Sept 14/Gold and silver are continuously being contained by our bankers as the world is now worried about higher bond yields crashing investors/Bank of Japan in chaos as they do not know what to do as they are running out of bonds to monetize/ Chinese trouble as POBC raises yuan to hurt the shorts but HIBOR at 8.25%/In the USA another co op in Obamacare bites the dust/

Gold:1321.50 up $0.50

Silver 18.98  up 7 cents

In the access market 5:15 pm

Gold: 1322.80

Silver: 18.99

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 5:30  am est (first fix) and 10 am est (second fix)

Thus Shanghai’s second fix corresponds to 195 minutes before London’s first fix.

*Mathew Hunter of the CFTC has corrected me on the timing of the London fixes

And now the fix recordings:

Shanghai morning fix Sept 14 (10:15 pm est last night): $1322.21

NY ACCESS PRICE: $1318.75 (AT THE EXACT SAME TIME)

Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$1325.01

NY ACCESS PRICE: 1321.50 (AT THE EXACT SAME TIME)

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

London Fix: Sept 14: 5:30 am est:  $1323.20   (NY: same time:  $1322.50:    5:30AM)

London Second fix Sept 8: 10 am est:  $1321.75  (NY same time: $1323.00 ,    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 16 notices filed for 1600 oz

For silver:  the front month of September we have a total of 106 notices filed for 530,000 oz

Let us have a look at the data for today

.

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In silver, the total open interest FELL by 1,541 contracts down to 193,953. The open interest fell as  the silver price was  down 2 cents in yesterday’s trading .In ounces, the OI is still represented by just LESS THAN 1 BILLION oz i.e. .969 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 106 notices served upon for 530,000 oz

In gold, the total comex gold fell by 1,717 contracts as  the price of gold fell BY $2.00 yesterday . The total gold OI stands at 575,002 contracts.  The level of OI now is good for us as it will support a rise in gold price.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

GLD

LAST NIGHT WE HAD ONE change  out of the GLD/ A HUGE WITHDRAWAL OF 4.45 TONNES FROM THE GLD/

Total gold inventory rest tonight at: 935.49 tonnes of gold

SLV

we had no changes with respect to inventory at the SLV

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 1541 contracts down to 193,953 as the price of silver fell by 2 cents with yesterday’s trading.The gold open interest fell 1,717 contracts down to 575,002 as the price of gold fell $2.00 IN YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

end

3. ASIAN AFFAIRS

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 20.66 POINTS OR 0.68%/ /Hang Sang closed DOWN 25.12 points or 0.11%. The Nikkei closed DOWN 114.80 POINTS OR 0.69% Australia’s all ordinaires  CLOSED UP 0.38% Chinese yuan (ONSHORE) closed MARGINALLY UP at 6.6746/Oil ROSE to 45.06 dollars per barrel for WTI and 47.17 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.6761 yuan to the dollar vs 6.6746 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS HUGELY AS  MORE USA DOLLARS ATTEMPT TO   LEAVE CHINA’S SHORES

REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

3a)Korea: 

none

b) REPORT ON JAPAN

i)Next week the Bank of Japan is ready to increase the negative interest as the centerpiece of its strategy.  It will still keep its QE intact but will concentrate its effort on the short end of the yield curve and not attack the long end.

This too will end in failure..

( Reuters)

ii) The Bank of Japan has hinted on 3 options that they will do next week.We outline the 3 trial balloons.  One thing is for sure: B of J officials themselves do not know what they are doing or what might happen if they attempt one of the trial balloons

(courtesy zero hedge)

c) REPORT ON CHINA

Unexpectedly the POBC raised the value of the yuan both offshore and onshore. While this was going on liquidity disappeared as HIBOR rose to 8.2%.  China wants to punish the yuan shorts

( zero hedge)

4 EUROPEAN AFFAIRS

none today

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

SAUDI ARABIA

The house passed the bill unanimously and it is now up to Obama to veto it.  He has just stated that he would veto.  However if he does not veto, the Saudis are threatening world chaos and extremism will follow.  No doubt that they will unload all of their bonds onto the USA.  Also the House can send the bill again and if 60% of the vote passes, it becomes law from which the Saudis will unleash their scorn!

(courtesy zerohedge)

6.GLOBAL ISSUES

And now the next nation to turn against the USA: the Philippines.  They are now buying weapons from Russian and China

( zero hedge)

7.OIL ISSUES

i)Crude tumbles again below 45 dollars

( zerohedge)

ii)Oil first rises and then falters as the Dow heads into negative territory:

( zerohedge)

8.EMERGING MARKETS

i)VENEZUELA 

A dozen eggs: 150 dollars.  Middle class fathers cannot feed their families as they scour garbage cans looking for food.  May I remind everyone that Venezuela has the largest oil reserves in the world and yet this once  experiment in social utopia has ended in a failed state.

I would also like to point out that the moronic Maduro is using his last reserves of gold to pay for stuff. You can just imagine what will happen when the last oz is used up.

( Warner/Gatestone Institute).

ii)BRAZIL

Former President of Brazil Lula has now been charged with corruption

(courtesy Bruce Douglas/Bloomberg)

9.PHYSICAL STORIES

i)A good story on the life of a South African gold miner:

( Reuters)

ii)John Embry explains the bond panic of yesterday coupled with more frantic efforts by the bankers trying to contain both gold and silver

( John Embry/Kingworldnews)

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

i)Trading early this morning:10 am est  2 commentaries

First: early morning trading

Second:

This is something to watch:  Risk Parity funds have been experiencing a bloodbath as stocks crashed!

( zero hedge)

ii)In the key state of Ohio, Donald Trump leads Hillary by 5 full percentage points

( zero hedge)

iii)We now have only 6 co operative health funding facility left.  Today Health Republkic Insurance of New Jersey is folding due to hazardous financial conditions:

( Mish Shedlock/Mishtalk)

Let us head over to the comex:

The total gold comex open interest fell to an OI level of 575,002 for a loss of 1717 contracts as the price of gold FELL by $2.00 with yesterday’s trading. We are now in the NON active month of SEPTEMBER/

The contract month of Sept saw it’s OI FALL by 17 contracts DOWN to 154. We had 20 notices filed yesterday so we GAINED 3 contracts or 300 additional oz will stand for delivery. The next delivery month is October and here the OI FELL by 1237 contracts down to 40,836. 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 1,135 contracts down to 429,064.The estimated volume today at the comex: 171,811 fair  Confirmed volume yesterday: 210,555 which is good.

Today we had  16 notice filed for  21600 oz of gold.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

And now for the wild silver comex results.  Total silver OI fell by 1541 contracts from 195,494 down to 193,953  with the FALL in price of silver to the tune of 2 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 79 contracts down to 886. We had 27 notices filed upon YESTERDAY so we lost 52 contracts or 260,000 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 2 contracts up to 270 contracts.  The next big delivery month will be December and here it fell , down 1,057 contracts  to 168,561. 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 106 notices filed for silver: 530,000 oz

INITIAL standings for SEPTEMBER
 SEPT 14.
Note:  gold inventory not available today because of CME goof!
Gold
Ounces
Withdrawals from Dealers Inventory in oz  

NIL

Withdrawals from Customer Inventory in oz  nil
 98.96 oz
 manfra
Deposits to the Dealer Inventory in oz NIL oz
Deposits to the Customer Inventory, in oz 
NIL
No of oz served (contracts) today
16 notices 
1,600 oz
No of oz to be served (notices)
138 contracts
(13,800 oz)
Total monthly oz gold served (contracts) so far this month
2344 contracts
234,400 oz
7.2908 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month   192.90 oz
Total accumulative withdrawal of gold from the Customer inventory this month   76,216.2 oz
 Today; tiny activity at the gold comex
We had 0 dealer deposit:
Total dealer deposits; NIL oz
We had 0 dealer withdrawals:
total dealer withdrawals; NIL oz
we had 0 customer deposits:
Total customer deposits: nil oz.
 We had 1 customer withdrawal:
i) out of Manfra: 98.96 oz
total customer withdrawals: 98.96 oz
Today we had 0 adjustments:
 
 EVERYDAY MORE AND MORE GOLD IS LEAVING THE COMEX AND VERY LITTLE IS COMING IN WHETHER KILBARS OR NOT.  IN THE LAST MONTH 14 NET TONNES HAS LEFT THE COMEX.
Note:
If anybody is holding any gold at the comex, you must be out of your mind!!!
since comex gold storage is unallocated , rest assured any gold stored at the comex will be compromised!
I also urge all of you do not place any option trades at the comex as these gangsters will gun you down.
If you are taking delivery of gold/silver please remove it from comex banks and place it in private vaults 
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Today, 0 notices were issued from JPMorgan dealer account and 0 notices were issued form their client or customer account. The total of all issuance by all participants equates to 16 contract  of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped (received) by jPMorgan customer account.

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To calculate the initial total number of gold ounces standing for the SEPT contract month, we take the total number of notices filed so far for the month (2344) x 100 oz or 234,400 oz, to which we add the difference between the open interest for the front month of SEPT (154 contracts) minus the number of notices served upon today (16) x 100 oz per contract equals 248,200 oz, the number of ounces standing in this  NON active month of September.
 
Thus the INITIAL standings for gold for the SEPT contract month:
No of notices served so far (2344) x 100 oz  or ounces + {OI for the front month (154) minus the number of  notices served upon today (16) x 100 oz which equals 248,200 oz standing in this non  active delivery month of SEPT  (7.7200 tonnes).
we GAINED 3 contracts or an additional 300 oz will  stand.  We have surpassed  our original standings on first day notice. (ON FIRST DAY NOTICE 7.5561 TONNES STOOD FOR DELIVERY)
 Total dealer inventor 2,377,172.944 or 73.94 tonnes
Total gold inventory (dealer and customer) =10,880,707.372 or 338.43 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 338.43 tonnes for a  gain of 35  tonnes over that period. However since August 8 we have lost 15 tonnes leaving the comex.
Ladies and Gentlemen:  the comex is beginning to lose some of its gold as no doubt the Shanghai fix is having its effect.
The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent!
 

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

 
 end
And now for silver
 
SEPT INITIAL standings
 SEPT14.2016
Silver
Ounces
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
nil oz
Deposits to the Dealer Inventory
 760,861.770  OZ
Brinks
Deposits to the Customer Inventory 
 nil oz
No of oz served today (contracts)
106 CONTRACTS
(530,000 OZ)
No of oz to be served (notices)
780 contracts
(3,900,000 oz)
Total monthly oz silver served (contracts) 2216 contracts (11,080,000 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
today, we had 1 deposit into the dealer account:
i) Into brinks; 760,861.770 oz
total dealer deposit:  760,861.770 oz
we had 0 dealer withdrawals:
 total dealer withdrawals: NIL oz
 we had 0 customer withdrawals:
Total customer withdrawals: nil  oz
We had 0 customer deposit:
total customer deposits:  nil  oz
 
 
 
 we had 0 adjustment
The total number of notices filed today for the SEPT contract month is represented by 106 contracts for 530,000 oz. To calculate the number of silver ounces that will stand for delivery in SEPT., we take the total number of notices filed for the month so far at (2216) x 5,000 oz  = 11,080,000 oz to which we add the difference between the open interest for the front month of SEPT (886) and the number of notices served upon today (106) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the SEPT contract month:  2216(notices served so far)x 5000 oz +(886 OI for front month of SEPT ) -number of notices served upon today (106)x 5000 oz  equals  14,980,000 oz  of silver standing for the SEPT contract month.
we lost 52 contracts or an additional 260,000 will not stand FOR DELIVERY IN THIS  ACTIVE MONTH OF SEPTEMBER. 
 
