided it is unbelievable.  The specs are dominating on the long side and the crooked commercials are dominating on the short side. I cannot remember seeing a COT report like this one tonight. The markets took a nose dive due to higher interest rates shook the market.  The underwriting banks must have taken a huge haircut today with massive derivative losses.

Let us have a look at the data for today

.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest FELL by ONLY 701 contracts down to 198,631. The open interest fell slightly even though  the silver price was whacked down 29 cents in yesterday’s trading .In ounces, the OI is still represented by just LESS THAN 1 BILLION oz i.e. .993 BILLION TO BE EXACT or 141% of annual global silver production (ex Russia &ex China). the crooks are doing a great job fleecing unsuspecting longs

In silver we had 203 notices served upon for 1,015,000 oz

In gold, the total comex gold fell by 5,245 contracts as  the price of gold fell BY $7.50 yesterday . The total gold OI stands at 593,221 contracts

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

GLD

we had a big changes tonight out of the GLD/ there were two major withdrawals

i) first early morning: 1.19 tonnes

ii) second:  10.68 tonnes of gold

total: 11.87 tonnes

Total gold inventory rest tonight at: 939.94 tonnes of gold

SLV

we had no changes with respect to inventory at the SLV /SLV inventory

THE SLV Inventory rests at: 362.719million oz

.

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

1. Today, we had the open interest in silver fell by 701 contracts down to 198,631 as the  price of silver fell by 17 cents with yesterday’s trading.The gold open interest fell 5,245 contracts down to 593,221 as the price of gold fell $7.70 IN YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

end

2c) COT report

(Harvey)

3. ASIAN AFFAIRS

i)Late  THURSDAY night/FRIDAY morning: Shanghai closed DOWN 17.10 POINTS OR 0.55%/ /Hang Sang closed UP 180.36 points or 0.75%. The Nikkei closed UP 6.99 POINTS OR 0.04% Australia’s all ordinaires  CLOSED DOWN 0.86% Chinese yuan (ONSHORE) closed WELL DOWN at 6.6808/Oil FELL to 46.97 dollars per barrel for WTI and 49.27 for Brent. Stocks in Europe: ALL IN THE RED   Offshore yuan trades  6.6914 yuan to the dollar vs 6.6808 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS SLIGHTLY AS  MORE USA DOLLARS ATTEMPT TO  LEAVE CHINA’S SHORES

REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

3a)Korea: 

It sure looks like North Korea detonated a nuclear test inside its territory: this sent the Korean won down as well as Asia Pac stocks.

(courtesy zero hedge)

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

none today

4 EUROPEAN AFFAIRS

i)ITALY

Monte de Pashi outs its CEO as the bank turnaround is still mired in investo doubt

( Sonia Sirletti/Bloomberg)

ii)Europe in general

Graham Summers has a way of putting out short but accurate commentaries on the state of affairs of global markets.

Today is has issued a warning that Europe has officially entered the end game. Why? interest rates are rising and this will cause European banks which are already swollen with sovereign debt to implode. He makes two important points:

  1. the European banks have a leverage of 26: 1 and that is accurate
  2.  any 4% loss in value on those sovereign bonds will implode the banking sectors’ balance sheet

( Graham Summers/Phoenix Capital Research)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

Turkey

This ought to be good!  Turkey (via the ECB) provides debit cards equal to 1,000 Euros per card to all the refugees blocked in camps.  This will not end well!

(courtesy Mish Shedlock/Mishtalk)

Saudia Arabia

 

The fun begins:  both the Senate and the House pass the bill authorizing lawsuits against the Saudis

two questions:

  1. will Obama we classified as a traitor if he kills the bill
  2. what will the Saudi’s do if Obama signs it into law

( zero hedge)

6.GLOBAL ISSUES

For many months I have been warning you on the dangers of low yields on bonds and eventually the boys would run out of bonds to buy.  Royal Bank of Canada now states that the markets are paralyzed with uncertainty and the spook story of yesterday (Japan going to buy bonds on the short end and sell at long end) is sending those shock waves around the globe.

(courtesy Royal Bank of Canada/zero hedge)

7.OIL ISSUES

i)OIL falls as it appears scenario NO 4 will be borne:  no deal on oil production freeze

( zero hedge)
ii)Crude holds its losses as the rig count rises again for the 11th straight week.  This should increase production by a lot.

( zero hedge)

8.EMERGING MARKETS

An excellent commentary from the Mises Institute on the various South American economies.  Those that adopted market oriented economies like Chile, Uruguay and Columbia have done much better than the left orientated, Venezuela, Argentina and Brazil.

a must read.

( Mises Institute/McMaken)

9.PHYSICAL STORIES

10.USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD/SILVER

i)I think I have seen just about everything:  Well Fargo fines 185 million dollars for engaging in massive fraud by creating over 2 million fake accounts.  Wells Fargo fires 5,300 workers who engaged in this practice.

( zero hedge)

ii)I am so glad that I am alive to witness the following:

Tampons are coming to men’s washrooms at Brown University.

( Sydney Hutchison/CampusReform.com)

iii)Amazing the journalists are quite tonight even though the labour department revised away a huge 150,000 jobs or around 12,000 per month.  They probably know the truth anyway that the entire job scene is one big farce!

( zero hedge)

iv)It sure looks like the taxpayer is going to pick up the bill for the ITT cancellation:

( zero hedge)

v)This is something;  over 70% of USA doctors surveyed said that Hillary’s health concerns are serious enough to possibly disqualify her from the Presidency:

( zero hedge)

vi)Gundlach states that Yellen may surprise markets and raise interest rates even though the Fed may blow itself up.

a must read..

( Doubleline/Jeff Gundlach/zerohedge)

vii)And with economic conditions around the globe plummeting, we are witnessing odds of a September rate hike rise.  This too will not end well!

( zero hedge)

viii)Wholesale sales tumble hugely and the  sales/inventory ratio rose again back to 1.34 which means we are deep in recessionary territory:

( zero hedge)

ix)Today we have received a flood of warnings for lower profits in Q3  (July-Sept). Seems that David Stockman’s prediction on lower S and P is bearing fruit.

( zero hedge)

x)This will hurt: GM recalls 4 million vehicles over air bag defect linked to a death

( zero hedge)

xi)The following story is even better than the above:  the”Oh Sh&(% Guy” who wiped Hillary’s blackberry with Bleachbit has been granted immunity:

( zero hedge)

xii)The following ought to be good for the job scene next month:  Dell fires 3,000 USA workers( Wolf Richter)

Let us head over to the comex:

The total gold comex open interest fell to an OI level of 593,221 for a loss of 5,245 contracts as the price of gold FELL by $7.50 with yesterday’s trading. We are now in the NON active month of SEPTEMBER/

The contract month of Sept saw it’s OI RISE by 1 contract UP to 120. We had 1 notice filed yesterday so we GAINED 2 contracts or 200 additional oz will stand for delivery.  The next delivery month is October and here the OI FELL by 667 contracts DOWN to 43,613. This level is extremely high and no doubt many of these will wait it out and take delivery at the end of the month. The next contract month of December showed an decrease  of  4938 contracts down to 445,611.The estimated volume today at the comex: 191,886 fair  Confirmed volume yesterday: 165,383, which is also fair.

Today we had  4 notice filed for  400 oz of gold.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

And now for the wild silver comex results.  Total silver OI fell by 701 contracts from 199,332 DOWN TO 198,631  despite the HUGE FALL in price of silver to the tune of 17 cents yesterday.  We are moving away from the all time record high for silver open interest set on Wednesday August 3:  (224,540).  We are now into the next active month of September and here the OI fell by 128 contracts down to 1340. We had 304 notices filed on yesterday so we gained 176 contracts or 880,000 additional oz will stand for delivery in this active month of September.Somebody was in great need of physical silver.  The next non active delivery movement of October hardly moved rising by 4 contracts up to 274 contracts.  The next big delivery month will be December and here it fell , down 750 contracts  to 172,584. The volume on the comex today (just comex) came in at 54,299 which is very good  The confirmed volume yesterday (comex and globex) was excellent  at 57,676 . Silver is not in backwardation.  London is in backwardation for several months.

today we had 203 notices filed for silver: 1,520,000 oz

INITIAL standings for SEPTEMBER
 SEPT 9.
Gold
Ounces
Withdrawals from Dealers Inventory in oz  

NIL

Withdrawals from Customer Inventory in oz  nil
29,041.92 OZ
BRINKS
MANFRA
INCL 5 KILOBARS
Deposits to the Dealer Inventory in oz 299.84 oz

Brinks

Deposits to the Customer Inventory, in oz 
NIL
No of oz served (contracts) today
4 notices 
400 oz
No of oz to be served (notices)
116 contracts
(11,600 oz)
Total monthly oz gold served (contracts) so far this month
2308 contracts
230,800 oz
7.1788 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month   192.90 oz
Total accumulative withdrawal of gold from the Customer inventory this month   64,767.8 oz
 Today: tiny activity at the gold comex and 1 kilobar entry
We had 1 dealer deposit:
i) Into Brinks: 299.84 oz
Total dealer deposits; 299.84 oz
We had 0 dealer withdrawals:
total dealer withdrawals:  NIL oz
We had 0 customer deposits:
 Total customer deposits:  nil oz
We had 2 customer withdrawals:
i) Out of Brinks: 28,881.17  oz
ii) Out of Manfra: 160.75 oz (5 kilobars)
Total customer withdrawals: 29,041.92  oz
Today we had 1 dandy adjustment:
i) Out of jPMorgan:
63,437.219 oz was adjusted out of the dealer and this landed into the customer account of JPM and this should be deemed a settlement
EVERYDAY MORE AND MORE GOLD IS LEAVING THE COMEX AND VERY LITTLE IS COMING IN WHETHER KILOBARS OR NOT
 
Note:
If anybody is holding any gold at the comex, you must be out of your mind!!!
since comex gold storage is unallocated , rest assured any gold stored at the comex will be compromised!
I also urge all of you do not place any option trades at the comex as these gangsters will gun you down.
If you are taking delivery of gold/silver please remove it from comex banks and place it in private vaults 
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Today, 0 notices were issued from JPMorgan dealer account and 0 notices were issued form their client or customer account. The total of all issuance by all participants equates to 4 contract  of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped (received) by jPMorgan customer account.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
To calculate the initial total number of gold ounces standing for the SEPT  contract month, we take the total number of notices filed so far for the month (2308) x 100 oz  or 230,800 oz , to which we  add the difference between the open interest for the front month of SEPT  (120 CONTRACTS) minus the number of notices served upon today (4) x 100 oz   x 100 oz per contract equals 242,400  oz, the number of ounces standing in this NON active month. 
 
Thus the INITIAL standings for gold for the SEPT contract month:
No of notices served so far (2308) x 100 oz  or ounces + {OI for the front month (120) minus the number of  notices served upon today (4) x 100 oz which equals 242,400 oz standing in this non  active delivery month of SEPT  (7.5396 tonnes).
we  GAINED 2 contracts or an additional 200 oz will  stand. We are almost back to our original standings on first day notice. (ON FIRST DAY NOTICE: 7.5561 TONNES STOOD FOR DELIVERY)
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.  This is becoming quite a farce but I will no longer show settlements vs what is owing:
 
 Total dealer inventor 2,377,273.163 or 73.94 tonnes
Total gold inventory (dealer and customer) =10,892,155.289 or 338.79 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 338.79 tonnes for a  gain of 36  tonnes over that period. 
Ladies and Gentlemen:  the comex is beginning to lose some of its gold.
The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent!
 

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 they are in England.  This would be similar to the rehypothecated gold used by Jon Corzine. If this is the case, this would be the greatest fraud perpetrated on USA soil!!.

 
 end
And now for silver
 
SEPT INITIAL standings
 SEPT 9.2016
Inventory movements not available today from the CME/
Silver
Ounces
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
100,883.47 oz
BRINKS
SCOTIA
Deposits to the Dealer Inventory
 604,848.73 OZ
CNT
Deposits to the Customer Inventoryxxx
 1,132,881.570 oz
CNT
HSBC
SCOTIA

<

No of oz served today (contracts)
203 CONTRACTS
(1,015,000 OZ)
No of oz to be served (notices)
1137 contracts
(5,685,000 oz)
Total monthly oz silver served (contracts) 1914 contracts (9,570,000 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  3,223,282.9 oz

<

today, we had 1 deposit into the dealer account:
i) Into CNT:  604,848.73 oz
total dealer deposit:   604,848.73 oz
we had 0 dealer withdrawals:
 total dealer withdrawals: NIL oz
 we had 2 customer withdrawals:
 i) Out of BRINKS  40,719.700 OZ
ii) Out of Scotia: 60,163.79 oz
Total customer withdrawals: 100,883.47  oz
We had 2 customer deposits:
i) Into HSBC: 650,624.47
iii) into Scotia 482,257.100 oz
total customer deposits:  1,132,881.57  oz
 
 
 
 we had 1 adjustment
i) from the vaults of CNT:

10,841.330 oz was adjusted out of the customer at CNT into the dealer account of CNT

The total number of notices filed today for the SEPT contract month is represented by 203 contracts for 1,015,000 oz. To calculate the number of silver ounces that will stand for delivery in SEPT., we take the total number of notices filed for the month so far at (1914) x 5,000 oz  = 9,570,000 oz to which we add the difference between the open interest for the front month of SEPT (1340) and the number of notices served upon today (203) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the SEPT contract month:  1914(notices served so far)x 5000 oz +(1340 OI for front month of SEPT ) -number of notices served upon today (203)x 5000 oz  equals  15,255,000 oz  of silver standing for the SEPT contract month.
we gained another  176 contracts or an additional 880,000 will stand FOR DELIVERY IN THIS  ACTIVE MONTH OF SEPTEMBER. SOMEBODY TONIGHT WAS AGAIN IN GREAT NEED OF SILVER.
 
