Gold:1321.10 down $2.00
Silver 18.91 down 2 cents
In the access market 5:15 pm
Today, the big mover globally was the advance in yield on all bonds. This is quite something since 2/3 of the world still have negative interest rates and QE to boot.
No doubt this caught the attention of investors and they decided that it was not worth it to keep their money in the stock market.
Keep in mind that a rapid rise in yields will cause a huge hardship to our underwriting derivative banks.
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 13 (10:15 pm est last night): $1333.72
NY ACCESS PRICE: $1330.95 (AT THE EXACT SAME TIME)
Shanghai afternoon fix: 2: 15 am est (second fix/early morning):$1331.23
NY ACCESS PRICE: 1328.86 (AT THE EXACT SAME TIME)
London Fix: Sept 13: 3: am est: $1328.50 (NY: same time: $1328.80: 3 AM)
London Second fix Sept 8: 10 am est: $1323.65 (NY same time: $1323.70 , 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.
Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.
For comex gold:The front September contract month we had 20 notices filed for 2000 oz
For silver: the front month of September we have a total of 27 notices filed for 135,000 oz
Let us have a look at the data for today
In silver, the total open interest FELL by 2859 contracts down to 195,494. The open interest fell as the silver price was whacked down 37 cents in yesterday’s trading .In ounces, the OI is still represented by just LESS THAN 1 BILLION oz i.e. .977 BILLION TO BE EXACT or 139% of annual global silver production (ex Russia &ex China). the crooks are doing a great job fleecing unsuspecting longs
In silver we had 27 notices served upon for 135,000 oz
In gold, the total comex gold fell by a whopping 10,745 contracts as the price of gold fell BY $9.10 yesterday . The total gold OI stands at 576,719 contracts. The level of OI now is good for us as it will support a rise in gold price.
With respect to our two criminal funds, the GLD and the SLV:
we had no changes tonight out of the GLD/
Total gold inventory rest tonight at: 939.94 tonnes of gold
we had another big change with respect to inventory at the SLV a deposit of 1.329 million oz
THE SLV Inventory rests at: 362.434 million oz
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver fell by 2859 contracts down to 195,494 as the price of silver fell by 37 cents with yesterday’s trading.The gold open interest fell 10,746 contracts down to 576,719 as the price of gold fell $9.10 IN YESTERDAY’S TRADING.
2.a) The Shanghai and London gold fix report
2 b) Gold/silver trading overnight Europe, Goldcore
and in NY: Bloomberg
3. ASIAN AFFAIRS
i)Late MONDAY night/TUESDAY morning: Shanghai closed DOWN 56.88 POINTS OR 1.85%/ /Hang Sang closed DOWN 809.10 points or 3.36%. The Nikkei closed DOWN 292.84 POINTS OR 1.85% Australia’s all ordinaires CLOSED DOWN 2.24% Chinese yuan (ONSHORE) closed MARGINALLY UP at 6.6805/Oil FELL to 45.04 dollars per barrel for WTI and 47.16 for Brent. Stocks in Europe: ALL IN THE RED Offshore yuan trades 6.6930 yuan to the dollar vs 6.6805 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS HUGELY AS MORE USA DOLLARS LEAVE CHINA’S SHORES
REPORT ON JAPAN SOUTH KOREA NORTH KOREA AND CHINA
b) REPORT ON JAPAN
i)With yields rising across the globe, the bankers tried to spike the USA/JPY higher trying to avoid a stock bloodbath. The news furnished: one week old but that did not matter to our crooks. It did not work as stocks continued to falter
( zero hedge)
ii)And the reverse twist will not work and here is why! The big question is whether the Bank of Japan will orchestrate a huge global sell off on equities:
( zero hedge)
c) REPORT ON CHINA
4 EUROPEAN AFFAIRS
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
i)Oil slides as oversupply seems to be the name of the game as demand falters:
( zero hedge)
ii)Crude inventories rise again
(courtesy zero hedge)
i)My view is a little different than Ted’s. I agree that JPMorgan is accumulating silver in its vaults. Ted believes it is for their account. I believe that they have accumulated silver for China’s account inside JPMorgan’s vaults.
(courtesy Ted Butler/GATA)
ii)Stephen Leeb describes how China will use gold and the new SDR’s to gain control of the world’s monetary system. He warns it will be a slow process:
( Stephen Leeb/GATA)
iii)Legendary Paul Singer warns that the climate in the investment world is very dangerous and he prefers gold
(courtesy Paul Singer/zero hedge)
iv)Lawrie Williams notices (like myself) that the Shanghai fix is higher in price for gold than in London and/or NY.
The big question: is China trying to stabilize the gold price?
(courtesy Lawrie Williams/Sharp’s Pixley)
10.USA STORIES WHICH MAY INFLUENCE THE PRICE OF GOLD/SILVER
i)Goldman Sachs: the Fed does not want to startle the markets. There has been no clear signal of a rate rise. Thus September will probably not see the rate hike! and I agree with that:
( Goldman Sachs/zero hedge)
ii)It has been quite obvious to me that Hillary is suffering from advanced stage Parkinson. Here is a great video which should provide all the evidence you need to come to the same conclusion
iii)Markets not doing too good today: both stocks and bonds falling (bond yields rising)
iv)Janet and company will not like the following; the USA consumer is tapped out as retail spending falters:
( zero hedge)
Let us head over to the comex:
The total gold comex open interest fell to an OI level of 576,719 for a loss of 10,746 contracts as the price of gold FELL by $9.10 with yesterday’s trading. We are now in the NON active month of SEPTEMBER/
The contract month of Sept saw it’s OI ROSE by 61 contracts UP to 171. We had 0 notices filed yesterday so we GAINED 61 contracts or 6100 additional oz will stand for delivery. The next delivery month is October and here the OI FELL by 1115 contracts down to 42,073. 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 10,073 contracts down to 430,199.The estimated volume today at the comex: 171,811 fair Confirmed volume yesterday: 210,555 which is good.
And now for the wild silver comex results. Total silver OI fell by 2859 contracts from 198,353 DOWN TO 195,494 with the HUGE FALL in price of silver to the tune of 37 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 222 contracts down to 965. We had 169 notices filed upon YESTERDAY so we lost 53 contracts or 265,000 additional oz will not stand for delivery in this active month of September. The next non active delivery movement of October hardly moved rose by 6 contracts up to 268 contracts. The next big delivery month will be December and here it fell , down 2799 contracts to 169,618. The volume on the comex today (just comex) came in at 59,956 which is excellent The confirmed volume yesterday (comex and globex) was huge at 84,733 . Silver is not in backwardation. London is in backwardation for several months.
today we had 27 notices filed for silver: 135,000 oz
|Withdrawals from Dealers Inventory in oz||
|Withdrawals from Customer Inventory in oz nil||
|Deposits to the Dealer Inventory in oz||NIL oz|
|Deposits to the Customer Inventory, in oz||
|No of oz served (contracts) today||
|No of oz to be served (notices)||
|Total monthly oz gold served (contracts) so far this month||
|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||76,117.3 oz|
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 20 contract of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped (received) by jPMorgan customer account.
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!!.
|Withdrawals from Dealers Inventory||NIL|
|Withdrawals from Customer Inventory||
|Deposits to the Dealer Inventory||
|Deposits to the Customer Inventory||
|No of oz served today (contracts)||
|No of oz to be served (notices)||
|Total monthly oz silver served (contracts)||2110 contracts (10,550,000 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||4,021,672.1 oz|
15,043.23 oz was adjusted out of the dealer and this entered the customer account of CNT.
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
NPV for Sprott and Central Fund of Canada
And now your overnight trading in gold,TUESDAY MORNING and also physical stories that may interest you:
“Sorry, You Can’t Have Your Gold Bullion”
“Sorry, You Can’t Have Your Gold” by Jeff Thomas via InternationalMan.com
In this publication, we warn regularly of the risk involved in storing wealth in banks. They’ve made the removal of your deposits increasingly difficult in addition to colluding with governments to allow them to legally freeze or confiscate your money.
To add insult to injury, they’re creating reporting requirements with regard to the contents of safe deposit boxes and restricting what can be stored in them – again,at risk of confiscation.
More and more, banks are becoming one of the more risky places to store wealth inany form. Not surprising, then, that many people are returning to those facilities that treat wealth storage the way the first banks did millennia ago – vault facilities that store your wealth for a fee but engage in no other banking activities.
But, in suggesting to our readers that such facilities are a better bet, I’ve also repeatedly warned readers that many such facilities don’t store actual, physical gold. They instead provide a contract to you that states that they will deliver an agreed-upon amount of gold upon demand. The trouble with this idea is that it becomes tempting for such facilities to sign such a contract with you and collect the purchase price but never actually purchase and store any gold. It’s been estimated that the total worldwide value of such contracts equals 150 times the amount of gold in existence in the world.
This is why it’s imperative that you purchase only physical, allocated gold.
And another caution: I’ve repeatedly stated that, although many of the most secure facilities in the world are located in North America and Europe, these jurisdictions are on the cusp of economic crisis, a fact that suggests that, if and when the crisis arrives, the rule book will be thrown out the window. Governments and facilities alike may prove untrustworthy and, at some point, you may drop by the facility to withdraw your gold and be told, “Sorry, we’re unable to provide delivery.” There could be a multitude of reasons given, hoops to jump through, and endless red tape to deal with. And still, in the end, you may never be able to take delivery.
It’s for these reasons that we advise that, although nothing in life is guaranteed, you should always protect your wealth by choosing the least risky option.
This means that you should follow two simple rules – Rule #1: Select the jurisdictionwith the best laws and reputation. Rule #2: Make sure there’s a reputable storage facility in that jurisdiction that has a Class III vault and a contract that meets your needs.
But am I being overly cautious when I so frequently offer this advice? Unfortunately, no. I’ve predicted that, in the future, as we get closer to a monetary crisis, banks and storage facilities that are located in countries that are likely to be heavily affected will work ever harder to avoid releasing either money on deposit (in the case of banks) and precious metals (in the case of storage facilities).