Total dealer silver:  30.785 million (close to record low inventory  
Total number of dealer and customer silver:   166.813 million oz (close to a record low)
The total open interest on silver is NOW close to its all time high with the record of 224,540 being set AUGUST 3.2016.  The registered silver (dealer silver) is NOW NEAR  multi year lows as silver is being drawn out at both dealer and customer levels and heading to China and other destinations. The shear movement of silver into and out of the vaults signify that something is going on in silver.
end
 
And now the Gold inventory at the GLD
SEPT 14./A  withdrawal of 4.45 tonnes of gold inventory from the GLD/Inventory rests at 935.49 tonnes
SEPT 13/no changes in gold inventory at the GLD/Inventory rests at 939.94 tonnes
Sept 12/no changes in gold inventory at the GLD/inventory rests at 939.94 tonnes

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

i) first early morning: 1.19 tonnes

ii) second:  10.68 tonnes of gold

total: 11.87 tonnes

Total gold inventory rest tonight at: 939.94 tonnes of gold

Sept 8./no changes in gold inventory at the GLD/Inventory rests tonight at 951.81 tonnes
SEPT 7.2016/we had a small withdrawal of .333 tones from the GLD/Inventory rests tonight at 951.81 tonnes
Sept 6/a monstrous addition of 14.25 tonnes into the GLD/with London in backwardation in gold I wonder how these guys found so much “gold”/Inventory rests tonight at 952.14 tonnes/
Sept 2/no change in inventory at the GLD/Inventory rests at 937.89 tonnes
SEPT 1/another montrous withdrawal of 5.34 tonnes/Inventory rests at 937.89 tonnes
August 31/ a monstrous 13.36 tonnes of gold leaves the GLD/inventory rests at 943.23 tonnes
august 30/no change at the GLD/Inventory rests at 956.59 tonnes
August 29/no changes at the GLD/Inventory rests at 956.59 tonnes
August 26./no changes at the GLD/inventory rests at 956.59 tonnes
August 25/a withdrawal of 1.78 tonnes at the GLD/Inventory rests at 956.59 tones
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SEPT 14/ Inventory rests tonight at 935.49 tonnes

end

Now the SLV Inventory
SEPT 14/no change in silver inventory at the SLV/Inventory rests at 362.434 million oz
sept 13/2016: a huge deposit of 1.329 million oz into the SLV/Inventory rests at 362.434 million oz/
Sept 12/a huge withdrawal of 1.614 million oz from the SLV/Inventory rests at 361.105 million oz
SEPT 9/no change in silver inventory at the SLV/Inventory rests at 362.719 million oz/
Sept 8/ no changes in silver inventory at the SLV/Inventory rests at 362.719 million oz/
SEPT 7/We had a huge addition of 3.134 million oz into the SLV/Inventory rests a t 362.719 million oz. In less than a month we had added 11 million oz of silver into SLV vaults.
Sept 6/Strange: no addition of silver at the SLV. You mean they cannot find any paper silver?/Inventory rests at 359.585 million oz
Sept 2/a small withdrawal of 158,000 oz at the SLV probably to pay for fees/Inventor  rests at 359.585 million oz.
SEPT 1/no change in inventory at the SLV/Inventory rests at 359.743 million oz/
August 31/we had a monstrous addition of 1.899 million oz into the SLV/this would be a paper addition/inventory rests at 359.743 million oz//why the difference in gold and silver: one reduces dramatically and the other increases dramatically
August 30/no change in silver inventory/inventory rests at 357.844 million oz/
August 29/we had a good sized deposit of 950,000 oz at the SLV/Inventory rests at 357.844 million oz/
August 26/no change in silver inventory at the SLV/Inventory rests at 356.894 million oz
August 25/a withdrawal of 1.899 million oz from the SLV/Inventory rests at 356.894 million oz
.
SEPT 14.2016: Inventory 362.434 million oz
 end

NPV for Sprott and Central Fund of Canada

 Central fund data not available tonight
1. Central Fund of Canada: traded at Negative 6.1 percent to NAV usa funds and Negative 6.3% to NAV for Cdn funds!!!!  (the discount is starting to disappear)
Percentage of fund in gold 59.7%
Percentage of fund in silver:39.1%
cash .+1.2%( SEPT 13/2016).
2. Sprott silver fund (PSLV): Premium rises to +0.37%!!!! NAV (SEPT 14/2016) 
3. Sprott gold fund (PHYS): premium to NAV  rises TO  0.37% to NAV  ( SEPT 14/2016)
Note: Sprott silver trust back  into POSITIVE territory at +0.37% /Sprott physical gold trust is back into positive territory at 0.37%/Central fund of Canada’s is still in jail.
 
 
 

end

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

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

Silver Bullion Market – “Most Bullish Story Ever Told?”

Silver Bullion Market – “Still The Most Bullish Story Ever Told?”

Interview with Ted Butler from SilverSeek.com

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.

silver_bullion_2016Silver in USD – 10 Years (GoldCore)

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.

Interview with Ted Butler by Jim Cook here

Gold and Silver Bullion – News and Commentary

Gold holds losses as dollar gains versus yen (Reuters)

Gold extends losses on firm dollar, surge in Treasury yields (Reuters)

U.S. Stocks, Bonds Sell Off as Market Turmoil Resumes; Oil Drops (Bloomberg)

U.S. runs $107 billion budget deficit in August, Treasury says (Marketwatch )

Blockchain technology drives $100,000 Irish cheese and butter deal for Ornua (Reuters)

“Is Silver Still The Most Bullish Story Ever Told?” (Silverseek )

Paul Singer Warns It Is A “Very Dangerous Time” For Stocks, Prefers Gold (Zerohedge)

Who would be most painful for your portfolio? Clinton or Trump? (Moneyweek)

“Financial Crisis Has Morphed Into A Growth Crisis” – Rogoff Warns “Cash Is Not Forever, It’s A Curse” (Zerohedge)

Dubai is buzzing but oil’s decline tempers the mood (Telegraph)

7RealRisksBlogBanner

Gold Prices (LBMA AM)

14 Sep: USD 1,323.20, GBP 1,001.40 & EUR 1,177.91 per ounce
13 Sep: USD 1,328.50, GBP 1,000.36 & EUR 1,183.69 per ounce
12 Sep: USD 1,327.50, GBP 1,000.80 & EUR 1,182.54 per ounce
09 Sep: USD 1,335.65, GBP 1,004.68 & EUR 1,184.86 per ounce
08 Sep: USD 1,348.00, GBP 1,009.11 & EUR 1,195.81 per ounce
07 Sep: USD 1,348.75, GBP 1,008.60 & EUR 1,199.85 per ounce
06 Sep: USD 1,330.05, GBP 997.94 & EUR 1,191.46 per ounce

Silver Prices (LBMA)

14 Sep: USD 19.04, GBP 14.42 & EUR 16.96 per ounce
13 Sep: USD 19.16, GBP 14.44 & EUR 17.06 per ounce
12 Sep: USD 18.72, GBP 14.11 & EUR 16.68 per ounce
09 Sep: USD 19.41, GBP 14.58 & EUR 17.23 per ounce
08 Sep: USD 19.93, GBP 14.90 & EUR 17.65 per ounce
07 Sep: USD 19.92, GBP 14.89 & EUR 17.71 per ounce
06 Sep: USD 19.60, GBP 14.70 & EUR 17.55 per ounce


Recent Market Updates

– “Sorry, You Can’t Have Your Gold Bullion”
– 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

Mark O’Byrne
Executive Director

END

A good story on the life of a South African gold miner:

(courtesy Reuters)

Desperation and death beneath South Africa’s City of Gold

Section:

By Ed Cropley
Reuters
Tuesday, September 13, 2016

JOHANNESBURG, South Africa — When he lost his job as a Johannesburg gardener a month ago, 25-year-old Sibangani Tsikwe did what millions of men have done before him: seek their fortune deep underground in the gold mines that help to define South Africa.

The decision has probably cost him his life.

Equipped with little more than a head-torch, pick-axe, and nerves of steel, Tsikwe and a group of fellow Zimbabweans descended into the bowels of the earth on Sept. 5 via a derelict shaft at Johannesburg’s Langlaagte gold mine.
Tsikwe has not been seen since.

In the annals of South African mining, Langlaagte looms large as the farm where prospectors first stumbled upon gold in 1886, a discovery that would open up the richest veins of gold-bearing rock mankind has discovered.

Since then, the meter-wide seams, or reefs, that stretch for hundreds of kilometers east, west and south across the Witwatersrand Basin have produced more than 2 billion ounces of gold — roughly half of all the bullion ever mined.

In Zulu, Johannesburg is called Egoli, the City of Gold.

Yet history was probably the last thing on Tsikwe’s mind as he clung to a length of knotted string tied to a tree stump at the shaft entrance and took his first steps down the 30 degree slope into one of the most dangerous workplaces on earth. …

… For the remainder of the report:

http://www.reuters.com/article/us-safrica-mining-idUSKCN11J1M6

END

John Embry explains the bond panic of yesterday coupled with more frantic efforts by the bankers trying to contain both gold and silver

(courtesy John Embry/Kingworldnews)

Attacks on gold and silver ‘more frantic,’ Embry tells KWN

Section:

8:20p ET Tuesday, September 13, 2016

Dear Friend of GATA and Gold:

Sprott Asset Management’s John Embry tells King World news today that “the gold and silver markets are being attacked by the usual suspects in an even more frantic and transparent manner.” He adds: “The paper gold and silver markets are one of the greatest Ponzi schemes in world history, with hundreds of paper claims on each physical ounce of metal available in the West.” An excerpt from the interview is posted at KWN here:

http://kingworldnews.com/there-are-now-hundreds-of-paper-claims-on-each-…

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

END

Bill Murphy & Chris Powell – The Gold Cartel Will Have To Retreat Big Time

Moderated September 14th, 2016 by

THE MATTERHORN INTERVIEW – Sept 2016: Bill Murphy & Chris Powell

“The Gold Cartel Will Have To Retreat Big Time”

In this months’ Matterhorn Interview Bill Murphy and Chris Powell, co-founders of Gata,analyse risks of the monetary system and comment on changes to the London Gold fix procedures and participation, liquidity issues and the difficult relationship between paper (futures) and physical metals as well why, conveniently, mainstream media ignore the most popular market intervention methods by Central banks.

[Video/Podcast] 17 mins

Interview by Lars Schall:

The Gold Cartel Will Have To Retreat Big Time

end

 

Your early WEDNESDAY 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  UP to 6.6746( REVALUATION NORTHBOUND  /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN NARROWS  TO 6.6761) / Shanghai bourse  DOWN 20.66 OR 0.68 %  / HANG SANG CLOSED DOWN 25.12 or 0.11%

2 Nikkei closed DOWN 114.80 OR 0.69% /USA: YEN RISES TO 102.67

3. Europe stocks opened ALL IN THE GREEN (     /USA dollar index DOWN to 95.46/Euro UP to 1.1228

3b Japan 10 year bond yield: FALLS TO  -.021%     !!!!(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::  45.06  and Brent: 47.17

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 UP for WTI and UP for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES to +.036%   

3j Greek 10 year bond yield RISE to  : 8.43%   

3k Gold at $1322.35/silver $19.00(7:45 am est)   SILVER FINAL RESISTANCE AT $18.50 WILL BE DEFENDED 

3l USA vs Russian rouble; (Russian rouble UP 27/100 in  roubles/dollar) 65.05-

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  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 102.67 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 .9745 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0942 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT

3r the 10 Year German bund now NEGATIVE territory with the 10 year RISES to  +.036%

/German 9+ year rate BASICALLY  negative%!!!