Total dealer silver:  29.449 million (close to record low inventory  
Total number of dealer and customer silver:   164.078 million oz (close to a record low)
The total open interest on silver is NOW close to its all time high with the record of 224,540 being set AUGUST 3.2016.  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.
end
 
And now the Gold inventory at the GLD

SEPT 9/ we had a big changes tonight out of the GLD/ there were two major withdrawals

i) first early morning: 1.19 tonnes

ii) second:  10.68 tonnes of gold

total: 11.87 tonnes

Total gold inventory rest tonight at: 939.94 tonnes of gold

Sept 8./no changes in gold inventory at the GLD/Inventory rests tonight at 951.81 tonnes
SEPT 7.2016/we had a small withdrawal of .333 tones from the GLD/Inventory rests tonight at 951.81 tonnes
Sept 6/a monstrous addition of 14.25 tonnes into the GLD/with London in backwardation in gold I wonder how these guys found so much “gold”/Inventory rests tonight at 952.14 tonnes/
Sept 2/no change in inventory at the GLD/Inventory rests at 937.89 tonnes
SEPT 1/another montrous withdrawal of 5.34 tonnes/Inventory rests at 937.89 tonnes
August 31/ a monstrous 13.36 tonnes of gold leaves the GLD/inventory rests at 943.23 tonnes
august 30/no change at the GLD/Inventory rests at 956.59 tonnes
August 29/no changes at the GLD/Inventory rests at 956.59 tonnes
August 26./no changes at the GLD/inventory rests at 956.59 tonnes
August 25/a withdrawal of 1.78 tonnes at the GLD/Inventory rests at 956.59 tones
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SEPT 9/ Inventory rests tonight at 939.94 tonnes

end

Now the SLV Inventory
 STRANGE!!!! no changes today in silver but huge withdrawals in gold!!
SEPT 9/no change in silver inventory at the SLV/Inventory rests at 362.719 million oz/
Sept 8/ no changes in silver inventory at the SLV/Inventory rests at 362.719 million oz/
SEPT 7/We had a huge addition of 3.134 million oz into the SLV/Inventory rests a t 362.719 million oz. In less than a month we had added 11 million oz of silver into SLV vaults.
Sept 6/Strange: no addition of silver at the SLV. You mean they cannot find any paper silver?/Inventory rests at 359.585 million oz
Sept 2/a small withdrawal of 158,000 oz at the SLV probably to pay for fees/Inventor  rests at 359.585 million oz.
SEPT 1/no change in inventory at the SLV/Inventory rests at 359.743 million oz/
August 31/we had a monstrous addition of 1.899 million oz into the SLV/this would be a paper addition/inventory rests at 359.743 million oz//why the difference in gold and silver: one reduces dramatically and the other increases dramatically
August 30/no change in silver inventory/inventory rests at 357.844 million oz/
August 29/we had a good sized deposit of 950,000 oz at the SLV/Inventory rests at 357.844 million oz/
August 26/no change in silver inventory at the SLV/Inventory rests at 356.894 million oz
August 25/a withdrawal of 1.899 million oz from the SLV/Inventory rests at 356.894 million oz
.
SEPT 9.2016: Inventory 362.719 million oz
 end

COT REPORT

At 3:30 pm we receive the COT which gives position levels of our players who graciously interact with our criminal “commercials” who fleece them on a continual basis over over 30 yrs. You would think that they would learn from their mistakes;
Let us head over to the GOld COT:
Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
370,375 62,515 55,872 110,470 440,443 536,717 558,830
Change from Prior Reporting Period
29,789 -1,730 1,580 616 29,376 31,985 29,226
Traders
203 92 85 49 62 290 205
 
Small Speculators  
Long Short Open Interest  
53,939 31,826 590,656  
273 3,032 32,258  
non reportable positions Change from the previous reporting period
COT Gold Report – Positions as of Tuesday, September 06, 2016
What a report!!  The boat is loaded to one side for the gold specs and the other side for the gold commercials who have no gold behind them:
Our large specs: 
Those large specs who are long in gold added a monstrous 29,789 contracts to their long side (and this is up to Tuesday..it will increase by today)
Those large specs who are short in gold covered 1730 contracts from their short side
Our criminal commercials:
those commercials who are long in gold added a tiny 616 contracts to their long side
those commercials who are short in gold added a whopping 29,376 right under the watchful eyes of our regulators.
Our small specs:
those small specs who have been long in gold added 273 contracts to their long side
those small specs who have been short in gold added 3032 contracts to their short side.
Conclusions: commercials go net short by 28760 and must be construed as bearish and indicate of upcoming raids like the one of today!
And now for silver:
Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
118,059 30,031 8,814 45,970 145,552
3,829 155 1,381 1,592 5,496
Traders
126 47 36 32 37
Small Speculators Open Interest Total
Long Short 199,197 Long Short
26,354 14,800 172,843 184,397
2,979 2,749 9,781 6,802 7,032
non reportable positions Positions as of: 172 110
The boat is loaded to one side for the specs and the other side for the commercials
Something has got to give!
Our large specs:
those large specs that have been long in silver added a large 3829 contracts to their long side
those large specs that have been short in silver added only a tiny 155 contracts to their short side.
Our commercials:
those commercials that have been long in silver added 1592 contracts to their long side
those commercials that have been short in silver added 5496 contracts to their short side
Our small specs:
those small specs that have been long in silver added 2979 contracts to their long side
those small specs that have been short in silver added 2749 contracts to their short side
Conclusion: commercials go net short by 3904 and that is bearish for silver: no wonder the raid today.

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6.0 percent to NAV usa funds and Negative 6.2% to NAV for Cdn funds!!!!  (the discount is starting to disappear)
Percentage of fund in gold 59.6%
Percentage of fund in silver:39.3%
cash .+1.1%( SEPT 9/2016).
2. Sprott silver fund (PSLV): Premium falls to +0.18%!!!! NAV (SEPT 8/2016) 
3. Sprott gold fund (PHYS): premium to NAV  falls TO  0.28% to NAV  ( SEPT 8/2016)
Note: Sprott silver trust back  into POSITIVE territory at +0.18% /Sprott physical gold trust is back into positive territory at 0.28%/Central fund of Canada’s is still in jail.
 
 
 

<

end

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

Trading in gold and silver overnight in Asia and Europe

<

Mark O’Byrne/David Russell/Jan Skoyles

Gold, Silver, Blockchain and Fintech – Solutions To Negative Rates, Bail-ins, Cash Confiscations and Cashless Society

By GoldCore Research September 9, 2016

by Jan Skoyles

I was so pleased yesterday by the announcement that I have joined the Research team at GoldCore as it meant that I could finally start talking about it and was back in a role that lets me indulge in my passion by researching and geeking out on all things gold, silver and money.

As some of you may know, in a previous life I wrote a lot about gold and silver. I took the perspective of someone who was new and curious to the precious metals. I wanted to know more than just how the Fed announcements affected the prices, why demand and supply weren’t enough to predict movements and why history didn’t seem to have taught us any lessons.

After 3 years I stepped away as, to be honest, I was bored. Not of gold and silver but of the narrative, it didn’t seem to be changing and keeping up-to-date with what was happening in other areas of investment and changes in the financial arena.

I spent the next two years broadening my knowledge base, working with startups in the trendy world of fintech and speaking to people about that buzzword ‘blockchain’.

I continued to speak at events about gold but it was refreshing (hopefully for the listeners as well) to provide a perspective that was looking past the push for the gold standard, the (potential) confiscation of gold and theories surrounding COMEX delivery.

Instead I was able to speak about how fintech and other applications of technology were educating both investors and banks about how money could best be managed to the advantage of the consumer, howblockchain is widening the scope for gold as money and how a push for a cashless society is good for gold.

After a couple of years away from writing I return to the space with the same level of curiosity about precious metals but with a wider perspective and perhaps one focused on other areas. It is this that I hope to bring to the GoldCore research pages.

Below I outline some of the areas that I look forward to covering over the coming weeks and months (and maybe years if all goes well!).

Bail-ins and confiscation
Bail-ins is something that I think the British public (and EU citizens everywhere) have stuck their head in the sand about. Know this, they are very real and no-one’s money in a bank is without risk above a certain level.

When changes were made in January 2016 to the UK’s bail- in conditions and protected deposit amount it certainly was not well publicised, and few people realise that just by spreading your money across multiple banks may not mean you are any less at risk.

Bail-ins are the fiat equivalent of gold confiscation that has many gold fans worried.

We’ll be covering this in more detail in the coming fortnight, but the summary of it all is that diversification is key. And I don’t only mean diversifying your bank accounts, ISAs etc. I mean diversify your portfolio and include allocated and segregated gold and silver, assets that cannot be lifted thanks to EU regulations.

From a fintech perspective, the threat of bail-ins adds an extra level of interest as their appearance ties-in with the push for cashless society and negative interest rates.

Cashless society and those negative rates
With negative interest rates now making the front pages it is no longer valid for gold naysayers to claim that a non- yielding asset such as gold and silver is a waste of time. So as it’s not particularly attractive to hold your wealth in cash anymore, how do banks incentivise you to do so? They decide that cashless payments are the future, i.e. the only way you can spend is directly from your account and not from the cash in your purse.

Bail-ins are one of the latest (and increasingly important) reasons why you need to be incentivised to keep your cash in the bank. As long as we have the ability to withdraw our cash from the bank to avoid being penalised in this negative interest rate environment then banks are limited in what they can do. However once your cash is in there, then it is ripe for a bail-in opportunity.

Going cashless is a big mission by banks, payment providers and governments. It is believed to be wholly beneficial, not only for time-poor, permanently connected Westerners but also for the poor and those in the third- world who are perhaps without the physical banking structure that we are all so familiar with.

For both parties I completely see the advantages. Already I feel a transaction is taking too long if I have to pay by chip and pin rather than contactless or Apple Pay. For Big Issue sellers in Sweden I like that I can pay by card and so the old ‘sorry mate, I haven’t any change’ is no longer an acceptable reason. And for refugees and those in the third world whose live may well exist online but have difficulty to prove their identity in a physical manner (passport, drivers licence, address) then I can see a huge benefit. They can be online, paying for items by phone and don’t have to worry about establishing themselves in the city or country in which they find themselves.

My issue is, however, with a completely cashless society. To me this echoes the same steps as telling you what is legal tender. i.e. why can’t I spend my gold in Starbucks? I’m not a big believer in scare-mongering, I don’t think that there is a ‘war’ on cash, but there is certainly a growing mentality in the city that the rise of payment apps is incredibly convenient whereas cash is big and bulky, insecure and the medium of choice for criminals.

This works to the advantage of cash-strapped banks, who may one day face a bail-in.

Again, I plan to look at the war on cash in far more detail, however it will come to the simple conclusion (yet again) of diversifying your portfolio. Why, if there is a risk that something may disappear/get damaged etc., would you not take out insurance? You would.. And so to protect yourself from the steps that are being made for a cashless society, where your every transaction will be recorded, and at risk of regulatory decision, I would suggest that you buy the most tangible and trusted, border less asset there is – gold.

http://www.goldcore.com/us/gold-blog/gold-silver- blockchain-fintech-solutions-n
egative-rates-bail-ins- cash- confiscations-cashless-society/

end

And in the humour department, where there is smoke, there is fire. Rumours are abound that Romania has lost all of its gold reserves:

http://www.romania- insider.com/romanias-central-bank-denies-media-rumors-gold- reserves-missing/

Romania’s central bank denies media rumors that gold reserves are missing

The Romanian central bank’s gold reserve amounts to 103.7 tones, the same level as in 2007. Its current value is some EUR 3.9 billion.

The institution published the information after several rumors in the media said that BNR was missing gold from its reserves.

The false information could affect the image of the Romanian state, and lead to its weakening on the international market, reads a press release issued by Romania’s National Bank (BNR). It could also present the risk of increasing the state’s lending costs, as well as those of public and private companies in Romania, by affecting the exchange rate stability and financial stability.

editor@romania-insider.com

end

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

 
 

:

1 Chinese yuan vs USA dollar/yuan DOWN to 6.6808(HUGE DEVALUATION SOUTHBOUND  /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN NARROWS SLIGHTLY TO 6.6914) / Shanghai bourse  DOWN 17.10 OR 0.55%   / HANG SANG CLOSED UP 180.36 or 0.75%

2 Nikkei closed UP 6.99 OR 0.05% /USA: YEN RISES TO 102.57

3. Europe stocks opened ALL IN THE RED  (     /USA dollar index UP to 95.03/Euro DOWN to 1.1267

3b Japan 10 year bond yield: RISES TO  -.015%     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 101.62/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY.

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  46.97  and Brent: 49.27

3f Gold DOWN /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“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 -.021%   German bunds BASICALLY negative yields from  10+ years out

 Greece  sees its 2 year rate FALL to 8.29%/: 

3j Greek 10 year bond yield FALL to  : 8.27%   (YIELD CURVE NOW COMPLETELY FLAT)

3k Gold at $13434.00/silver $19.43(7:45 am est)   SILVER FINAL RESISTANCE AT $18.50 BROKEN 

3l USA vs Russian rouble; (Russian rouble DOWN 37/100 in  roubles/dollar) 64.40-

3m oil into the 46 dollar handle for WTI and 49 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 DEVALUATION DOWNWARD from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 102.57 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9635 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0969 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT

3r the 10 Year German bund now NEGATIVE territory with the 10 year RISES to  -0.021%

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

3s The Greece ELA NOW a 71.4 billion euros,AND NOW THE ECB WILL ACCEPT GREEK BONDS (WHAT A DISASTER)

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 1.627% early this morning. Thirty year rate  at 2.342% /POLICY ERROR)

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

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

HELICOPTER MONEY STILL ON THE TABLE/JAPANESE STIMULUS PLAN DISAPPOINTS

Global Stocks Slide As Bond Curves Steepen On Central Bank Concerns; Oil Falls

Yesterday we asked if the stealthy Japanese intention to steepen the JGB yield curve will crash global markets. While a crash, if any, has yet to emerge, overnight we have observed another bond selloffs, particularly at the long end of the curve, which has spilled over into stocks around the world on what Bloomberg dubbed were “signs central banks are starting to question the benefits of further monetary easing.” Oil pared a weekly gain, leading commodities lower.