Recently, the reports that I’ve been receiving from wealth storage facilities in advantageous jurisdictions are indicating that that prediction is beginning to come to fruition. In case after case, clients are having a harder time getting their money and their metals out. In most cases, those institutions that don’t wish to deliver are creating red tape, stalling techniques (which are costly in both time and money), and, in some cases, outright refusals to deliver.
Let’s look at two actual examples – one of a bank, one of a wealth-storage facility.
USA: A client asks his bank to wire transfer US$178,000 in funds to an overseas facility to purchase precious metals for storage. The bank then created a series of roadblocks:
- Required a written request with an original, signed copy to be hand-delivered.
- Once that was done, a voice authorization of the letter by phone was required.
- Once that was done, it required the client to receive a PIN number, which would take several days to create and would need to be sent by courier.
- After the client jumped through all those hoops, the bank changed its requirements completely, requiring that a cashier’s cheque be sent instead, which required ten days clearance.
Lost time – four weeks from date of first request.
Austria: A client tries to transfer his allocated 138 gold Philharmonics from his bank to a facility in another jurisdiction. The bank repeatedly produced roadblocks, as follows:
- Refused to ship the products themselves and refused to arrange shipment.
- Refused to release the goods to FedEx when they arrived, even though proof of insurance was provided. The bank then insisted on the hiring of a Brinks truck.
- They then refused to release the coins at all, except to another bank.
- They then claimed that they were “not ready” to release the coins. The client was invited to “try again” if he wished. (Eight attempts were required.)
- Finally, they agreed to release the coins, but only if a 1% withdrawal fee were applied (not part of the original agreement – essentially a ransom).
There are many, many more examples already, but these should suffice to illustrate the growing trend: If you wish to get your money or metals out of an endangered jurisdiction, such as an EU country or North America, the window of opportunity is closing. Expect them to make it difficult, costly, and even impossible for you to get out.
But why should this be? What are these institutions up to? Don’t they realise that they’re sending a message to clients that they’re not helpful partners?
Well, yes they do, but they’re also aware of another factor that’s more important to them. As the economic crisis gets ever closer, they understand that the day will soon come when a banking emergency is declared and the banks will shut their doors for an as-yet-unknown period of time (presumably until a solution is found). What will the new rules be? No one knows. Will the banks and storage facilities be obligated to deliver in full if the doors open once again? No one knows.
Therefore, in the final stretch of this race to the bottom, they want to be holding as much of your money and metals as they can.
The above examples are just the thin end of the wedge and we can expect the future to reveal greater restrictions. Whilst, in an economic crisis, there are no guarantees, what we can do is opt for the situation that’s least likely to cost us our wealth. Again,
Choose a jurisdiction that has the best track record – a long history of a low-tax, or no-tax, regime; a stable government and legislation that protects rather than victimises the foreign investor.
Choose the jurisdiction that’s easiest for you to access – In Europe, this might be Switzerland or Austria. In Asia, this might be Singapore or Hong Kong. In the Western Hemisphere, this might be the Cayman Islands.
Choose the best facility within that jurisdiction – the one that has the best reputation and offers the best contract (competitive rates, Class III vault facility, 24-hour viewing access, etc.).
At this juncture, we can’t say how long the need to safeguard wealth will be as essential as it will be in the near future. It may be brief (a few years), or it may be many years before the dust has settled. Whatever the outcome of the coming economic crisis, those who have chosen the safest havens for their wealth will be those who will fare best.
Gold and Silver Bullion – News and Commentary
Gold Prices (LBMA AM)
13Sep: USD 1,328.50, GBP 1,000.36 & EUR 1,183.69 per ounce
12Sep: USD 1,327.50, GBP 1,000.80 & EUR 1,182.54 per ounce
09Sep: USD 1,335.65, GBP 1,004.68 & EUR 1,184.86 per ounce
08Sep: USD 1,348.00, GBP 1,009.11 & EUR 1,195.81 per ounce
07Sep: USD 1,348.75, GBP 1,008.60 & EUR 1,199.85 per ounce
06Sep: USD 1,330.05, GBP 997.94 & EUR 1,191.46 per ounce
05Sep: USD 1,328.30, GBP 996.23 & EUR 1,189.49 per ounce
Silver Prices (LBMA)
13Sep: USD 19.16, GBP 14.44 & EUR 17.06 per ounce
12Sep: USD 18.72, GBP 14.11 & EUR 16.68 per ounce
09Sep: USD 19.41, GBP 14.58 & EUR 17.23 per ounce
08Sep: USD 19.93, GBP 14.90 & EUR 17.65 per ounce
07Sep: USD 19.92, GBP 14.89 & EUR 17.71 per ounce
06Sep: USD 19.60, GBP 14.70 & EUR 17.55 per ounce
05Sep: USD 19.46, GBP 14.60 & EUR 17.43 per ounce
Recent Market Updates
– Global Stocks, Bonds Fall Sharply – Gold Consolidates After Two Weeks Of Gains
– Gold, Silver, Blockchain and Fintech – Solutions To Negative Rates, Bail-ins, Cash Confiscations and Cashless Society
– Jan Skoyles Appointed Research Executive At GoldCore
– Silver Bullion Surges 3.5% To Over $20/oz
– Ireland “Especially Exposed” To “International Shocks” Warns Central Bank
– Deutsche Bank Tries To Explain Failure To Deliver Physical Gold
– Physical Gold Delivery Failure By German Banks
– Avoid Paper Gold – “Gold Delivery” Refused By Gold Exchange Traded Commodity
– Debt Bubble in Ireland and Globally Sees Wealthy Diversify Into Gold
– “Why Case Against Gold Is Wrong” – James Rickards
– Obama To Leave $20 Trillion Debt Crisis For Clinton Or Trump
– Gold Bullion Averages Biggest Seasonal Gains in September Over Past 20 Years
– Gold Futures See Massive $1.5 Billion “Non Profit” Liquidation In “One Minute”
Legendary Paul Singer warns that the climate in the investment world is very dangerous and he prefers gold
(courtesy Paul Singer/zero hedge)
Paul Singer Warns It Is A “Very Dangerous Time” For Stocks, Prefers Gold
Having previously warned that “the ultimate breakdown from this environment is likely to be surprising, sudden, intense, and large,” Elliott Management’s Paul Singer slammed the “amazing arrogance” of policy-makers who have “created a tremendous increase in hidden risk, risk that investors don’t exactly know.” As CNBC notes, Singer issued cautionary words for the path ahead, “it’s a very dangerous time in the global economy and global financial markets,” adding that gold was “under-represented” in investors’ portfolios.
- *ELLIOTT’S SINGER SAYS IN MIDDLE OF 40-YEAR LEVERAGE EXPERIMENT
- *ELLIOTT’S SINGER SAYS VERY DANGEROUS TIME IN GLOBAL MARKETS
- *ELLIOTT’S SINGER SAYS MID-2009 WAS TIME FOR PIVOT POST-CRASH
- *ELLIOTT’S SINGER SAYS G-7 BONDS ARE NOT ‘SAFE HAVENS’
- *ELLIOTT’S SINGER SAYS SELL LONG-TERM BONDS
Policies are exacerbating inequality, restlessness.
Economies fragile because of debt, low rates.
Sees risk both stocks, bonds can decline simultaneously.
Sees risk in inflation surprising everyone.
Gold underrepresented in portfolios.
As CNBC reports, Singer faulted the Federal Reserve and others for creating unusual dangers that are unique in the “5,000 years-ish” history of finance due to low and negative interest rates.
“What they have done is created a tremendous increase in hidden risk, risk that investors don’t exactly know or have faced about their holdings,” he said at the conference presented by CNBC and Institutional Investor. “I think it’s a very dangerous time in the global economy and global financial markets.”
Singer spoke as the Fed weighs whether to enact just its second rate increase in more than 10 years and its first since December, the hedge funder said policy makers acted with “amazing arrogance” when he and others were warning of the financial crisis that would explode in 2008.
In the current situation, he said, the best central bankers can do is say that things would have been even worse had they not acted after the crisis.
He issued cautionary words for the path ahead.
“With roughly $15 trillion on the major central bank balance sheets, with all of these rates at zero or even crazily below zero, you have a very delicate situation which cannot be solved by a sledgehammer,” Singer added. “You need some finesse.”
As we noted previously, Singer admits in Elliott’s Q2 letter to investors, what the fund, up 6% YTD, is seeing, is “the most peculiar period we have faced in 39 years.” The details are familiar to those who have read Singer’s previous laments (most recently here) on central planning: too much central bank power, too much monetary debasement, inevitable inflation, and “when it happens it could be swift and impossible to tamp down.”
Not surprisingly, Singer touches on a very popular topic in a world of nearly $14 trillion in negative yielding bonds, namely the scramble for safety, and surprised by the “continued stampede” to buy such bonds, he says that today’s environment marks “the biggest bond bubble in world history”, leading him to declare that “the global bond market is broken.”
Singer is stumped by the “mentality that flies to an asset class regarded as a “safe haven” even when there are low or nonexistent returns attached to it and no guarantee that current conditions will persist”, and warns buyer of negative yielding debt to “hold such instruments at your own risk; danger of serious injury or death to your capital!”
Actually, it is far less complicated than that: bonds are no longer being bought for current yield purposes (which does not exist in NIRP world) – an honor instead delegated to dividend yielding stocks, which can wipe out several years of dividends in an instant, as happened earlier today to CXW – but simply for capital appreciation, as demonstrated last week by the failed BOE QE buyback operation, where the central bank would literally pay anything to a willing seller, and yet was unable to find one in an offerless market. Of course, the culprit behind this irrational scramble is well-known: central banks.
Which leads us to Singer’s next point, namely that “trading in this market is particularly difficult”, something hedge funds which haven’t generated any collective alpha in 5 years know too well.
“Everyone is in the dark,” Elliott notes. “Experience doesn’t count for much, and extreme confidence may be fatal.”