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

The bank withdrawals were causing massive hardship to the Greek bank. the Greek referendum voted overwhelming “NO”.  Next step for Greece will be the recapitalization of the banks and that will be difficult.

4. USA 10 year treasury bond at 1.715% early this morning. Thirty year rate  at 2.450% /POLICY ERROR)

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

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

HELICOPTER MONEY STILL ON THE TABLE/JAPANESE STIMULUS PLAN DISAPPOINTS

Global Market Rout Abates As Bond Selloff Pauses, Oil Rebounds

After a sudden rout in financial markets that wiped $2 trillion in global market cap over the past week showed signs of easing, overnight stocks tried to stage another “BTFD-type” comeback with European stocks climbing for the first time in five days as oil and metals prices gained. S&P futures were modestly in green, although they faded earlier gains, on the back of a slide in the USDJPY which initially spiked to 103.31 only to fade back to the mid 102-range.

As DB’s Jim Reid summarizes, markets have been busy since the end of last week and after no +\- 1% sessions for 43 days we’ve now seen 3 in a row as the S&P 500 (-1.48%) closed at its lowest level since July 7th. The VIX (+18% to 17.85) closed at its highest since June 28th and 10y Treasuries (+6.4bps) are now at their highest level since June 6th. So a lot has happened in a short space of time.

The moves haven’t just been confined to the US though with markets in Europe having also been sent into a tailspin in the last few days, while emerging market equities have tumbled nearly 4.5% since the close on Thursday. On this side of the pond the Stoxx 600 (-1.03%) was down for the fourth consecutive session yesterday and to the lowest level since August 4th while 10y Bund yields (+3.3bps) rose to 0.068% and are now at the highest yield since June 23rd. Yesterday was in fact the second day that we’ve seen bond and equity markets tumble in tandem since Friday and it’s interesting to see that the 20-day correlation between the 10y Treasury yield and the S&P 500 is now the most negative since 2007 (at -0.626).

The market continues to be glued to every move in long-rates, concerned that the upcoming change in BOJ monetary policy could de anchor Japan’s bond long-end.  The possible spillover effects of rising bond yields into stock and commodity markets has hit financial assets as funds, betting on a long period of low volatility and suppressed bond yields, are being forced to reassess positions. As such, headlines like these were closely followed and did not inspire much confidence in today’s rebound:

  • JAPAN’S 20-YEAR YIELD RISES TO 0.495%, HIGHEST SINCE MAR.14
  • JAPAN’S 30-YEAR YIELD RISES TO 0.605%, HIGHEST SINCE MAR.17
  • JAPAN’S 40-YEAR YIELD RISES TO 0.67%, HIGHEST SINCE MAR.11

Japan’s yield curve steepened amid speculation the BOJ will concentrate its bond-buying program more heavily on short-term securities. The five-year yield decreased two basis points to minus 0.19%, while the 30-year rate jumped six basis points to 0.58%. “Investors are expecting that the BOJ will adopt a more flexible stance on its bond-buying measures and couple that with an additional cut to the deposit rates,” said Katsutoshi Inadome, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. “Superlong bonds are being sold amid speculation that’s starting to look more of a reality.”

japanese banks were among the biggest losers among Japanese shares after Nikkei newspaper said the BOJ is considering delving deeper into negative interest rates, a policy that squeezes lenders’ earnings. Slightly more than half the economists surveyed by Bloomberg forecast an expansion of monetary stimulus on Sept. 21. Some officials still favor stepping up purchases of bonds, according to people familiar with the discussions, suggesting that cutting a key interest rate further below zero, or expanding purchases of risk assets such as real-estate investment trusts, aren’t the only options. “The limits of monetary policy are being discussed, and it’s unclear whether the situation will improve even if the BOJ does add to its easing program,” said Kiyohide Nagata, a senior global strategist at Tokai Tokyo Research Institute Co.

Keep a close eye on the long end in Bunds and USTs for a sense of whether the recent freakout about central banks losing control over the long end, leading to more acute VaR shocks, will persist.

Europe led the global gains with the Stoxx Europe 600 Index pulled out of its steepest slide in two months and U.S. equity index futures rose. The ruble and other currencies of resources-exporting nations recovered some of the last session’s slide as the Bloomberg Commodity Index advanced with crude oil back above $45 a barrel after yesterday’s smalled than expected API inventory build. Treasuries edged higher along with sovereign securities across most of Europe after global yields surged to this quarter’s high on Tuesday amid concern global central banks are turning less accommodative. The yen weakened after some Bank of Japan officials were said to still favor stepping up purchases of government bonds.

As we predicted last Thursday – correctly identifying the culprit for the ongoing risk-flaring episode in the face of the BOJ – volatility has roared back into financial markets over the past week as the Federal Reserve weighed the case for a U.S. interest-rate increase. Cited by Bloomberg, Harvard University Professor of Economics Kenneth Rogoff said  that “markets are losing confidence in the ability of central banks to boost inflation and there is a limit to how much quantitative easing programs can accomplish”. European Central Bank president Mario Draghi refrained from adding to stimulus last week and the BOJ is conducting a comprehensive review of the costs and benefits of its policies.”

“We are coming back from a very quiet summer period when volatility was unusually low,” said Daniel Murray, head of research at EFG Asset Management in London. “Markets woke up again, and investors have started to reposition their portfolios

Helping push risk modestly higher, crude oil rose 0.5 percent to $45.11 a barrel in New York following a 3% tumble in the last session. Official figures due Wednesday are forecast to show U.S. supplies rose by 4 million barrels, exacerbating a glut. Money managers have been slashing bets on falling oil prices at the fastest pace in five months before major producers meet this month in Algiers to discuss output constraints.

Amusingly, the Mexican peso erased its advance after a Bloomberg Politics poll of Ohio showed Donald Trump leading Hillary Clinton by 5 percentage points.

The Stoxx 600 climbed 0.4% in early trading. Glencore Plc and Anglo American Plc climbed at least 3.4 percent, pushing a gauge of basic-resource companies to the biggest gain of the 19 industry groups on the index as base metals rose. Richemont fell 2.9% after the maker of Cartier jewelry said first-half operating profit will probably decline about 45 percent. Hermes International SCA slid 6.8% after abandoning its mid-term annual sales growth target.

S&P 500 Index futures were little changed after the gauge of U.S. equities ended Tuesday 1.5 percent lower amid declines in commodity-related companies. Bayer AG rose as people familiar with the matter said Monsanto Co.’s top managers support an improved takeover offer from the German company. Emerging-market stocks extended the longest selloff since June. The MSCI Emerging Markets Index fell 0.3 percent, paring its 2016 gain to 11 percent. The Shanghai Composite Index closed down 0.7 percent and has shed 2.5 percent this week, the most since May.

More importantly than stocks, which have become a derivative play on rate volatility, were the ongoing sharp moves in global bonds. Euro zone bond yields rose across the board after European Central Bank Executive Board member Sabine Lautenschlaeger said the central bank should hold off on new monetary easing measures. Most yields touched their highest levels since Britain’s vote to leave the European Union in late June, extending a rise that started after the ECB’s policy meeting last week, when it disappointed investors by introducing no new easing measures. German 10-year bond yields rose 2 basis points to 0.05 percent on Wednesday, having climbed as high as 0.09 percent in early trades.

The Yield on 10Y Treasury fell one basis point to 1.72%, following a 6 bps gain on Tuesday. The yield on the Bloomberg Barclays Global Aggregate Index climbed to 1.24 percent Tuesday, the highest since June 23. Portuguese bonds slid for a fifth day, trailing behind their euro-area peers, as the nation prepared to sell securities maturing in 2023 and 2037. The yield on the nation’s 10-year bond yields reached 3.36 percent, the highest since June 27.

“Markets have continued to be spooked by the potential for central banks to scale back the level of monetary support on almost a global basis,” Peter Chatwell, head of euro rates strategy at Mizuho said. “Lautenschlaeger’s comments did little to ease fear of withdrawal of central bank’s support.”

Morgan Stanley said trades most vulnerable to any unwind, are equities as well as bullish bets on the Japanese yen, emerging market currencies and Asia ex-Japan bonds.

* * *

Market Snapshot

  • S&P 500 futures up 0.2% to 2126
  • Stoxx 600 up 0.4% to 340
  • FTSE 100 up 0.5% to 6696
  • DAX up 0.1% to 10402
  • German 10Yr yield down 2bps to 0.05%
  • Italian 10Yr yield down less than 1bp to 1.32%
  • Spanish 10Yr yield down 2bps to 1.08%
  • S&P GSCI Index up 0.3% to 351.5
  • MSCI Asia Pacific down 0.6% to 136
  • Nikkei 225 down 0.7% to 16614
  • Hang Seng down 0.1% to 23191
  • Shanghai Composite down 0.7% to 3003
  • S&P/ASX 200 up 0.4% to 5228
  • U.S. 10-yr yield down 1bp to 1.72%
  • Dollar Index down 0.06% to 95.58
  • WTI Crude futures up 0.4% to $45.06
  • Brent Futures up 0.1% to $47.15
  • Gold spot up 0.2% to $1,322
  • Silver spot up 1.1% to $19.07

Top Global Headlines

  • Monsanto Board Said to Back Bayer Bid After Improved Offer: German company said to double break fee to about $3b
  • Global Yields Highest Since June as El-Erian Says Fed Should Act: Japan L/T yields are highest since March on BOJ outlook
  • Trump Has 5-Point Lead in Bloomberg Poll of Battleground Ohio: The poll was taken Friday through Monday
  • Facebook Probe in Antitrust and Privacy Gray Zone, Vestager Says: Facebook has “a very dominant position” as social network
  • Valeant’s New CFO Will Review 2016 Numbers, CEO Papa Says: Asset sales will be announced in next six months, Papa says
  • Wells Fargo Eclipsed by JPMorgan as World’s Most Valuable Bank: Bank stocks pressured as traders bet against Fed rate hike
  • Icahn Is Seeking Approval to Own Up to 50% of Herbalife: Billionaire says Ackman’s short is increasingly risky
  • Oil Industry May Cut Spending for Third Year in Row, IEA Says: Upstream 2016 capex set to drop 24%, more than last est.
  • Oi Top Shareholders Reach Accord Ending Legal Power Struggle: Societe Mondiale ends effort to call two shareholder meetings
  • Philip Morris Raises Quarterly Div. to $1.04/Shr: Increased regular quarterly div. by 2% to annualized rate of $4.16/share

Looking at regional markets, we start in Asia where markets traded mixed following a negative lead from the US where sentiment was dampened alongside declines in oil after a bearish market forecast by the IEA. This initially pressured ASX 200 (+0.5%) and Nikkei 225 (-0.7%) at the open and although markets in Australia staged a recovery, Japanese stocks were not so resilient as energy names and financials suffered after yesterday’s 3% drop in WTI and reports the BoJ could explore cutting rates deeper into negative territory. Chinese markets were lower with Shanghai Comp (-0.7%) underperforming and Hang Seng (-0.1%) ahead of tomorrow’s extended weekend in the mainland and after the PBoC kept its liquidity injections firm. 10yr JGBs traded higher amid weakness in risk appetite, although yields in 20yr and 30yr JGBs rose to their highest since March amid reports BoJ could discuss shifting some purchases from 25yr+ debt into shorter term bonds to curb the declines in long term yields.