As predicted yesterday, today longer-maturity bonds bore the brunt of the losses after the European Central Bank on Thursday downplayed the need for more stimulus, sending 30-year German bund yields to the highest since June, while Reuters added that “The Bank of Japan is studying several options to steepen the bond yield curve, say sources familiar with its thinking, as authorities desperately seek out policy tools to revive an economy that has failed to emerge from stagnation despite years of massive stimulus.”

As shown in the chart below, both Japan and German long-term yields are almost back to positive…

while those invested in Japanese 40-year bond have already suffered a 15% loss.

‘Yes’, can go down too. ‘s 40-year govt bond down 15% as is running out of options.

The “initial reaction could be that there will be less activity from the ECB and central banks in general,” Frederic Pretet, a strategist at Scotiabank Europe told Bloomberg. “It was a bit unexpected to see no actions from the ECB yesterday at a time when they revised down their growth and inflation forecast. The lack of further activity is surprising and a bit worrying.”

As further expected, the bond selling is spilling over into stocks, with the MSCI All-Country World falling the most in more than a week. The euro rose to a two-week high and the yen strengthened, although it has since tumbled on a rumor from Japan’s Kyodo that the BOJ is “mulling” cutting negative rates further for easing, which as explained yesterday, is the BOJ’s most likely next step: cutting short-rates, while engaging in a “reverse twist” to steepen the yield curve.

As a result, Draghi’s reticence accelerated a selloff in bonds that extended from Europe to the U.S. and Japan, with longer-dated securities, which have been outperforming in recent months, being the hardest hit. While yields are still low compared with historical averages, they are quickly rising from records reached earlier this year, recalling the bond rout of 2015, which saw German 10-year yields climb more than a percentage point in less than two months. The yield on German 30-year bonds climbed six basis points to 0.57 percent at 10:40 a.m. in London, adding to a nine-basis-point jump the previous day, while that on similar-maturity U.S. securities has increased nine basis points since Thursday. Chances of the Fed raising rates at the September meeting climbed to 28 percent, up six percentage points from Wednesday, according to fed funds futures. Odds for a December increase are about 52 percent.

Oil surged almost 6 percent this week following a surprise plunge in U.S. stockpiles, however overnight WTI has pared gains as the market sees the largest inventory draw since 1999 as isolated occurrence that’s likely to be corrected in next week’s data. WTI trades near $47, Brent above $49. “It’s market participants realizing it was very likely a one-off factor and imports will rebound sharply next week,says UBS commodity analyst Giovanni Staunovo. “That headline number was really huge but the tankers will not disappear.” Staunovo added that “The other story of today is probably this meeting in Paris, although I don’t expect anything specific besides some headlines.”

South Korean assets dropped following a nuclear weapons test in North Korea. As reported last night, North Korea conducted a nuclear test which resulted to a magnitude 5.3 seismic activity near its nuclear test site, which would suggest North Korea’s largest test. North Korea stated that it is now able to make a miniaturised nuclear arms and will continue with its weapons program. This was condemned by South Korean and Japanese officials with South Korean President Park stating they will increase pressure on North Korea with all possible means.

Hong Kong’s Hang Seng Index rose to a one-year high and a gauge of Chinese shares listed in the city rallied for a seventh day on prospects for more inflows from the mainland. Chinese insurers can buy Hong Kong shares through an exchange trading link with Shanghai, the industry regulator announced late Thursday. Hong Kong Exchanges & Clearing Ltd. jumped as much as 7.4 percent, its biggest intraday gain of the year.

The MSCI AC World Index fell 0.3 percent. The Stoxx Europe 600 Index also slipped 0.3 percent, taking its weekly drop to 0.5 percent. A Bank of America Corp. report showed fund managers withdrew money from Europe’s equity funds for a 31st straight week. UniCredit SpA fell 1.1% after a report that it’s considering raising as much as 10 billion euros ($11 billion) in capital. Burberry Group Plc slid 1.9 percent after a report that it cut prices in Hong Kong and China. Deutsche Bank AG rose 3.1% as Manager Magazin reported that the U.S. Department of Justice will next week begin settlement talks regarding the long-running investigation into the German lender’s mortgage-backed securities business.

S&P 500 Index futures slipped 0.1 percent. Equities failed to post gains for a second day on Thursday, as Apple Inc. led a slide in technology shares.

* * *

Market Snapshot

  • S&P 500 futures down 0.1% to 2168
  • Stoxx 600 down 0.2% to 349
  • FTSE 100 down 0.2% to 6847
  • DAX down less than 0.1% to 10667
  • German 10Yr yield up 3bps to -0.04%
  • Italian 10Yr yield up 1bp to 1.17%
  • Spanish 10Yr yield up 1bp to 1%
  • S&P GSCI Index down 0.7% to 359.3
  • MSCI Asia Pacific down 0.8% to 141
  • Nikkei 225 up less than 0.1% to 16966
  • Hang Seng up 0.8% to 24100
  • Shanghai Composite down 0.6% to 3079
  • S&P/ASX 200 down 0.9% to 5339
  • US 10-yr yield up 1bp to 1.61%
  • Dollar Index down 0.09% to 94.94
  • WTI Crude futures down 1.4% to $46.95
  • Brent Futures down 1.5% to $49.26
  • Gold spot down 0.2% to $1,336
  • Silver spot down 0.5% to $19.51

Global Headline News

  • Enterprise Says It Has Withdrawn Interest in Williams Merger: Enterprise says Williams showed a “lack of engagement;” Williams says Enterprise didn’t give board chance to review
  • North Korea Says Tested Nuclear Bomb, Can Miniaturize Arms: Blast was as big as 10 kilotons, South Korea ministry says
  • EU Suspends Deadline for Dow/DuPont Transaction: EC says it stopped the clock on its review of Dow/DuPont deal because cos. haven’t provided an “important” piece of information
  • Amazon Said to Seek Sports Streaming Rights From Tennis to Rugby: Prime Video service could offer live tennis, rugby matches
  • Gundlach Says It’s Time to Get Defensive as Rates May Rise: DoubleLine CIO says rates bottomed in July and are turning up
  • Wal-Mart’s U.K. Job Cuts Show How Asda Fell Behind Grocery Pack: Asda’s retail staff fell by 5% in 2015 despite store openings
  • Gilead Hires Former Roche Executive to Build China Business: co. preparing for potential launch of its blockbuster hepatitis drugs in that market over the next few years
  • Fed Urges U.S. Ban on Wall Street Buying Stakes in Companies: Goldman could be most impacted by merchant banking limit; Fed among agencies issuing long-overdue report required by law
  • Apple Tax Case Prompted by U.S. Senate ‘Tip:’ EU’s Vestager; the EU’s Apple tax probe was inspired by the U.S. Senate’s examination of Apple, EU Competition Commissioner Vestager says
  • Elon Musk Calls SpaceX Explosion Most Vexing Failure in 14 Years
  • DoJ to Start RMBS Settlement Talks W/ Deutsche Bank Next Week: Manager Magazin
  • Samsung to Sell Printer Business to HP for About 2t Won: Aju; Samsung Electronics, HP may announce deal as early as Sept. 12
  • PE Firms Team Up to Bid for CenturyLink Data Centers: Reuters
  • Canada Pension Plan Aims to Raise China Investment: Bus. Herald

Looking at regional markets, we start in Asia, where equity markets traded mixed following a lacklustre lead from the US in the wake of the ECB, while the region also digested reports of a North Korean nuclear test. Nikkei 225 (flat) traded choppy alongside JPY fluctuations and after of a seismic event near North Korea’s nuclear test site which measured a magnitude 5.3. This also weighed heavy on  the KOSPI (-1.3%), while ASX 200 (-0.9%) was led lower by gold miners. Shanghai Comp (-0.6%) was lower while the Hang Seng (+0.8%) outperformed after reports the CIRC is to allow insurers to invest in  Hong Kong through the stock connect. 10yr JGBs traded higher as a cautious tone supported demand for safety, while the BoJ were also in the market for a total of JPY 890b1n of short-to-medium term debt. BoJ Governor Kuroda said that no special instructions were received from PM Abe and they did not discuss foreign bond purchases during a lunch meeting today.  Chinese reported that August CPI rose only 1.3% Y/Y, below exp. 1.7%, and missing the lowest estimate, also lower than the July 1.8% print; PPI declined by -0.8% Y/Y vs. exp. -0.9%, if higher than the July -1.7% print.

Top Asian News

  • China Sovereign Fund Eyes Asian Hedge Funds to Boost Returns: Asia hedge funds set to outperform U.S., Europe, CIC says
  • PBOC Adviser Says Yuan Should Weaken as Dollar Set to Strengthen: Capital opening-up should continue despite outflows, Fan says
  • China’s Factory Deflation Improves as CPI Muted in Profit Boost: PPI improves for an eighth month, CPI lowest since Oct.
  • SoftBank Gets $4.6 Billion in Its Biggest Yen Bond Offering Ever: Offering follows SoftBank’s completion of ARM acquisition
  • Bank of Korea Holds Key Rate Steady as Household Debt Rises: Governor Lee Ju Yeol says Friday’s decision was unanimous

In Europe, the ECB decision, or lack thereof, remain on focus amid quiet Friday morning newsflow and as such both equities and fixed income opened in the red. That being said, equities have been paring much of their opening losses since the open to trade flat by mid-morning (Euro Stoxx 50: 0%). Financials outperform on a sector breakdown, amid relief that the ECB did not put further pressure on the sector through greater easing. Deutsche Bank have seen particular strength and are among the best performers, benefitting from the aforementioned ECB news, combined with the reports that the Co. are set to settle with the US DoJ for EUR 2.4b1n, with their current legal reserves at EUR 5.4bIn. As mentioned above, fixed income markets have seen one of their busiest sessions of the summer and trade lower by almost 50 ticks and below the 164.50 level after some were left disappointed with the inaction by the ECB. Also of note, Gilts yields have now retraced the entirety of their post August BoE move

Top European News

  • Paschi Ousts CEO as Bank Revamp Is Mired by Investor Doubt: Italian Treasury says bank’s situation is under control; Viola’s replacement as CEO seen named within next few days
  • Bayer Said to Explore Sale of $1.1 Billion Dermatology Business: co. working with JPMorgan on potential disposal; Bayer considering sale as it pursues Monsanto acquisition
  • Commerzbank Weighs Split of Mittelstandsbank: Handelsblatt; split is likeliest scenario among several options, paper says
  • BASF’s Wintershall to Decide on Iran Oil Investments This Year: CEO Mehren says co. is assessing four onshore oil fields

In FX, the yen gained against all of its 16 major peers, climbing 0.3 percent to 102, although in recent trading had dipped back to 102.35 per dollar.
The yuan was down 0.2 percent in Shanghai, set for a third weekly loss.

China will allow a gradual depreciation of its currency and policy
makers should keep opening up the nation’s capital account despite fund
outflows, said Fan Gang, head of the National Institute of Economic
Research and an adviser to the nation’s central bank. The Korean won fell 0.5 percent, paring this week’s advance to 1.7 percent. The Bank of Korea kept its benchmark interest rate at a record-low 1.25 percent on Friday and said it’s prepared to intervene to curb volatility in the currency market if herd behavior is evident. The euro gained 0.1 percent to $1.1273, headed for a weekly gain of about 1 percent. The ECB refrained from adding to its unprecedented stimulus at a policy review on Thursday and Draghi said an extension of its quantitative-easing program wasn’t even discussed. About half of respondents to a Bloomberg survey conducted last week foresaw easing, with almost all the others predicting changes in October or December.

In commodities, oil fell after the biggest U.S. stockpile slump in 17 years was seen as a one-off caused by a tropical storm that disrupted imports and offshore production. West Texas Intermediate fell 1.3 percent to $47.01 a barrel, paring the weekly increase to 5.8 percent. Brent dropped 1.3 percent to $49.32. U.S. crude inventories fell 14.5 million barrels last week, the biggest decline since January 1999, according to Energy Information Administration data Thursday. Imports tumbled 21 percent as Tropical Storm Hermine moved into the Gulf of Mexico on Aug. 28, disrupting shipping and output. The energy ministers of Saudi Arabia and Algeria will meet with OPEC’s top official in Paris on Friday as major oil producers continue to lay the ground for a potential deal to bolster crude prices in Algiers later this month. Gold fell for a third day percent, dropping 0.2 percent to $1,336.25 an ounce. Copper slid 0.6 percent and aluminum declined 0.3 percent, along with most other industrial metals, amid persistent concerns about the strength of demand in China, the world’s top metals buyer.