Singer’s gloomy conclusion is almost as apocalyptic as that of Carl Icahn from his latest Bloomberg TV interview: “the ultimate breakdown (or series of breakdowns) from this environment is likely to be surprising, sudden, intense, and large.”
End of the investing world aside, the hedge funder says he is seeing opportunity in the distressed-energy sector despite the rebound of oil and gas prices from their lows. The fund also has been building up its gold position “in a conditional format,” to ebb losses “should prices fall back from their recent strength.”
Finally, Singer says that “it seems to us that investments and trading strategies which make money in a value-added way, in a different manner than the returns obtainable from the passive ownership of stocks and bonds, are especially good additions to institutional portfolios in the world going forward,” the letter states. As Kelly adds, that may be a more challenging argument for the average hedge fund competitor, which according to the HFR composite is up just 3 percent through July versus an S&P 500 that’s up more than 6 percent. Furthermore, considering Steve Eisman’s latest “big bet”, this time against the hedge fund industry’s well-known “2 and 20” compensation model, many active managers may not be in business long enough to see the “ultimate sudden, intense breakdown” predicted by Singer.
Lawrie Williams notices (like myself) that the Shanghai fix is higher in price for gold than in London and/or NY.
The big question: is China trying to stabilize the gold price?
(courtesy Lawrie Williams/Sharp’s Pixley)
13It has been noticeable in the past few trading days that the overnight gold price benchmarks set on the Shanghai Gold Exchange (SGE) have been tending to set the metal price higher than the New York close. This has resulted in a stronger opening in Europe, with the price being gradually brought down in London and New York throughout the day, leaving gold little changed overall. But is this a sign that the Chinese are beginning to play the gold card to try at least to stabilize the price, and if so could they then start to push it up as and when it suits them?
The SGE is a division of the People’s Bank of China (PBoC) – the Chinese central bank- which is not an autonomous unit like some western central banks purportedly are, but part of the Chinese government’s machine, so it is not unreasonable to suggest that there may be a degree of influence being exerted on the SGE gold price benchmark levels, as is the nature of Chinese government tactics in many areas. China is the world’s largest gold producer with an annual output of around 450 tonnes and the fifth largest national holder of gold in its reserves, although many analysts and China-followers believe its total gold holdings are far higher than the levels it reports to the IMF on a monthly basis. It also has been successfully encouraging many of its citizens to buy gold as an investment for some years now (See an article I wrote back in 2009:China pushes silver and gold investment to the masses). Thus the gold price is important to China both in terms of its national economy, the overall value of its gold and foreign currency reserves and in keeping its middle (spending) classes happy – and consuming – as it seeks to transform its economy from being export-driven to being domestic consumption-driven.
While the SGE benchmark setting arrangement is technically at least as transparent as its London equivalent (which is not saying a great deal), relying on input from a number of commercial banks in setting its twice daily price benchmarks, the vast majority of these banks are Chinese, and thus themselves ultimately state-influenced and controlled. After all China remains a centrally-planned economy.
With the Chinese yuan set to become an integral part of the IMF’s Special Drawing Right (SDR) in just three weeks’ time, China is becoming increasingly involved in the internationalization of its currency in global trade and as a possible reserve unit. It thus feels that a strong gold holding and value would enhance its position in achieving this goal.
There are those who believe that the onset of the new SDR including the yuan, and a supposed corresponding downgrading of the US dollar will start a process of dollar devaluation which will ultimately lead to a total dollar collapse and a thus a massive increase in the gold price (in US dollar terms). There’s little doubt that the U.S. economy does get a boost from its position as the world’s principal reserve currency and its place in global trade, but perhaps the inclusion of the yuan in the SDR will not be the trigger to cause an immediate change in global dollar perception, although it could be the thin end of the wedge. The IMF would like to enhance the position of the SDR as a world currency, thereby ultimately replacing the dollar as the global reserve unit. After all the IMF is not mired in trillions of dollars of debt and does not use the printing presses to help balance its books as the U.S. does, so this could be an appealing prospect to countries worried about the long term stability of the dollar. Certainly China and Russia – the two countries which have been most fervently building their gold reserves – have made no secret that they would like to see the dollar’s global reserve currency role diminished at the very least.
My view is a little different than Ted’s. I agree that JPMorgan is accumulating silver in its vaults. Ted believes it is for their account. I believe that they have accumulated silver for China’s account inside JPMorgan’s vaults.
(courtesy Ted Butler/GATA)
Ted Butler explains why he thinks Morgan is controlling silver
Submitted by cpowell on Mon, 2016-09-12 18:01. Section: Daily Dispatches
2p ET Monday, September 12, 2016
Dear Friend of GATA and Gold:
In an interview with Jim Cook of Investment Rarities, silver market analyst Ted Butler explains why he thinks JPMorganChase is controlling the silver market, being long real metal and short futures contracts, and is waiting for the best chance to let the price fly. The interview is headlined “Jim Cook Interviews Ted Butler” and it’s posted at GoldSeek’s companion site, SilverSeek, here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
AND HERE IS THE TED BUTLER INTERVIEW BY JAMES COOK:
Jim Cook Interviews Ted Butler
September 12, 2016 – 1:22pm
Cook: What’s happening in the silver market is hard to understand right now. Can you simplify it for us?
Butler: First you must understand the price of silver is set on the COMEX by two large opposing forces. On the short side are the big banks or traders led by JPMorgan. Four of these big traders are short 72% of the total commercial short position.
Cook: Isn’t that highly manipulative?
Butler: Of course, I think it’s grossly illegal, but the regulators sit on their hands.
Cook: Let’s leave that story for another day. Who is on the long side of the silver futures market?
Butler: The technical hedge funds known as the managed-money traders. They are pretty much computer-driven and react to technical trading signs.
Cook: Such as?
Butler: The most important are the 50-day and the 200-day moving averages. When the averages are penetrated by a price move to the upside, they buy. When they are penetrated to the downside, they sell.
Cook: Didn’t we just penetrate the 50-day to the downside?
Butler: Yes, and for the first time ever the tech funds didn’t sell as many contracts as they have sold in the past
Cook: Why not?
Butler: I don’t know, but if they are not going to sell, we are going to have a price explosion in silver.
Cook: They can still sell can’t they?
Butler: Yes, and they are likely to do so because the big short traders have always been able to snooker the tech funds into selling by driving the price down so it penetrates the moving averages and triggers their computerized sell programs.
Cook: Then what?
Butler: The big banks make a lot of money and buy back a lot of their shorts.
Cook: Rinse and repeat?
Butler: For the first time I don’t know. The numbers are just too big. The big shorts, not including JPMorgan, are out $2 billion in both gold and silver, the most ever. They aren’t going to go short that much ever again.
Cook: So are we at an inflection point where the nature of trading on the COMEX is altered significantly?
Butler: That’s possible. Bear in mind, those big traders are manipulating the market in order to reap massive profits. Miners and industrial users are supposed to set prices, not big short speculators. They’ve gotten so big in gold and silver futures they are a threat to their own solvency. It has to end and I think that will be soon.
Cook: What happens then?
Butler: The free market re-exerts itself. The low manipulated price of the past gives way to something much higher.
Cook: What happens if JPMorgan and the gang persist in their evil ways?
Butler: Bear in mind that JPMorgan has acquired at least 500 million ounces of physical silver. It’s in their interest to see the price go up.
Cook: Why aren’t they letting that happen?
Butler: They’ve been keeping the price low while they acquire more silver. They’ve loaded up at a cheap price.
Cook: Are they still adding physical silver?
Butler: Not currently that I can see. I think they are trying to get out of their big paper short position and are not having much luck. It seems like they are doing things to keep a silver shortage from happening. They don’t want the price to go up until they have driven the price of silver down to the point the technical-fund holders sell to them and as they buy from these tech funds their short position is reduced.
Cook: You make it sound like JPMorgan is the whole story.
Butler: They are, and the best part of that is that they want much higher prices for silver one of these days.
Cook: Is silver still the most bullish story ever told?
Butler: More than ever.
September 12, 2016
Stephen Leeb describes how China will use gold and the new SDR’s to gain control of the world’s monetary system. He warns it will be a slow process:
(courtesy Stephen Leeb/GATA)
Leeb describes how China will use gold to gain control of world’s monetary system
Submitted by cpowell on Mon, 2016-09-12 18:07. Section: Daily Dispatches
2:05p ET Monday, September 12, 2016
Dear Friend of GATA and Gold:
In commentary posted at King World News, fund manager Stephen Leeb describes how he thinks China is maneuvering to gain control of the world’s monetary system, making a big and ever-growing place for gold in the International Monetary Fund’s currency, Special Drawing Rights. But, Leeb adds, China wants gradual developments, not sudden shocks. Leeb’s commentary is posted at KWN here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
James Turk explains why the Fed will not raise rates at any time@!
(courtesy James turk/Kingworldnews)
Turk explains why Fed isn’t likely to raise interest rates
Submitted by cpowell on Tue, 2016-09-13 03:49. Section: Daily Dispatches
11:50p ET Monday, September 12, 2016
Dear Friend of GATA and Gold:
GoldMoney founder and GATA consultant James Turk today tells King World News why he thinks the Federal Reserve won’t raise interest rates any time soon. First, Turk says, the presidential election will discourage it, and second, the U.S. government could not bear the increased interest expense. The interview is excerpted at KWN here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Your early TUESDAY morning currency, Asian stock market results, important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight
1 Chinese yuan vs USA dollar/yuan SLIGHTLY UP to 6.6799(SLIGHT REVALUATION NORTHBOUND /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN NARROWS MARGINALLY TO 6.6859) / Shanghai bourse UP 1/53 OR 10.05% / HANG SANG CLOSED DOWN 74.84 or 0.32%
2 Nikkei closed UP 56.12 OR 0.34% /USA: YEN RISES TO 102.19
3. Europe stocks opened ALL MIXED ( /USA dollar index UP to 95.30/Euro DOWN to 1.1229
3b Japan 10 year bond yield: FALLS TO -.013% !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 101.87/ 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:: 45.17 and Brent: 47.35
3f Gold UP /Yen DOWN
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“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 FALLS to +.012%
Greece sees its 2 year rate FALL to 8.29%/:
3j Greek 10 year bond yield RISE to : 8.38% (YIELD CURVE NOW COMPLETELY INVERTED)
3k Gold at $1325.10/silver $19.09(7:45 am est) SILVER FINAL RESISTANCE AT $18.50 WILL BE DEFENDED
3l USA vs Russian rouble; (Russian rouble DOWN 12/100 in roubles/dollar) 64.72-
3m oil into the 45 dollar handle for WTI and 47 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT a SMALL REVALUATION UPWARD from POBC.
JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 102.19 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 .9722 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0919 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 FALLS to +.012%
/German 9+ year rate BASICALLY negative%!!!
3s The Greece ELA NOW at 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 1.657% early this morning. Thirty year rate at 2.374% /POLICY ERROR)
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Dow Futures Slide Over 100 Points Despite Fed’s Dovish Relent; Oil Drops On IEA Pessimism
After yesterday’s torrid rally, which sent stocks higher the most in 2 months on the back of Lael Brainard surprisingly dovish comments, we have seen an unexpected profit-taking session overnight – maybe the market’s concern about a September rate hike is back – with US equity futures down 0.6%, driven largely by a renewed drop in oil prices which slid after the IEA said a surplus in global markets will last longer than initially estimated, persisting well into 2017 as reported previously. As Bloombergobserves, investors remain wary of riskier assets even after dovish comments on Monday from Federal Reserve Governor Lael Brainard damped expectations for a U.S. interest-rate increase next week. The Fed and the Bank of Japan have policy decisions on Sept. 21, with the latter weighing the case for more stimulus.
The oil drop dragged down currencies of commodity-producing nations, while a flat USDJPY meant that the Nikkei was unable to capitalize on yesterday’s US surge. In China, the Composite was unchanged after stronger than expected industrial production and retail sales data, together with the PBOC unveiling a 28-day repo, doused expectations of a near-term monetary stimulus.
“The lack of U.S. data and the start of the Fed blackout period need not stand in the way of further risk underperformance and outperformance against commodity and high-yielding currencies,” said Valentin Marinov, head of Group-of-10 currency strategy at Credit Agricole SA’s corporate and investment-banking unit in London. The dollar’s reliance after the Brainard speech “suggests that other factors may be at play that could keep the dollar supported especially against commodity and risk-correlated currencies,” he said.
Given the moves over the last few days, it’s worth taking stock of where markets are this morning relative to the closing levels last Wednesday. Most notable perhaps is the fact that the September implied probability for a rate hike is now unchanged in that time frame at 22%. December odds have crept up from 52% to 57%. In terms of US Treasuries, the 10y yield is up 11bps, while 2y yields are a much more modest 2bps higher. 30y yields are also 14bps higher so we have seen a reasonable steepening across the curve. At the other end of the risk spectrum, the S&P 500 and Dow are -1.24% and – 1.09% in the time, while CDX IG is just 2bps wider. In the commodity complex Gold is -1.20% and WTI Oil is +1.10%. So all in all, notwithstanding a reasonable steepening in the yield curve, overall moves have been relatively contained in general.
“Markets are really struggling to read the runes of Fed statements,” said Andrew Parry, London-based head of equities at Hermes Fund Managers Ltd. “Only last week they were talking about the need to have an early rate rise. They are still very nervous about the process of normalization,” he said in a Bloomberg TV interview.
European stocks were little changed as investors assessed a selloff that sent equities to their lowest level in almost three weeks. Partners Group Holding AG led financial-services shares to the biggest gains among industry groups, up 10 percent after posting a jump in first-half earnings. Energy producers fell the most, tracking declines in crude. Ocado Group Plc plunged 14 percent after the online grocer said it sees no respite from sustained margin pressure in the short term. Health-care companies, traditionally viewed as stocks with greater payouts, contributed the most to Stoxx 600 gains today. A Morgan Stanley index tracking companies with high and sustainable dividends is faring its worst versus the broader European gauge since at least January 2013 amid an uptick in bond yields and a shift into so-called cyclical shares. Graham Secker, head of European equity strategy at the bank, says the extent of the rout has made such shares attractive. A gauge of miners fell for a fourth day, the longest losing streak since June. Anglo American Plc and BHP Billiton Ltd. dropped at least 1.2 percent.
The Stoxx Europe 600 Index was largely unchanged, erasing gains of as much as 0.6 percent. The benchmark fell for the past three days as investors fretted central banks may be less willing to use monetary policy to stimulate economic growth. It’s trading near its lowest valuation in more than a month, on an estimated earnings basis.
- S&P 500 futures down 0.6% to 2139
- Stoxx 600 up less than 0.1% to 342
- FTSE 100 down less than 0.1% to 6697
- DAX up 0.3% to 10462
- German 10Yr yield down 3bps to 0.01%
- Italian 10Yr yield down 2bps to 1.26%
- Spanish 10Yr yield down 3bps to 1.06%
- S&P GSCI Index down 0.9% to 353.5
- MSCI Asia Pacific down 0.1% to 137
- Nikkei 225 up 0.3% to 16729
- Hang Seng down 0.3% to 23216
- Shanghai Composite up less than 0.1% to 3024
- S&P/ASX 200 down 0.2% to 5208
- US 10-yr yield down less than 1bp to 1.66%
- Dollar Index up 0.13% to 95.22
- WTI Crude futures down 2.2% to $45.26
- Brent Futures down 1.9% to $47.41
- Gold spot up less than 0.1% to $1,329
- Silver spot up 0.3% to $19.17
Top Global Headlines
- Brainard’s Argument for No September Hike Likely to Sway Fed: Fed governor spells out risk-management calculus for prudence
- Bond Traders Left Doubting Rate Hike as Fed Speakers Go Silent: Traders pare bets on a Sept. rate increase after speech
- Wells Fargo’s CEO to Face Senate Panel in Cross-Selling Scandal: Senate Banking Committee to hold a hearing Sept. 20
- Oil Declines as IEA Says Surplus Will Last Longer Than Expected: Surplus to persist into late 2017 as demand slows: IEA
- Anadarko Pays Freeport $2 Billion for Deepwater Gulf Assets: Driller will generate $3 billion for U.S. drilling efforts
- DraftKings CEO Leaves the Door Open for a Possible FanDuel Merger: Combining co. could also reduce legal and lobbying costs
- Golfsmith May File for Chapter 11 Within Days: NYP: Owner OMERS decided to not invest more capital to save Golfsmith
- GIP to Acquire $4.3 Billion Stake in Spain’s Gas Natural: Repsol sees capital gain from sale of about 246 million euros
- U.S. Bombers Train With Japan, South Korea After Nuclear Test: Training in response to North Korea’s fifth test last week
Looking at regional markets, in Asia stocks traded mixed as they struggled to sustain the impetus from a firm Wall St. lead where S&P500 posted its largest gain in 2 months, after dovish comments Fed’s Brainard boosted sentiment. This supported Nikkei 225 (+0.3%) and ASX 200 (+0.2%) at the open with global markets hanging on to every word from the Fed ahead of next week’s FOMC, although stocks in Japan then swung between gains and losses alongside JPY fluctuations. Chinese markets are mixed with Hang Seng (-0.3%) positive and Shanghai Comp (+0.1%) choppy after better than expected Industrial Production and Retail Sales, as the firm data reduces urgency for measures while the PBoC also resumed the use of 28-day reverse repos, which some suggested could be an attempt to curb financial leveraging. 10yr JGBs traded higher to track gains in T-Notes while today’s 20yr bond auction was mixed with the average and lowest accepted prices higher than previous, although b/c printed its lowest in 6 months.
As noted above, China reported key economic data for the month of August, which saw both factory output, and retail sales rebound, suggesting that the July deterioration may have been a one off event. Here are the details:
- Chinese Industrial Production (Aug) Y/Y 6.3% vs. Exp. 6.2% (Prey. 6.0%)
- Chinese Retail Sales (Aug) Y/Y 10.6% vs. Exp. 10.2% (Prey. 10.2%)
Top Asian News:
- China’s Economy Strengthened as Factory Output, Retail Perk Up: Rebound suggests July weakness was a blip, not fresh downturn
- CEO’s Leveraged Bet on Himself Earns $423 Million as Sina Soars: Charles Chao’s investment has jumped 81% in 10 months
- BOJ Is Said to Mull Change or Abandonment of JGB Maturity Range: BOJ last adjusted the guidance in December
- Axiata Said to Seek Buyers for $700m of Overseas Holdings: Axiata to cut stakes in Indonesia, Sri Lanka, Cambodia units
- Rich Indonesians Snap Up Singapore Luxury Homes as Taxman Calls: Indonesians beat all foreign buyers of high-end units in 2016
- China’s Postal Savings Bank Seeks Up to $8.1b in H.K. IPO: Co. plans to offer 12.1b shares in price range of HK$4.68- HK$5.18 each
- Japan’s Renesas Agrees to Buy Intersil for $3.2 Billion: Renesas is offering $22.50 a share, 14% premium
- Hanjin Fall Is Lehman Moment for Shipping, Seaspan CEO Says: Gerry Wang concerned about systemic impact from Hanjin
European equities started off on the front foot but as the session continued energy prices dampened the mood with the energy sector underperforming to see European equities slip into negative territory (Euro Stoxx -0.1 %) with newsflow particularly light from a European perspective and markets unreactive to the latest German ZEW survey. In fixed income markets, prices have ebbed higher alongside the downtick in equities with Europe absorbing supply from the Netherlands and Italy this morning. As has been the case for equity markets, newsflow is on the light side with the next source of focus on the latest BoE buyback and 30yr Bond auction from the US.