BoJ are said to explore delving deeper into negative rates and plans to make NIRP centre of future monetary easing, according to reports in Nikkei. The report further added that the BoJ will also discuss reducing purchases of 25yr+ JGBs and the increase of shorter-term bond purchases due to declines in long-term yields. Further source reports have also suggested that the BoJ could debate extending rates further in to negative territory and offer new forward guidance.

Top Asian News

  • PBOC Boosts Weekly Injections as Yuan Climbs Amid Stability Bets: Yuan interbank rates in Hong Kong surge before China holidays
  • China’s Credit Growth Rebounds in Aug. as Growth Stabilizes: Broadest measure of new credit exceeded estimates in August
  • Japan Banks on Wildest Ride Since Global Crisis Before BOJ: Steeper yield curve fueled rally that’s now reversing course
  • Japan Said Planning to Seek $5b From Kyushu Railway IPO: Listing planned for Oct. 25
  • Samsung Limits Note 7 Battery Charging to Prevent Overheating: Software update from Sept. 20 will cap capacity at 60%
  • China Brewer Said to Mull Bid for $6b of SABMiller Assets: China Resources Beer would join Asahi, private equity bidders
  • Last Holdout in Korean War Sees Busy Docks Idled by Hanjin: More than 11,000 jobs in Busan at risk if shipping line folds
  • Thailand Holds Key Rate as Economic Recovery Gains Momentum: Consumer prices rose for fifth month after year of deflation
  • Singapore Air Won’t Extend Lease on Airbus A380 Jet Next Year: Carrier yet to decide on future of 4 other A380s on lease

The European session has got off to a tentative start, with equities opening in the green but failing to hold onto their gains, to trade relatively flat by mid-morning (Euro Stoxx 50: flat). In terms of a sector breakdown, luxury names are the notable laggards, with Richemont (-3.8%) and Hermes (-6.4%) weighing on the indices after performance updates. Elsewhere, energy and material names are among the best performers, retracing some of their recent weakness. Furthermore, a BBC journalist has reported that sources suggest that a Commons decision on Hinkley is likely today or tomorrow and is expected to be a ‘Yes, with conditions.’ Finally, fixed income markets initially opened lower, however in a similar fashion to equities, pared the early move to trade flat by mid-morning with fixed income related newsflow once again on the light side ahead of tomorrow’s deluge of US data and central bank decisions.

Top European News

  • Richemont, Hermes Slump as Luxury-Goods Malaise Worsens: Richemont says 1H earnings will probably drop 45%
  • U.K. Labor Market Shows Continued Resilience to Brexit Vote: Unemployment rate stayed at 11-year low in 3 months through July
  • ZF Raises Offer for Haldex to Match Rival Bid for Brakemaker: Knorr-Bremse says it can offer Haldex a ‘better future’
  • Unilever Chief Says Brands Can Profit Despite Global Turmoil After Brexit, time for politicians to ‘cool down’: Polman
  • Imaginary VW Deadline Prompts Flood of Real Investor Lawsuits: More than 1,000 cases will be filed by Sept. 19
  • Telecom Italia’s Cattaneo Says He’s Ready to Fight Niel’s Iliad: Co. preparing counter measures to compete with Iliad

In FX, the Bloomberg Dollar Spot Index, a gauge of the greenback against 10 peers, was little changed after climbing 0.7 percent on Tuesday. Goldman Sachs Group Inc. is holding fast to a bullish call on the U.S. currency, undeterred by waning expectations for a Fed interest-rate increase this month. The yen fell 0.2 percent as investors weighed the BOJ’s options. The Mexican peso was little changed, erasing gains of about 0.4 percent, after the Bloomberg Politics poll of Ohio, a key swing state, showed Trump leads Clinton 48 percent to 43 percent among likely voters in a two-way contest and 44 percent to 39 percent when third-party candidates are included. The currency has shown signs of acting as a barometer of the presidential contest, according to data compiled by Bloomberg. It tends to drop when Trump gains ground in RealClearPolitics’s average of presidential poll results, and increases when he falls. The yuan strengthened 0.1 percent in Shanghai amid speculation China’s central bank was shoring up the exchange rate before this week’s holidays. HSBC Holdings Plc said a daily fixing for the currency was set stronger than it expected on Wednesday and yuan borrowing costs jumped in Hong Kong, making its costlier to bet on depreciation in the offshore market. The MSCI Emerging Markets Currency Index was little changed, paring losses of as much as 0.3 percent, as the Russian ruble strengthened 0.5 percent, the biggest gain in a week, and the South African rand advanced 0.4 percent.

In commodities, the Bloomberg Commodity Index rose 0.3 percent after dropping 1.3 percent on Tuesday. Gold reversed earlier losses to trade 0.2 percent higher, set for its first advance in six days. Crude oil rose 0.5 percent to $45.11 a barrel in New York following a 3 percent tumble in the last session. Official figures due Wednesday are forecast to show U.S. supplies rose by 4 million barrels, exacerbating a glut. Money managers have been slashing bets on falling oil prices at the fastest pace in five months before major producers meet this month in Algiers to discuss output constraints. Nickel gained 0.5 percent, after slumping almost 5 percent over the last two sessions. Mines in the Philippines, the world’s largest supplier, are being shut amid a nationwide audit of welfare and environmental standards that’s set to end this week. The government said more closures are coming and Goldman Sachs has warned that nickel ore stockpiles could sink to “critically low” levels by March or April 2017.

Bulletin Headline Summary From RanSquawk and Bloomberg

  • European equities trade with little firm direction after failing to hold on to their opening gains
  • USD/JPY made new highs through 103.00, on fresh reports of negative rates, but has since slipped back into the mid 102.00’s
  • Looking ahead, highlights include US DoE Crude Oil Inventories, New Zealand GDP and a speech from RBA Assist Gov Debelle
  • Treasuries rise during overnight trading, rebounded from yesterday’s drop as Japanese funds, Asian banks added 5Y, 10Y duration “in decent size,” Seaport Global managing director Tom di Galoma said in note.
  • Traders who complained all summer about markets stuck in a zombie state are getting what they wanted, and probably will be for a while
  • Bayer AG has reached an agreement to acquire Monsanto Co. for about $56 billion to create the world’s biggest maker of seeds and pesticides, according to people familiar with the matter
  • Some BOJ officials still favor stepping up purchases of government bonds if the board decides it needs to expand stimulus, according to people familiar with the discussions
  • As activist short sellers descend on Japan’s stock market for the first time, one local analyst is emerging from obscurity to contend for the title of Tokyo’s most influential bear
  • U.K. unemployment rate stayed at an 11-year low in the three months through July as the economy added jobs, according to figures from the Office for National Statistics
  • If everyone was caught out by the U.K.’s vote to leave the EU, at least some people in financial markets are going to be right about the next referendum that threatens to upend a country’s politics

DB’s Jim Reid concludes the overnight wrap

Markets have been busy since the end of last week and after no +\- 1% sessions for 43 days we’ve now seen 3 in a row as the S&P 500 (-1.48%) closed at its lowest level since July 7th. The VIX (+18% to 17.85) closed at its highest since June 28th and 10y Treasuries (+6.4bps) are now at their highest level since June 6th. So a lot has happened in a short space of time.

The moves haven’t just been confined to the US though with markets in Europe having also been sent into a tailspin in the last few days, while emerging market equities have tumbled nearly 4.5% since the close on Thursday. On this side of the pond the Stoxx 600 (-1.03%) was down for the fourth consecutive session yesterday and to the lowest level since August 4th while 10y Bund yields (+3.3bps) rose to 0.068% and are now at the highest yield since June 23rd. Yesterday was in fact the second day that we’ve seen bond and equity markets tumble in tandem since Friday and it’s interesting to see that the 20-day correlation between the 10y Treasury yield and the S&P 500 is now the most negative since 2007 (at -0.626).

While yesterday’s losses for risk assets in particular were fairly broad-based across sectors, energy names were again at the epicentre of things following a tumble across the Oil complex. WTI (-3.00%) closed back below $45/bbl following the latest bearish update from the IEA. The agency said that ‘supply will continue to outpace demand at least through the first half of next year’ and that ‘it looks like we may have to wait a while longer’ for the market to return to balance. Energy credits were hit hard too as a result with CDX IG eventually finishing over 3.5bps wider. European credit indices outperformed relatively (Main +2bps) given the lower exposure to energy.

The bigger story for credit at the moment continues to be the glut of new issues hitting the market. Despite a weak day for indices, over $30bn was said to have priced in the US IG market according to Bloomberg across 15 tranches. That’s only the second time this year that daily issuance has topped the $30bn mark. Perhaps more notable though was the latest deal in the Sterling market. National Grid yesterday raised £3bn across four tranches, attracting over £6bn of orders in the process. The deal is said to be the biggest Sterling deal by a non-financial ever and comes just one day after the BoE announced that the power company is eligible to be bought under the BoE’s corporate purchasing program.

So while Oil was a driving force yesterday the last few days have shown that markets are clearly on edge with global Central Bank uncertainty (and to a degree disappointment) as high as its been in sometime. Speculation as to what the BoJ might do from a purchasing perspective has seen yield curves steepen globally but the 22% probability of a September Fed hike has now returned us back to the lowest likelihood in four weeks. With US and global economic surprise indices also at their lowest in two months and persistent concerns about valuations and weak corporate earnings it’s not just central banks that are to blame. It does however seem like one eye is already on the BoJ next week though which is the next big event for markets before we move straight on to the FOMC.

On that subject, another story which caused a few heads to turn was the report out of the Nikkei newspaper yesterday suggesting that the BoJ board is expected to conclude in its comprehensive assessment next week that the benefits of negative rates outweigh the side effects. The article suggests that the BoJ is exploring the idea of cutting rates further with asset purchase expansion now near their effective limit. Supposedly BoJ Governor Kuroda and his deputy governors are unanimous on the point and the rest of the board members are expected to show similar support. The same report also suggests that the BoJ may consider lowering purchases of JGB’s longer than 25 years in a bid to push long-end yields up, while purchases of short-end JGB’s may by increased to compensate.

The Yen was -0.70% weaker yesterday and is down another -0.30% this morning (around 102.90) however weakness in energy stocks has seen the Nikkei and Topix fall -0.36% and -0.30% respectively. Elsewhere it’s a bit more mixed this morning in Asia. Bourses in China are also struggling (Shanghai Comp -0.59%) however the Hang Seng (+0.08%), Kospi (+0.40%) and ASX (+0.23%) are all firmer. Oil has recovered slightly (WTI +0.51%) while Gold is flat. Looking at the JGB curve, 2y yields are unchanged this morning however 30y yields have surged over 6bps with the curve again steepening.

Staying in Asia, following on from the stabilization in August economic activity indicators in China yesterday, our Chief China Economist Zhiwei Zhang also noted a strengthening in property sales last month, both in volume terms (+19.8% yoy) and in value terms (+31.8% yoy) reflecting rising property prices in tier 1 cities especially, as well as some tier 2 cities. In his mind the latest developments in the property sector puts upside risk to his H2 GDP forecast of 6.5% in Q3 and 6.4% in Q4, but downside risks to his 2017 forecast of 6.5%. Zhiwei believes that a bubble is building in some of the tier 2 cities and that he had previously though that the government would have started to tighten liquidity conditions and contain the risk of a bubble in the summer, but property sales and land auctions have continued to boom. While this poses some upside risk into year end, the development of the property sector is critical to his growth and policy outlook in 2017. On that, Zhiwei has revised his policy outlook. He no longer expects an RRR or interest rate cut in 2016 and instead expects further policy easing to happen in the first half of 2017.