Bulletin Headline Summary from RanSquawk and Bloomberg

  • European equities enter the North American crossover relatively flat in what has been a session void of pertinent macro newsflow
  • Asian equities traded tentatively amid reports of further North Korean nuclear missile tests
  • Looking ahead, highlights include Canadian employment data and comments from Fed’s Rosengren
  • Treasuries slightly lower on the long-end while world equity markets, oil and precious metals drop as central banks’ question the benefits of further monetary easing.
  • Japan’s sovereign debt is suffering its worst rout in 13 years, handing investors bigger losses over the past two months than any other government bonds amid speculation the Bank of Japan plans to change its asset-purchase strategy
  • DoubleLine Capital CIO Jeffrey Gundlach said it’s time for fixed-income investors to prepare for rising interest rates and higher inflation
  • Investors scooping up the riskiest emerging-nation corporate bonds in an indiscriminate rush for yield are facing a growing clamor of warnings
  • China’s $814 billion sovereign wealth fund may increase investments in hedge funds in Asia, betting they can beat rivals trading in developed markets
  • China’s factory-gate deflation eased to the least in four years while consumer prices remain muted, giving policy makers fresh evidence that the price outlook is stabilizing along with demand
  • Euro-area finance ministers signaled that the European Union would become more unified as it looks for fresh ways forward in the wake of a planned U.K. exit from the bloc
  • As he tries to jump start the economies of today, European Central Bank President Mario Draghi is punching holes in the retirements of tomorrow
  • Sales of bonds from companies other than financial firms worldwide have exceeded $75 billion this week, the most since May
  • North Korea conducted its fifth nuclear test on Friday, the anniversary of the reclusive nation’s founding, and said it was now able to produce miniaturized nuclear arms

DB’s Jim Reid concludes the overnight wrap

There weren’t many winners in markets yesterday as the ECB and Draghi came and went and in the process disappointed slightly. As widely expected policy was held steady but more significantly there was no announcement of a QE extension which had divided opinions in the market. In fact Draghi went as far as to say that the ECB didn’t have any discussion as to an extension of the asset-purchase plan and instead chose to focus much of his press conference on ensuring that the current programme continues to be implemented and operated smoothly. That said he did also say that the ECB committee have a full mandate to redesign QE and that they are forming working groups to evaluate easing options. As DB’s Mark Wall noted perhaps the most significant news from the press conference was Draghi’s recognition of the bond shortage problem for the first time, which he has previously dismissed as a concern. Mark notes that tasking the committees is not a commitment to extending QE, but extending QE would require some complementary policy moves to ensure sufficient eligible assets, and so fits in with his view that the ECB will announce a 9-12 month extension of QE in December and accompany this with moves on eligible assets. In terms of staff forecasts, growth was lowered in 2017 and 2018 to 1.6% (from 1.7%) while growth this year was raised one-tenth to 1.7%. Inflation continues to be pegged for 0.2% this year while the 2017 forecast was lowered one-tenth to 1.2%.

Staying with central banks, despite market pricing being at 28% for a Fed hike this month it was interesting to read last night that DB’s Peter Hooper thinks it’s much closer to 50/50 than the market believes. Peter thinks a very recently added speech for this coming Monday – the day before the FOMC blackout – from the dovish Brainard may have been set up as a way to raise market expectations. There are other Fed speakers scheduled ahead of the blackout but Peter thinks hawkish comments from the normally dovish Brainard could set the scene for more aggressive hike pricing. So one to watch at the very least.
Before we recap yesterday’s price action, a quick summary of events this morning where there’s been some fairly mixed inflation data released in China. August CPI in China has printed at +0.1% mom and +1.3% yoy which is a fair bit down from +1.8% yoy in July and also well below expectations of +1.7% yoy. In fact it is the lowest reading this year and the lowest since last October with a big decline in food prices to blame. There was however much better news to come from the PPI print which increased to -0.8% yoy (vs. -0.9 expected) from -1.7% last month. That’s actually the highest reading since April 2012 and continues the trend of putting the worst of the factory gate deflation in the past.

Bourses in China appear to be a bit unsure as to how to react. The Shanghai Comp initially rose, then swung to a loss, and is now back to flat. Elsewhere the big mover this morning is the Kospi (-1.62%) which tumbled on reports of seismic activity in North Korea, which has since been speculated by South Korea’s state news agency as a possible nuclear test. Meanwhile the Nikkei (-0.19%) and ASX (-0.78%) are also lower, while the Hang Seng (+0.67%) is up. Over in the rates market this morning yields have marched higher reflecting the post-ECB selloff yesterday.

Indeed it was sovereign bond markets which bore the brunt of the ECB disappointment yesterday. 10y yields in Germany (+5.5bps), France (+6.5bps), Netherlands (+5.8bps), Italy (+7.4bps), Spain (+5.7bps) and Portugal (+9.0bps) were sharply higher. Gilt (+7.9bps) and Treasury (+6.0bps) yields were also dragged up, while the initial reaction for the Euro was to strengthen +0.78%. The single currency did however pare most of those gains into the close however to finish with a much more modest +0.19% gain by the close.

Meanwhile European equities had been treading water leading into the ECB, but the headlines saw indices spike lower with the Stoxx 600 in particular down as much as -1.17%. A bounceback for financials and energy names however – the former supported by the leg up in yields and the latter by a big rally for oil – helped the index finish -0.33% while peripherals actually recovered to finish with reasonable gains (IBEX +0.95% and FTSE MIB +0.48%). Across the pond it was a similar story with the S&P 500 ending -0.22%. That continues this remarkable streak for the S&P which has seen it fail to close up or down more than 1% for 43 consecutive sessions now.

Oil was the other big story yesterday. Indeed WTI rallied +4.66% to close at $47.62/bbl and the highest level in nearly two weeks. That came following the latest US crude inventory data with the EIA reporting that inventories fell a remarkable 14.5m barrels last week in what is the biggest drop since January 1999 and the second biggest with records going back to 1982. A WSJ survey showed analysts had expected a 500k increase. There does appear to be some scepticism over the data however with much of the chatter attributing it to the tropical storm and hurricane which swept through the Gulf of Mexico at the end of August. So we’ll have to see what the next reading shows.

Just wrapping up the small amount of data yesterday. In France there was no change in the August business sentiment reading of 98 which also matched expectations. Meanwhile in the US we learned that initial jobless claims declined 4k last week to 259k which happens to be the lowest level in seven weeks. The four-week average is now running at 261k. Finally consumer credit printed at $17.7bn in July (vs. $16bn expected) which puts it at a +5.8% annual rate.

3.REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

i)Late  THURSDAY night/FRIDAY morning: Shanghai closed DOWN 17.10 POINTS OR 0.55%/ /Hang Sang closed UP 180.36 points or 0.75%. The Nikkei closed UP 6.99 POINTS OR 0.04% Australia’s all ordinaires  CLOSED DOWN 0.86% Chinese yuan (ONSHORE) closed WELL DOWN at 6.6808/Oil FELL to 46.97 dollars per barrel for WTI and 49.27 for Brent. Stocks in Europe: ALL IN THE RED   Offshore yuan trades  6.6914 yuan to the dollar vs 6.6808 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS SLIGHTLY AS  MORE USA DOLLARS ATTEMPT TO  LEAVE CHINA’S SHORES

3a)NORTH KOREA:

It sure looks like North Korea detonated a nuclear test inside its territory: this sent the Korean won down as well as Asia Pac stocks.

(courtesy zero hedge)

AsiaPac Stocks, Won Tumble After Possible North Korea “Nuke Test”

Reports of an “artificial earthquake” in North Korea sparked a bout of risk off in AsiaPac stocks and the Korean Won as USGS says the 5.3 magnitude quake at zero depth is near past North Kore nuclear test sites.

  • *S. KOREA DETECTS ARTIFICIAL EARTHQUAKE IN N.KOREA AROUND 9:30AM
  • *S. KOREA GOVT CALLS FOR TASK FORCE ON POSSIBLE NUKE TEST:YONHAP
  • *5.3 MAG. EARTHQUAKE CHINA-NORTH KOREA BORDER REGION :EMSC
  • *USGS CITES ‘POSSIBLE EXPLOSION’ FOR M5.3 EVENT IN N. KOREA
  • *USGS: LOCATION NEAR PAST NORTH KOREA NUCLEAR TESTS
  • *JAPAN SAYS NORTH KOREA LIKELY CONDUCTED NUCLEAR TEST

As Bloomberg reports, the 5.1-magnitude earthquake in a similar location was recorded before North Korea’s fourth nuclear test in January at the site. The news agency said the test was at the same location.

  • *SUGA: JAPAN SEES POSSIBILITY N.KOREA QUAKE WAS NUCLEAR TEST
  • *S. KOREA FOREIGN MINISTRY HOLDS EMERGENCY MEETING: YONHAP

And the initial reaction is selling pressure in local currencies…

And stocks…

As AP reports, a second nuclear test this year would be a defiant response to Western pressure on Pyongyang to halt its nuclear ambitions. The country has previously conducted tests every three to four years.

Any test will lead to a strong push for new, tougher sanctions at the United Nations and further worsen already abysmal relations between Pyongyang and its neighbors.North Korean nuclear tests worry outside governments because they are seen as moving North Korea’s scientists and engineers that much closer to their goal of an arsenal of nuclear-tipped missiles that can reach the United States.

North Korea is thought to have a handful of rudimentary nuclear bombs and has spent decades trying to perfect a multistage, long-range missile to eventually carry smaller versions of those bombs. After several failures, it put its first satellite into space with a long-range rocket launched in December 2012, and has since launched another such successful launch.

Experts say that ballistic missiles and rockets in satellite launches share similar bodies, engines and other technology. The U.N. calls the North’s long-range rocket launches banned tests of ballistic missile technology.

Some analysts say the North hasn’t likely achieved the technology needed to manufacture a miniaturized nuclear warhead that could fit on a long-range missile capable of hitting the U.S. But there is a growing debate on just how far the North has advanced in its secretive nuclear and missile programs.

The question is – what does it take to prompt a retaliation from South Korea (or its big brother ‘Murica)?
END

b) REPORT ON JAPAN

c) Report on CHINA

4 EUROPEAN AFFAIRS

ITALY

Monte de Pashi outs its CEO as the bank turnaround is still mired in investo doubt

(courtesy Sonia Sirletti/Bloomberg)

Paschi Ousts CEO as Bank Turnaround Is Mired by Investor Doubt

  • Italian Treasury says bank’s situation is under control
  • Viola’s replacement as CEO seen named within next few days

Banca Monte dei Paschi di Siena SpA ousted Chief Executive Officer Fabrizio Viola as investors sought a change in leadership to back the Italian lender’s turnaround plan and avoid a bailout.

The board aims to identify the new CEO in the short term and Viola, 58, will stay in the position until that time, according to a statement from the Siena-based lender after markets closed Thursday.

Burdened by mounting bad loans and losses on derivatives bets gone wrong under the previous management, Viola was forced to take state funds and tapped shareholders twice in two years. Those efforts didn’t pay off, as the bank still posted the biggest capital gap in European stress tests, while the shares have tumbled about 95 percent during his four-year tenure. Monte Paschi plans to sell stock again to bolster its balance sheet over the coming months, following the disposal of most of its soured-loan portfolio.

“Viola tried to solve Monte Paschi’s problems at a time when the problems were probably already too big to be solved on a stand-alone basis,” said Jacopo Ceccatelli, chief executive officer of Marzotto SIM SpA, a Milan-based broker-dealer. “After four years, having the same person while seeking money again would be a problem, so a change could help to sell a new equity story to investors.”

Last month, Chairman Massimo Tononi had denied Italian press reports that Viola would be replaced.

Under Control

Monte Paschi’s situation is under control and a new CEO will be appointed in the next few days, an Italian Treasury official said. The Treasury owns 4 percent of Paschi after it converted debt sold by the bank to the government into equity.

The fate of Monte Paschi has contributed to deepening pessimism about the European financial industry: banks are the worst performing group in the Stoxx Europe 600 Index, dropping 19 percent this year. Doubts over the health of Italy’s weakest lenders have also helped drag down the shares of the nation’s biggest bank, UniCredit SpA, which hired a new CEO two months ago to speed its own restructuring plan.

To read about Paschi’s struggle with stress tests, click here.

Viola’s leadership also attracted scrutiny because of how the bank booked derivatives used by the previous management to hide losses. After the transactions came to light in 2013 and the bank restated accounts, it had to amend the results again in 2015 at the request of market regulator Consob.

The latest effort to restore the ailing lender to profitability will see Monte Paschi cleanse its balance sheet and bolster capital sufficiently for the company to grow again. That would also make it more attractive to a potential buyer.

The bank in July rejected a proposal from UBS Group AG and Corrado Passera, Italy’s former economic development minister, that included a capital increase of between 2.5 billion euros ($2.8 billion) and 3 billion euros, guaranteed by UBS, and the voluntary conversion of about 1 billion euros of subordinated bonds.

Debt Conversion

The bank is now studying the size of a probable voluntary debt-for-equity offer to cut back a 5 billion-euro stock sale envisaged in the bank’s current turnaround plan, according to people with knowledge of the discussions. The troubled Italian lender may propose that bondholders have the option of converting as much as 90 percent of the 5 billion euros of outstanding subordinated notes, said the people, who asked not to be identified because the discussions are private. The restructuring is viewed as crucial to stabilize the bank and Italy’s financial system, the people said.The sudden departure “could mean that still there is no agreement on the final restructuring plan,” said Stefano Girola, who helps manage about 40 billion euros at Syz Asset Management in Lugano, Switzerland. “That said, a new CEO with a clear, stronger mandate to solve the emergency, like we’ve seen at UniCredit, may speed up the whole process.”

Success depends in part on winning backing for a new fund that will buy the bank’s bad loans. After that, Monte Paschi needs to find investors ready to provide new equity for five times its market value.

“The bank may have requested Viola to resign to give more credibility to the restructuring plan,” said Fabrizio Bernardi, a Milan-based analyst at Fidentiis Equities. “Viola has already tapped investors twice, so a new face may lure more investors.”

end

Europe in general

Graham Summers has a way of putting out short but accurate commentaries on the state of affairs of global markets.