Top European News:
- U.K. Inflation Holds at 0.6% as Import Price Pressures Build: U.K. inflation was unexpectedly unchanged in August
- German ZEW Investor Confidence Unchanged as Brexit Risks Persist: ZEW cites ‘ambiguity’ in signals for economic prospects
- Air Liquide Starts 3.3 Billion-Euro Rights Issues for Airgas: French gases supplier offers one share for every eight held
- Veolia $1.3b Deal Shows French Company Unfazed by Brexit: Waste-to-energy contract caps series of recent U.K. deals
- Porsche Said to Show First Station Wagon in 2017 to Expand Range: New car to challenge Mercedes-Benz’s CLS Shooting Brake
- ABN Amro Chief to Leave Early After Returning Bank to Market: Zalm, CEO since 2009, says lender needs longer-term leader
- Esure Shares Advance on Plan to Spin Off Gocompare.com Unit: Demerger to take place in fourth quarter, backed by board
- Ocado Shares Slump as U.K. Grocery Price War Damages Profits: Amazon encroachment in London also pressures margins: analyst
- Vedanta Wins Cairn Nod for BHP-Style Resources Conglomerate: Vedanta shareholders gets cash while Cairn’s add debt
- Italian Industry Output Exceeds Expectations, Boosting Outlook: Pharma, vehicle production lead monthly increase
In FX, it has been a mixed session in early Europe, with FX markets showing no discernible theme other than watching the broader risk sentiment reflected in the equity markets. The JPY has seen a modest bid to keep the USD rate below the 102.00 mark. USD sentiment has been mixed with last night’s comments from Fed member Brainard having taken the shine off a little, but in the case of EUR/USD, the market still has designs to a test on 1.1200, having snapped up to 1.1265 or so in NY yesterday, but returning lower just as sharply. German and EU ZEW were weaker than expected this morning, with the former down on the previous month, but there was little noticeable impact on the single unit. In terms of data, UK CPI was a potential mover, but given the sharp post Brexit losses in GBP, both the headline and core Aug reads were unchanged vs Jul, but there was no major impact on the Pound as we look to the BoE later this week as well as the key retail sales number. EUR/GBP is holding off resistance levels ahead of .8500, while Cable is flitting either side of 1.3300. The commodity currencies remain pressured after some temporary relief late yesterday, but USD/CAD shot back up to 1.3100 again on Oil prices (and S&P futures deep in the red again) — the !EA forecasting the surplus to persist into 2017 and reducing 2016 demand by 100k bpd.
In commodities, WTI and Brent crude futures reside in negative territory amid a paring of some of yesterday’s gains as well as the latest update from the IEA, in which the organization predicted the current surplus in oil markets will persist in 2017 while also reducing its oil demand forecast for 2016 by 100k bpd to 1.3mln bpd. Looking ahead, markets will await the latest after-market API data which comes in the context of last week’s significant drawdown in inventories — the largest since 1999. Elsewhere, in precious metals, price action has been relatively muted, with the likes of gold and silver in modest positive territory having traded in a tight range throughout European hours.
Bulletin Headline Summary from RanSquawk and Bloomberg
- European equities enter the North American crossover relatively unchanged with early gains erased alongside a downtick in energy
- FX markets showing no discernible theme while the JPY has seen a modest bid to keep the USD rate below the 102.00 mark
- Looking ahead, highlights include German CPI, UK CPI, German ZEW, API Crude Oil Inventories and a speech from ECB’s Draghid
- Treasuries slightly higher in overnight trading with global equities lower; auctions conclude with $12b 30Y bonds reopening, WI 2.35%, last sold at 2.274% in August, 27.7% primary dealer award was lowest on record for a refunding.
- The bond market is signaling growing skepticism over the prospect of a Federal Reserve interest-rate increase before next week’s policy meeting
- Libor has risen above 0.75%, could amount to about an extra $250 million of total interest expense annually for junk- rated companies with about $230 billion of loans outstanding, according to data compiled by Bloomberg
- The Bank of Japan is considering either a tweak to or an abandonment of its guidance on the range of government bonds that it buys, according to people familiar with the discussions
- The negative interest rate strategy that Japan and Europe’s central banks have embraced may do more harm than good, according to John Taylor, the creator of an eponymous rule for guiding monetary policy
- Banks may face an increase of about 10% in their capital requirements as a result of the overhaul of risk-assessment rules under way at the Basel Committee on Banking Supervision, according to Philippe Heim, CFO of Societe Generale
- U.K. inflation was unexpectedly unchanged in August at 0.6%, though more signs emerged of imported price pressures because of the weaker pound, according to figures from the Office for National Statistics
- German investor confidence was unchanged in September after recent data signaled economic momentum cooled, with an index of investor and analyst expectations, which aims to predict economic developments six months ahead, held at 0.5
- Italian industrial output rose 0.4% compared with June, more than economists estimated in July, led by pharmaceuticals and vehicle production, prompting hopes for a renewed recovery after growth stalled in the second quarter
DB’s Jim Reid concludes the overnight wrap
The main conclusion from yesterday was that 2+2 sometimes just equals plain old 4 as the conspiracy theories around the timing of Brainard’s speech were proved unfounded. It’s rare that a Fed speaker gets so much global attention. I even forced my wife to sit through the Q&A when I got home last night. She was thrilled.
Indeed Brainard made her view pretty clear and stuck to her well versed dovish script. The Fed Governor said that ‘in the presence of uncertainty and the absence of accelerating inflationary pressures, it would be unwise for policy to foreclose on the possibility of making further gains in the labour market’ and so ‘to the extent that the effect on inflation of further gradual tightening in labour market conditions is likely to be moderate and gradual, the case to tighten policy pre-emptively is less compelling’. She also added that asymmetry in risk management in today’s new normal ‘counsels prudence in the removal of policy accommodation’. In the Q&A the question was asked if she would dissent at a hike in September but she sidestepped this. Overall it was pretty clear from the speech that there was little change in her uber dovish views.
Prior to this we’d also heard from a couple of the more centrist non-voters of the FOMC in the Minneapolis Fed’s Kashkari and Atlanta Fed President Lockhart. The former preached a similar cautious tone, saying that he ‘wants to see more movement in core inflation’ and that ‘he doesn’t see huge urgency to do anything’, while the latter was a little more upbeat but largely consistent with his prior view, saying that he expects the FOMC to have a ‘serious discussion’ at next week’s meeting but that he didn’t ‘feel that we are incurring the costs of patience that put a lot of urgency on the question of raising rates’.
It was Brainard’s comments that dominated the market though. Treasuries retraced a bit of Friday’s losses with the benchmark 10y yield closing 1.2bps lower at 1.664% although had been as high as 1.696% prior to the comments.
2y yields were also 1.2bps lower by the close at 0.772% although were nearly 4bps down from the pre-Brainard highs. Her comments took 6 percentage points out of the September hike odds with it closing at 22% while December is now down to 57% from 60% on Friday. Meanwhile the USD edged lower (Dollar index closing -0.23%) and risk assets rallied back. The S&P 500 closed +1.47% and sector wise it was a mirror image of what we got on Friday with high yielding dividend stocks in telecoms, consumer staples and utilities sectors leading gains, while financials lingered towards the bottom (albeit still in positive territory). There was a similar rebound for credit with CDX IG nearly 3bps tighter on the day.
Given the moves over the last few days, it’s worth taking stock of where markets are this morning relative to the closing levels last Wednesday. Most notable perhaps is the fact that the September implied probability for a rate hike is now unchanged in that time frame at 22%. December odds have crept up from 52% to 57%. In terms of US Treasuries, the 10y yield is up 11bps, while 2y yields are a much more modest 2bps higher. 30y yields are also 14bps higher so we have seen a reasonable steepening across the curve. At the other end of the risk spectrum, the S&P 500 and Dow are -1.24% and -1.09% in the time, while CDX IG is just 2bps wider. In the commodity complex Gold is -1.20% and WTI Oil is +1.10%. So all in all, notwithstanding a reasonable steepening in the yield curve, overall moves have been relatively contained in general.
Switching now to the latest in Asia where the August activity indicators in China, released this morning, have made for fairly positive reading and importantly indicated a rebound from the softer July prints. Industrial production was reported as increasing three-tenths last month to +6.3% yoy (vs. +6.2% expected) and retail sales increased four-tenths to +10.6% yoy (vs. +10.2% expected). Fixed asset investment was unchanged at +8.1% YTD yoy, but came in ahead of expectations of +7.9%. That data follows the better than expected export numbers in August, as well as the improvement in the latest manufacturing PMI and so a sign perhaps that we’ve seen some stabilization in economic activity.
We haven’t seen too much of a reaction in China’s equity markets following the data with the Shanghai Comp (-0.18%) and CSI 300 (-0.22%) modestly lower. Elsewhere though there is a better tone for much of the rest of Asia with the Nikkei (+0.19%), Hang Seng (+0.93%), Kospi (+0.45%) and ASX (+0.30%) all up. US equity index futures are a touch in the red, not helped by a near 1% decline for WTI this morning. Sovereign bond yields in Asia meanwhile are a couple of basis points lower. There’s also been some focus on the move by the PBoC to pump $9bn of liquidity into the financial system through 28-day reverse repos this morning, the first time it has done so since February and ahead of a public holiday later this week.
Back to yesterday. There wasn’t a huge amount to report during the European session with Brainard’s comments coming after the closing bell. Equity markets continued to weaken although this generally reflected some of the catch-up with the sell-off in the US session late on Friday. The Stoxx 600 finished -0.95% and has fallen for three consecutive sessions now. Sovereign bond markets also weakened further with 10y Bund yields climbing +2.7bps to 0.035% and to the highest yield since June 8th. In fact 10y Bunds are now up 15.4bps since Wednesday’s close. If you prefer more eye catching numbers then these are the last three daily moves for yields in percentage terms: +291%, +115% and +46%.
Staying in Europe the ECB’s CSPP certainly stepped back up a gear last week. The latest numbers showed that after the previous holiday shortened week, net purchases totalled €2.398bn (average €480mn/day) which is the second highest weekly run rate since buying began (average daily run rate of €352 since program started). This increase was likely helped by a pickup in primary. We won’t know updated official primary levels of purchase until next month though.