Before we look at the day ahead, a quick wrap-up of the relatively small amount of economic data released yesterday. In Europe the main focus was on Germany’s ZEW survey which dipped 2.5pts this month to 55.1 (vs. 56.0 expected). While lower relative to August that reading is still some 5pts above the post-Brexit slump the index tumbled to in July. The expectations survey held steady at 0.5. Also released in Germany was the final August CPI revisions however there were no surprises with the print left at 0.0% mom and +0.4% yoy. In the UK headline CPI in August was +0.3% mom which was a shade lower than the consensus of +0.4%. RPI printed at +0.4% mom and in line, while PPI input prices were up only +0.2% mom (vs. +0.6% expected).

3.REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 20.66 POINTS OR 0.68%/ /Hang Sang closed DOWN 25.12 points or 0.11%. The Nikkei closed DOWN 114.80 POINTS OR 0.69% Australia’s all ordinaires  CLOSED UP 0.38% Chinese yuan (ONSHORE) closed MARGINALLY UP at 6.6746/Oil ROSE to 45.06 dollars per barrel for WTI and 47.17 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.6761 yuan to the dollar vs 6.6746 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS HUGELY AS  MORE USA DOLLARS ATTEMPT TO   LEAVE CHINA’S SHORES

3a)NORTH KOREA:

none today

b) REPORT ON JAPAN

Next week the Bank of Japan is ready to increase the negative interest as the centerpiece of its strategy.  It will still keep its QE intact but will concentrate its effort on the short end of the yield curve and not attack the long end.

This too will end in failure..

(courtesy Reuters)

The Bank of Japan will consider making negative interest rates the centerpiece of future monetary easing by shifting its prime policy target to interest rates from base money at its review next week, sources familiar with its thinking say.

The change would underscore growing concerns in the central bank and financial markets over the limits to the BOJ’s economic stimulus efforts, as more than three years of aggressive bond buying is draining market liquidity.

It would also be a shift away from the BOJ’s unique monetary experiment that attempted to crush yields across the curve and try to convince the public that its massive money printing will boost economic activity and prices.

“Among the BOJ’s policy tools, the priority will likely shift more towards interest rates and away from huge bond purchases,” said one of the sources on condition of anonymity.

The Nikkei reported earlier on Wednesday that the BOJ will put more emphasis on negative rates as a tool for future easing.

The BOJ is unlikely to abandon its current base money target, which is the amount of money it commits to print each year, or adopt an explicit cap on long-term rates, they said.

Still, by shifting its policy focus to negative rates, the BOJ hopes to dispel growing market views that the unpopularity of negative rates among the public would discourage it to cut rates, even if it would arrest unwelcome rises in the yen.

A prolonged period of indecision by the Federal Reserve could undermine the dollar and push up the yen, which has already surged nearly 17 percent so far this year, pressuring Japan’s export machine.

There is no consensus in the BOJ yet on whether to deepen negative rates at the Sept. 20-21 meeting, when it conducts the comprehensive assessment of its policies, the sources said.

That decision will depend on yen moves and whether the board members feel that doing so would be necessary to reinforce the bank’s commitment to achieving its inflation target, they said.

Most BOJ board members prefer such a modest fine-tuning of the current policy framework. But with markets increasingly expecting some form of easing at the review, more radical options are not off the table, such as ditching setting an explicit cap on bond yields, they said.

MIDDLE GROUND?

The BOJ shocked markets and the government in January by adding negative rates to its massive asset-buying program launched in 2013. Under that scheme, it has pledged to increase base money at an annual pace of 80 trillion yen ($777 billion) via purchases of bonds and risky assets.

Many BOJ officials have grown doubtful about how much effect increasing base money has had in heightening inflation expectations.

But they are equally wary of entirely abandoning the base money target, the bank’s prime policy target, for fear of triggering market fears it will taper its asset buying.

Policymakers got a taste of how markets might react to that this week as investors dumped longer-dated bonds on fears the BOJ will slow the pace of its purchases. The 30-year JGB yield rose to a six-month high JP30YTN=JBTC while the 20-year JGB yield rose to 0.495 percent, a level last seen in March.

The BOJ will thus maintain the base money target and the pace of asset purchases. But it will consider changing its prime policy target to the 0.1 percent negative rate it now charges for a portion of excess reserves financial institutions park with the bank, the sources said.

“The base money target does not need to be removed because there is indeed some positive effects to it,” said a source familiar with the BOJ’s thinking.

“But it’s feasible to focus more on keeping short-term interest rates low,” the source said.

The BOJ says it has three easing tools: buying more bonds, buying more risky assets and deepening negative rates.

At next week’s review, it will likely signal markets that cutting rates would be the more preferred future option as it directly pushes down short- to medium-term rates that have the biggest impact on corporate borrowing costs.

The BOJ will also consider reducing purchases of super-long government bonds to give financial institutions such as insurers and pension funds a better environment for earning returns, the sources said.

Purchases of shorter-term bonds could be increased to compensate, so that the overall bond buying amount would not decrease, they said.

To justify concentrating its purchases on short-term debt, the BOJ will issue an analysis showing that lowering yields of up to 10 years has a bigger positive impact on the economy than pushing down longer-dated yields, sources said.

The BOJ is likely to maintain its pledge to hit its 2 percent inflation target “at the earliest date possible.”

But with over three years having passed since deploying its asset-buying program, the central bank will abandon the two-year timeframe it set for achieving the price goal, they said.

With consumer inflation stuck near zero, the BOJ has been forced to repeatedly push back the target, most recently to the March 2018 end of fiscal 2017.

(Editing by Eric Meijer and Kim Coghill)

end

The Bank of Japan has hinted on 3 options that they will do next week.We outline the 3 trial balloons.  One thing is for sure: B of J officials themselves do not know what they are doing or what might happen if they attempt one of the trial balloons

(courtesy zero hedge)

The Bank Of Japan Unleashes Chaos

c) Report on CHINA

Unexpectedly the POBC raised the value of the yuan both offshore and onshore. While this was going on liquidity disappeared as HIBOR rose to 8.2%.  China wants to punish the yuan shorts

(courtesy zero hedge)

China Crushes Yuan Shorts As HIBOR Explodes 190% To 7 Month High

One week ago, with the Yuan having traded within fractions of what many consider a key psychological level for the USDCNY at 6.70, we reported that as many traders expected that following the just concluded G-20 meeting in China, the PBOC would finally relent in its devaluation defense, and let the currency slide on through to the other side. Not only did that not happen, but last Thursday the Chinese Central bank unleashed an unexpected and aggressive attack on currency Yuan shorts, the biggest since the January devaluation scare when the cost of borrowing yuan in Hong Kong soared to a seven-month high amid. The overnight HIBOR, or Hong Kong Interbank Offered Rate, jumped – seemingly without reason – by 3.88% points to 5.45%, the most expensive since February, according to Treasury Markets Association data. Other tenors joined with the one-week rate rose 2.09% points to 4.06%.

Then overnight, the onshore Yuan gained even more following the latest CNY fixing at 6.6895 (some had expected that based on the USD move, the PBOC would have to finally fix the currency above the key 6.70 level) with USD/CNH seeing broad-based selling driven by banks turning to spot market to reduce CNH funding needs. The reason for that is that after last week’s dramatic spike in overnight funding rates, this morning Hong Kong’s overnight interbank yuan borrowing rate, or the yuan hibor, shot up to its highest level since February , soaring nearly threefold to 8.16% from only 2.84% on Tuesday.

Even more acute, the 1-week yuan hibor was set at 10.15% according to the Treasury Markets Association.

One reason for the latest surge in funding costs is that with Chinese and Hong Kong holidays on deck, liquidity is scarce. The Hong Kong market will be closed on Friday for the mid-autumn festival and the China markets will be closed on Thursday and Friday. China has traditionally intervened in currency markets just before holidays: according to the FT, last October using illiquidity just before its long National Day celebrations to intervene in Hong Kong and reduce an embarrassingly wide gap between the offshore and onshore rates.

Of course, next week we will have the Fed and BOJ meetings as well, where uncertainty is leading to even more illiquidty.

However, the most likely explanation is that in order to force Yuan shorts to capitulate as 6.70 remains just barely within reach, the PBOC is simply continuing to squeeze the yuan shorts and raising the cost of shorting yuan, as explained last week.  Ultimately, the PBoC weakened its yuan fix by 169 pips to 6.6895 versus yesterday’s 6.6726, even as many were expecting the USDCNY to finally breach the the 6.70 resistance level, the defense of whjich may have explained today’s aggressive spike in HIBOR tightening.

Interventions to dampen volatility are not costless, warned Hao Zhou, strategist at Commerzbank. “On one hand, the market volatility will surge, which could lead to sell off in risk assets, therefore cracking down the market confidence,” he said. “On the other hand, as the central bank frequently intervenes, the market will tend to believe that CNY depreciation is inevitable, resulting in further capital outflows.”

And so the PBOC, like the Fed, remains trapped.

Confirming that today’s action was merely another intervention, Bloomberg reports that big Chinese banks sold dollars to support the currency: at least three Chinese banks sold USD onshore, pushing CNY higher, two traders were quoted by BBG. USD/CNH selling was also seen, focused on covering funding needs, according to FX traders in North Asia

4 EUROPEAN AFFAIRS

none today

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

The house passed the bill unanimously and it is now up to Obama to veto it.  He has just stated that he would veto.  However if he does not veto, the Saudis are threatening world chaos and extremism will follow.  No doubt that they will unload all of their bonds onto the USA.  Also the House can send the bill again and if 60% of the vote passes, it becomes law from which the Saudis will unleash their scorn!

(courtesy zerohedge)

Saudis Threaten US: “Passage Of Sept 11 Law Will Lead To Instability, Chaos And Extremism”

When Congress unaninmously passed a bill last Friday known as “Justice Against Sponsors of Terrorism Act,” or JASTA, allowing families of 9/11 victims to sue Saudi Arabia in U.S. courts, there was confusion whether Obama would still veto said bill, as he had threatened to previously, even though by sheer numbers Obama’s veto may be overruled, leaving him hanging and appearing to support a Saudi position over that of the US people. Then on Monday we got the answer when White House press secretary Josh Earnest announced that Obama would still veto said bill. “That is still the plan,” Earnest said. “The president does intend to veto this legislation.”

The Saudis, however, are not taking any chances, and are back to engaging in the same verbal warnings they unleashed in April of this year, when they suggested passage of the law would force the kingdom to sell its US-denominated reserves: threats.

As Reuters reports, a senior Saudi policy adviser on Wednesday condemned a U.S. bill that would allow families of victims of the Sept. 11 attacks to sue the kingdom for damages, warning it would stoke instability and extremism. In other words, if Obama fails too stop a law which everyone in Congress voted for, the US would suffer.

“This legislation sets a dangerous precedent in the field of international relations,” Abdullah Al al-Sheikh was quoted as saying by state news agency SPA. Al al-Sheikh is the speaker of the Shura Council, an appointed body that debates new laws and advises the government on policy.

“(The bill risks) triggering chaos and instability in international relations and might contribute to supporting extremism, which is under intellectual siege, as the new legislation offers extremists a new pretext to lure youths to their extremist thoughts,” al-Sheikh added without elaborating.

JASTA would remove sovereign immunity, preventing lawsuits against governments, for countries found to be involved in terrorist attacks on U.S. soil. Saudi Foreign Minister Adel al-Jubeir said on May 2 that the kingdom had warned the United States that the proposed law would erode global investor confidence in America.