Today is has issued a warning that Europe has officially entered the end game. Why? interest rates are rising and this will cause European banks which are already swollen with sovereign debt to implode. He makes two important points:

  1. the European banks have a leverage of 26: 1 and that is accurate
  2.  any 4% loss in value on those sovereign bonds will implode the banking sectors’ balance sheet

(courtesy Graham Summers/Phoenix Capital Research)

Europe Has Just Officially Entered the “END GAME”

Phoenix Capital Research's picture

 

end

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

This ought to be good!  Turkey (via the ECB) provides debit cards equal to 1,000 Euros per card to all the refugees blocked in camps.  This will not end well!

(courtesy Mish Shedlock/Mishtalk)

“Exciting Step Forward” – Helicopter Drop Of Debit Cards For Refugees In Turkey

Submitted by Michael Shedlock via MishTalk.com,

The largest ever humanitarian program in the history of the EU, is now underway in Turkey.

The humanitarian effort comes in the form of a $393 million helicopter drop of Debit Cards and Cash to Refugees in Turkey as Part of Migration Deal.

turkey-drop

 

As many as one million refugees in Turkey will receive debit cards and monthly cash transfers to help pay for food and housing under a new €348 million ($393 million) humanitarian program from the European Union announced on Thursday.

The EU’s largest-ever humanitarian program is part of a €3 billion package of assistance the bloc promised Turkey to support some three million refugees the country hosts, mainly from Syria.

“The European Union is keeping its promise to assist Turkey in hosting the largest refugee population in the world,” Mr. Stylianides said. When it comes to humanitarian assistance, “our cooperation with Turkish authorities has been excellent,” he added.

The new EU aid program will be overseen by the World Food Program, in cooperation with the Turkish Red Crescent. Each family’s need will be assessed individually and there are additional funds available for education or supporting elderly family members, Mr. Stylianides said.

Ertharin Cousin, the WFP’s executive director, said the debit-card project “is an exciting step forward.”

“The money spent by the refugees will go directly into local economies, giving a boost to communities so generously hosting refugees,” she added.

Of the €3 billion pledged, the EU has now earmarked projects valued at €2.2 billion for Turkey’s refugees, including humanitarian aid and programs to provide health, education and other services for migrants.

Of that amount, €652 million has been contracted and €181 million has been spent.

How Far Will €3 billion Go?

The EU pledged €3 billion. There are 3 million refugees.

If no more refugees arrive (fat chance), and none of the money disappears down some graft-hole (fat chance), then each refugee will get €1,000.

Exciting First Step

This is indeed an “exciting step”. Let’s look ahead at the logical progression of following steps.

Step-by-Step Progression

  1. More refugees will seek free handouts.
  2. Turkey will complain €3 billion is not enough.
  3. The refugees will complain €1,000 is not enough.
  4. EU citizens will wonder why refugees are getting €1,000 and they are not.
  5. Demands for an EU-wide helicopter drop of free debit cards will soar.
  6. The amounts demanded will soar.
  7. Some economist will propose the debit cards will expire if not used quickly.
  8. And then, and then ….

Point eight requires an explanation:

Under Eurozone rules the ECB cannot simply print money and give it away. Countries have budget constraints.

So, either taxes go up to pay for the scheme, or the EMU rules have to change.

Place your bets. More excitement is sure to follow.

 

end

 

The fun begins:  both the Senate and the House pass the bill authorizing lawsuits against the Saudis

two questions:

  1. will Obama we classified as a traitor if he kills the bill
  2. what will the Saudi’s do if Obama signs it into law

courtesy zero hedge)

Obama Faces Humiliation After House Unanimously Passes Bill Allowing Sept 11 Lawsuits Against Saudi Arabia

Two days before the 15 year anniversary of the September 11 attack, moments ago the House unanimously passed – to thunderous applause – legislation allowing the families of 9/11 victims to sue Saudi Arabia in U.S. courts,   The bill, which passed the Senate unanimously in May, now heads to President Obama’s desk. And that’s where things get tricky for Obama.

The White House has fiercely opposed the bill, arguing it could both strain relations with Saudi Arabia and also lead to retaliatory legislation overseas against U.S. citizens. Obama has lobbied fiercely against the bill, and has hinted strongly it will veto the measure.

He is not alone: the Saudi government has likewise led a vocal campaign in Washington to kill the legislation. Those efforts have been fruitless in Congress, however. Meanwhile, the legislation saw broad support from both parties, and Congress could override an Obama veto for the first time if he rejects the legislation. Such an outcome would undoubtedly embarrass Obama and divide Democrats ahead of the 2016 elections and a crucial lame-duck session of Congress.

For now, Obama is adamanat: “The Saudis will see this as a hostile act,” said Dennis Ross, Obama’s former Middle East policy coordinator. “You’re bound to see the Obama administration do everything they can to sustain a veto.”

How Obama will spin such a pro-Saudi, and anti-US decision, which may be overriden anyway, to the US population is unclear.

To an extent, Obama finds himself between a rock and a hard place. As we reported in April, Saudi officials threatened the enactment of the law could lead them to sell off the kingdom’s U.S. Treasury debt and other American assets, which the officials told lawmakers and U.S. officials totaled $750 billion, according to the New York Times. The Saudi government held $117 billion in U.S. Treasury debt in March, according to Treasury figures obtained by Bloomberg. The kingdom may have additional holdings not included in the data on deposit with the New York Federal Reserve Bank, in entities in third countries, or through positions in derivatives.

According to the Hill, lawmakers on Capitol Hill are unsure whether Obama will actually use his veto pen on the Justice Against Sponsors of Terrorism Act.  “I presume they would have to think very carefully about a veto because it might very well be overridden,” said Nadler.

To override the president, supporters would need a two-thirds majority in each chamber. “I think the votes will be there to override it,” said Rep. Pete King (R-N.Y.), who introduced the bill in the House.

As a result of potentially facing a lose-lose outcome, many on Capitol Hill do not believe that the veto is a done deal. The White House has not issued an official position on the bill and spokespeople have been careful with their language, stopping short of issuing a full veto threat. “We have serious concerns with the bill as written,” a White House official said Wednesday.

“We believe there needs to be more careful consideration of the potential unintended consequences of its enactment before the House considers the legislation,” the official said. “We would welcome opportunities to further engage with the Congress on that discussion.”

The president has 10 days to either sign or reject the legislation before it becomes law.

Meanwhile, supporters of the legislation see it as a moral imperative.

“The victims of 9-11 and other terrorist attacks on US soil have suffered much pain and heartache, but they should not be denied justice,” Schumer said in a statement Wednesday. Under current U.S. law, victims may sue a country designated as a state sponsor of terrorism, like Iran. The bill would allow citizens to sue countries without that designation — like Saudi Arabia.

Fifteen of the 19 hijackers on 9/11 hailed from Saudi Arabia. Critics have long suspected that the kingdom’s government may have either directly or indirectly supported the attacks.

Congress in July released 28 previously secret pages detailing suspicious Saudi ties to the 9/11 hijackers, which made it very clear – according to a closer read of the document – that Saudi officials did indeed help plan and organize the attacks, even as the White House downplayed their involvement.

Saudi officials have for years denied that their government had any role in plotting the attacks and the Saudi government has led a quiet campaign in Washington to kill the legislation.

Despite its popularity in Congress, some prominent national security advisors have also pilloried the bill.

Former United Nations Ambassador John Bolton and ex-Attorney General Michael Mukasey, both of whom served under President George W. Bush, this week warned that the legislation “is far more likely to harm the United States than bring justice against any sponsor of terrorism.”

* * *

The real question, however, is not so much what Obama – who could potentially be branded a traitor if he proceeds with a veto as suggested, against the wishes of every single member of Congress, and the US population – will do, but how the Saudis, some of the most generous donors of the Clinton Foundation, will respond if the law indeed passes. As a reminder, in an epic media blunder, in early June, the Saudi Crown Prince admitted that Saudi Arabia had funded 20% of Hillary’s presidential campaign, and will surely demand a quid pro quo in exchange. What Saudi vengeance may look like, should the generous Clinton donor’s will not be obeyed, will be something Hillary’s campaign will surely be very interested in.

 

end

6. GLOBAL ISSUES

For many months I have been warning you on the dangers of low yields on bonds and eventually the boys would run out of bonds to buy.  Royal Bank of Canada now states that the markets are paralyzed with uncertainty and the spook story of yesterday (Japan going to buy bonds on the short end and sell at long end) is sending those shock waves around the globe.

a must read…

(courtesy Royal Bank of Canada/zero hedge)

“Get Ya Popcorn Ready” RBC Says: “Markets Are Paralyzed With Uncertainty” As “Spook Story” Arrives

In a post that in retrospect was timed perfectly, yesterday we first warned that the BOJ may be about to unleash a bond “VaR shock”, one that would promptly lead to a global asset contagion, as a result of Kuroda’s surprising eagerness to steepen the yield curve, a move which would lead to an accelerated selling of the long end first in Japan, then across the entire world where some $13 trillion in bonds trade at negative yields. We also explained how “with cross asset correlation soaring, not to mention with risk-party and CTA funds approaching record leverage, the risk is that investors frontrunning a perceived change in the BOJ’s policy in two weeks time could lead to a dramatic selloff in JGBs, which then spreads across to global fixed income markets, all of which trade like connected vessels.”

The warning did not stop there: as we explained previously, in early June, Goldman warned that a sharp 1% spike in rates across the curve in the US alone, would result in MTM losses of $2.4 trillion. That excludes the crossover impact into stocks, as a selloff in bonds
leads to a correlated liquidation across equities, as a result of record leverage for Risk-Parity and other quant funds

… for whom coordinated selling in both asset classes could lead to dramatic deleveraging, and a positive feedback loop of even more selling.

Risk Parity

Our conclusion was simple: just as central banks had pushed the markets higher, so they could – and would – be the catalyst that send everything plunging as a result of dramatic changes in trillions in bond positions.

* * *

Overnight we were delighted to find that RBC’s head of cross-asset strategy, Charlie McElligott not only read our analysis but appears to have agreed with everything we said.

* * *

Here is McElligott’s note released this morning.

COMMENTARY: Markets don’t like getting hit four sides at once…

The “Draghi Disappointment / Brainard Bogeyman / BoJ NIRP-ier / IG Supply Tantrum” we shall call it—elegant right?!  Global rates markets continue to bear-steepen on account of four “developments”:

  1. Draghi’s ECB presser disappointed the crowd with no increases, no extensions and no tweaks—“ECB did not discuss extension of asset purchases plan.”  There also was a very slight “upgrade” to inflation as well, as the 2018 forecast was NOT dropped as expected, while stating the expected inflation will be more stable than before.  Geez.
  2. The bizarre Fed / Brainard speech episode, where an (initially understood to be) “impromptu” scheduling of Fed’s Lael Brainard to give a speech next Monday evening—immediately before the Fed’s blackout period—was interpreted by the market (and conspiracy theorists) as a sign that Yellen was rolling out the increasingly high-profile and UBER-DOVE Brainard (remember, she was the “international factors are impacting US rates” proponent who helped start the R-Star discussion) to actually be the person with the best chance to communicate a HAWKISH message on the September meeting.  In turn, by having the “person least likely to speak hawkishly” then make a case / at least say that the committee is confident on achieving its mandates, that you could get market probability north of 50% “required” to pull the trigger.  From speaking with folks close to the situation, there is a real belief that the Fed is adamant on at least one-hike this year, data be damned.  Apparently they are keenly aware that they could be driving financial asset instability.  : /  Nonetheless, it came out later in the afternoon that Brainard had been scheduled at the event in question for weeks…so head-scratching abounds.
  3. The point I made reference to in yesterday’s “Big Picture” w.r.t. the BoJ being equally adamant on going even MORE negative with rates while also investigating “curve tweaks” (from a change in the composition of their JGB purchases to the potential for a reverse operation twist) has gained steam, with multiple media outlets floating these “trial balloons” ( http://reut.rs/2c4zgi5 ).  The concerns here are many: even more negative rates is an enormous risk after the way the market treated them post the initial move, which saw a counterintuitive strengthening of Yen and a flattening of the JGB curve which sent the Topix Banks index -25.5% to its current  YTD performance.  And again, as stated yday, an outright “reverse op twist” could be interpreted as a “backing-down” from a market that knows the BoJ is married-to the perma-stim / perma-easing path for the rest of its days.  If markets smell weakness, “things could get weird” (flipside of course being a potentially very POSITIVE reaction to a steeper curve, esp w/ banking sector…I know it’s noncommittal, but we simply can’t gauge how mkts respond).
  4. A final factor driving the move in UST (absolute) yields (and as noted a few weeks ago as a risk to what had been low rate vol) is the insane supply being pumped out of both US IG corporates, now standing at $52B on the week….and then next week, with a HUGE calendar of Treasury issuance, with potential of ~$100B in bills, ~$50B in coupons and another $50B in more US IG!  For those of you keeping track at home, that’s potentially ~$200B of supply.  Per IFR, Monday alone could see $76Bt-bills at 11:30am, and then $24B 3s plus $20B 10s both at 1pm ET.