Looking at the day ahead now, this morning we’ll be kicking off in Germany where the final revisions to August CPI are due. The UK will then publish the August CPI/RPI/PPI monthly data where it’s expected that Sterling depreciation has helped to boost headline CPI +0.4% mom last month. Following that we’ll then get the September ZEW survey in Germany where the consensus is for a nearly 1.5pt fall in the current situations index. It’s fairly quiet in the US session again this afternoon. The NFIB small business optimism reading for August will be released as well as last month’s Monthly Budget Statement this evening. With the FOMC blackout now in effect there’s no Fedspeak now, while over at the ECB Lautenschlager and Nowotny are scheduled speakers.
3.REPORT ON JAPAN SOUTH KOREA NORTH KOREA AND CHINA
i)Late MONDAY night/TUESDAY morning: Shanghai closed UP 1.53 POINTS OR 0.05%/ /Hang Sang closed DOWN 74.84 points or 0.32%. The Nikkei closed UP 56.12 POINTS OR 0.34% Australia’s all ordinaires CLOSED DOWN 0.23% Chinese yuan (ONSHORE) closed MARGINALLY UP at 6.6799/Oil FELL to 45.17 dollars per barrel for WTI and 47.35 for Brent. Stocks in Europe: ALL IN THE RED Offshore yuan trades 6.6859 yuan to the dollar vs 6.6799 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS MARGINALLY AS MORE USA DOLLARS ATTEMPT TO LEAVE CHINA’S SHORES
b) REPORT ON JAPAN
With yields rising across the globe, the bankers tried to spike the USA/JPY higher trying to avoid a stock bloodbath. The news furnished: one week old but that did not matter to our crooks. It did not work as stocks continued to falter
(courtesy zero hedge)
USDJPY Spikes On Week Old News, Pulling Stocks Higher With It
It’s 2am in Japan and Nikkei has decided – right as the 30Y Treasury auction hits – to unleash a spurious headline – BOJ TO EXPLORE DELVING DEEPER INTO NEGATIVE RATES, with Bloomberg providing the following detail:
- Sept. 20-21 review expected to conclude that benefits of -0.1% deposit rate announced Jan. outweighed side effects; BOJ Gov. Kuroda and his deputies are unanimous on this point
- Some observers had expected negative rates to be scrapped in policy review
- Further negative rates will require careful consideration: “It’s not as though we can keep lowering rates forever,” report quotes unidentified BOJ official as saying
- Board to discuss trimming purchases of bonds longer than 25 years to boost yields
- Purchases of shorter-term bonds could be increased to keep overall purchases at current level
- To retain 2% price growth target, while considering abandoning two-year time frame
- Stronger forward guidance may be discussed to demonstrate commitment to easing
In other words, a Reverse Operation Twist. There is just one issue, as regular readers will know, all of this is ‘old news’… but don’t tell the algos. As a reminder, another rate cut is precisely what we said would happen last week when we explained how the BOJ would try to force a reverse “Operation Twist.” Recall:
Japan’s central bank in coming weeks will modify its stimulus program to alleviate risks from ultra-low long-term yields, by pursuing a reverse “Operation Twist”, where the central bank sell long-end bonds while buying the short-end…. To avoid market fears that the central bank is seeking an outright tightening of monetary conditions, which a “reverse Twist” would suggest, the BOJ may cut short rates further from the current -0.20%. A cut in the already-negative benchmark rate, levied on a portion of banks’ reserves parked at the BOJ, which would also steepen the yield curve, could show the BOJ is still implementing unvarnished stimulus.
Confirming that all this is, is an attempt to steepen the yield curve is the news that:
- BOJ TO DISCUSS TRIMMING PURCHASES OF 25Y JGBS, NIKKEI SAYS
Why? So the market sells the long ends and rushes into the short end. Incidentally, what this means is that the curve steepening in Japan will only get more acute, in line with what the BOJ believes it wants to accomplish, but in the process it will only accelerate the JGB selloff, as all those trillions in long dated bonds will have to be sold, in what may soon be an avalanche, ultimately leading to a parallel of the 2003 VaR shock we previewed last week.
Of course, USD strength after a weak auction is also helping but the timing is simply too coincidental not to be an attempt at manipulation:
For now it’s not helping stocks too much:
But that didn’t last long – stocks algos quickly jumped on the USDJPY spike on old news:
Once the algos realize that all the BOJ’s act of desperation will do, is destabilize the JGB bond market even more, we expect an appropriate (VaR) shocked reaction.
And the reverse twist will not work and here is why! The big question is whether the Bank of Japan will orchestrate a huge global sell off on equities:
(courtesy zero hedge)
“It’s Not As Though We Can Keep Lowering Rates Forever,” A BOJ Official Said
As we reported earlier, moments ago the USDJPY spiked on the latest Nikkei market trial balloon, which as we also reported, was old news, according to which Kuroda is now considering conducting a reverse Operation Twist, where it forces a selloff in the long end, while push short-ends even more into record negative territory courtesy of another rate cut.
As we explained last week, it won’t work (read here for the details). But what attracted our attention was the quote by a BOJ official, which once again demonstrates the farce that passes for “clear, lucid” central banker thought in the “new normal” (from Nikkei):
Any decision to take rates deeper below zero will require careful consideration of the yen’s exchange rate and the state of the broader economy. And debate will likely proceed cautiously. “It’s not as though we can keep lowering rates forever,” a BOJ official said.
And why not?
Actually, we take that back: this is not a farce, this may well be the cold, hard truth, because we have now reached a point where even a BOJ member is wondering out loud just how far the idiocy of his central banking peers can reach, and if it even has an actual limit. Sadly, for the BOJ – and the global market – we are now virtually certain that the answer to the question we posed last week, namely whether “The Bank Of Japan Is About To Unleash A Global Selloff“, is a resounding yes.
c) Report on CHINA
4 EUROPEAN AFFAIRS
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
6. GLOBAL ISSUES
7. OIL ISSUES
Oil slides as oversupply seems to be the name of the game as demand falters:
(courtesy zero hedge)
Oil Slides After IEA Turns Pessimistic, Sees Oversupply Extending On “Dramatic Deceleration” In Crude Demand
One of the great oddities in oil price forecasts and analysis in the past year has been the fascination with the supply side of the oil market, which is perhaps understandable following the relentless chaos coming out of OPEC nations. However, as we have long contended, the true wildcard is the demand side, which has been deteriorating over the past 6 months, driven primarily by a slowdown in Chinese demand, coupled with a US peak driving season which was far less exciting than many had expected.
We were glad to see the IEA finally realizing just how important the demand side also was, when in its latest report released earlier today, the Paris-based organization revealed a much more pessimistic outlook on the state of the oil market, predicting that a sharp slowdown in global oil demand growth, coupled with ballooning inventories and rising supply means the crude market will be oversupplied into late 2017. The IEA had previously expected the market to show no surplus in the second half of 2016.
“Our forecast in this month’s report suggests that this supply-demand dynamic may not change significantly in the coming months. As a result, supply will continue to outpace demand at least through the first half of next year,” the Paris-based adviser said in its monthly report. “As for the market’s return to balance — it looks like we may have to wait a while longer.”
The IEA trimmed projections for global oil demand next year by 200,000 barrels a day to 97.3 million a day. It reduced growth estimates for this year by 100,000 barrels a day to 1.3 million a day, citing a “dramatic deceleration in China and India” this quarter coupled with “vanishing growth” in developed economies.
“Recent pillars of demand growth — China and India — are wobbling,” said the IEA, which counsels 29 nations on energy policy. “The stimulus from cheaper fuel is fading. Refiners are clearly losing their appetite for more crude oil.”
The IEA also noted that global refinery runs are expected to grow at their slowest pace in at least a decade this year, which will curb appetite for crude oil, just as inventories across the OECD rose to a fresh record high of 3.111 billion barrels, the report said. “With our more pessimistic outlook for the second half of 2016 refining activity and revisions to crude supply, the expected draws in the third quarter of 2016 are now lower, while the build in the fourth quarter of 2016 is higher,” the IEA said.
More importantly, the IEA admitted that “global demand growth is slowing at a faster pace than the group initially predicted.” The IEA left its forecast for demand growth for 2017 unchanged from its prediction in June at 1.2 million barrels per day, but cut its forecast for 2016 consumption growth to 1.3 million bpd, from 1.4 million.
“The key demand change in this report is the erosion of 300,000 bpd from the third quarter of 2016’s global demand estimate, and the resulting removal of 100,000 bpd from the net 2016 forecast,” the IEA said.
Here are the details from the report as summarized by Bloomberg and Reuters:
- IEA cuts global oil demand fcast by ~200k b/d in 2H 2016 and throughout 2017 amid “fading” stimulus from cheaper fuel and “economic worries in developing countries,” monthly report shows.
- 3Q16 demand growth seen at 0.8m b/d, lowest in 2 years, vs 1.2m b/d in last month’s report
- “Dramatic deceleration” in China, India demand growth; “Severity of the 3Q16 slowdown has surprised”
- Chinese growth “all but disappeared” amid economic restructuring, heavy flooding, factory closures ahead of G20
- “Complete absence” of y/y oil demand growth in 3Q16 China
- Demand growth in 2016 “will struggle” to rise above 1.3m b/d vs >1.4m b/d seen in previous report
- Product prices no longer falling now that crude “hovering” near $50/bbl
- “Unexpected” gains in European oil demand earlier in year have “vanished”
- IEA sees European oil demand down y/y in 3Q16 for 1st time in 18 months; slowdown in France, Austria, Finland, Italy
- Partial rebound expected in 4Q16 as temporary factors end
- India’s y/y demand growth slowed to 16-month low in July
- Heavy monsoon rains, “stuttering” industrial activity led slowdown
* * *
Despite oil’s collapse and resulting investment cuts, global oil production is still expanding, although nowhere near the breakneck pace of 2015. High-cost non-Organisation of Petroleum Exporting Countries (OPEC) producers have been hit particularly hard.