Fifteen of the 19 hijackers who crashed airliners in New York, outside Washington and in Pennsylvania on Sept. 11, 2001 were Saudi nationals; furthermore the recently released formerly classified “28 pages” showed a clear connection between Saudi officials and events on Sept 11, but the Saudi government has strongly denied responsibility and has lobbied against the bill.

That has not stopped some members of Congress from becoming increasingly vocal in criticizing Saudi Arabia, long a U.S. ally and trade partner.

A bigger question is whether the Saudis have backed off their previous threat to dump US Treasuries in case Obama fails to veto a bill which all of America wants passed; needless to say Obama finds himself in a rather unpleasant situation – deciding how to appease a country which has openly threatened the US if it does not get its way, potentially roiling the bond market at a very sensitive time, and at the same time avoiding to appear like a traitor to an entire nation with just a few months left in his term.

end

6. GLOBAL ISSUES

And now the next nation to turn against the USA: the Philippines.  They are now buying weapons from Russian and China

(courtesy zero hedge)

Duterte Turns Back On US, Orders Philippines To Buy Weapons From Russia And China

While until now the verbal outbursts of the outspoken, “vulgar” Philippines president Rodrigo Duterte, who last week called president Obama a “son of a whore” (before he  were mostly bark, and no bite, something changed yesterday.

In an abrupt departure from his nation’s longstanding military reliance on the U.S., Duterte said the Philippines would pursue “independent” foreign and military policies separate from US interests in the region, and ordered his defense secretary to seek weapons from suppliers in China and Russia to fight drug traffickers and insurgents. In another dramatic shift, the WSJ notes that the president also said Tuesday that the Philippines would stop patrolling the South China Sea alongside the U.S. Navy, to avoid upsetting Beijing. Instead, he said the nation’s military would focus on combating drugs and terrorism, handing a major diplomatic victory of Beijing and a symbolic loss to the US and its support of non-Chinese terrotorial claims to the South China Sea.


Philippine President Rodrigo Duterte, wearing a pilot’s jacket, gestures
on Tuesday with Defense Chief Delfin Lorenzana

The Philippines has had close ties with the U.S. for decades, most recently bolstering military cooperation through a 2014 pact. Both Washington and Manila have leveraged their alliance to counter China, whose increasingly assertive actions in support of its maritime claims have stoked unease in the region. But since coming to power on June 30, Mr. Duterte has indicated he wants to distance the Philippines from the U.S., a stance that threatens to alter the precarious strategic balance of power in the Asia-Pac region, especially when it comes to US interests. As we previously reported, in his initial anti-US shift, Duterte said on Monday that he wanted the U.S. military to leave Mindanao, the site of a strategic base set to host American forces.

Mr. Duterte’s statements this week were the latest in a string of developments that have pleased, surprised and horrified his audiences since he took office. His so-called war on drugs and crime has already claimed 2,956 lives, according to police, and his sometimes crude statements have insulted targets as varied as the pope, the United Nations head and U.S. President Barack Obama.

However, it has been his abrupt snubbing of Obama that has provoked the most surprise, indignation, outrage and admiration. Duterte continued his open criticism of American security policies, when in a televised speech on Tuesday before military officers in Manila, he said a ‘paradigm shift’ is coming in the country’s dealing with allies. “We are not cutting our alliances – military (alliances) as well. But certainly, we will follow an independent posture and independent foreign policy,” Duterte said.

The first step for the Philippines would be to opt out of US-led patrols of the South China Sea because the country does “not want trouble,” the president said announcing that his navy “will not join any expedition of patrolling the seas… because I do not want my country to be involved in a hostile act.”

In the second step, Duterte hinted that he was ending Phillipino reliance on US weaponry by at least partially shifting the procurement of arms to Russia and China. Duterte said that the two countries had agreed to give the Philippines a 25-year soft loan to buy military equipment.

About 75% of the Philippines’ arms imports since the 1950s came from the US, according to Stockholm International Peace Research Institute. Russia and China have since that time have been out of the loop. In announcing a definite shift in defense policy, the president said that he wanted to buy arms “where they are cheap and where there are no strings attached and it is transparent.”

“Let’s contend ourselves with the propeller-driven planes but which we can use extensively in counter-insurgency,” Duterte added. “I don’t need jets, F-16 – that’s of no use to us… we don’t intend to fight any country.”

Preempting what would be an angry response from the White House, Duterte’s spokesman said that the Philippines would continue to honor agreements with the US such as the Enhanced Defense Cooperation Agreement (EDCA) and the Visiting Forces Agreement (VFA). “We’re not turning back on anybody. We are just charting an independent course,” the spokesman said. We doubt that will placate Obama, or his replacement.

The country’s Foreign Affairs Secretary Perfecto Yasay also clarified Duterte’s message to US troops, saying: “There is no shift in so far as our policy is concerned with respect to our close friendship with the Americans.”

Naturally, the US responded in the most neutral possible way: State Department spokesman John Kirby said that Washington was aware of Duterte’s comments, but was “not aware of any official communication by the Philippine government to that that effect and to seek that result.” He will be soon.

Pentagon spokesman Commander Gary Ross meanwhile said that US-Philippine relationship “has been a cornerstone of stability for over 70 years.”  “We will continue to consult closely with our Filipino partners to appropriately tailor our assistance to whatever approach the new Administration adopts,” Ross said.

Alas, Ross may also have to consult with the Philippines’ new strategic partners too: Russia and China; he will hardly enjoy it.

7. OIL ISSUES

Crude tumbles again below 45 dollars

(courtesy zerohedge)

WTI Crude Crumbles Below $45 Again As Inventory Hype Disappears

 

end

Oil first rises and then falters as the Dow heads into negative territory:

(courtesy zerohedge)

Oil Pumps’n’Dumps As Algos Fight Over Distillates/Gasoline Inventories Surge & Surprise Crude Draw

Following last week’s Hurrican Hermine-inspired collapse in crude inventories (and API’s disapponting build), DOE surpreised with another (small) inventory draw (559k barrels). However, machinese were confused as the week sawmajor builds in Gasoline (most in 2 months) and Distillates (most in 8 months). Crude production rose (+0.4% WoW) for the first time in 4 weeks further confusing the algos. For now prices are higher post-inventories…

API

  • Crude +1.4mm (+4mm exp)
  • Cushing -1.12mm (-300k exp)
  • Gasoline -2.4mm (-1.1mm exp)
  • Distillates +5.3mm

DOE

  • Crude -559k (+1.44mm exp)
  • Cushing -1.245mm (-300k exp)
  • Gasoline +567k (-1.1mm exp)
  • Distillates +4.6mm

Last week, EIA data showed crude inventories unexpectedly fell 14.5m bbl, 2nd-biggest drop since EIA records began in 1984, after Tropical Storm Hermine battered imports; but API overnight and now DOE data has confused themn even more. The product builds are the most notable…

Crude production rose for the first time in 4 weeks…

And imports bounced back dramatically after the storm – biggest rise since 2015…

As one analyst explained, “considering how wrong it was estimated last week there may be some nervousness” about the actual numbers and judging by the chaotic moves following API, the DOE follow-through wil lbe just as nerve-wracking for the machines… and the crude draw versus product build confused them to start with before the maltup…

Prices initially kneejerked higher but the product build and increased production sparked panic-selling once $45 (API) stops had been run…

Charts: Bloomberg

end

8. EMERGING MARKETS

VENEZUELA

A dozen eggs: 150 dollars.  Middle class fathers cannot feed their families as they scour garbage cans looking for food.  May I remind everyone that Venezuela has the largest oil reserves in the world and yet this once  experiment in social utopia has ended in a failed state:

 

I would also like to point out that the moronic Maduro is using his last reserves of gold to pay for stuff. You can just imagine what will happen when the last oz is used up.

(courtesy Warner/Gatestone Institute).

 

Venezuela’s “Death Spiral” – A Dozen Eggs Cost $150 As Hyperinflation Horrors Hit Socialist Utopia

Submitted by Susan Warner via The Gatestone Institute,

  • The question of whether Socialism can be an effective economic system was famously raised when Margaret Thatcher said of the British Labor Party, “I think they’ve made the biggest financial mess that any government’s ever made in this country for a very long time, and Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them. They then start to nationalise everything.”
  • There are dire reports of people waiting in supermarket lines all day, only to discover that expected food deliveries never arrived and the shelves are empty.
  • There are horrific tales of desperate people slaughtering zoo animals to provide their only meal of the day. Even household pets are targeted as a much-needed source for food.
  • President Maduro is doubling down on the proven failed policies and philosophies of “Bolivarian Socialism,” while diverting attention away from the crisis — pointing fingers at so-called “enemies” of Venezuela such as the United States, Saudi Arabia and others.
  • A dozen eggs was last reported to cost $150, and the International Monetary Fund “predicts that inflation in Venezuela will hit 720% this year.

For many Venezuelans, by every economic, social and political measure, their nation is unravelling at breakneck speed.

Severe shortages of food, clean water, electricity, medicines and hospital supplies punctuate a dire scenario of crime-ridden streets in the impoverished neighborhoods of this nearly failed OPEC state, which at one time claimed to be the most prosperous nation in Latin America.

Today, a once comfortable middle-class Venezuelan father is scrambling desperately to find his family’s next meal — sometimes hunting through garbage for salvageable food. The unfortunate 75% majority of Venezuelans already suffering extreme poverty are reportedly verging on starvation.

Darkness is falling on Hugo Chavez’s once-famous “Bolivarian revolution” that some policy experts, only a short time ago, thought would never end.

In a 2007 study on the Chavez years for the Washington, DC-based Center for Economic and Policy Research, Mark Weisbrot and Luis Sandoval wrote:

“[a]t present it does not appear that the current economic expansion is about to end any time in the near future. The gains in poverty reduction, employment, education and health care that have occurred in the last few years are likely to continue along with the expansion.”

While it was not so long ago that many people heralded Venezuela as Latin America’s successful utopian Socialist experiment, something has gone dreadfully wrong as the revolution’s Marxist founder, Hugo Chavez, turned his Chavismo dream into an economic nightmare of unimaginable proportions.

The question of whether Socialism can be an effective economic system was famously raised whenMargaret Thatcher said of the British Labor Party:

“I think they’ve made the biggest financial mess that any government’s ever made in this country for a very long time, and Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them. They then start to nationalise everything, and people just do not like more and more nationalisation, and they’re now trying to control everything by other means.”

In short: “The trouble with Socialism is that eventually you run out of other people’s money.”

When President Nicolas Maduro inherited the Venezuelan Socialist “dream”, in April of 2013, just one month after Chavez died, he was facing a mere 53% inflation rate. Today the Venezuelan bolivar isvirtually worthless, and inflation is creeping to 500% with expectations of much more. A recent Washington Post report stated:

” …markets expect Venezuela to default on its debt in the very near future. The country is basically bankrupt. It is not easy for a nation to go bankrupt with the largest oil reserves in the world, but Venezuela has managed it. How? Well, a combination of bad luck and worse policies. The first step was when Hugo Chávez’s socialist government started spending more money on the poor, with everything from two-cent gasoline to free housing. That may all seem like it’s a good idea in general — but only as long as there’s money to spend. And by 2005 or so, Venezuela didn’t have any.”

Chavez had the good fortune to die just before the grim reaper showed up on Venezuela’s doorstep. According to policy specialist Jose Cardenas:

“What began as a war against the ‘squalid’ oligarchy in order to build what he called ’21st-century socialism’ — cheered on as he was by many leftists from abroad — has collapsed into an unprecedented heap of misery and conflict.”