The spook story for low-volatility equities for years has been a spillover of rate vol—see all of our various “tantrum” episodes.  Why?  Because of the painful grind higher in cross-asset correlations as the market has become more macro–thanks to both 1)  global central bank policy that is essential based around controlling one asset (USD) and tamping-down volatility through unprecedented asset-purchases…along with 2) the enormous growth of systematic strategies, especially those which target volatility and / or use leverage to “balance risk” across asset classes based on historical volatility

Risk-Parity as you all know has been a favorite “bad guy” to mention during these episodes (otherwise the strategy is a ‘home run’ the rest of the time in a global QE environment), because (being painfully simplistic here) they run leveraged long fixed income as it is a historically “low volatility” asset.  But under certain economic condition “buckets” (inflation / growth) you too can run very long risk assets too…ESPECIALLY with HISTORICALLY DEPRESSED TRAILING VOLATILITY.  I.E. RP / target vol / CTAs are most likely REALLY REALLY long equities right now bc of this, which is SPX 30 day historical vol sitting at its 10 year lows, with 50 day historical vol on the same cusp:

So the punchline is that many systematic macro, risk-parity or vol targeting funds are very long both equities and fixed-income (helping drive the recent correlation)…and when a “butterfly flaps its wings” in one leg of the trade, suffering a “macro drawdown,” we have seen in the past “VaR shock” selling episodes as other positions are taken-down as well. 

In turn, the long-end of fixed-income took it in the face yday and today, from Bunds to Gilts to Treasuries:

TWO DAY MOVE IN GERMAN 30Y BUND YIELDS A 5 STANDARD DEVIATION EVENT:

Markets are paralyzed with uncertainty—and I’m not even including Trump’s recent resurgence.  How can you get more aggressive with your growthier / reflationary / cyclical outlook when not only is global economic data turning south again, but you have a month ahead with so much event risk–btwn ECB / BoE / BoJ / Fed / first US Presidential debate?  Pile-on four different banks downshifting on growth / saying to get more defensive this week (most notably Trahan  / Lazar at Cornerstone), you have a real pivot forming….especially as so much performance has been “gained back” (certainly within the equities complex) on the shift back into the “reflation” thesis.

EQUITY L/S HF PERFORMANCE SEES GAIN OF +4% SINCE SHIFTING OVERWEIGHT CYCLICALS / UNDERWEIGHT DEFENSIVES: Upper panel shows correlation of “high hedge fund concentration” equities holdings basket against the ‘cyclical / defensive’ equities ratio.  In turn, the below panel shows the % performance in the HFR Eq L/S HF index.

…THIS THEN GETS PRETTY SCARY WHEN YOU LOOK AT THE SWOON IN GLOBAL DATA: Global developed market surprise index plummeting, against the same ‘cyclical / defensive’ equities ratio from above, which is trading back at extremes.  Ruh-roh.

So here we go: BoJ seemingly ready to commit to go deeper negative rates and experiment with their curve, the Fed is seemingly locked-and-loaded on a hike as global growth rolls over, a deluge of supply into a suddenly wobbly rates backdrop (and a world ‘stuffed to the gills’ on duration via NIRP and QE forcing real money / AML community into deeper “yield seeking” / “yield compression” behavior), and a loaded-coil of synthetically low volatility across asset classes…as cross-asset correlations trickle back near multi-year / crisis extremes.

Get ya popcorn ready….

 

end

7. EMERGING MARKETS

An excellent commentary from the Mises Institute on the various South American economies.  Those that adopted market oriented economies like Chile, Uruguay and Columbia have done much better than the left orientated, Venezuela, Argentina and Brazil.

 

a must read.

 

(courtesy Mises Institute/McMaken)

Latin America’s ‘Pink Tide’ Crashes On The Rocks

Ten years ago, South America was witnessing the rise of what came to be known as the “pink tide.” Characterized by an allegedly kinder and softer version of socialism than the “red” communism of Castro’s Cuba, the pink tide had begun with the election of Hugo Chavez in Venezuela in 1998, followed by the election of Lula da Silva in Brazil in 2002, and followed by the rise of the Kirchners in Argentina in 2003. The tide continued to roll in with the election of Evo Morales in Bolivia in 2006, and Rafael Correa’s election in Ecuador in 2007.

As these new leftist candidates gained traction, their success was said to herald a new era of leftist politics in South America that would bring to an end the “neoliberal” consensus and impose a new, more humane economics on Latin American society.

Eighteen years after Hugo Chavez’s inauguration, things haven’t gone quite as planned.

The economy of Venezuela is in seemingly terminal decline with riots, shortages, and enforced slave labor imposed in an attempt to force more production out of the population. Meanwhile, the economies of Brazil and Argentina — while not comparable to Venezuela — are among the worst in Latin America, with Brazil heading for its its worst depression since 1901.

As economies worsened, corruption and authoritarian tactics worsened as well. Venezuelans have gotten the worst of it with citizens groaning under the weight of a police state that shuts down small business and persecutes even the smallest entrepreneurs for alleged economic “crimes” such as being a “class traitor.” In her final years, Kristina Kirchner became increasingly autocratic and paranoid, going so far as to prosecute and impose fines on economists who made economic forecasts the Argentinian state found to be be unflattering. Meanwhile in Brazil, corruption reached new heights as President Rousseff — the pink-tide successor to da Silva — attempted to save the economy and her political career by showering her political allies with “stimulus” cash.

The Hard-liners Give the Worst of It

Much of the most serious damage has been limited to Venezuela, Brazil, and Argentina, however, as it seems the pink tide was never quite as deep or strong as many suspected it to be.

Correa and Morales, for instance, while spouting Marxist rhetoric, proved to be more pragmatic rather than ideological, opting for more restrained reforms that still left room for the more standard fare of so-called neoliberalism, such as expanded international trade and relatively restrained government budgets.

In contrast, Venezuela’s regime committed itself to revolutionary changes in its economic and political systems while the Kirchners clamped down on free trade, manipulated exchange rates, imposed capital controls and persecuted political enemies. Brazil expanded government spending to new highs.

Over the past decade, we saw the rise of two different blocs in Latin America. There were the more market-oriented economies, found in Chile, Colombia, Peru, and Uruguay. In some cases, these countries elected avowed leftists as well. But, even these center-left governments tended to lean toward expanded trade or benign neglect toward informal economies and the business sector.

Some countries — Chile, Colombia, Peru, and Mexico — after years of consistent growth and stable politics, were even christened the “Pacific Pumas” in a play on the “Asian Tigers” moniker of the 1990s.

The general trend continued into 2015, as the two blocs of South America show two very different trajectories:

Of course, this is just a snapshot of a trend that has continued for several years. The committed pink tide countries have foundered while the more pragmatic, restrained, and trade-oriented regimes have seen far better growth trends:

Source: IMF calculations and estimates.

The next graph shows trends in GDP per capita since 1990. In this case, I have taken the same per capita GDP values and indexed them, with a base year of 1990 to give us a view of growth over the past 25 years.

In this case, we find that countries that were less committed to the pink tide experienced the most growth. The top three countries for growth by this measure are Chile, Peru, and Uruguay. Argentina had been keeping pace with Peru, but has gone into decline since 2011, and now is about equal to Colombia in terms of growth.

Indeed, there has been generally unabated growth for all countries shown here except for Argentina, Brazil, and Venezuela. All three of the leading “pink tide” countries show distinct downtrends in recent years, with no growth at all over the past five years. Venezuela is in the worst position with no net growth at all in 25 years.

For help in reading the graph, here are all countries by index value in 2016, and by percentage growth since 1990 (GDP per capita):

  • Chile 2.5 (151% growth)
  • Peru 2.3 (125% growth)
  • Uruguay 2.1 (110% growth)
  • Argentina 1.9 (86% growth)
  • Colombia 1.8 (77% growth)
  • Bolivia 1.6 (59% growth)
  • Ecuador 1.6 (55% growth)
  • Brazil 1.4 (42% growth)
  • Mexico 1.4 (41% growth)
  • Paraguay 1.3 (34% growth)
  • Venezuela 1 (-1.2% growth)

Naturally, not everything can be explained simply by the politics of the past decade. There are always other major institutional issues, and even military issues, as in the case of Colombia’s recently-endedconflict with FARC rebels. Mexico’s War on Drugs continues to be a significant drag on growth.

Moreover, it is also too simplistic to slap easy left-right labels on regimes, since the brand of socialism practiced in Venezuela is significantly different from that practiced by the Peronists in Argentina. Clearly, political institutions in Brazil are relatively less authoritarian than those in Venezuela. Even worse would be to go off mere political party labels as in the case of the Socialist Party in Chile, which currently controls the presidency in that country. The “Socialist Party” in Chile is best described as mildly center-left by modern standards, and party members should obviously not be lumped together with the Chavismo socialists of Venezuela.

Nevertheless, whether called Peronista or Chavismo, regimes more committed to populist, third-way, and socialist political action in practice are, not surprisingly, coming up against some of the disastrous economic side effects of their policies. 

Of course, we can’t prove anything by demonstrating correlations, which is why we must rely on sound economic theory as well.

 

END

 

8. OIL ISSUES

OIL falls as it appears scenario NO 4 will be borne:  no deal on oil production freeze

(courtesy zero hedge)

Oil Slides As Freeze ‘Deal’ Hope Falters

Of the four scenarios that we laid out yesterday, it appears “exemptions” or “no deal” are now the only ones left on the table for Algiers – neither of which are good for oil prices. As Bloomberg reports, Iran, Libya, and Nigeria have demanded the right to increase production – a solution that makes a Saudi agreement to ‘freeze’ less likely and a “no deal” reaction in Algiers more likely.

“I think it is normal that Iran has the right to increase production to the pre-sanctions level. It is also the right of Libya, Nigeria to increase,” Algerian Energy Minister Noureddine Bouterfa says in interview in Moscow.

“All the solutions are possible” at Algiers talks this mo., Bouterfa says when asked if countries including Iran, Libya, Nigeria may have the opportunity to raise output from current levels within the framework of a freeze deal

“Algeria is ready for any actions to stabilize the market”

Paris meeting Friday w/ Bouterfa, OPEC Sec-Gen, Saudi Oil Minister will “evaluate all actions by Iran, Russia, Algeria, Qatar” to prepare for talks in Algiers

The reaction in markets is to start giving back the US inventory draw gains…

And finally here is the statement of the day so far…

“If we have an agreement in Algiers it’s very good, but if we don’t have an agreement, it’s also good” and there will be an opportunity for more talks at the OPEC meeting in Vienna later in the year

So even if we don’t get a solution this month, dtill buy oil please and send prices higher because we could squeeze you again in a few months?

 

end

 

Crude holds its losses as the rig count rises again for the 11th straight week.  This should increase production by a lot.

(courtesy zero hedge)

 

Crude Holds Losses As Oil Rig Count Rises For 11th Straight Week

 

The US oil rig count rose by 7 to 414 last week – the 11th straight week of increases (and 14th of the last 15 weeks). This is the highest rig count in 7 months and is tracking lagged oil prices perfectly still…

  • *U.S. OIL RIG COUNT +7 TO 414 , BAKER HUGHES SAYS
  • *U.S. TOTAL RIG COUNT +11 TO 508 , BAKER HUGHES SAYS

14th week of rising oil rigs in the last 15…

 

Very little reaction in crude prices which are already down 3% on the day, hovering around $46 the figure.

 

end

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

Euro/USA   1.1267 DOWN .0007 (STILL  REACTING TO BREXIT/REACTING TO BRITISH CUT IN INTEREST RATE TO .25%

USA/JAPAN YEN 102.57  UP .271(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA HELICOPTER MONEY  ON THE TABLE BUT DISAPPOINTS WITH STIMULUS

GBP/USA 1.3313 UP .0007 

USA/CAN 1.2952 UP .0029

Early THIS FRIDAY morning in Europe, the Euro FELL by 7 basis points, trading now well above the important 1.08 level FALLING to 1.1267; 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 CLOSED DOWN 17.10 POINTS OR 0.55%    / Hang Sang CLOSED UP 180.36 POINTS OR 0.75%     /AUSTRALIA IS LOWER BY .71% / 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 FRIDAY morning CLOSED UP 6.99 POINTS OR 0.04%  

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 180.36 POINTS OR 0.75%  ,Shanghai CLOSED DOWN 17.10  POINTS OR 0.55%    / Australia BOURSE IN THE RED: /Nikkei (Japan)CLOSED IN THE GREEN   INDIA’S SENSEX IN THE RED 

Gold very early morning trading: $1304.80

silver:$19.46

Early FRIDAY morning USA 10 year bond yield: 1.627% !!! UP 1  in basis points from THURSDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield  2.342, UP 2 IN BASIS POINTS  from YESTERDAY night. 

USA dollar index early FRIDAY morning: 95.03 UP 4 CENTS from THURSDAY’s close.

This ends early morning numbers FRIDAY MORNING

END

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And now your closing FRIDAY NUMBERS

killer move higher on all sovereign bonds globally today

Portuguese 10 year bond yield: 3.16%  UP 9 in basis point yield from THURSDAY  (does not buy the rally)

JAPANESE BOND YIELD: -0.015% UP 2 in   basis point yield from THURSDAY

SPANISH 10 YR BOND YIELD:1.08% UP 10 IN basis point yield from THURSDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.248 UP 10 in basis point yield from THURSDAY 

the Italian 10 yr bond yield is trading 17 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +0.011% UP 7IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR FRIDAY

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

Euro/USA 1.1253 UP .0015 (Euro UP  15 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 102.47 UP .638(Yen DOWN 64 basis points/

Great Britain/USA 1 .3297 DOWN 0.0040 ( Pound DOWN 40 basis points/BREXIT DECISION AFFIRMATIVE/THE BREXIT HAS NOT HURT ENGLAND AT ALL!~

USA/Canada 1.2916 UP 0.0033 (Canadian dollar DOWN 33 basis points AS OIL ROSE (WTI AT $45.44). Canada keeps rate at 0.5% and does not cut!