However, the loss has been more than made up for by OPEC. Saudi Arabia and Iran have each raised oil output by over 1 million barrels a day since late 2014 when OPEC shifted strategy to defend market share rather than price.
As a result of the IEA report, WTI tumbled 2.5% and was trading just above $45/bbl, erasing virtually all of yesterday’s dovish Brainard “risk on” gains.
Crude inventories rise again
(courtesy zero hedge)
Crude Chaos Strikes On Disappointing Post-Hurricane Rebound In Inventories
Following last week’s epic crude inventory drawdown, the market expected a post-hurricane build of 4mm barrels, but API reported a mere 1.4mm build. However, a massive build in Distillates inventories (+5.3mm – biggest in 8 months) confused the machines. WTI had fallen back to a $44 handle – erasing all the inventory-draw-spike gains – before API data hit; but then spiked to last week’s API levels, tumbled, then spiked again…
- Crude +1.4mm (+4mm exp)
- Cushing -1.12mm (-300k exp)
- Gasoline -2.4mm (-1.1mm exp)
- Distillates +5.3mm
After last week’s (storm-driven) massive inventory draw, expectations were for a build, but the build disappointed. However Distillates saw the biggest build in 8 months…
Notably, WTI had fallen back and erased all of the post-inventory bounce. As Price Futures’ Phil Flynn noted, the market “is worried about a post-hurricane rebound in supply.”
But price ati0on was chaotic with the big distillates build confusing algos…
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings TUESDAY morning 7:00 am
Euro/USA 1.1229 DOWN .00010 (STILL REACTING TO BREXIT/REACTING TO BRITISH CUT IN INTEREST RATE TO .25%
USA/JAPAN YEN 102.19 DOWN .462(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 1.3255 DOWN .0081
USA/CAN 1.3103 UP .0073
Early THIS TUESDAY morning in Europe, the Euro FELL by 9 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 up 1.53 POINTS OR 0.05% / Hang Sang CLOSED DOWN 74.84 POINTS OR 0.32% /AUSTRALIA IS LOWER BY 0.23% / EUROPEAN BOURSES ALL mixed
We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;
1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.
2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)
3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.
These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>
The NIKKEI: this TUESDAY morning CLOSED UP 56.12 POINTS OR 0.34%
Trading from Europe and Asia:
1. Europe stocks ALL MIXED
2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 74.84 POINTS OR 0.32% ,Shanghai CLOSED UP 1.53 POINTS OR 0.05% / Australia BOURSE IN THE RED: /Nikkei (Japan)CLOSED IN THE GREEN INDIA’S SENSEX IN THE RED
Gold very early morning trading: $1325.20
Early TUESDAY morning USA 10 year bond yield: 1.657% !!! DOWN 1 in basis points from MONDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield 2.374, DOWN 2 IN BASIS POINTS from YESTERDAY night.*VERY PROBLEMATIC THAT YIELDS ARE RISING IN A HUGE KILLER MOVE ON THE DOW SOUTHBOUND
USA dollar index early TUESDAY morning: 95.30 UP 15 CENTS from MONDAY’s close.
This ends early morning numbers TUESDAY MORNING
And now your closing TUESDAY NUMBERS
Portuguese 10 year bond yield: 3.297% UP 10 in basis point yield from MONDAY (does not buy the rally)
JAPANESE BOND YIELD: -.013% DOWN 1 in basis point yield from MONDAY
SPANISH 10 YR BOND YIELD:1.10% UP 7 IN basis point yield from MONDAY (this is totally nuts!!/
ITALIAN 10 YR BOND YIELD: 1.321 UP 5 in basis point yield from MONDAY
the Italian 10 yr bond yield is trading 22 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +0.071% UP 3IN BASIS POINTS ON THE DAY
IMPORTANT CURRENCY CLOSES FOR TUESDAY
Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/3:30 PM
Euro/USA 1.1223 DOWN .0016 (Euro DOWN 16 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 102.57 UP.842(Yen DOWN 84 basis points/
Great Britain/USA 1 .3195 DOWN 0.0140 ( Pound DOWN 140 basis points/BREXIT DECISION AFFIRMATIVE/THE BREXIT HAS NOT HURT ENGLAND AT ALL!~
USA/Canada 1.3181 UP 0.0150 (Canadian dollar DOWN 150 basis points AS OIL FELL (WTI AT $45.02). Canada keeps rate at 0.5% and does not cut!
This afternoon, the Euro was DOWN by 16 basis points to trade at 1.1223
The Yen FELL to 102.57 for a LOSS of 84 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 FELL 140 basis points, trading at 1.3195/
The Canadian dollar FELL by 150 basis points to 1.3181, WITH WTI OIL AT: $45.02
the 10 yr Japanese bond yield closed at -.013% DOWN 1 IN BASIS POINTS / yield/ AND THIS IS BECOMING BOTHERSOME TO THE BANK OF JAPAN
Your closing 10 yr USA bond yield: UP 7 IN basis points from MONDAY at 1.7430% //trading well below the resistance level of 2.27-2.32%) very problematic
USA 30 yr bond yield: 2.483 UP 11 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, 95.57 UP 37 CENTS ON THE DAY/4 PM
Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for TUESDAY
London: CLOSED DOWN 35.27 POINTS OR 0.53%
German Dax :CLOSED DOWN 45.17 OR 0.43%
Paris Cac CLOSED DOWN 52.62 OR 1.19%
Spain IBEX CLOSED DOWN 142.40 OR 1.61%
Italian MIB: CLOSED DOWN 292.53 POINTS OR 1.74%
The Dow was DOWN 258.32 points or 1.41%
NASDAQ DOWN 56.63 points or 1.09%
WTI Oil price; 45.25 at 4:30 pm;
Brent Oil: 47.17
USA DOLLAR VS RUSSIAN ROUBLE CROSS: 65.40 (ROUBLE DOWN 80/100 ROUBLES PER DOLLAR FROM FRIDAY)
TODAY THE GERMAN YIELD FALLS TO +0.071% FOR THE 10 YR BOND
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:$45.25
USA 10 YR BOND YIELD: 1.731%
USA DOLLAR INDEX: 95.55 UP 40 cents
The British pound at 5 pm: Great Britain Pound/USA: 1.3188 DOWN.01457 or 146 basis pts.
German 10 yr bond yield at 5 pm: +0.073%
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:
Bond Bloodbath Bashes Brainard Bounce As ‘BillionBears’ Slam Stocks
Yeah, that just happened…
Traders dumped bonds and stocks with vigor today…
USD vs risk assets…
Rate hike odds for September have tumbled and stocks are pushing The Fed to not raise rates…
But post-Rosengren, stocks are worst…
Risk Parity Funds are tumbling... worse drop since August crash…
And further today…
Between Singer And Dalio – investors were slapped with the ugly stick of reality…
On the day Small Caps were worst…
S&P and Dow scrambled up to unch briefly…
VIX biefly tagged 19.00 (we also note that S&P cash bounced prefectly off its 100DMA at 212 once again…
But as WSJ reports, for the first time since 1963 where the S&P 500 went at least 43 days where it didn’t have a 1% up or down day followed by three straight days where the index did move at least 1%.
Bonds were a bloodbath again with the long-end yields spiking 9bps – biggest spike in 7 months…
The ugliness in the long-end over thelast few days is the biggest since Feb 2015 (but remains below ther Brexit day highs)…
The last 10 days have seen the fastest steepening in the yield curve 2s30s since Feb 2009…
But we do note that post-Brexit, the long-end remains lower in yield with the belly yields higher…
With all the chaos in bonds and stocks, FX markets started off slow but accelerated as the day went on (with commodity currencies slammed on crude weakness)… (USD Index ended up most in 3 weeks today)
Copper was flat but USD strength and seeming derisking sent crude , silver and gold lower on the day…
Crude was ugly again after IEA demand forecasts were cut and dragged stocks lower… (don’t forget API data tonight)…
Bonus Chart: Buy… and Hold?
h/t NewEdge’s Brad Wishak
Early this morning!
Markets not doing too good today: both stocks and bonds falling (bond yields rising)
Bonds & Stocks Are Dumping…
Blame Rosengren/Brainard schizophrenia; blame China money markets turmoil; blame Japan’s rumored reverse twist; blame reality sneaking in… Whatever you blame, bonds and stocks are both getting monkey-hammered…
Interesting the USD is not moving…
Janet and company will not like the following; the USA consumer is tapped out as retail spending falters:
(courtesy zero hedge)
The US Consumer Taps Out: BofA Internal Credit Card Data Shows Retail Spending Tumbles
Ahead of this week’s big macro event, Thursday’s retail sales report, Bank of America has, as is customary, released its own internal credit and debit card data. It’s downright ugly.
As BofA’s new chief economist Michelle Meyer writes, “as we know from the choppiness of the monthly data, we are due for a partial payback in 3Q. We already saw a weakening in July retail sales based on both the BAC aggregated card data and Census Bureau figures. Based on the BAC aggregated card data, retail sales ex-autos fell 0.1% mom SA in August, a payback from 2Q strength.”
The details, as per BofA, reveal that “the BAC aggregated card data showed that retail sales ex-autos declined 0.1% mom SA in August. This follows the 0.3% mom decline in July and pushes the 3-month average down to -0.2% mom.” The number would have been even worse if BofA had not decided to adjust out data from the recently bankrupt Sports Authority. As BofA writes, “there is a special factor to account for — we adjusted our data to control for the bankruptcy of Sports Authority, which officially shut stores this month. We expect the Census Bureau will do the same.” In other words, if one did not “adjust” the data for this factor, it would have been an outright disaster.
Broken down by various component categories, BofA finds that within the components of the back-to-school composite, spending on teen retail and young adult clothing has performed poorly. Here BofA has seen “fairly consistent contraction in this category since 2012.This fits into the “apparel malaise” theme that BofA Merrill Lynch’s consumer equity analysts have noted. It also likely reflects the shift in consumer budgets towards greater spending on experiences, which is evident in relatively stronger spend at hobby stores, travel and restaurants.” It also means less spending on, well, non-experiences, which includes most goods and services.