Maduro is doubling down on the failed Chavismo economic and social policies that have contributed to an inflationary crisis not seen since the days of the 1920’s Weimar Republic in Germany, when the cost of a loaf of bread was a wheelbarrow full of cash.

Demonstrations and public cries for food are the unpleasant evidence of a once-prosperous society being torn apart by the very largess that marked its utopian ideals less than a decade ago.

There are dire reports of people waiting in supermarket lines all day, only to discover that expected food deliveries never arrived and the shelves are empty.

In desperation, some middle class families have organized online barter clubs as helpless citizens seek to trade anything for diapers and baby food, powdered milk, medicines, toilet paper and other essentials missing from store shelves or available only on the black market for double and triple already impossibly inflated prices..

There are horrific tales of desperate people slaughtering zoo animals to provide their only meal of the day. Even household pets are targeted as a much-needed source for food. This is a desperate time for a desperate people.

As things continue to worsen, President Maduro, unfortunately, is doubling down on the proven failed policies and philosophies of “Bolivarian Socialism,” while diverting attention away from the crisis —pointing fingers at so-called “enemies” of Venezuela such as the United States, Saudi Arabia and others.

Efforts to convince Maduro to enlist help from outside have failed, according to a report in the Catholic magazine, Crux:

Maduro has refused to accept help from international charitable organizations, including the Vatican-sponsored Caritas Internationalis, which through different affiliates has tried to send medicine and food.

“Denying that there’s a crisis and refusing to let the world send medicine and food is not possible,” said Cardinal Jorge Urosa Savino, archbishop of Caracas.

The prelate believes that Maduro is refusing to accept help in an attempt to hide the “very grave situation of total shortage,” which far from improving, he said, continues to deteriorate.

According to Breitbart:

“The Venezuelan Episcopal Conference, the organization of the nation’s Catholic bishops, issued a scathing statement condemning president Maduro for giving the military full control of the nation’s food supply, accusing him of being at the helm of a devastating “moral crisis” and crippling every aspect of life in Venezuela.”

In what some economists have been calling a “death spiral”, the government’s failed economic policies are at the same time causing and trying to stem a runaway inflation with price-fixing policies which, in turn, are triggering shortages. Maduro is strongly urging businesses and farmers to sell their goods at severe losses, forcing shut-downs when the cost of doing business becomes prohibitive.

According to a recent Bloomberg report, the black market is thriving because goods are unavailable at prices fixed by the government. There are reports of ordinary people quitting inadequate-paying jobs to set up black market operations, hoping to be able to make enough to sustain life.

A dozen eggs was last reported to cost $150, and the International Monetary Fund “predicts that inflation in Venezuela will hit 720% this year. That might be an optimistic assessment, according to some local economic analysts, who expect the rate to reach as high as 1,200%.”

According to a Bloomberg report from April:

“In a tale that highlights the chaos of unbridled inflation, Venezuela is scrambling to print new bills fast enough to keep up with the torrid pace of price increases. Most of the cash, like nearly everything else in the oil-exporting country, is imported. And with hard currency reserves sinking to critically low levels, the central bank is doling out payments so slowly to foreign providers that they are foregoing further business.

“Venezuela, in other words, is now so broke that it may not have enough money to pay for its money.”

In the midst of this galloping cataclysm, there is no shortage of pundits who simplistically assert that the catastrophe is caused solely by the international collapse of oil prices. However, according to Justin Fox at Bloomberg:

“The divergence between Venezuela’s revenue and spending started long before (the 2014) oil-price collapse. When oil prices hit their all-time high in July 2008, government revenue — 40 percent of which comes directly from oil — was already falling. The main problem was Venezuelan oil production, which dropped from 3.3 million barrels a day in 2006 to 2.7 million in 2011. It was still at 2.7 million in 2014, according to the latest BP Statistical Review of World Energy.”

“Venezuela isn’t running out of oil. Its proven reserves have skyrocketed since 2000 asgeologists have learned more about the heavy crude of the Orinoco Belt. But getting at that oil will take a lot of resources and expertise, both things that Venezuela’s state-owned oil company, Petroleos de Venezuela (PDVSA, best known in the U.S. for its Citgo subsidiary), has been lacking in since Chavez initiated a sort of hostile takeover starting in the early 2000s. First he kicked out 18,000 workers and executives, 40 percent of the company’s workforce, after a strike. Then he started demanding control of PDVSA’s joint ventures with foreign oil companies. One could interpret this in the most Chavez-friendly way possible — he was aiming for a more just allocation of his nation’s resources — and still conclude that he made it harder for PDVSA to deliver the necessary tax revenue.”

Cronyism and corruption prevailed under Chavez when oil was selling at almost $200 a barrel — at a time when Venezuela could have put some money away for the inevitable rainy day. But President Hugo Chavez and successor president Maduro, were busy buying votes and consolidating power with free giveaways, according to Michael Klare in The Nation.

Behind the doom and gloom Venezuela’s collapse is the continuing specter of street crime and murder, according to Time.com in a May 2016 report:

“The country’s runaway murder rate is just one of the factors driving opposition to President Nicolas Maduro in a country where shortages of food and basic goods are chronic, inflation is running rampant and the government is jailing political prisoners. But it serves as a bloody illustration of just how close to outright societal collapse Venezuela has come since the end of the 20th century, as gangs, guerrillas and militia defend their turfs and traditional authority structures fall by the wayside.”

Venezuela’s crime rate is one of the highest in the world. Called the world’s most homicidal nation, Venezuela has more than street crime, thuggery and murder. Drug cartels, black marketeers, narcoterrorists, white collar criminals and money launderers are unfortunate hallmarks of the Chavez/Maduro legacy.

The ruin of this once prosperous, oil-rich nation might be a harbinger for other nations, such as the United States, which may be tempted into believing that Socialist giveaway policies actually can provide the promise of a free lunch for longer than the next election cycle. Or might that be all many politicians need or want?

Venezuela’s food shortages, hyperinflation, black marketeers, narcoterrorists and money launderers are unfortunate hallmarks of the legacy of Presidents Chavez (left) and Maduro (right).

 

end

BRAZIL

Former President of Brazil Lula has now been charged with corruption

(courtesy Bruce Douglas/Bloomberg)

Brazil Prosecutors Charge Lula With Corruption, Papers Report

Prosecutors in Brazil charged former President Luiz Inacio Lula da Silva with corruption and money laundering, in the latest phase of an investigation that has tarnished the legacy of the once hugely popular leader, according to local media reports.Investigators confirmed the charges filed by federal police at the end of August, news publications including UOL, G1 and Estadao reported on Wednesday. The former president and his wife, Marisa Leticia, are accused of receiving improper benefits from a construction company in the form of improvements to a beach-side apartment. Lula has repeatedly denied any wrongdoing and says that he is the victim of political persecution.Prosecutors are scheduled to hold a press conference in the city of Curitiba later on Wednesday.

The latest charges against Lula mark the continued momentum behind the so-called Carwash probe, a corruption investigation that has gripped a nation long accustomed to the impunity of its political elite. Dozens of top business executives have been jailed and around 50 serving politicians are under investigation for their role in a corruption scandal centered around the state-owned oil company Petrobras.

Towering Figure

Earlier this week, Congress voted to expel Eduardo Cunha, the former speaker of the house and mastermind of the impeachment of Dilma Rousseff, on accusations he lied over Swiss bank accounts which prosecutors claim he used to stash kickbacks.

Despite the accusations against him, Lula remains a towering political figure in Brazil and the Workers’ Party’s preferred presidential candidate for the 2018 elections. A possible trial of the former president could prove problematic for newly-confirmed President Michel Temer, who continues to face street protests questioning the legitimacy of his mandate.

The 70-year old former trade union leader has been under increased scrutiny in recent months as investigators examined allegations ranging from obstruction of justice to accepting perks from construction companies in exchange for favors. Police raided his home and detained him for questioning in March, setting off a political firestorm.

The accusations weakened him politically just when his hand-picked successor, Rousseff, needed him the most. The courts prevented him from joining her cabinet before Congress voted to temporarily remove her from office and put her on trial for allegedly using accounting tricks to mask the size of the budget deficit. She lost the trial in August, resulting in the end of her presidency.

Millions of Brazilians rose out of poverty during Lula’s two terms as president, and he left office in 2011 with record-high approval ratings.
end

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

Euro/USA   1.1228 UP .0010 (STILL  REACTING TO BREXIT/REACTING TO BRITISH CUT IN INTEREST RATE TO .25%

USA/JAPAN YEN 102.67  UP .168(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 1.3204 UP .0012 

USA/CAN 1.3169 UP .0011

Early THIS WEDNESDAY morning in Europe, the Euro ROSE by 10 basis points, trading now well above the important 1.08 level RISING to 1.1228; Europe is still reacting to Gr Britain BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and NOW THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE / Last night the Shanghai composite CLOSED DOWN 20.66 POINTS OR 0.68%    / Hang Sang CLOSED DOWN 25.12 POINTS OR 0.11%     /AUSTRALIA IS HIGHER BY 0.38% EUROPEAN BOURSES ALL IN THE GREEN

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 WEDNESDAY morning CLOSED DOWN 114.80 POINTS OR 0.69%  

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 25.12 POINTS OR 0.11%  ,Shanghai CLOSED DOWN 20.66  POINTS OR 0.68%    / Australia BOURSE IN THE GREEN: /Nikkei (Japan)CLOSED IN THE RED   INDIA’S SENSEX IN THE RED 

Gold very early morning trading: $1321.90

silver:$19.00

Early WEDNESDAY morning USA 10 year bond yield: 1.715% !!! DOWN 3 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  2.450, DOWN 3 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 WEDNESDAY morning: 95.46 DOWN 11 CENTS from TUESDAY’s close.

This ends early morning numbers WEDNESDAY MORNING

END

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And now your closing WEDNESDAY NUMBERS

Portuguese 10 year bond yield: 3.267%  DOWN 3 in basis point yield from TUESDAY  (does not buy the rally)

JAPANESE BOND YIELD: -.021% DOWN 1 in   basis point yield from TUESDAY

SPANISH 10 YR BOND YIELD:1.07% DOWN 3 IN basis point yield from TUESDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.294 DOWN 3 in basis point yield from TUESDAY 

the Italian 10 yr bond yield is trading 22 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +0.021% DOWN5 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR WEDNESDAY

Closing currency crosses for WEDNESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/2:30 PM

Euro/USA 1.1246 UP .0027 (Euro UP 27 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 102.28 DOWN: 0.224 (Yen UP 23 basis points/

Great Britain/USA 1 .3226 UP 0.0035 ( Pound UP 35 basis points/BREXIT DECISION AFFIRMATIVE/THE BREXIT HAS NOT HURT ENGLAND AT ALL!~

USA/Canada 1.3190 UP 0.0033 (Canadian dollar DOWN 33 basis points AS OIL FELL (WTI AT $43.70). Canada keeps rate at 0.5% and does not cut!

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was UP by 27 basis points to trade at 1.1246

The Yen FELL to 102.28 for a GAIN of 22 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 ROSE 35 basis points, trading at 1.3226/

The Canadian dollar FELL by 33 basis points to 1.3190, WITH WTI OIL AT:  $43.70

 

The USA/Yuan closed at 6.6725

the 10 yr Japanese bond yield closed at -.021%  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 TUESDAY 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 WEDNESDAY

London:  CLOSED UP 7.68 POINTS OR 0.12%
German Dax :CLOSED DOWN 8.20 OR  0.08%
Paris Cac  CLOSED DOWN 16.92 OR 0.39%
Spain IBEX CLOSED DOWN 21.80 OR 0.25%
Italian MIB: CLOSED DOWN 7.85 POINTS OR 0.05%

The Dow was DOWN 31.98 points or 0181% 

NASDAQ  UP 18.32 points or 0.36%
WTI Oil price; 43.70 at 4:30 pm;

Brent Oil: 45.88

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  65.12 (ROUBLE UP  20/100 ROUBLES PER DOLLAR FROM FRIDAY) 

TODAY THE GERMAN YIELD FALLS TO +0.021%  FOR THE 10 YR BOND

END

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

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

WTI CRUDE OIL PRICE 5 PM:$43.67

BRENT: $45.99

USA 10 YR BOND YIELD: 1.6959%

USA DOLLAR INDEX: 95.35 DOWN 25 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.32359 UP 0.0044 or 44 basis pts.

German 10 yr bond yield at 5 pm: +0.073%

END

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

Stocks Slump To ‘Rosengren Lows’ As Crude Carnage & China Credit Crunch Continues

Get back to work ‘Mr’ Yellen…

Very quietly – away from the mainstream media cheerleaders – Chinese money markets are turmoiling…

More pressure on stocks and bonds (long-end underperforming and broad equity market slide) as Risk-Parity funds plunge...

and in real-time… risk-parity suffered more today...

VIX ETF and Futures Volume was yuuge once again; suggesting something is afooot

Stocks dipped with crude early on, crude spiked algortihmically on the DOE data, then slid back below $44… and stocks slowly caught down…

Stocks on the day desperately tried to get back to green in the last 30 mins… Nasdaq managed to hold greentoday with AAPL’s yuuge move...

AAPL had a big day but faded…

But on the week stocks hit Rosengren lows…

Post-Rosengren, oil has crashed, stocks are slumping and bonds and gold are outperforming (but lower)…

Financials and the yield curve continue to converge (note 2s30s steepest since June)…

Treaury yields slipped lower today across the entire curve bull steepening (2Y -4bps, 30Y -1bp)…

The USD Index drifted lower on the day (despite further weakness in commodiry currencies) as JPY strengthened; back to unch on the week…

Crude was clobbered again, PMs flatlined, but Copper gained as USD slid lower

Charts: Bloomberg

Bonus Chart :Perhaps the most important chart for us all…

end

 

Trading early this morning:10 am est
(courtesy zero hedge)

Stocks Suddenly Tumble In Catch-Down To Oil’s Slump

In what is normally the pre-open ramp time, US equity markets just jolted lower into the red as they finally stopped ignoring the plunge in crude prices this morning…

Looks like stocks have further to fall…

end

 

This is something to watch:  Risk Parity funds have been experiencing a bloodbath as stocks crashed!

(courtesy zero hedge)

The Last Time This Happened, Stocks Crashed

Wondering why the stock and bond markets are tumbling simultaneously? Confused by the market’s apparent inability to follow the mainstream media’s narrative that higher rates are good for markets? Wonder no longer – the answer, as we have previously detailed – is the collapse in so-called “risk-parity” funds that force leveraged long positions in equity and bond markets to be unwound en masse.

The last few days have seen the biggest plunge in risk-parity funds since last August’s market crash…

Which forces the funds to dump bonds and stocks… and as volatility increases the selling is exacerbated in a vicious cycle…

And something yuuge is happening in the VIX complex…

As we previously explained, a generation of traders have grown up with the idea that stock prices and bond yields tend to rise and fall together, as what is good for stocks is bad for bonds (pushing the price down and yield up), and vice versa. However, as The Wall Street Journal reports, this summer, the relationship seems to have broken down in the U.S. Share prices and bond yields moved in the same direction in just 11 of the past 30 trading days, close to the lowest since the start of 2007.

This is far from unprecedented. But since Lehman Brothers failed in 2008, such a swing in the relationship has been unusual and suggests prices are being driven by something other than the balance of hope and fear about the economy. It has tended to coincide with times of deep discontent in markets, notably the 2013 “taper tantrum,” when bond yields briefly surged after Federal Reserve officials signaled they would soon end stimulus, and last year’s brief bubble in German bunds.

The simplest explanation is that expectations of interest rates being lower for longer—some central bankers have suggested lower forever—pushes the price of everything up, and yields down. When the focus is on the discount rate used to value all assets, bond and stock prices rise and fall together, creating the inverse relationship between bond yields and shares.

Such a focus on monetary policy isn’t healthy. It leaves markets more exposed to sudden shocks,both from changes in policy and from an economy to which less attention is being paid.

“It’s a somewhat mercurial thing, but there are big shifts [in correlations], and being on the right side of those big shifts is important,” said Philip Saunders, co-head of the multiasset team at Investec Asset Management. “You do see some brutal price action at these correlation inflection points.”

Much depends on what is behind a selloff. For stocks and bonds to fall together needs rising interest rates combined with weak growth. Stagflation as in the 1970s could be one cause; a central-bank mistake could be another.

Or, as Alasdair Macdonald, head of U.K. advisory portfolio management at Willis Towers Watson says, such a breakdown could be caused by a loss of faith in central banks. “Investors might realize that the central banks have run out of ammunition, and they can’t keep pushing up asset prices further,” he said.

Raising notable concerns over a risk-parity fund blow up. As BofA warns: “Latent risk remains worth monitoring,as (i) leverage is still near max levels across a variety of risk parity  parametrizations, (ii) bond allocations are historically elevated, and (iii) markets continue to be sceptical of a 2016 Fed hike.”

If BofA is correct, it would mean that a day which sees a -4% SPX drop and +1% bond rally (good diversification) would generate no selling pressure, “underscoring the critical role played by bond-equity correlation in governing the severity of risk parity unwinds.” However, a troubling scenario is one where even a relatively benign 2% selloff of the S&P coupled with just a 1% selloff of the 10Y could result in up to 50% deleveraging, which in turn would accelerate further liquidations by other comparable funds, and lead to a self-fulfilling crash across asset classes.

Which incidentally sounds like precisely the scenario that could happen when the Fed tries to raise rates, and is also why asset classes continue to move without fear of any rate hike, as they now realize – very well – just how trapped the Fed truly is. That said, in short order, we will see if the Fed, for once, has the intestinal fortitude to actually raise rates in the face of the extreme volatility awaiting equities in the event they do… we doubt it.

What kind of ‘event’ could occur this time?As we noted previously, it appears the bigger concerns are on the stock side of the imbalance… 

end

And it was all going so well…

In the key state of Ohio, Donald Trump leads Hillary by 5 full percentage points

(courtesy zero hedge)

Trump Soars In Latest Polls: Sees 5 Point Lead In Ohio And Latest LA Times National Poll

end

We now have only 6 co operative health funding facility left.  Today Health Republkic Insurance of New Jersey is folding due to hazardous financial conditions:

(courtesy Mish Shedlock/Mishtalk)

17th Obamacare Co-Op Exits Due To “Hazardous Financial Conditions” – Only 6 Left

Now it’s Ford’s turn to warn of a decline in 2017 income as sales have reached a plateau;

(courtesy zero hedge)

Ford Warns That EBIT Will “Decline In 2017” As Sales Have “Reached A Plateau”

As Ford prepares for it’s annual investor day, the company announced expectations this morning thatoperating income will decline in 2017 as the automaker increases investment in electric and autonomous vehicles, before rising again in 2018.  This news comes after Ford just lowered it’s expectations for FY 2016 EBIT to $10.2BN from $10.8BN due to increasing costs associated with an expanded recall related to faulty door latches.  This latest profit warning from Ford also comes just weeks after executives, on their August sales call, provided sobering commentary on future auto sales saying they believe sales have “reached a plateau” and will be “at a lower level” in 2017.  Below are some of the other key comments made on the August sales call:

“For the remainder of the year, we continue to see retail in the industry provide incentives still running at historically high levels, but down versus the record that we experienced in 2015.  Looking ahead to 2017, we continue to see industry sales are strong, but at a lower level than this year.”

“Sales have reached a plateau.”

“It’s just that we’re no longer in a period where we have a lot of pent-up demandcoming out of the financial crisis. So that’s why, I think we use the term plateau”

“Comparisons for the rest of the year are going to be really tough.”

Ford will also spend a lot of time at their investor day talking about their transition to focus on “mobility” and autonomous vehicles…something we warned would likely result in some financial growing pains over the long run (see “Ford Announces Plans To Self-Destruct Starting In 2021“)…but more on that later.

Ford’s investor presentation now calls for Adjusted EBT to be down for 2 consecutive years before recovering in 2018.  Why is the good year always a year away?

Ford

Meanwhile, Ford is apparently running “robustness” tests to analyze how the company would hold up in another “great recession” scenario.

Ford

But don’t worry, Ford will make money under almost any imaginable scenario. 

Ford

But, most of Ford’s time today will be spent talking about their growth opportunities including “autonomous” vehicles and “mobility” or ride sharing.

The company also is aggressively growing its autonomy leadership. Building on more than a decade of development experience, Ford intends to have a high-volume, fully autonomous SAE-defined level 4-capable vehicle in commercial operation in 2021 in a ride-hailing or ride-sharing service. The vehicle is being specifically designed for commercial mobility services without a steering wheel or gas and brake pedals.

By targeting its autonomous vehicle for a ride-hailing or ride-sharing service, Ford is changing the economics of mobility. Traditionally, owning a vehicle has cost between 70 cents and $1.50 a mile. By contrast, taking a taxi is four times more, and using ride-hailing is double the cost of an owned vehicle. Ford’s autonomous vehicle with a ride-hailing or sharing could reduce the cost to about $1 per mile – on par or even less than personal ownership with a vehicle that can improve safety, convenience and congestion.

Similarly, the company’s focus on leadership in mobility starts with the view that the world has moved from just owning vehicles to owning and sharing them. To start, Ford is working with global cities, starting in San Francisco, to help solve congestion and help move people more efficiently. Ford will acquire Chariot, a crowd-sourced shuttle service, to grow Ford’s dynamic shuttle services globally. It will provide affordable transportation and expand to at least five additional cities in 18 months.

Now, while Ford sees autonomous vehicles and ride sharing as opportunities (and they may well be in the short-to-medium term) we see long-term downside for the auto industry due to the inherent increase in utilization rates which will inevitably decrease the required rolling stock of passenger vehicles on the road (something we wrote about here:  “Ford Announces Plans To Self-Destruct Starting In 2021“).  Here is our comment on this issue from last month:

But the best part is that capacity utilization with fully autonomous cars can skyrocket driving per unit costs even lower for passengers.  For example, when you drive to work right now your car sits there all day until you drive home.  In the autonomous car world, that car will drive you to work then go pick up multiple other poeple to do the same thing. Now, if capacity utilization doubles from just 3% to 6% all of sudden half the number of cars are required in the US which means annual SAAR goes from ~17mm to ~8.5mm…which means Ford and GM likely find themselves in another bailout situation.

Normalized SAAR

But somehow we’re not surprised that while Ford chose to talk about the benefits of lower cost of ownership associated with autonomous vehicles they left out the downside of increased capacity utilization.  Nevertheless, here’s what they had to say.

Ford sees autonomous vehicles representing 20% of sales by 2030…

Ford

With a roll-out schedule looking something like this…

Ford

Meanwhile, Ford points out (as we have) that the cost per mile of an autonomous vehicle is even lower than the cost of personal ownership.  While this fact is great for vehicle owners…it’s not so great for vehicle manufacturers.

Ford

Ford also warns that initial autonomous vehicles will be unleashed to wreak their havoc on New York and Detroit.

Ford

end:

We will see you tomorrow night

Harvey

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