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 15 basis points to trade at 1.1253

The Yen FELL to 102.47 for a LOSS of 64 basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE 

The POUND was DOWN 40 basis points, trading at 1.3297/

The Canadian dollar FELL by 33 basis points to 1.2916, DESPITE WTI OIL AT:  $47.61

 

The USA/Yuan closed at 6.6640

the 10 yr Japanese bond yield closed at -.015%  UP 2 IN BASIS POINTS / yield/ AND THIS IS BECOMING BOTHERSOME TO THE BANK OF JAPAN

Your closing 10 yr USA bond yield: UP 6 IN basis points from THURSDAY at 1.670% //trading well below the resistance level of 2.27-2.32%) very problematic

USA 30 yr bond yield: 2.392  UP 6 in basis points on the day /*very problematic as all bonds globally rose in yield (lowered in price)

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

Your closing USA dollar index, 95.47 UP 47 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 FRIDAY

London:  CLOSED DOWN 81.75 POINTS OR 1.19%
German Dax :CLOSED DOWN 101.85 OR  0.95%
Paris Cac  CLOSED DOWN 50.80 OR 1.12%
Spain IBEX CLOSED DOWN 75.60 OR 0.83%
Italian MIB: CLOSED DOWN 219.25 POINTS OR 1.26%

The Dow was DOWN 394.46 points or 2.13% 

NASDAQ down  133.58 points or 2.54%
WTI Oil price; 46.01 at 4:30 pm;

Brent Oil: 47.98

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  63.85 (ROUBLE UP  35/100 ROUBLES PER DOLLAR FROM FRIDAY) 

TODAY THE GERMAN YIELD FALLS TO +0.011%  FOR THE 10 YR BOND

 

END

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

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

WTI CRUDE OIL PRICE 5 PM:45.65

BRENT: 47.86

USA 10 YR BOND YIELD: 1.678% a huge move upwards in yield 

USA DOLLAR INDEX: 95.32 UP 33 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.329616 DOWN .0045 or 45 basis pts.

German 10 yr bond yield at 5 pm: +0.011%

END

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

Trading early today:

 

This is why markets tanked across the globe:

(courtesy zerohedge)

“You Get Nothing” – Japanese, German Bond Yields Surge To 0%

Concerns about Japan’s possible ‘var shock’-inducing reverse twist policy has sparked selling across global sovereign bond markets. Both Japanese 10Y and German 10Y yields have surged to 0% overnight.

Japanese 10Y yields have not been this high since March….

And German Bund yields have reached 0% for the first time in 2 months…

*GERMAN 10-YEAR YIELD TURNS POSITIVE, FIRST TIME SINCE JULY 22

As we concluded previously…

So will the BOJ shock markets and unleash this year’s “bond tantrum”,
one which would come at a time when there is an unprecedented $13
trillion in negative yielding bonds? According to Old Mutual Global
Investors which oversees the equivalent of about $436 billion, a policy
change aimed at steepening the yield curve wouldn’t be surprising, even though it would come at the expense of bondholders.

“It would definitely see some pain,” said Mark Nash, head of global bonds at the London-based fund manager. “Money flows across borders. It’s all linked.

And it appears that pain is beginning.

end

 

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

Bondmageddon Sparks Crude Carnage & Biggest Stock Slump In 7 Months

Oops…Compared to recent lack of volatility, today was indeed a bloodbath and the week was the worst week for stocks in 7 months…

 

Dovish Rosengren’s confidently hawkish comments seemed to spark this, sending rate hike odds notably higher (and not sparking confidence in the market)…

 

And rate hike odds are rising as macro data dumps…

 

But blame Draghi for starting it…

 

Before today’s tumult, realized volatility had collapse to a 45 year low…Volatility has rarely been lower. We can argue about the cause but the facts are clear: S&P 500 one-month trailing realized volatility has dropped to 4.8, its lowest level since 1971.

 

Some context for today’s move – Equity market at post-Brexit cliff-edge…

 

Stocks catching down to fundamentals?

 

Today’s moves were impressive… Dow -392 points!! *S&P 500 SINKS 2.4% IN BIGGEST SELLOFF SINCE JUNE 24, *DOW AVERAGE LOSES 392 POINTS IN BIGGEST DECLINE SINCE JUNE 24

 

On the week it was ugly, worst week since February…

 

“Most Shorted” stocks plunged… (biggest drop since Brexit)

 

On the day, homebuilders lost the most ground, but this was the biggest drop in financials since Brexit..

 

Financials and the yield curve have begun to converge…

 

VIX soared…

 

Jumping most since Brexit…surging above its 200-day moving-average…

 

Notably most ‘risk-parity’ indices are end-of-day only, we found one fund in Canada that trades – The Horizons Global Risk Parity ETF – and today was ugly (as we expected)…Bonds & Stocks slammed on the week

 

Total bloodbath in bondland today with the long-end getting slammed… Worst 2 days for 30Y in a year – few things to consider – major issuance demands rate-locks, Japanese reverse twist chatter contagion, ECB losing faith at long-end, and finally Congress signed the 9/11 bill today allowing families to sue Saudi Arabia who have threatened to sell their Treasuries…

The entire curve is back to Brexit level highs in yields.

2s30s jumped around 12bps on the week (with a bear steepening) – the biggest weekly steepening since Jan 2013

 

Notably USTreasuries and Bunds tracked each other almost perfectly this week (as JGBs and Bunds managed to get back to 0% yield)…

 

The Dollar Index ended the week lower, despite a notable rise in the last two days (led by Cable and commodity currency weakness)… Yen strengthened on the week.

 

Dollar strength slammed into commodities with crude giving back yesterday’s inventory gains and silver rolling over notably… (gold and silver closed below their 50DMAs)

 

Today’s crude retracement of yesterday’s inventory drawdown…

 

Charts: Bloomberg

Bonus Chart: A gentle reminder of how well things are going in the ‘economy’

 

Bonus Bonus Chart: Stocks year-to-date…

 

end

 

I think I have seen just about everything:  Well Fargo fines 185 million dollars for engaging in massive fraud by creating over 2 million fake accounts.  Wells Fargo fires 5,300 workers who engaged in this practice.

(courtesy zero hedge)

Wells Fargo Fires 5,300 For Engaging In Massive Fraud, Creating Over 2 Million Fake Accounts

For years we have wondered why Wells Fargo, America’s largest mortgage lender, is also Warren Buffett’s favorite bank. Now we know why.

On Thursday, Wells Fargo was fined $185 million, (including a $100 million penalty from the Consumer Financial Protection Bureau, the largest penalty the agency has ever issued) for engaging in pervasive fraud over the years which included opening credit cards secretly without a customer’s consent, creating fake email accounts to sign up customers for online banking services, and forcing customers to accumulate late fees on accounts they never even knew they had. Regulators said such illegal sales practices had been going on since at least 2011.

In all, Wells opened 1.5 million bank accounts and “applied” for 565,000 credit cards that were not authorized by their customers.

Wells Fargo told to CNN that it had fired 5,300 employees related to the shady behavior over the last few years. The firings represent about 1% of its workforce and took place over several years.  The fired workers went to far as to create phony PIN numbers and fake email addresses to enroll customers in online banking services, the CFPB said.

How Wells perpetrated fraud is that its employees moved funds from customers’ existing accounts into newly-created accounts without their knowledge or consent, regulators say. The CFPB described this practice as “widespread” and led to customers being charged for insufficient funds or overdraft fees, because the money was not in their original accounts. Additionally, Wells Fargo employees also submitted applications for 565,443 credit card accounts without their knowledge or consent, the CFPB said the analysis found. Many customers who had unauthorized credit cards opened in their names were hit by annual fees, interest charges and other fees.

According to the NYT, regulators said the bank’s employees had been motivated to open the unauthorized accounts by compensation policies that rewarded them for drumming up new business. Many current and former Wells employees told regulators they had felt extreme pressure to expand the number of new accounts at the bank.

And, since it is US government policy never to send a banker to prison, they thought that engaging in criminal behavior was not such a bad idea.

Federal banking regulators said the practices reflected serious flaws in the internal culture and oversight at Wells Fargo, one of the nation’s largest banks.

“Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences,” said CFPB Director Richard Cordray. He added that “unchecked incentives can lead to serious consumer harm, and that is what happened here.”

Consumers must be able to trust their banks. They should never be taken advantage of,” said Mike Feuer, the Los Angeles City Attorney who joined the settlement.

On its behalf Wells fargo issued a statement saying it “is committed to putting our customers’ interests first 100 percent of the time, and we regret and take responsibility for any instances where customers may have received a product that they did not request,” the bank said in a statement adding that “at Wells Fargo, when we make mistakes, we are open about it, we take responsibility, and we take action.”

As the NYT puts it, “this is an ugly moment for Wells Fargo, one of the few large American banks that have managed to produce consistent profit increases since the financial crisis.” Now we know one of the reasons why.

As CNN redundantly adds, “the scope of the scandal is shocking.”

And since nobody will go to prison, in a few months we will read another such “shocking scandal” perpetrated by another bailed-out bank.

 

END

 

Gundlach states that Yellen may surprise markets and raise interest rates even though the Fed may blow itself up.

a must read..

(courtesy Doubleline/Jeff Gundlach/zerohedge)

“This Is A Big, Big Moment” – Gundlach Warns Yellen May Surprise Markets

In his latest webcast to DoubleLine investors and the general public, the “new bond king” Jeffrey Gundlach, who had taken a one month sabbatical from public appearances after warning (hyperbolically as he explained yesterday) to “Sell Everything, Nothing Here Looks Good“, said that the Fed is determined to show it is independent from market forces, and may hike rates even as investors bet they will not.

As a result, Gundlach said it’s time for fixed-income investors to prepare for rising rates and higher inflation by reducing the duration of their positions, moving money into cash and protecting against volatility. In his presentation titled appropriately “Turning Points” (presented below) Gundlach said that “this is a big, big moment,” predicting that “interest rates have bottomed. They may not rise in the near term as I’ve talked about for years. But I think it’s the beginning of something and you’re supposed to be defensive.”

“They want to show that they are not guided by the markets,” Gundlach told Reuters in a telephone interview following the DoubleLine webcast. “The Fed wants to show, at some point, that they can’t be replaced by WIRP (World Interest Rate Probability). The only way they can do that is to tighten when WIRP is below 50.”

However, by trying to prove its independence from the WIRP, the Fed might be “blowing itself up,” Gundlach warned. The Fed will not hike in September if the WIRP is below 40 and the S&P 500 is below 2150, he said on the webcast, which we assume means that the market is in control after all.

Meanwhile, the economy continues to contract: Gundlach pointed out that the non-mfg ISM released earlier this week is at the lowest level since 2009, and it is almost on recession watch. “Clearly, it’s a bad environment to be raising rates,” yet some Fed members are talking about two rate hikes between now and the end of the year, Gundlach said. Gundlach said investors should get defensive with bonds, adding that he is sensing a “bond unfriendly turn” such as fiscal stimulus and that bond yields bottomed several years ago.

Quoted by Bloomberg, Gundlach cited a July low of 10-year Treasuries that didn’t hold as evidence interest rates have hit bottom. The fund manager said rates on the U.S. 10-year bond may surpass 2% by the end of 2016. If we are correct, and if Japan is about to unleash a 2003-like VaR shock, they may surpass 2% in a few days.

As a justification for his higher rates call, Gundlach stuck to his prediction that Republican Donald Trump will be elected the next U.S. president, and said both Trump and Democrat Hillary Clinton have advocated more spending on infrastructure, which would add fiscal stimulus to the economy, which as we have explained, simply means “more debt.”

“This idea that fiscal stimulus may be coming seems to be getting sniffed out by the bond market,” Gundlach said. More debt spending may increase the cost of government borrowing by adding supply and making investors demand higher yields, he said. “People say, ‘How can rates rise?”’ he said. “That’s how they can rise and they’re sort of rising already.

Gundlach told Reuters this summer that his firm went “maximum negative” on Treasuries on July 6 when the yield on the benchmark 10-year Treasury note hit 1.32 percent. The 10-year now yields around 1.60 percent. All told, Gundlach said he turned short-term negative on gold and gold miners but has not sold any of his firm’s positions. He also said DoubleLine’s bet on emerging-market debt over high yield “junk” bonds have paid off, given that EM has posted returns of more than 15.2% so far this year.

Gundlach’s full presentation is below.

Gundlach Prez 9.8.2016 by zerohedge on Scribd

 

 

END

 

And with economic conditions around the globe plummeting, we are witnessing odds of a September rate hike rise.  This too will not end well!

(courtesy zero hedge)

September Rate Hike Odds Are Soaring

Despite dismal economic data, traders are suddenly pricing in a considerably higher chance of a rate hike in September…

Interestingly, the market is pricing in around a 40% chance of a hike. Jeff Guindlach noted last night that if rate-hike odds remain below 40%, then September is off the table (as The Fed does not want to shock the markets)…

As a reminder, this is what is happening in the real world…

Perfect time to hike rates.

 

 

end

 

Wholesale sales tumble hugely and the  sales/inventory ratio rose again back to 1.34 which means we are deep in recessionary territory:

(courtesy zero hedge)

Wholesale Sales Tumble Most Since January, Inventories Ratio Deep In Recessionary Territory

Wholesales sales slumped 0.4% MoM in July – the biggest drop since January. Inventories were unchanged MoM, driving the inventories-to-sales ratio back up to 1.34x. Year-over-year, this was the 19th consecutive month of declines for wholesale sales

Notably Auto sales dropped for the 3rd month in a row but Hardware saw the biggest monthly drop in sales.

Farm products saw the biggest drop in inventories along with drugs. Auto inventories rose but professional equipment rose the most.

The absoluet gap between sales and inventories remeains near record highs…

But the sales drop and inventiories flat has led to a rise in the inventories-to-sales ratio, which remains deep in recessionary territory…

Probably a good time to hike rates?

Charts: Bloomberg

I am so glad that I am alive to witness the following:

Tampons are coming to men’s washrooms at Brown University.

(courtesy Sydney Hutchison/CampusReform.com)

Tampons Coming To Men’s Rooms At Brown University

Submitted by Sydney Hutchison via CampusReform.com,

  • Brown University’s student body president will be hand-delivering menstrual products to all nonresidential bathrooms on campus, including men’s rooms, with the help of 20 other students.
  • The initiative is intended to communicate the message that “pads and tampons are a necessity, not a luxury,” and that not all people who menstruate are women.

Brown University’s student body president will be hand-delivering menstrual products to all nonresidential bathrooms on campus, including men’s rooms, with the help of 20 other students.

Viet Nguyen, President of the Undergraduate Council of Students, announced the initiative in a campus-wide email Tuesday, saying he wants to communicate the message that not all people who menstruate are women, according to Newsweek.

“There’s been a lot of conversation about why pads and tampons are a necessity, not a luxury, but not a lot of action. We wanted to take it into our own hands,” Nguyen explains in the email, observing that “low-income students struggle with having the necessary funding for food, let alone tampons.”

By putting menstrual products in women’s, men’s, and gender-inclusive bathrooms, Nguyen aims to “set a tone of trans-inclusivity, and not forget that they’re an important part of the population,” but is under no illusions that the effort will be universally popular.

“I’d be naïve to say there won’t be push back,” he preemptively concedes. “I’ve had questions about why we’re implementing this in male bathrooms as well. It’s an initial confusion, but people generally understand when we explain it.”

Nguyen told Newsweek that menstrual products will be available in approximately 30 to 40 bathrooms across campus for the 2016–2017 school year, financed exclusively by the undergraduate finance board, rather than general university funds.

“Why aren’t these products treated the same way as other products we hand out, like toilet paper?” he pondered in an interview with The Guardian. “It’s a necessity, rather than a luxury, so Brown and other universities should treat them as such.”

“Feminine hygiene products are not a luxury. They’re as essential as toilet paper; just ask anyone who has ever struggled to obtain or afford them,” agreed Terry O’Neill, president of the National Organization for Women. “Students’ participation in school should not be hindered by insufficient access to this basic necessity. Universities around the country should follow suit.”

Yuzuka Alaska, a junior at Brown, opined that menstruation is currently a “taboo,” but speculated that “if we can implement this project, that will add to this conversation and make it more of an accessible topic.”

*  *  *

UPDATE:Brian Clark, Brown’s Director of News and Editorial Development, praised the students for their “tremendous initiative” in a statement to Campus Reform, saying the school will look forward to observing the results.

“In efforts to work with and support their peers, leaders from the Undergraduate Council of Students take on a number of student-focused efforts each year,” he said, clarifying that “these are student-led and independent of the university administration, although we recognize that many important resources on campus today were first idenitified and advocated for by students themselves.

“We expect that UCS will continue to solicit feedback on this new initiative and collect data on the use of these products,” he concluded, saying the administration “will be interested to learn what they find as they assess the effectiveness of the program moving forward.”

ZH: We have nothing to add here… not one word!!

end

 

Amazing the journalists are quite tonight even though the labour department revised away a huge 150,000 jobs or around 12,000 per month.  They probably know the truth anyway that the entire job scene is one big farce!

(courtesy zero hedge)

Labor Department Revises Away 150,000 Jobs

end

Today we have received a flood of warnings for lower profits in Q3  (July-Sept). Seems that David Stockman’s prediction on lower S and P is bearing fruit.

(courtesy zero hedge)

A Flood Of Profit Warnings Just Crushed The “Earnings Recovery”

fter what is set to be six consecutive quarters of annual earnings declines – consensus now sees Q3 EPS dropping -2.1% according to Facset when as recently as the end of March, analysts were expecting EPS growth of 3.2% for the quarter – Wall Street has decided that it will take no more of this negativism, and expects S&P500 earnings to soar in the half, as shown in the following Deutsche Bank chart.

There is just one problem: contrary to the cheerful narrative of an earnings recovery, companies have been slashing H2 earnings, and as MarketWatch reports, at least 10 companies this week alone have lowered outlooks for the second half of the year.

Indeed, as we have been warning for months, and as Jeff Gundlach cautioned on his presentation last night…

… the EPS “hockeystick” has been once again indefinitely postponed; in fact what happens next will be a steep drop in forward EPS.

MW admits as much, saying that “Investors expecting the earnings picture to improve significantly in the year’s second half may want to keep an eye on a wave of sales and profit warnings from some large- and small-cap companies this week.” Some examples: Ford Motor, Barnes & Noble, Tractor Supply, SuperValu, Sprout’s Farmers Market,  Pier 1 Imports, General Mills, HD Supply Holdings, EnQuest and Dave & Buster’s are among the companies tempering expectations for their second half.

So far, the flood of negative earnings warnings has not moved the needle on expectations for the third quarter, according to FactSet. But it wil: 78 of the 113 S&P 500 companies that have provided an outlook for the quarter have issued negative earnings-per-share guidance, according to FactSet senior analyst John Butters.

This number is set to surge for one simple reason: regular readers are quite familiar with what the latest “scapegoat” is – it is shown in the photo below.

As we said on August 31, when we first reported about Hanjin’s bankruptcy, we said that “the global implications from the bankruptcy are unknown: if, as expected, the company’s ships remain “frozen” and inaccessible for weeks if not months, the impact on global supply chains will be devastating, potentially resulting in a cascading waterfall effect, whose impact on global economies could be severe as a result of the worldwide logistics chaos. The good news is that both economists and corporations around the globe, both those impacted and others, will now have yet another excuse on which to blame the “unexpected” slowdown in both profits and economic growth in the third quarter.

Lo and behold, this is precisely what is about to take place, cue MarketWatch this morning:

The negative outlooks provided this week reflect a range of issues facing companies, some of which have emerged only recently.

For retailers, the bankruptcy of South Korea’s biggest shipping line and the world’s seventh biggest as measured by capacity, Hanjin Shipping, is a big risk, as it has left cargo valued at $14 billion stranded at sea, as the Wall Street Journal reported Wednesday. That’s because ships carrying its containers have been denied access to ports, or even been seized by some of the company’s creditors.

Coming right before the holiday season, that is likely to hurt a range of companies. Fashion-driven specialty retailers and clothing retailers making significant fashion shifts are most at risk from the Hanjin-related havoc, according to Cowen & Co. analysts. They name names, including Ascena Retail Group, Abercrombie & Fitch, American Eagle, Urban Outfitters, Gap, Michael Kors and Coach.

Further confirming our prediction, Cowen said that “an ability to chase into working trends could be limited if there are problems in the supply chain.” Others compared the issue to the strike by dock workers on the U.S.’s West Coast that began in the fall of 2014 and delayed shipments of goods for months. Deutsche Bank said companies that were especially hard hit by the port strike included sports retailers; home-furnishings companies such as Home Depot Inc., Lowe’s Corp. and Bed Bath and Beyond and the crafts chain Michaels.

Of course, there is a far more critical issue: the demand is just not there. soft consumer spending has continued to “stump” analysts, although there is no secret: rising rents and health-care costs, have been the biggest catalyst crushing the US consumer, as we first explained in 2014, and as dollar store discounters confirmed two weeks ago, as we reported in “”Things Are Worse” – Dollar Stores’ Startling Admission: Half Of US Consumers Are In Dire Straits.”

Finally, with the oil rebound fading fast again, the EPS tailwind from energy companies may prove to be the final mirage in the much anticipated earnings rebound, as annual earnings are at best flat, and far from the dramativ contributor to the S&P bottom line. In fact, the biggest question remains whether or not Apple, whose earnings are 7% of the S&P’s bottom line, can finally get out of its rut. Considering the company just said it would no longer report new product launch weekend sales – for obvious reasons – we can safely conclude that the latest forecast hockey-stick is not going to materialize, and if anything we may see the 6 quarter stretch of negative earnings continue into Q4 – an unprecedented 7 consecutive quarters of annual earnings declines.

end

It sure looks like the taxpayer is going to pick up the bill for the ITT cancellation:

(courtesy zero hedge)

29,000 ITT Students Are Stuck In Limbo: Guess What Happens To Their Debt Next

 

This is something;  over 70% of USA doctors surveyed said that Hillary’s health concerns are serious enough to possibly disqualify her from the Presidency:

(courtesy zero hedge)

Over 70% Of US Doctors Surveyed Say Hillary’s Health Concerns Are “Serious, Possibly Disqualifying”

END

This will hurt: GM recalls 4 million vehicles over air bag defect linked to a death

(courtesy zero hedge)

GM Stock Slides As Automaker Recalls 4 Million Vehicles Over Air-Bag Defect Linked To Death

The following story is even better than the above:  the”Oh Sh&(% Guy” who wiped Hillary’s blackberry with Bleachbit has been granted immunity:
(courtesy zero hedge)

The “Oh Shit” Guy That Wiped Hillary’s Server With BleachBit Was Just Granted Immunity

end

 

The following ought to be good for the job scene next month:  Dell fires 3,000 USA workers

(courtesy Wolf Richter)

 

Dell Fires 3000 US Employees, Requests 5000 Visas For Foreign Workers

Submitted by Wolf Richter via WolfStreet.com,

Trying to find efficiencies and synergies to save $1.7 billion.

The ink was barely dry on Dell’s acquisition of EMC, the largest technology deal ever, valued at $67 billion when it was announced in October last year – and already the layoff rumors are oozing from the woodwork.

“People familiar with the company’s plans” told Bloomberg that Dell will cut 2,000 to 3,000 jobs.

Dell spokesman Dave Farmer refused to comment specifically on the report on Thursday but said instead, as sort of a confirmation: “As is common with deals of this size, there will be some overlaps we will need to manage and where some employee reduction will occur.”

On Wednesday, the day the deal closed, CEO Michael Dell gave some clues in an interview: “There are some overlapping functions and that sort of thing – that’s not the primary feature of this, but there is some of that.”

These “overlaps” or “overlapping functions” are terms in corporate speak for real people, and these real people are mostly working in the US, according to the report: supply chain, marketing, and general and administrative positions.

Dell is trying to find some efficiencies and synergies to save about $1.7 billion in the first 18 months after the deal closes, so starting from Wednesday. They’re not dilly-dallying around cutting costs and laying off people.

Combined they have about 140,000 employees. So the trimming might have a long ways to go, especially if the cloud and the Internet of Things are not as fun as imagined. But that doesn’t mean that the headcount will come down – they’re bringing in foreign workers, mostly from India.

Between 2014 and 2016, Dell applied for 2,039 H-1B visas and 256 Green Cards. EMCapplied for 2,347 H-1B visas and 453 Green Cards, for a total of 5,095 applications.

These are just applications. Not all of them will be certified, and of those that are certified, not all beneficiaries will be hired. But the data for 2016 isn’t complete yet either.

It’s the hot thing to do for tech companies: laying off existing workers in the US, and bringing it foreign workers on H-1B visas. The Senate has been looking into some of the abuses. In February, Senator Richard Blumenthal (D-Conn.) sent US Attorney General Loretta Lynch a letter requesting a Justice Department investigation. But the tech lobby will likely get the Senate back on track soon.

But Dell needs to save some money, one way or the other. Dell’s corporate credit rating is at the upper end of junk. It’s loaded to the gills with debt, stemming from when it was taken private. Now the EMC deal has piled new debt on the company, including $20 billion of bonds it sold in May, followed by a $5-billion leveraged loan.

It needed this pile of cash to pay EMC shareholders $24.05 per share. They also got a “tracking stock” linked notionally to EMC’s interest in VMware, but in reality they get no real ownership of anything. Tracking stocks were hot during the dotcom bubble, with disastrous results for investors.

The combined company is also trying to boost sales, which they’ve been trying to do individually for years. All old tech companies, including IBM and Microsoft are trying to boost sales, and particularly those in the withering PC ecosystem are having the hardest time. They need to find a new niche for growth, and so they’re all piling into the “cloud” and the adjacent “Internet of Things” that links even the fridge to the cloud. But this is precisely where Amazon, Microsoft, Facebook, Apple, and Google dominate.

This is the situation Dell and EMC are in. Both have a large part of their products scattered around the PC ecosystem, Dell with servers and PCs, and EMC with storage devices. A match made in heaven. And so they’re going to innovate their way out of it! As Michael Dell said in the interview:

“We’ve got the ability to innovate at scale and invest – not for next quarter, but we have the agility and speed of a startup, but the scale and reach of the largest company in the industry.”

Alas, Dell became successful by building the same boxes everyone else was building, but it was building them on order, marketing and selling them directly, and getting customers to pay before their computers were even assembled, which was a new approach to supply chain management and working-capital financing in the 1980s: For the first time in history, accounts receivable were a negative amount, and working capital was funded entirely by customers, free of charge. Credit cards made that possible.

That was Dell’s big invention. It gave it a huge cost advantage, until everyone started doing it. But it wasn’t technological innovation. EMC is a different animal. But now it’s under Dell’s control, and they’re carrying a lot of debt, and cost cutting is going to be the big strategy going forward.

Mergers & Acquisitions often just lead to more shut-downs, write-offs, and layoffs. But somebody is making a killing.Read…  “Tech” Paid $5 Billion in Fees to Wall Street in 2016, and Look What it Got for it

 

end

Well that is all for today

I will see you Monday night

Harvey

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3 comments

  1. I heard, years ago, that the Fed rates followed the Treasury rates. There was no reason given why, just that it works that way. If so, and Treasuries continue to tank, the Fed may have to raise their rates, in concert, in spite of any economic weakness or disasters.

    Like

  2. hello… rtrn call…

    Like

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