The weakness continued at department stores, where sales based on the BAC aggregated card data fell 1.1% mom SA in August and are now down 4.6% yoy. The weakness in department stores is not a new phenomenon. Based on the BAC data, the share of sales to department stores declined from 2.5% in the beginning of the sample in 2005 to 2.0% today. The Census Bureau shows an even steeper decline.
Then, there is auto parts and vehicle unit sales, both of which also have shown continued weakness. BofA isolated a time series for autoparts that includes aftermarket parts but not original equipment parts. Autoparts trend well with vehicle unit sales, showing that the same macro factors are generally influencing demand for new autos and replacement parts. Both series have softened recently on a YoY basis.
Summarizing all the underlying components in tabular format, the data shows that the US consumer has now fully tapped out, and unless the Dept of Commerce comes out with some ridiculous seasonal adjustment, this Thursday’s number will be bad enough to kill not only a December rate hike, but potentially all rate hike in this “none and done” cycle.
Finally, if that isn’t enough, here are six more charts showing the trend of US retail sales. All else equal, the Fed should be cutting rates aggressively at this point.
Goldman Sachs: the Fed does not want to startle the markets. There has been no clear signal of a rate rise. Thus September will probably not see the rate hike! and I agree with that:
(courtesy Goldman Sachs/zero hedge)
Goldman Slashes September Rate-Hike Odds As Hilsenrath Warns Of Divided Fed
Goldman Sachs’ estimate of September rate-hike odds continue to collapse faster than Hillary Clinton as the absence of a clear signal from a series of speeches by Fed officials (concluding with Lael Brainard’s headfake). Goldman have reduced their subjective odds for a hike next week to 25% from 40% previously (still above market expectations of 13%) but remains hopeful for December. However, as Fed-whisperer WSJ’s Jon Hilsenrath warns, Yellen faces record levels of dissent as she “confronts a divided group of policy-makers.”
As Goldman’s Jan Hatzius explains, over the last several days many Fed officials have expressed their views on the outlook for policy, concluding with Governor Brainard yesterday. Policymakers expressed a wide range of views, but a common element was the lack of a clear signal that the FOMC is prepared to raise rates as soon as next week’s meeting. If action were likely, we would normally see an effort to raise market expectations, such that a rate increase did not startle markets. Thus, the lack of a signal is meaningful, and lowers the probability of an increase. We are further reducing our subjective odds for a hike next week to 25% from 40% previously, and nudging up the odds that the next increase comes at the December meeting to 40% from 30%. Together these changes lower our cumulative odds of at least one increase this year to 65% from 70%.
Although it would be very unusual for the committee to raise rates in the face of low market-implied odds, we are reluctant to cut our subjective probabilities further given uncertainty about the committee’s basic framework. Based on the June dot plot and what they have said in recent months, we estimate that there are eight Fed officials who would prefer to raise rates this month (including four voters), and four who would prefer to wait (including two voters). The views of the remaining five officials (four voters) are unclear, but we had thought Chair Yellen was leaning toward a September increase, based on her comments at the Jackson Hole Symposium, as well as the two-hike baseline in the June Summary of Economic Projections (SEP). The lack of a coordinated signal from Fed leadership in recent days suggests this is no longer the case—or was never the case to begin with—and that Chair Yellen herself favors standing pat.
Both sides of the FOMC’s internal debate have outlined the rationale for either hiking or not hiking in recent weeks. Presidents Rosengren and Williams have spelled out the case for further tightening. Their view, excerpted in Exhibit 1, is that allowing the economy to overheat—by which they mean allowing the unemployment rate to fall too far below its structural rate consistent with stable inflation—could lead to excessive inflation or other imbalances in the future. It is better for the Fed to tighten gradually in advance, they argue, than to be forced to slow the economy down to a sustainable pace later.
Their position echoes the argument made by the Fed leadership in late 2015. In a speech last November, President Dudley argued that “overheating is a risk” because it could force the FOMC “to tighten monetary policy more aggressively.” In that case, he argued, “the risk of a recession would probably climb significantly” due to the difficulty that the Fed has historically faced in engineering a soft landing. Chair Yellen made much the same argument in a speech last December, noting that “Were the FOMC to delay the start of policy normalization for too long, we would likely end up having to tighten policy relatively abruptly,” which “would risk disrupting financial markets and perhaps even inadvertently push the economy into recession.”
Governor Brainard spelled out the case against further tightening in a speech Monday afternoon, excerpted in Exhibit 2. She argues that the Fed officials should wait for further tangible evidence of a pick-up in inflation, especially given uncertainly about both how much slack remains and the strength of the Phillips curve relationship. Moreover, she notes that tightening would likely lead to dollar appreciation that could depress inflation further. Finally, she argues, given the likelihood that the neutral rate is lower today and that the risks associated with hiking too soon exceed the risks associated with hiking too late, policy should be “tilted somewhat in favor of guarding against downside risks relative to preemptively raising rates to guard against upside risks.” Governor Tarullo made similar arguments in a TV interview on Friday.
The arguments on both sides of the current debate largely mirror those made in the run-up to liftoff. But while the FOMC ultimately decided at the December meeting that four hikes would be appropriate this year if the economy evolved in line with its forecast, as it largely has, it now appears likely to conclude its September meeting without hiking even once. While we are not ready to conclude that there has been a regime shift on the center of the committee – after all, the basic argument for tightening has not changed much since last year – our uncertainty about the committee’s framework has increased.
But as The Wall Street Journal’s Jon Hilsenrath notes, Fed Chairwoman Janet Yellen will spend the week before the central bank’s Sept. 20-21 policy meeting conferring behind the scenes with 16 officials to listen to their views and plot out a plan for the meeting. She confronts a divided group of policy makers and the potential for more internal dissent than has been common during her tenure running the Fed since 2014.
With the jobless rate at 4.9%, some regional Fed bank presidents believe that the labor market has largely recovered from the financial crisis of 2007-2009, and that short-term interest rates just above zero are no longer warranted. This group notes that risks to the U.S. economy from overseas have dissipated in recent weeks, strengthening the case for a move now.
For others, the watchword is patience. This group largely expects to raise rates this year but doesn’t see a need to act now. These officials note the jobless rate hasn’t moved much this year. Slack in the labor market is thus diminishing at a slower pace than before. That has reduced the urgency to raise the cost of credit to prevent the economy from overheating.
Moreover, because the economy is growing so slowly, this group doesn’t believe rates need to move very high in the months and years ahead, thus the Fed can take its time.
I don’t feel that we are incurring the costs of patience,” Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, told reporters after a speech on Monday.
Fed governor Lael Brainard—who has been an outspoken voice in the camp of those who want to wait—called for “prudence” in raising rates in a speech in Chicago on Monday.
“I would like to find a way for us to remove some amount of accommodation, but you can’t force it,” said Robert Kaplan, president of the Federal Reserve Bank of Dallas, in an interview. “You have to remind yourself it makes sense to be patient, because I don’t think the economy is overheating.”
The Fed might sound like it is waffling, but Mr. Kaplan said it is simply reacting to a mixed economic backdrop. “For the public hearing this, it sounds like, ‘Boy, this is on-the-one-hand, on-the-other-hand,’ ” he said. “That’s true. It is not that the Fed is being so agonizingly judicious. It is that the economy is expanding at a very moderate pace, and inflation has been very slow to get to our target, and we’re reacting to that, and that’s what people are seeing.”
But, a decision to delay would bring its own risks for Ms. Yellen. The Fed could be criticized for confusing market participants with mixed messages. Ms. Yellen herself argued in Jackson Hole, Wyo., last month that the case for a rate increase had strengthened. It was taken by some market participants as a sign that she was ready to move.
Officials also meet Nov. 1-2, but a move seems unlikely then, just a week before Election Day.
And Mish Shedlock seconds Goldman Sachs that there will be no rate hike in September. He points out the huge increase in corporate debt against the backdrop of lower earnings will kill the Dow and USA markets:
(courtesy Mish Shedlock/Mishtalk)
Fed Like A “Cowardly Scarecrow” As Corporate Debt Bubble Expands
Thanks to massive stimulus that the Fed can never seem to unwind despite promising to do so for years, theCorporate Bond Deluge Rolls and Leverage Soars to New Heights.
What has the analysts uneasy isn’t just the speed at which leverage is climbing, but that it’s happening while the economy continues to grow.
“Leverage tends to rise most in a recession — so the fact that it is this high in a ‘healthy economy’ is even more concerning,” the analysts wrote. In other words, they said, “mistakes are both more likely and more costly.”
Corporate-bond issuance this year is on pace to exceed last year’s record $1.3 trillion, data compiled by Bloomberg show. That would push sales during the past five years to more than $6 trillion. Companies that sold dollar bonds this week included Home Depot Inc., Cox Communications Inc. and TJX Cos.
Total debt at companies grew steadily at about 10 percent year-on-year since 2009 and accelerated to 16 percent year-on-year at the end of 2015. As that happened, Ebitda fell 4 percent for twelve months through the end of 2015, according to the report.
Debt loads are swelling across most all industries, the analysts said. But it’s been most pronounced among energy and healthcare companies. Companies have also borrowed to buyback stock rather than investing, a factor that contributed to weak productivity in the U.S. economy, and that does not “bode well for earnings,” the analysts wrote.
Wizard of Fed
Speculation had it that Fed governor Lael Brainard, an interest rates dove, would signal she was ready for rate hikes in a speech yesterday. Instead, I wrote, Strike Three on September Rate Hike: Brainard Urges “Prudence”.
Prior to her speech, I was highly skeptical the Fed would hike. It’s now a near certainty the Fed won’t hike.
The Fed is like a talking statue that cannot think clearly or ever move. Envision a combination of the brainless scarecrow and the cowardly lion from the Wizard of Oz, stuck on a pointed stick, yapping incessantly but afraid to do anything.
It has been quite obvious to me that Hillary is suffering from advanced stage Parkinson.
Here is a great video which should provide all the evidence you need to come to the same conclusion: