Sept 28/Gold and silver hit again as Janet speaks to Congress/A huge withdrawal of 1.614 million oz from the SLV/Deutsche bank in trouble again as credit default swaps rise to record levels/German government rumoured to be contemplating a rescue/Even sovereign Turkey thinks they can buy DB without those nasty derivatives/Financial Turmoil inside Saudi Arabia/ USA senate overturns Obama veto and embarrasses the President/Will Saudi cash in their 700 billion USA of treasuries?California “murders” Wells Fargo for their criminal activity!!!

Gold $1319.40 down $6.50

Silver 19.04  down 5 cents

In the access market 5:15 pm

Gold: 1322.50

Silver: 19.19

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.

And now the fix recordings:

Shanghai morning fix Sept 28 (10:15 pm est last night): $  1327.50

NY ACCESS PRICE: $1325.60 (AT THE EXACT SAME TIME)

Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1328.12

NY ACCESS PRICE: 1325.40 (AT THE EXACT SAME TIME)

HUGE SPREAD TODAY!!

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

London Fix: Sept 28: 5:30 am est:  $1324.80   (NY: same time:  $1324.80:    5:30AM)

London Second fix Sept 16: 10 am est:  $1322.50  (NY same time: $1324.80 ,    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.

end

For comex gold:The front September contract month we had 12 notices filed for 1200 oz

For silver:  the front month of September we have a total of 30 notices filed for 150,000 oz

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We are still in options expiry week.  The comex in NY expired yesterday but we still have options on the oTC silver and gold as well as LBMA options.  So I am afraid we will be under pressure until the end of the week.

 

 

Let us have a look at the data for today

.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest FELL by 1955 contracts DOWN to 201,486. The open interest ROSE DESPITE THE FACT THAT the silver price was DOWN 43 cents in yesterday’s trading .In ounces, the OI is still represented by just MORE THAN 1 BILLION oz i.e. 1.0007 BILLION TO BE EXACT or 144% of annual global silver production (ex Russia &ex China).

In silver we had 30 notices served upon for 150,000 oz

In gold, the total comex gold FELL by 16812 contracts as the price of gold fell BY $12.70 YESTERDAY . The total gold OI stands at 583,161 contracts.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

GLD

LAST NIGHT WE HAD NO CHANGES OUT OF THE GLD//

Total gold inventory rests tonight at: 949.14 tonnes of gold

SLV

we had a huge  change, a withdrawal of 1.614 million oz from the SLV

THE SLV Inventory rests at: 362.909 million oz

.

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

1. Today, we had the open interest in silver FELL by 1955 contracts down to 201,486 as the price of silver FELL by 43 cents with yesterday’s trading.The gold open interest FELL by 16,812 contracts DOWN to 583,161 as the price of gold fell $12.70 IN YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

end

3. ASIAN AFFAIRS

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 10.31 POINTS OR .34%/ /Hang Sang closed UP 47.75 POINTS OR 0.20%. The Nikkei closed DOWN  218.53 POINTS OR 1.31% Australia’s all ordinaires  CLOSED UP 0.12% /Chinese yuan (ONSHORE) closed DOWN at 6.6735/Oil ROSE to 45.32 dollars per barrel for WTI and 46.76 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.6868 yuan to the dollar vs 6.6735 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS  AS MORE USA DOLLARS   LEAVE CHINA’S SHORES

REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

3a)Korea:

none

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

You have to see the video and from that you can surely see that China has a housing bubble:

 

( zero hedge)

4 EUROPEAN AFFAIRS

i)Who blinks first with respect to the huge problems facing Deutsche bank:  the last sentence says it all!!!!

So who blinks first? The ECB knowing the collateral chains that will snap. The Bundesbank – knowing their entire banking system is at risk. The German government – knowing it’s over for them if DB depositors have to take a haircutOr Brussels (EU) – who know the entire EU plan is teetering is done if anything but the ‘rules’ are applied to Deutsche. For now, there is one thing for sure – the market will press for one of these players to be forced to make decision.

( zero hedge)

ii)The following is a biggy!  The German newspaper Zeit, a well respected paper states that the German finance ministry is working on a rescue plan for Deutsche bank to shore up its liquidity. They have denied the story but you can bet the farm that it is true

( zero hedge)

 

iib)Now it is the blame game.  Meanwhile back at the ranch , DB is in serious trouble:

( zer0 hedge)

iii)The Italian referendum is to be held on Dec 4.2016.  This is a thumbnail sketch as to what the citizens will be voting for

( zero hedge)

iv) OH OH!! This is going to go over real well!! Credit Suisse CEO claims that all EU banks are not investable!!!!( zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

i)Saudi Arabia

Now we know why Obama vetoed the Saudi bill as turmoil is setting inside the kingdom.  Bets on a Saudi devaluation is increasing as stocks crash and a debt deal is cancelled, all due to 9/11 anxiety

( zero hedge)

 

ii) Turkey

Your humour story of the day, Sovereign Turkey contemplates purchasing Deutsche bank

(zero hedge)

6.GLOBAL ISSUES

none today

7.OIL ISSUES

i)Goldman pounds the table that oil is heading lower

( Goldman Sachs/zero hedge)

ii)Oil first rises on production drops but then falls again after the biggest gasoline buildup in 4 months

( zero hedge)

iii)OPEC has reached an understanding on a production cut even though not one member has agreed to its cut. The level for OPEC is cut from 33 million barrels per day down to 32.5 million barrels/day. Interestingly both Russia and Iran are not mentioned.( zero hedge)

8.EMERGING MARKETS

none today

9.PHYSICAL STORIES

i)Rangold’s chief executive officer is one smart cookie.  He states that the gold industry needs to find 90 million oz a year to keep going.  They are only finding 10 million oz and thus a huge gold supply problem.  He could add Barrick’s huge problems where two major developments have been curtailed:  Pasqua Lama and Veladaro.

( Bristow/Rangold/GATA/Independent New/CapeTown)

ii)John Embry is warning the world on the huge increase in world debt and this will implode the system.  We are just not getting any increase in global growth anywhere.

( John Embry/Kingworldnews)

iii)These guys figured it out pretty good.  After building a depository they are now contemplating buying much gold/silver

( Tinsley/FortWorth Star-Telegram)

 

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

i)Wow!! Former Philly President Charles Plosser on Bloomberg just  admitted that Trump is correct on Yellen in that they are always conjuring up reasons not to act. He admitted that the Fed has basically no credibility

( zero hedge)

ii)This kind of shows you how the uSA economy is really behaving:  for the 20th consecutive month, core durable goods orders contract:  this is the longest non recessionary strak in USA history

(courtesy zero hedge)

iii)The treasurer of California has just ‘murdered’ Wells Fargo as it suspends 2 trillion USA banking relationships for the next 12 months;

( zero hedge)

Let us head over to the comex:

The total gold comex open interest FELL BY AN HUGE 16,812 CONTRACTS to an OI level of 583,161 as price of gold FELL by only $12.70 with YESTERDAY’S trading.We are continuing with the ritual that as soon as we approach the first day notice of an active month, the entire open interest complex obliterates. We are now in the NON active month of SEPTEMBER/

The contract month of Sept saw it’s OI ROSE by 3 contracts UP to 144. We had 5 notices filed yesterday so we GAINED BACK 8 gold contracts or an additional 800 gold ounces will  stand for delivery.. The next delivery month is October and here the OI lost 9,198 contracts DOWN to 14,318. This level is still extremely elevated.  To give you an idea as to its size, I will give you the burn rates for the 3 dates Sept 28, Sept 29 and Sept 30 last yr:

 

Sept 28.2015:  8279 contracts vs 14,318 Sept 28. 2016.

Sept 29.2015: 4351 contracts

Sept 30.2015: 3092  or 309200 oz (9.66 tonnes) standing for delivery. which was pretty good last yr.

We are a good 6,000 contracts ahead of last year. The next contract month of December showed an decrease of 7,478 contracts down to 450,651. The estimated volume today at the comex: 151,136 which is WEAK.  Confirmed volume yesterday: 218,381 which is good.

Today we had  12 notices filed for  1200 oz of gold.
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And now for the wild silver comex results.  Total silver OI FELL BY 1955 contracts from 203,441 DOWN to 201,486 as the  price of silver fell badly to the tune of 43 cents   yesterday.  We are moving  FURTHER 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 5 contracts down to 493. We had 4 notices filed upon yesterday so we LOST 1 contract or 5,000 additional oz will NOT stand  for delivery in this active month of September. The next non active delivery movement of October GAINED 32 CONTRACTS TO 372 contracts.  The next big delivery month is December and here it FELL by 3415 contracts DOWN to 173,722. The volume on the comex today (just comex) came in at 48,766 which is very good.  The confirmed volume yesterday (comex and globex) was huge at 71,608 . Silver is not in backwardation.  London is in backwardation for several months.

today we had 30 notices filed for silver: 150,000 oz

INITIAL standings for SEPTEMBER
 SEPT 28.
Gold
Ounces
Withdrawals from Dealers Inventory in oz  

NIL

Withdrawals from Customer Inventory in oz  nil
33,649.165 oz
 Delaware
Scotia
HSBC
incl. 5 kilobars
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
nil
No of oz served (contracts) today
12 notices 
1200 oz
No of oz to be served (notices)
132 contracts
(13,200 oz)
Total monthly oz gold served (contracts) so far this month
2670 contracts
267,000 oz
8.304 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   499,014.6 oz
 Today; good activity at the gold comex and 1 kilobar entries and another large amount of gold leaving the 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 deposit:
Total customer deposits: nil oz.
 We had 3 customer withdrawals:
i) Out of Delaware; 96.726 oz
ii) Out of Manfra: 160.75 ( 5 kilobars)
iii) out of HSBC: 33,649.165 oz  (real physical leaving)
total customer withdrawals: 33,649.165 oz
Today we had 0  adjustments:
 
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 12 contract  of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped (received) by jPMorgan customer account.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
To calculate the initial total number of gold ounces standing for the SEPT contract month, we take the total number of notices filed so far for the month (2670) x 100 oz or 267,000 oz, to which we add the difference between the open interest for the front month of SEPT (144 contracts) minus the number of notices served upon today (12) x 100 oz per contract equals 280,200 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 (2670) x 100 oz  or ounces + {OI for the front month (144) minus the number of  notices served upon today (12) x 100 oz which equals 280,200 oz standing in this non  active delivery month of SEPT  (8.7153 tonnes).
We gained an additional 800 oz that will stand.  We have surpassed  our original standings on first day notice. (ON FIRST DAY NOTICE 7.5561 TONNES STOOD FOR DELIVERY) as well as surpassing the 8 tonne mark and heading for the 9 tonnes.  This is without a doubt a record level of gold ounces standing for September.
Total dealer inventor 2,145,901.084 or 66.74 tonnes
Total gold inventory (dealer and customer) =10,575,923.641 or 328.9 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 328.95 tonnes for a  gain of 26  tonnes over that period. However since August 8 we have lost 26 tonnes leaving the comex.(corrected total from yesterday)
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 of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine.
 
IN THE LAST MONTH and one half , 26 NET TONNES HAS LEFT THE COMEX.
Ladies and Gentlemen:  We are now having our old fashioned run on the bank: the comex as gold is leaving by the buckets.

end
And now for silver
 
SEPT INITIAL standings
 SEPT28. 2016
Silver
Ounces
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
115,808.55 oz
CNT, Scotia
Deposits to the Dealer Inventory
 nil OZ
Deposits to the Customer Inventory 
1,212,358.38 oz
CNT
JPM
No of oz served today (contracts)
30 CONTRACTS
(150,000 OZ)
No of oz to be served (notices)
463 contracts
(2,315,000 oz)
Total monthly oz silver served (contracts) 2747 contracts (13,735,000 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  8,424,504.6 oz
today, we had 0 deposit into the dealer account:
total dealer deposit: nil oz
we had 0 dealer withdrawals:
 total dealer withdrawals: NIL oz
 we had 1 customer withdrawals:
i) Out of CNT: 29,637.500 oz
Total customer withdrawals: 29.637.5  oz
We had 2 customer deposit:
ii) Into JPM: 913,179.900oz
iii) Out of CNT: 299,178.480 oz
total customer deposits: 1,212,358.38  oz
 
 
 
 we had 0 adjustment
The total number of notices filed today for the SEPT contract month is represented by 30 contracts for 150,000 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 (2747) x 5,000 oz  = 13,735,000 oz to which we add the difference between the open interest for the front month of SEPT (493) and the number of notices served upon today (30) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the SEPT contract month:  2747(notices served so far)x 5000 oz +(493 OI for front month of SEPT ) -number of notices served upon today (30)x 5000 oz  equals  16,050,000 oz  of silver standing for the SEPT contract month.
we LOST 1  contract or an additional 5,000 oz will  stand FOR DELIVERY IN THIS  ACTIVE MONTH OF SEPTEMBER. 
 
Total dealer silver:  31.439 million (close to record low inventory  
Total number of dealer and customer silver:   173.396 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 28/ NO CHANGES AT THE GLD/INVENTORY RESTS AT 949.14 TONNES
SEPT 27/A huge withdrawal of 2.08 tonnes from the GLD/Inventory rests at 949.14 tonnes/
SEPT 26./no changes in gold inventory at the GLD/Inventory rests at 951.22 tonnes
SEPT 23/A SMALL CHANGE IN GOLD INVENTORY AT THE GLD: A DEPOSIT OF .3 TONNES/INVENTORY RESTS AT 951.22 TONNES
Sept 22/a huge deposit of 6.53 tonnes of gold into the GLD/Inventory rests at 950.92 tonnes/this would be a paper deposit entry/
SEPT 21/ A HUGE DEPOSIT OF 5.69 TONNES INTO THE GLD/INVENTORY RESTS AT 944.39 TONNES
SEPT 20/A HUGE CHANGES IN INVENTORY AT THE GLD/: A WITHDRAWAL OF 3.86 TONNES/INVENTORY RESTS AT 938.75 TONNES
SEPT 19/2016: 10.39 TONNES WERE ADDED INTO THE GLD/THIS WOULD BE A “PAPER DEPOSIT”/INVENTORY RESTS AT 942.61 TONNES
Sept 16./no change in gold inventory at the GLD/Inventory rests at 932.22 tonnes
SEPT 15/another paper withdrawal of 3.27 tonnes of “gold” inentory leaves the GLD/Inventory rests at 932.22 tonnes
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
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
SEPT 28/ Inventory rests tonight at 949.14 tonnes

end

Now the SLV Inventory
SEPT 28/ WE HAD A HUGE WITHDRAWAL OF 1.614 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 362.909 MILLION OZ/
SEPT 27./no change in silver inventory at the SLV/Inventory rests at 364.523 million oz/
SEPT 26./no changes in silver inventory at the SLV./Inventory rests at 364.523 million oz/
SEPT 23./A HUGE CHANGE IN INVENTORY AT THE SLV: AN ADDITION OF 1.044 MILLION OZ INTO INVENTORY/INVENTORY RESTS AT 364.523 MILLION OZ/
Sept 22/no change in inventory at the SLV/Inventory rests at 363.479  million oz/
SEPT 21/NO CHANGES IN INVENTORY AT THE SLV/INVENTORY RESTS AT 363.479 MILLION OZ/
SEPT 20/NO CHANGES IN INVENTORY AT THE SLV/INVENTORY RESTS AT 363.479 MILLION OZ
SEPT 19/A HUGE ADDITION OF 1.045 MILLION OZ WAS ADDED INTO THE SLV/INVENTORY RESTS AT 363.479 MILLION OZ/
Sept 16/no changes in silver inventory/inventory rests at 362.434 million oz/
SEPT 15/no change in silver inventory/inventory rests at 362.434 million oz.
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 28.2016: Inventory 362.909 million oz
 end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 4.9 percent to NAV usa funds and Negative 5.9% to NAV for Cdn funds!!!!  (the discount is starting to disappear)
Percentage of fund in gold 59.8%
Percentage of fund in silver:39.1%
cash .+1.1%( SEPT 28/2016).
2. Sprott silver fund (PSLV): Premium FALLS to +1.11%!!!! NAV (SEPT 28/2016) 
3. Sprott gold fund (PHYS): premium to NAV  RISES TO  0.97% to NAV  ( SEPT 28/2016)
Note: Sprott silver trust back  into POSITIVE territory at 1.11% /Sprott physical gold trust is back into positive territory at 0.97%/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

Euro “Might Start To Unravel” If Collapse Of Deutsche Bank

The euro “might start to unravel” if Deutsche Bank collapses according to respected financial journalist Matthew Lynn. “It all has a very 2008 feel to it …” he warns in the Telegraph where he outlines his growing concerns about Deutsche Bank, concerns we have written about in recent months. He writes:

Our image of German banks, and the German economy, as completely rock solid is so strong that it takes a lot to persuade us they might be in trouble.

And yet it has become increasingly hard to ignore the slow-motion car crash that is Deutsche Bank, or to avoid the conclusion that something very nasty is developing at what was once seen as Europe’s strongest financial institution. Its shares have been in free-fall for a year, touching a new low of 10.7 euros on Monday, down from 27 euros a year ago. Over the weekend, the German Chancellor Angela Merkel waded into the mess, briefing that there could be no government bail-out of the bank.

But hold on. Surely that is an extra-ordinary decision? If the German government does not stand behind the bank, then inevitably all its counter-parties – the other banks and institutions it deals with – are going to start feeling very nervous about trading with it. As we know from 2008, once confidence starts to evaporate, a bank is in big, big trouble. In fact, if Deutsche does go down, it is looking increasingly likely that it will take Merkel with it – and quite possibly the euro as well.

Merkel is playing a very dangerous game with Deutsche – and one that could easily go badly wrong. If her refusal to sanction a bail-out is responsible for a Deutsche collapse that could easily end her Chancellorship. But if she rescues it, the euro might start to unravel. It is hardly surprising that the markets are watching the relentless decline in its share price with mounting horror. 

GoldCore: Warren Buffett Quiote

We have warned about Deutsche Bank and its massive derivative book and potential insolvency for many months now – see
Fed’s Annual Stress Tests: Deutsche Bank & Santander Fail
CEOs of Deutsche Bank “Shown Door” – Trouble Brewing at World’s Largest Holder of Derivatives?

See full article in Telegraph here

Gold and Silver Bullion – News and Commentary

Gold extends losses as dollar, stocks rise (Reuters)

Gold prices mostly steady in Asia as rates, politics and OPEC mix (Investing)

WTO cuts 2016 world trade growth forecast to 1.7 percent, cites wake-up call (Reuters)

City-by-city look as house price gains slow (MarketWatch)

IMF sounds alarm bells over trade slowdown and low inflation (Telegraph)

7RealRisksBlogBanner

What the return of politics means for your money (MoneyWeek)

Dollar Going the Way of the Denarius (InternationalMan)

Transition of Price Discovery in the Global Gold and Silver Market (SafeHaven)

Will Deutsche Bank’s Collapse Be Worse Than Lehman Brothers? (GoldEagle)

Deutsche Bank To Blow Up and Create Euro “Chaos”? (DollarCollapse)

Gold Prices (LBMA AM)

28 Sep: USD 1,324.80, GBP 1,020.10 & EUR 1,181.06 per ounce
27 Sep: USD 1,335.85, GBP 1,031.01 & EUR 1,187.84 per ounce
26 Sep: USD 1,336.30, GBP 1,033.23 & EUR 1,188.91 per ounce
23 Sep: USD 1,335.90, GBP 1,027.17 & EUR 1,192.16 per ounce
22 Sep: USD 1,332.45, GBP 1,019.59 & EUR 1,186.68 per ounce
21 Sep: USD 1,319.60, GBP 1,015.96 & EUR 1,183.81 per ounce
20 Sep: USD 1,315.40, GBP 1,011.02 & EUR 1,175.84 per ounce

Silver Prices (LBMA)

28 Sep: USD 19.12, GBP 14.69 & EUR 17.05 per ounce
27 Sep: USD 19.42, GBP 14.99 & EUR 17.26 per ounce
26 Sep: USD 19.44, GBP 15.04 & EUR 17.29 per ounce
23 Sep: USD 19.82, GBP 15.28 & EUR 17.66 per ounce
22 Sep: USD 19.88, GBP 15.22 & EUR 17.69 per ounce
21 Sep: USD 19.43, GBP 14.95 & EUR 17.43 per ounce
20 Sep: USD 19.17, GBP 14.78 & EUR 17.15 per ounce


Recent Market Updates

– Do You Really Own Your Gold?
– “Gold Will Likely Soar To A Record Within Five Years”
– Savings Guarantee? U.N. Warns Next Financial Crisis Imminent
– Gold Up 1.5%, Silver Surges 3% – Yellen Stays Ultra Loose At 0.25%
– Trump and Clinton Are “Positive For Gold” – $1,900/oz by End of Year
– Gold Bugs Rejoice – Central Banks Think You’re On To Something
– ‘Hard’ Brexit Looms For Ireland
– EU Bail In Rules Ignored By Italy – Mother Of All Systemic Threats and World War?
– Buy Gold – Bonds Are ‘Biggest Bubble In World’ – Billionaire Singer Warns
– Silver Bullion Market – “Most Bullish Story Ever Told?”
– “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

Mark O’Byrne

Executive Director

end

 

Rangold’s chief executive officer is one smart cookie.  He states that the gold industry needs to find 90 million oz a year to keep going.  They are only finding 10 million oz and thus a huge gold supply problem.  He could add Barrick’s huge problems where two major developments have been curtailed:  Pasqua Lama and Veladaro.

(courtesy Bristow/Rangold/GATA/Independent New/CapeTown)

Randgold chief sees gold supply problem

Section:

By Dineo Faku
The Independent, Cape Town, South Africa
Tuesday, September 27, 2016

JOHANNESBURG, South Africa — Mark Bristow, South African-born founder and chief executive of Randgold Resources, foresees a looming supply problem in the gold industry, saying that there was not enough exploration to replace gold that was being produced.

Speaking to journalists in Johannesburg yesterday, Bristow said gold miners had to put effort into finding more quality ounces.

“To keep the gold industry supplied we need to discover 90 million ounces a year.” Bristow said. “We are discovering only 10 million to 15 million ounces a year. We either have to discover more quality ounces or reduce the life of mines.” …

… For the remainder of the report:

http://www.iol.co.za/business/companies/randgold-chief-sees-gold-supply-..

 

 

END

 

John Embry is warning the world on the huge increase in world debt and this will implode the system.  We are just not getting any increase in global growth anywhere.

(courtesy John Embry/Kingworldnews)

‘Debt binge’ will implode world financial system, Embry says

Section:

3:12p ET Tuesday, September 27, 2016

Dear Friend of GATA and Gold:

Sprott Asset Management’s John Embry tells King World News today that the implosion of the world financial system is approaching because of the “epic debt binge” of the last 30 years and market manipulation won’t forestall it forever. Embry’s interview is excerpted at KWN here:

http://kingworldnews.com/john-embry-warns-global-implosion-edges-closer/

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

 

 

END

 

These guys figured it out pretty good.  After building a depository they are now contemplating buying much gold/silver

(courtesy Tinsley/FortWorth Star-Telegram)

 

First up: a gold depository in Texas. And then?

Section:

By Anna M. Tinsley
Fort Worth Star-Telegram
Tuesday, September 27, 2016

A gold depository in Texas is just the first step.

After work begins on the state’s first bullion depository — and proposals to create it are due by the end of the week — then officials hope to bring more commodity markets to the state.

“Gold is just the first thing,” said state Rep. Giovanni Capriglione, R-Southlake, who asked lawmakers last year to create the depository. “We have been talking to other commodity players, asking if we can create a bigger platform. This is just the beginning of something we are starting.”

After a gold depository is up and running, he said, officials should look at cattle, oil, gas, and more.

“We want to say Texas is a place where you can not only buy and sell commodities, but you can receive a shipment of those products as well,” Capriglione said. “I see us being able to start turning this into something much more.” …

… For the remainder of the report:

http://www.star-telegram.com/news/politics-government/article104509111.h…

 

 

END

 

(courtesy Koos Jansen)

 

 

How Constant Is Gold’s Purchasing Power?

— Published: Wednesday, 28 September 2016

By Koos Jansen

https://www.bullionstar. com/

An often-perceived analysis in the gold community is that gold is the constant in our global economy. But is this true? Yes and no. Allow me to share my observations. Although gold has an exceptionally constant nature, and we have yet to see another currency that can compete with gold’s constant nature, the reality is, that there is no exact constant in economics. In any market all goods, assets, currencies, etc. continuously fluctuate in value relative to each other due to ever changing supply and demand dynamics. Having said that, in this post we’ll examine gold’s constant nature by measuring its purchasing power in the short (weeks) medium (years) and long term (decades). Additionally, we’ll compare our findings tofiat’s nature.

We will find that when gold is officially recognized as the center of a monetary system – throughout history there have been several forms ofgold standards– gold is approximately constant in the short, medium and long term. Since the gold standard has been abandoned, the metal has become less constant in the short and medium term, but has remained impressively constant in the long term.

In turn, fiat can have periods of being constant in the short term, but will always loose value in the medium term and evaporate in the long term. Thereby, due to fiat’s fragile nature and the current stress in global finance, there are also risks fiat can significantly devalue overnight. Hence, gold is highly suitable to secure one’s purchasing power.

When examining the value of gold we have to measure it in terms of goods and services. In this day and age one might forget the end goal of any participant in the economy is goods and services. All else traded in our vast financial system is merely a means to an end. All sorts of money, but also stocks, bonds, credit default swaps, options, futures, etc., have nouse-valuefor humans as we can’t eat, drink or wear them. Only goods and services we can truly use (for more information regarding use-value please read my postThe Concept Of Money.) Therefor, to measure the stability of gold’s value we have to compute the amount of goods and services gold can buy. For the sake of simplicity, we’ll use publicly available Consumer Price Index (CPI) and Wholesale Price Index (WPI) data to measure the value of goods and services.

Gold’s Purchasing Power In The Short And Medium Term

On occasion we can read gold commentators stating that when the price of gold rises or falls in the short term, it’s actually fiat that is falling or rising. As, according to this analysis gold is the constant. Let’s test if this analysis is accurate. In the week from January 4 until January 9, 2016, the price of gold in British pounds surged 5.9 % from £23,096 pound per Kg to £24,469 per Kg. We can be quite sure that the price of goods and services in the UK remained flat during this period. As a consequence, in this example gold could buy 5.9 % more goods and services at the end of the week, whilst sterling could buy exactly the same amount of goods and services all week long. So, in this particular example, what was the constant? The constant was not gold, it was sterling. The reason is that currently the international monetary standard is fiat.

Graph created withBullionS tar Charts.

Moving on to the medium term. In the chart below I’ve plotted the purchasing power index of gold versus the British pound, based onC PI data and the gold price, from July 2010 until June 2016.

Over this period we can observe that the British pound was more constant than gold in the short term, but it’s purchasing power has been declining in the medium term due to the inherent inflationary policies by the central bank of the UK. Gold’s purchasing power has been volatile in the short and medium term, but in this case has remained its purchasing power over the shown period. Though, it should be clear that if I would’ve adjusted the period gold’s purchasing power could’ve shown an increase or decrease.

Gold’s Purchasing Power in the Long Term

To get the best understanding of his subject, let us zoom out and have a look at gold and the pound’s purchasing power since 1500. The following chart is conceived by Nick Laird fromGCRU, based on data collected by himself andRoy Jastram. The chart is perhaps more difficult to interpret than the previous one. To be clear, we can see 3 index lines:

  • Thered linereflects gold’s purchasing power index (1930 = 100)
  • Theblue linereflects the price of gold index, denominated in British pounds (1930 =100). Note, until 1914 the blue line was mostly straight which shows fixed parities between sterling and gold.
  • Thegreen linereflects the wholesale (/goods) price index, denominated in British pounds (1930 = 100)

As you cans see, if the price of gold (blue) transcends wholesale prices (green), as a consequence gold’s purchasing power (red) is escalated – and vice versa.

Courtesy Nick Laird, fromGCRU. Note the scale is logarithmic.

Clearly the red line has remained roughly flat, around 100, for hundreds of years! This shows gold’s remarkable constant nature.Note, since the gold standard has been gradually dismantled (1914) gold’s purchasing power became more volatile but remained robust in the long term.

Furthermore, we can see that prior to 1914 wholesale prices were also fairly constant but this is due to the fact sterling was tied to gold during this era. Since the gold standard was abandoned step-by-step from 1914 onwards, the blue and the green line have skyrocketed, evaporating the purchasing power of sterling. Since 1971 the British pound has lost over 93 % of its purchasing power – in 1975 inflation topped 20 %.

We can conclude, while there is no exact constant in economics, the stability of gold’s purchasing power is unprecedented.Not only on a gold standard the metal shows it’s constant nature, but also off the gold standard gold’s purchasing power is remarkably constant, albeit more volatile in the short term.

For the future, if the current fiat international monetary system will breach its limits and has to be re-anchored to gold, I expect gold to become more constant in both the short and medium term when providing a center pillar in finance.

Koos Jansen

E-mail Koos Jansen on: koos.jansen@bullio nstar.com

 

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 DOWN to 6.6735( DEVALUATION SOUTHBOUND  /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN WIDENS TO 6.6868 / Shanghai bourse CLOSED DOWN 10.31 POINTS OR 0.24%   / HANG SANG CLOSED UP 47.75 POINTS OR 0.20%

2 Nikkei closed DOWN 218.53 OR 1.31%   /USA: YEN RISES TO 100.71

3. Europe stocks opened ALL IN THE GREEN (     /USA dollar index UP to 95.33/Euro DOWN to 1.1209

3b Japan 10 year bond yield: LOWERS TO     -.090%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 100.71/ 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::  45.32  and Brent: 46.76

3f Gold DOWN /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS  AND SELLING THE SHORT END

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 A BIT to -.132%   

3j Greek 10 year bond yield FALLS to  : 8.34%   

3k Gold at $1326.50/silver $19.17(7:45 am est)   SILVER FINAL RESISTANCE AT $18.50 WILL BE DEFENDED 

3l USA vs Russian rouble; (Russian rouble DOWN 28/100 in  roubles/dollar) 63.94-

3m oil into the 45 dollar handle for WTI and 46 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  DEVALUATION UPWARD from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 100.71 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 .9721 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0898 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  -.132%

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

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

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

4. USA 10 year treasury bond at 1.575% early this morning. Thirty year rate  at 2.296% /POLICY ERROR)

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

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

HELICOPTER MONEY STILL ON THE TABLE FOR THE FUTURE/JAPANESE STIMULUS PLAN DISAPPOINTS

Futures Fail To Rebound As Deutsche Bank Tries To Comfort Markets That It Is “Fine”

3.REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 10.31 POINTS OR .34%/ /Hang Sang closed UP 47.75 POINTS OR 0.20%. The Nikkei closed DOWN  218.53 POINTS OR 1.31% Australia’s all ordinaires  CLOSED UP 0.12% /Chinese yuan (ONSHORE) closed DOWN at 6.6735/Oil ROSE to 45.32 dollars per barrel for WTI and 46.76 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.6868 yuan to the dollar vs 6.6735 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS  AS MORE USA DOLLARS   LEAVE CHINA’S SHORES

3a)NORTH KOREA:

none today

b) REPORT ON JAPAN

none today

end

c) Report on CHINA

You have to see the video and from that you can surely see that China has a housing bubble:

(courtesy zero hedge)

Viral Surveillance Video Reveals A Shocking Scene From China’s Housing Bubble

Chinese home prices in August rose the most in more than six years, indicating local government efforts to avert a housing bubble have failed. Average new-home prices in the 70 cities rose 1.2% in August from July, the biggest increase since January 2010, while the value of home sales jumped 33% last month from a year earlier. At the same time, prices in Tier 1 cities, soared 3.5%, the most on record.

Still, in ongoing efforts to limit speculation in China’s latest housing bubble, cities such as Hangzhou have phased in ownership rules like banning those born outside the city from owning more than one property. Alas, squeezing demand represents a misguided way to tame a bubble, because if anything it leads to bursts of buying, sending prices soaring, followed by just as sharp plunges as the greater foolspanic and rush to offload, forcing the initial rule to be undone, resetting the cycle… something which last happened in China in 2013 and is taking place again now.

Nowhere was this seen better than on a surveillance camera recording which captured China’s sheer housing bubble lunacy in its shocking raw intensity.

As People’s Daily reports, a surveillance camera – and the resulting viral video – caught the moment new real estate in east Hangzhou opened for sale on September 24. The resulting spree was prompted by the abovementioned new restrictions launched on Monday, which prevents people born outside Hangzhou from buying more than one property.  What is mind-boggling is that despite one of the buying lunatics caught in the stampede literally tearing down the entrance door, all the properties sold out in a matter of hours.

4 EUROPEAN AFFAIRS

Who blinks first:  the last sentence says it all!!!!

So who blinks first? The ECB knowing the collateral chains that will snap. The Bundesbank – knowing their entire banking system is at risk. The German government – knowing it’s over for them if DB depositors have to take a haircutOr Brussels (EU) – who know the entire EU plan is teetering is done if anything but the ‘rules’ are applied to Deutsche. For now, there is one thing for sure – the market will press for one of these players to be forced to make decision.

(courtesy zero hedge)

Deutsche CEO Goes Full ‘Dick Fuld’: Bailout “Out Of The Question” Sees “Few Risks… Comfortable Liquidity”

Will John Cryan’s name go down in the annals of financial history lore alongside Erin Callan, Joe Gregory, and Dick Fuld?

Given the extreme level of denial and hubris the Deutsche Bank CEO reportedly uses in an interview with Germany’s Bild magazine, we’d say chances are better than even.

Echoing Fuld’s blustering 2008 description of a Lehman balance sheet with “billions in highly liquid assets,” along with his plan to sell prized assets, and threats to “hurt the shorts”;

Deutsche’s Cryan stated unequivocally that the bank is “comfortably equipped with free liquidity,” that he sees no need for a capital raise – as he plans to sell Postbank – and a state bailout “is not an issue for us,”  could not understand “how someone can say that.”

As a reminder, here are some special moments from Fuld and Callan’s mouths as Lehman fell…

March 2008: Lehman had eliminated close to 4,000 jobs in the last year.

April 2008:“The worst of the financial crisis impact is behind us” … “environment will remain challenging for a while”

” by adhering to strong risk-management standards and running the company well, “I will hurt the shorts, and that is my goal.”

Lehman has more than $35 billion of cash and liquid assets and another $65 billion of “unencumbered” assets that aren’t pledged elsewhere and can easily be turned into cash, Fuld and Chief Financial Erin Callan said Tuesday.

And here, as Bild reports, is Deutsche Bank’s CEO John Cryan explaining that everything is fine, nothing to see here… (via Google Translate)

The CEO of Deutsche Bank sees no need for state support of his institution. In an interview with “Bild” (Wednesday) John Cryan said aloud advance notification to the question whether the Bank need government aid: “This is not an issue for us.”

The manager had also jected reports and speculation about alleged talks with German Chancellor Angela Merkel (CDU) on state aid for the German bank. “I have not asked the Chancellor at any time for help. I have indicated like nothing.” Cryan said. He could not understand “how someone can say that.”

Even its shareholders do not want to ask for help of the German Bank CEO. “The question of a capital increase currently does not arise,” said the manager. The Bank met all regulatory capital requirements. They have “far fewer risks in the books than in the past” and was “comfortably equipped with free liquidity”.

The CEO described the situation of Deutsche Bank as better than it was currently perceived from the outside.

So no capital increase, plenty of liquidity, and fewer risks?

Investor jitters were stoked by a preliminary Justice Department request that the bank pay $14 billion to resolve a probe into its handling of mortgage-backed securities. The company has said it expects to whittle down the settlement amount, just as other Wall Street banks did during their talks.

“It was clear from the beginning that we would not pay this sum,” Bild quoted Cryan as saying.

“The Department of Justice will treat us with the same fairness as American banks that have already agreed on a compromise.”

The bank is also selling assets (just like Lehman)…

The CEO stressed that he considers the planned sale of Postbank started: “.. Everything is ready, we could pass Postbank tomorrow into new hands – but then the price has to be right, we have time.”

When asked whether there would be a bonus waiver for directors like 2016 again next year, Cryan said:

“We’re in a difficult transition, everyone knows that no one harbors unrealistic expectations..”

So there you have it. Nothing to see here at all. All you hedgers and speculators are crazy…

So who blinks first? The ECB – knowing the collateral chains that will snap. The Bundesbank – knowing their entire banking system is at risk. The German government – knowing it’s over for them if DB depositors have to take a haircut… Or Brussells – who know the entire EU plan is teetering is done if anything but the ‘rules’ are applied to Deutsche. For now, there is one thing for sure – the market will press for one of these players to be forced to make decision.

 

END

 

The following is a biggy!  The German newspaper Zeit, a well respected paper states that the German finance ministry is working on a rescue plan for Deutsche bank to shore up its liquidity. They have denied the story but you can bet the farm that it is true

(courtesy zero hedge)

Germany Working On Deutsche Bank Rescue Plan As Lender Sells Unit To Shore Up Liquidity

Update: In an emailed statement, the German finance ministry told Bloomberg that the report on Deutsche Bank by German weekly Die Zeit “is incorrect” adding that “the federal government isn’t preparing any rescue plans. There are no grounds for such speculation.

  • GERMAN FINANCE MINISTRY DENIES DIE ZEIT REPORT ON DEUTSCHE BANK
  • GERMAN GOVERNMENT ISN’T WORKING ON BANK RESCUE PLAN: MINISTRY

Only two more denials until it is unofficially confirmed.

* * *

It’s all about Deutsche Bank this morning again, where after last night’s vigorous denial by CEO John Cryan, who told Bild that the troubled German lender is not seeking a government bailout and that it’s balance sheet is solid, earlier this morning Germany’s Zeit reported that the German government is working on a contingency plan for Deutsche Bank. The German outlet writes that possible scenarios apply in case Deutsche Bank AG needed capital injection to cover litigation costs and include the option of German government taking a stake.

Contingency plan envisages possible sales of Deutsche Bank units, with the option of state guarantees to back the transactions if needed. One worst-case scenario involving the government taking a 25% stake would apply only in extreme emergency. All options are contingency planning and German govt hopes Deutsche Bank won’t need any state aid.

Queried by Reuters, a Deutsche Bank spokesman referred to an interview Chief Executive John Cryan gave German daily Bild on Wednesday and denied the report. “At no point did I ask the chancellor for support. Neither did I suggest anything like that,” had told Cryan Bild in response to a different report that said he had asked German Chancellor Angela Merkel for her support with a $14 billion U.S. demand to settle claims it missold mortgage-backed securities. Such a request would be “out of the question for us,” Cryan said, adding that he could not understand how “anyone could claim that.”

Despite the preemptive denial, Zeit said that the German government is still hoping Deutsche Bank will not need state support and only scenarios for a potential rescue are being discussed so far.

Of course, realizing that such an narrative could promptly trigger a counterparty, if not bank run, moments after German regulator Bafin told Reuters that it is not working on an emergency plan for Deutsche Bank two sources familiar with the situation said on Wednesday.

However, confirming the severity of the situation, earlier today Deutsche Bank also announced it had sold its Abbey Life insurance unit to Phoenix Group Holdings for £935 million ($1.22 billion) in a deal that will boost the German lender’s capital position. Deutsche Bank Chief Executive John Cryan said in a statement that the sale would allow the bank’s asset-management arm to focus on its core business and strengthen its capital position.

As the WSJ adds, the sale, while relatively small, is good news for the bank at a time of renewed investor concerns about its thin capital cushion ahead of a potential multibillion-dollar settlement with U.S. authorities over mortgage-securities probes. The looming charge has sparked concerns that the bank may need to raise fresh funds, and questions about whether Berlin might be forced to support the lender.

The bank said the Abbey Life sale will add about 0.1 percentage point to its common equity tier 1 capital ratio. However, from an income statement basis, the transaction—which is subject to regulatory approval—will result in an expected pretax loss of about €800 million ($897.2 million) because of goodwill impairment.

For Phoenix, the deal will add £10 billion of assets under management, 735,000 new policyholders and boost cash flow to support planned dividend increases. The U.K.-listed business will partly fund the deal through a £735 million rights issue. As part of the transaction, Deutsche has agreed to indemnify Phoenix to cover a potential negative outcome from a U.K. investigation into Abbey Life’s fair treatment of customers and annuity sales practices.

The bottom line: whether a bailout of Deutsche Bank is on the horizon is still up to speculation, and mostly to the market, where should pressure on the company stock and CDS continue, DB may have no choice but to active the “contingency plan.” In any case, US equity futures which until the report were in the green, promptly went south of the unchanged line once the news hit as echoes of the financial crisis get disturbingly familiar.

end
Now it is the blame game.  Meanwhile back at the ranch , DB is in serious trouble:
(courtesy zer0 hedge)

Deutsche Denial Tsunami Begins: Draghi “Not ECB Fault”, IMF “Solid Base”

It is becoming very clear that the Deutsche Bank debacle is getting very serious. How do we know? Simple – everyone is denying everything. Overnight DB CEO Cryan denied any need to raise capital or need a bailout; this morning ECB’s Draghi denied low rates were responsible, and denied The IMF’s statement the bank is systemically important; and now IMF’s Lagarde is denying any need for government intervention.

Mario Draghi said the financial industry must stop blaming the actions of central banks for their problems and focus on fixing internal management and risk failings.

“Many banks have problems that don’t have primarily to do with the low level of interest rates but possibly with other reasons,” the European Central Bank president said after a meeting with German lawmakers in Berlin on Wednesday.

 

He cited business models and risk management and said this was “generally acknowledged” by those at the talks.

As Bloomberg reports, when asked about accusations by some in the financial industry that the ECB is to blame for some banks’ woes, Draghi said he didn’t share that view.

“If a bank represents a systemic threat for the euro zone, this cannot be because of low interest rates,” he said. “It has to do with other reasons.”

While correlation is not causation – as everyone says when trying to prove a false positive – in this case we can’t help but think Draghi’s handiwork certainly didn’t help...

 

Then IMF Chief Christine Lagarde piped in, telling CNBC that…

“Deutsche Bank is a systemic important player in the global financial system.

 

But, is on a solid base currently, and we are not at a stage in which I see the need for a government intervention.”

So to clarify:

  • DRAGHI: DEUTSCHE BANK DOES NOT POSE SYSTEMIC RISK
  • LAGARDE: DEUTSCHE BANK SYSTEMICALLY IMPORTANT

Yeah, you’re right, its probably nothing…

 

So, as we asked overnight, who blinks first? The IMF – “told you so” dance. The ECB – knowing the collateral chains that will snap. The Bundesbank – knowing their entire banking system is at risk. The German government – knowing it’s over for them if DB depositors have to take a haircut… Or Brussels – who know the entire EU plan is teetering is done if anything but the ‘rules’ are applied to Deutsche. For now, there is one thing for sure – the market will press for one of these players to be forced to make decision.

The Italian referendum is to be held on Dec 4.2016.  This is a thumbnail sketch as to what the citizens will be voting for
(courtesy zero hedge)

The Italian Referendum: What You Need To Know

In addition to the recent note by Credit Suisse, here, courtesy of a note by UBS’ Felix Huefner, is what you need to know about the upcoming Italian referendum – an event that has been dubbed by some as the most important risk event for Europe in the remainder of the year – scheduled for December 4.

Referendum is about political uncertainty and reform progress

An important forthcoming event is the Italian referendum on constitutional reform, which is scheduled for 4 December. Based on recent opinion polls, the outcome is too close to call. This referendum is important for at least two reasons. First, political uncertainty is affected, as the outcome of the referendum is perceived to impact Prime Minister Renzi’s decision whether to remain in office (despite recent attempts to de-link the content of the referendum from his decision whether to stay in power). This seems to be the key market focus currently. Second, constitutional reform is an important element of the government’s reform agenda. Along with past reforms, such as the one on the labour market, continuing reform is likely positive for the longer-term growth outlook. Possible scenarios for the referendum include: (1) if the referendum is voted down, political uncertainty increases and reform progress takes a step back; (2) if voted in favour, political uncertainty decreases and the reform agenda progresses, potentially including steps to overhaul the judicial system. This double impact arguably increases the importance of the Italian referendum for the outlook.

Implications for Italian government bonds

The associated implications of a ‘No’ vote continue to present a risk to Italian bond spreads. Our expectation of core euro area yields rising gradually over the next few months (supported by upcoming base effects and potential tweaks to the ECB’s QE programme), combined with the fact that the 10yr Italy-Germany spread is close to our year-end target of 125bp, implies a gradual rise in 10yr Italian yields to 1.45% by end- 2016. If a ‘Yes’ vote were to materialise, we would expect 10yr Italy-Germany spreads to initially tighten by 5-10bp. Meanwhile, a ‘No’ vote at the upcoming referendum is likely to result in 10yr Italy-Germany spreads widening to over 155bp. The political backdrop in Spain is currently more favourable than in Italy, and we maintain our preference of being long 10yr Spain versus Italy. We also recommend hedging against a potential escalation of Italian risks by selling 10yr Italy vs US Treasuries (targeting 0bp).

The actual constitutional reform

The constitutional reform that is voted on in the referendum is part of a package aimed at making the political system more stable and facilitating decision-making. The package includes: (1) the electoral reform (Italicum); and (2) reform of the Senate. The first entered into effect earlier this year (but is currently challenged and awaits a decision by the Constitutional Court), while the Senate reform is being decided on 4 December in a referendum.

In broad terms, the Italicum legislative electoral reform replaced proportional representation in the lower house (Chamber of Deputies) with a majority-assuring voting system that attributes a majority bonus to the party (no coalition) with the highest share of votes. The intention is to make the government majority more stable and homogenous. The law came into force in July 2016 (and the next elections in 2018 would be the first held under the new rules). However, the Italicum is viewed controversially and is under review by the constitutional court.

The upcoming December constitutional referendum is about transforming the Senate of the Republic (the upper house) into a Senate of the Regions (a referendum being necessary because the reform failed to achieve a two-thirds majority in parliament). Currently, both the lower house (Chamber of Deputies) and the Senate are elected simultaneously, the government needs the confidence of both houses, and all legislation is passed by both houses. Under this ‘perfect bicameralism’, both chambers thus have equal powers, complicating decisionmaking. Under the reform, the number of senators will be reduced from 314 directly elected to 95 indirectly elected (by the regional councils of Italy) and the participation of the Senate in the law-making procedure will be reduced. Constitutional reform is thus seen by the IMF and the OECD as a key part of the reform agenda to streamline decision-making, along with further implementation of the Jobs Act labour market reform.

The political uncertainty surrounding the referendum outcome

When the referendum was first announced, Prime Minister Renzi specifically noted that, in case of defeat, he would step down as Italian Prime Minister, opening up the possibility of new elections. Over the past few weeks, the perception has been that he has adjusted his position on this matter, stressing that the next general election would be held in spring of 2018 (as originally planned). Another scenario could thus be that PM Renzi remains in power even in the case of a defeat. Yet another alternative scenario could foresee Prime Minister Renzi stepping down and a new PM being appointed without new elections. Either way, a defeat in the referendum would likely heighten policy uncertainty, not least because the 5-Star Movement has become a main challenger to Renzi’s PD in recent opinion polls, notably after the UK referendum.

New elections right after a ‘No’ vote look less likely, given that the new electoral law (Italicum) applies only to the lower house (Chamber of Deputies) – it was passed in the expectation that the reform of the Senate would proceed. Any government after a ‘No’ vote will thus likely be occupied with adapting the respective electoral laws for the next election.

Implications of a ‘No’ vote a risk to Italian bond spreads

Opinion polling ahead of the constitutional referendum remains finely balanced and the associated implications of a ‘No’ vote continue to present a risk to Italian bond spreads. Our expectation of core euro area yields rising gradually over the next few months (supported by upcoming base effects and potential tweaks to the ECB’s QE programme), combined with the fact that the 10yr Italy-Germany spread is close to our year-end target of 125bp, implies a gradual rise in 10yr Italian yields to 1.45% by end-2016. If a ‘Yes’ vote were to materialise, we would expect 10yr Italy-Germany spreads to initially tighten by 5-10bp. Meanwhile, a ‘No’ vote at the upcoming referendum is likely to result in 10yr Italy-Germany spreads widening to over 155bp. The political backdrop in Spain is currently more favourable than in Italy, and we maintain our preference of being long 10yr Spain versus Italy. We also recommend hedging against a potential escalation of Italian risks by selling 10yr Italy versus US Treasuries (targeting 0bp).

END

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

Now we know why Obama vetoed the Saudi bill as turmoil is setting inside the kingdom.  Bets on a Saudi devaluation is increasing as stocks crash and a debt deal is cancelled, all due to 9/11 anxiety

(courtesy zero hedge)

Saudi Devaluation Bets Surge, Stocks Crash As Debt Deal Falters On 9/11 Legislation Anxiety

Despite its peg, Spot Riyal is trading at its weakest in 8 months as turmoil mounts in The Kingdom as a failed ‘deal’ in Algiers, pay cuts for royalty, and now growing concerns that the US vote/veto on 9/11 Legislation will delay Saudi Arabia’s first international bond sale. Forward bets on Saudi currency devaluation are surging and default risk is on the rise again as Bloomberg reports, a Senate vote to override President Barack Obama’s veto could cause some investors to balk at the issue.

The country is planning to sell at least $10 billion of bonds next month, four people said. As Bloomberg adds,

Senate leaders in both parties said Tuesday they expect the vote to succeed, though Congress has yet to override a veto by Obama. Senator Ben Cardin of Maryland, the ranking Democrat on the Foreign Relations Committee, said last week that the Saudi government has warned that enacting the bill would cause a “significant change” in the U.S.-Saudi relationship. Saudi stocks tumbled and the currency weakened the most in four months.

Overriding the bill “could dent investor demand in near term,” said Kaan Nazli, who helps oversee $4.8 billion of emerging-market debt at Neuberger Berman Europe Ltd. in The Hague.

“It would subject the new bonds to some headline noise but ultimately the U.S.-Saudi relationship is very deep and the thinking would be that this issue would be overcome somehow.”

he Saudi Arabian riyal weakened the most since January…

And one-year forward contracts for the currency (Devaluation bets) headed for the biggest increase since July…

Saudi stocks lost the most in the world for a second straight day. The Tadawul All Share Index was the worst performer among more than 90 gauges tracked by Bloomberg, falling 4.5 percent as of 2:11 p.m. in Riyadh to the lowest level in more than eight months (near its lowest sicne 2009)

So now we know why Obama was so adamant to veto the bill… The Saudis have a lot to lose… this is not about US blowback.

 

 

end

 

A big story:  the Senate overrides Obama’s veto by 97 to 1.  Now the House will vote next Wednesday. This will be problematic for both Saudi Arabia and the USA especially if the Saudis cash in their USA treasuries:

(courtesy zero hedge)

Obama Humiliated: Senate Overrides President’s Veto Of “Sept 11” Bill In Crushing 97-1 Vote

Late last Friday, we reported that in a troubling development for all Americans, Barack Obama sided with Saudi Arabia when he vetoed the Justice Against Sponsors of Terrorism Act , better known as the “Sept 11” bill, allowing Americans to sue Saudi Arabia over its involvement in terrorism on US soil, passed previously in Congress, despite clear signs that the veto may be rejected by both the Senate and the House.

Moments ago, that is precisely what happened, when the Senate voted overwhelmingly 97 to 1, to override President Obama’s veto of a bill letting the victims of the 9/11 attacks sue Saudi Arabia, striking a blow to the president on foreign policy weeks before he leaves office. The vote marks the first time the Senate has mustered enough votes to overrule Obama’s veto pen.

Democratic Leader Harry Reid was the sole NO vote.


As the Hill reported, not a single Democrat came to the Senate floor before the vote to argue in favor of Obama’s position.

Obama has never had a veto overridden by Congress.

Lawmakers don’t want to be seen as soft on punishing terrorist sponsors a few weeks before the election, at a time when voters are increasingly worried about radical Islamic terrorism in the wake of recent attacks in Manhattan, Minnesota and Orlando, Fla. Oddly enough, Obama had no problem with those particular optics.

The House will take up the matter later on Wednesday, and Speaker Paul Ryan told reporters last week that he expects there be to enough votes for an override.

As a reminder, the legislation, sponsored by Senate Republican Whip John Cornyn (Texas) and Sen. Chuck Schumer (D-N.Y.), the third-ranking member of the Democratic leadership, would create an exception in the Foreign Sovereign Immunities Act to allow the victims of terrorism to sue foreign sponsors of attacks on U.S. soil.

It was crafted primarily at the urging of the families of victims of the Sept. 11, 2001, attacks who want to sue Saudi Arabian officials found to have links with the hijackers who flew planes into the World Trade Center and Pentagon. It passed the Senate and House unanimously in May and September, respectively, but without roll-call votes.

“This is pretty much close to a miraculous occurrence because Democrats and Republicans, senators [and] House members have all agreed [on] the Justice Against Sponsors of Terrorism Act (JASTA), which give the victims of a terrorist attack on our won soil an opportunity to seek the justice they deserve,” Cornyn said on the Senate floor before the vote.

President Obama warned in a veto message to the Senate last week that the bill would improperly give legal plaintiffs and the courts authority over complex and sensitive questions of state-sponsored terrorism. He also cautioned that it would undermine protections for U.S. military, intelligence and foreign service personnel serving overseas, as well as possibly subject U.S. government assets to seizure.

Obama sent a letter to Senate leaders reiterating his threats concerns that the measure could put U.S. troops and interests at risk.:

“The consequences of JASTA could be devastating to the Department of Defense and its service members — and there is no doubt that the consequences could be equally significant for our foreign affairs and intelligence communities,” he wrote in the letter, which was later circulated by a public affairs company working for the embassy of Saudi Arabia.

For once, using threat as a negotiating tactic, especially when on behalf of a foreign sponsor of terorrism and one of the Clinton foundation’s biggest donors, failed to work.

Now we wait to see if the Veto is likewise overriden in the House, in what is set to be a historic humiliation for the outgoing Saudi American president.

As for the implications for capital markets should the House follow the Senate in overriding Obama’s veto, they could be dramatic: as noted earlier, the threat of the 9/11 bill passing has put on hold Saudi plans to issue its megabond, effectively putting even more pressure on the kingdom’s finances; alternatively as Saudi Arabia has threatened before, should the bill pass, it would (and may have no other choice considering its liquidity crisis) have to sell US reserves, among which billions in Treasurys and an unknown amount of US equities.

 

end

 

The White House is enraged at the most embarrassing vote ever:  the Senate Veto override

(courtesy zero hedge)

 

White House Enraged At “Most Embarrassing Vote Ever” Senate Veto Override

It appears for once, the word (of some politicians) is mightier than the pen (of Obama). The White House has lashed out at The Senate’s veto override, which Josh Earnest described as “the single most embarrassing thing that the United States Senate has done.” As The Hill reports, in the most overwhelming vote (97-1) since 1983, President Obama’s lame-duckedness was exposed and that enraged Obama (and his Saudi friends’ money).

As The Hill detailed, Earnest’s unusually harsh words are an effort to shame lawmakers for their support for the Justice Against Sponsors of Terrorism Act (JASTA), which passed unanimously through both chambers earlier this year. For weeks, White House officials have accused members of Congress of failing to publicly express the reservations about the measure that they have spoken about privately. Earnest seized on comments by made by Senate Foreign Relations Committee Chairman Bob Corker (R-Tenn.), who told reporters that Judiciary Committee members didn’t pay much attention to the legislation until it came to the floor. Corker suggested senators backed the measure because no one wanted to break with 9/11 victims and their families who support the measure.

“To have members of the United States Senate only recently informed of the negative impact of this bill on our service members and our our diplomats is in itself embarrassing,” Earnest said.

 

“For those senators then to move forward on overriding the president’s veto that would prevent those negative consequences is an abdication of their basic responsibilities of representatives of the American people.”

Senate Minority Leader Harry Reid (D-Nev.) was the sole vote to sustain Obama’s veto.

Not a single Democrat came to the Senate floor before the vote to argue in favor of Obama’s position. Obama expressed grave concerns about the measure in his veto message last Friday, warning JASTA would improperly involve U.S. courts in national security matters, including whether foreign governments should be considered state sponsors of terror. He also said it would undermine the concept of sovereign immunity, putting American diplomats, military service members and government assets abroad at risk of legal action, should other countries pass reciprocal laws.

The White House is also wary of angering the Saudi government, which strongly opposes the bill. The U.S.-Saudi alliance has been tested under Obama’s watch, especially by last year’s nuclear deal with Iran. But the president’s strong objections fell on deaf ears in Congress, though Obama personally convinced Reid to sustain his veto after a phone conversation and letter. But no other lawmakers were swayed by appeals from the president, his staff or representatives of the Saudi government, which lobbied against the bill.

Corker told reporters that Obama put virtually no effort into persuading lawmakers to sustain his veto.

“Hopefully, these senators are going to have to answer their own conscience and their constituents as they account for their actions today,” Earnest said.

Bad loser?

 

end

 

OH OH!! This is going to go over real well!! Credit Suisse CEO claims that all EU banks are not investable!!!!

(courtesy zero hedge)

“Russian Roulette” – Credit Suisse CEO Admits “EU Banks Not Really Investable”

European banks are in a “very fragile situation” and are “not really investable as a sector” according to Credit Suisse chief executive Tidjane Thiam. Speaking at a conference in London this morning, The FT reports, the CEO of Europe’s ‘other Deutsche Bank’ said “only a fool would try to make a five-year prediction in a world that is so random,” wishing John Cryan (DB CEO) well, “I hope that they come out of their current predicament.”

“The next nine months are going to be difficult,”Thiam began, adding that “risk is everywhere, risk is everything. I trained in maths and physics and all that teaches you is that basically the world is a big random experiment,” and Brexit was “like Russian Roulette.” Asked specifically about Deutsche Bank, he wished them luck…

“You get extreme movements on the basis of relatively minor piece of news because there’s a lot of uncertainty,” he said, citing “regulatory uncertainty” about future capital requirements and concerns about “potential fines like you’ve seen on Deutsche Bank this week”.

“I think there is also a lot of doubt, a fundamental doubt, is there a viable business model that covers its cost of equity?” Mr Thiam added.

“That’s the big big big question,” he said, describing it as something that “makes banks not really investable as a sector”.

“Deutsche Bank is an old institution, a great institution and I really wish them well, I hope that they come out of their current predicament”. 

For now CS is outperforming…

But looking forward, Thiam was anything but the usual unequivopcally bullish bank CEO Americans are so used to…

“I cannot remember, in my lifetime, so many elections. Politics are going to play a big role. I think you will have spikes in volatility. And then you also have the drift towards populism in the political discourse, which will scare markets. The next six to nine months are going to get choppy.”

“I know I don’t know. Only a fool would try to make a five-year prediction in a world that is so random. You cannot see the future, that is a futile activity. What you can do is think through how you’re going to cope with a range of futures and then you define a risk appetite – which is what probably of death are you comfortable with.”

“In life you should only worry about the bad outcomes. If you raise capital and you’re wrong, it’s ok. If you don’t raise capital and you’re wrong, you die,”

Your humour story of the day:

Turkey contemplates purchasing Deutsche bank

Turkey Contemplates Buying Deutsche Bank

In what is surely the most stealthy version of Wednesday humor we have ever posted, Bloomberg reports that according to Yigit Bulut, chief adviser to Turkish President Recep Erdogan, Turkey should considerusing a new wealth fund or a group of state-owned banks to buy” the embattled Deutsche Bank. Bulut made the proposal on Tuesday via his Twitter account, saying Germany’s largest lender should be made into a Turkish bank.

“For months on TV programs, I’ve been calling on Turkey’s private and public capital: ‘Some very good companies in the EU are going to fall into trouble and we need to be ready to buy a controlling stake in them,’” Bulut wrote on Twitter. “Wouldn’t you be happy to make Germany’s biggest bank into a Turkish bank!!” the advisor said, cited by Bloomberg.

Aside from the farcically comical overtones of the proposal, the suggestion will likely infurate Germany and may ignite political opposition in Europe’s strongest economy, where Deutsche Bank has long been viewed as a national champion and has played an integral role in Germany’s economy.

Going with the flow, Bloomberg does a “serious” analysis of the proposal and notes that  Turkey’s financial industry, long viewed as a source of strength for the $700 billion economy, “has suffered some loss of market confidence over the past few years.”

The market capitalization of the country’s publicly traded lenders stands just above $49 billion, roughly the size of General Motors Co. and about half what it was in 2013, while that of Deutsche Bank is almost $17 billion. Banking assets in the country amounted to about $836 billion at the end of July, while Deutsche Bank had total assets of 1.63 trillion euros ($1.83 trillion) at the end of last year.

Yeah, the numbers don’t really work but that’s the smallest issue facing the “contemplated” transaction. There is a bigger problem.

Back in July, Turkish Prime Minister Binali Yildirim announced that the government was planning to form a wealth fund to finance investments in infrastructure mega-projects, stabilize markets and keep growth on track. The fund could be as large as $200 billion, Maritime and Communications Minister Ahmet Arslan said in August, without providing details on where its money would come from.

And here is the issue: Turkey’s wealth fund does not exist, and considering the urgent nature of DB’s troubles, this may prove to be a modest hurdle.

“Turkey’s sovereign wealth fund is still in the works, but the critical problem at this stage is that while it is ‘sovereign,’ the key bit it lacks is the ‘wealth,’” Timothy Ash, a credit strategist at Nomura International Plc in London, said in an e-mail on Wednesday. “I am not sure that Turkey’s state-owned banks would want to be saddled with Deutsche Bank’s balance sheet at this stage — they possibly have enough problems/challenges with their own in the context of the domestic growth slowdown.”

While Turkey’s “consideration” whether or not to buy Deutsche Bank will sadly go nowhere, “sadly” for the purely comedic value that would ensue as Turkey is straddled with some €42 trillion in derivatives, one person who would be delighted from such an outcome is Angela Merkel herself, who is now caught between the political hammering that would ensue from any state bailout on one hand, and on the other risks collapsing the global financial system should Deutsche Bank indeed be “Lehmaned”, as the worse case scenario has been dubbed by some.

end

 

6. GLOBAL ISSUES

none today

7. OIL ISSUES

Goldman pounds the table that oil is heading lower

(courtesy Goldman Sachs/zero hedge)

Not Even An OPEC Deal Will Stop Oil Going Lower, Goldman Warns

Having been bullish for nearly half a year, yesterday Goldman’s flipped again, when it cut its Q4 oil price target from $50 to $43, admitting the previously anticipated rebalancing will take longer to achieve, and now expects “a global surplus of 400 kb/d in 4Q16 vs. a 300 kb/d draw previously.” Moments ago, the same Goldman analyst released a follow up note, confirming what we have been saying for the past year, namely that OPEC is increasingly irrelevant as a marginal supply-setter in a world in which it is the lack of demand that is a far bigger threat.

In “OPEC won’t stop oil going”, Damien Courvalin writes that “an OPEC deal to curb oil production, either today or at the November meeting, is thought more likely than at any point in the past two years.” That said, he notes, “we remain sceptical of its impact. For one, our production forecast continues to reflect a seasonal Saudi production decline into year-end, with no growth elsewhere. Second, even with this OPEC help, our updated oil supply-demand forecast now points to a renewed build in inventories in 4Q 2016 vs. a forecast for a draw only last month. This weaker oil outlook into year-end led us yesterday to lower our year-end WTI oil price forecast to $43/bbl, from $51/bbl previously.Given a well-supplied market and a crude curve in contango (with limited spot upside).”

Here are the details behind Goldman’s pessimism:

Intraday oil price volatility has picked up over the past week and ahead of today’s OPEC advisory meeting in Algiers. Statements by participants suggest a deal to curb production today or at the next meeting in November is more likely than at any point over the past two years. We remain sceptical of its impact, for two reasons: (1) independent of today’s outcome, our production forecast continues to reflect a seasonal Saudi production decline into year-end and no growth elsewhere, the equivalent of a deal; and (2) even with this OPEC help, our updated oil supply-demand forecast now points to a renewed build in inventories in 4Q 2016 vs. a forecast for a draw only last month.

This weaker oil outlook into year-end led us yesterday to lower our year-end WTI oil price forecast to $43/bbl, from $51/bbl previously, and still below the forward curve even after yesterday’s sell-off (“Beyond Algiers, weakening oil fundamentals,” September 27, 2016). While a potential OPEC deal today could support prices in the short term, we find that the potential for fewer disruptions and the relatively high speculative net long positioning instead leave risks to our forecast squarely skewed to the downside. Given the uncertainty on forward supply-demand balances, we reiterate our view that oil prices need to reflect near-term fundamentals – which are weaker – with a lower emphasis on the more uncertain longer-term fundamentals.

This renewed weakness in fundamentals reflects the three key drivers of the ongoing oil market rebalancing:

  • New Oil Order: Low cost production continues to surprise to the upside, most recently in Saudi Arabia and the UAE, previously in Iraq and Iran, and next in Russia. This relentless production growth reflects the core of the New Oil Order, where the flattening of the oil cost curve created by shale leads to a loss of pricing power by low-cost producers, leaving them with only volume growth to sustain fiscal revenues (“OPEC loses pricing power, shale shifts to the margin,” October 26, 2014).
  • Wall of Supply: The ramp up in new production capacity outside of OPEC is set to accelerate into year-end, with 2017 additions of projects started up to 2014 expected to be 30% higher than in 2016 (“The Battle for Capital: A Flatter Cost Curve Drives OPEC Growth and Non-OPEC Deflation,” Top Projects 2016, May 20, 2016). In turn, the US production declines are set to slow even at the current low rig count given the rising age of producing wells (less drilling of new wells) and the much smaller decline rates of mature shale oil wells.
  • Détente: Collapsed fiscal revenues are incentivising both a ‘detente’ in areas where geopolitical conflicts have disrupted production as well as a deflationary reduction in local taxation as countries fight to compete with US shale for revenues and capital (“More worried about a thaw than a freeze,” Commodities Research, August 22, 2016). As a result, the surge in short-term production disruptions that balanced the oil market unexpectedly in 2Q 2016 is slowly starting to reverse.

Importantly, even if disruptions remain at current levels in Libya and Nigeria, and Saudi reduces production into year-end, we project that global oil supply will continue to rise in coming months driven by low cost production growth and new project deliveries. We continue to view such supply shifts as the key drivers to oil prices through 2017, especially given today’s high level of inventories. Oil demand growth, and in particular China’s, has remained the bright spot of the oil market over the past two years. This strong demand growth has been supported by both low prices as well as the ongoing rotation from investment to consumption which put downward pressure on demand for CapEx commodities used in infrastructure and manufacturing, such as steel, relative to OpEx commodities exposed to consumer spending, such as oil.

Medium term, we believe that the decline in drilling activity around the world is still setting the stage for an eventual recovery in prices. For now, our 2017 outlook remains unchanged, with demand and supply projected to remain in balance and WTI oil prices to average $53/bbl, with a 1H 2017 expected trading range of $45-$50/bbl. The risks around this forecast remain high, however, with our forecasts conservative on both further low cost production growth and further disruption reversals, which combined represent today 1.6% of global supply, the equivalent of the average global oil surplus observed during 1Q 2015 – 1Q 2016.

Assuming, for example, that global supply exceeds our forecasts by 400 kb/d (0.4%), our models imply that oil prices would need to average $43/bbl on average next year. Such a scenario is not that unlikely as it could be reached either (1) with half of Libya’s and Nigeria’s current disruptions reversing, (2) 2017 non-OPEC new projects coming online in line with company guidance instead of our lower ‘risked’ forecasts, or finally (3) Iran and Iraq delivering on their advertised production growth instead of our more conservative expectations.

Given our outlook for a well supplied market and a crude curve in contango with limited spot upside, we continue to recommend being short the S&P GSCI Crude Oil index, especially paired with positive yielding oil-exposed assets such as HY E&P credit, which is our recommended Top Trade #8.

* * *

This is what other analysts believe as we await today’s OPEC conference:

Vitol chief executive officer Ian Taylor

  • Oil market may not tighten until 2018
  • Can’t see good reason for “major increase” in prices
  • Energy market remains “way oversupplied,” low oil price is “a struggle” for OPEC countries

BNP Paribas head of commodity markets Harry Tchilinguirian

  • Nothing concrete to come from OPEC
  • WTI to trade in a range of $35-$50/bbl
  • Global crude balance “won’t change much”

Citigroup analysts incl. Seth Kleinman and Ed Morse

  • “Widening gulf” between Iran, Saudi Arabia on oil deal, analysts write in report dated Sept. 27
  • Disparity between Saudi Arabia and Iran on acceptable level of output will likely see talks at Algiers or meetings in near future fail
  • “All options on the table are essentially a direct trade-off between the market shares of Iran and Saudi Arabia”

In short, for OPEC it may be lose-loser, as the following schematic circulating on Twitter shows.

end
Oil first rises on production drops but then falls again after the biggest gasoline buildup in 4 months
(courtesy zero hedge)

Oil Oscillates As Production Drops; RBOB Plunges After Biggest Gasoline Build In 4 Months

 

end

 

OPEC has reached an understanding on a production cut even though not one member has agreed to its cut. The level for OPEC is cut from 33 million barrels per day down to 32.5 million barrels/day.

Interestingly both Russia and Iran are not mentioned.

(courtesy zero hedge)

 

OPEC Has “Reached An Understanding On A Production Cut”, Will Wait Until November To Finalize

As was leaked earlier today by Reuters, which reported that OPEC could announce an output-freeze deal on Wednesday in Algeria, although full details are unlikely to be firmed up before a formal meeting of the Organization of the Petroleum Exporting Countries in November, moments ago Reuters blasted that a production cut – the organization’s first in 8 years – is precisely what OPEC has agreed on (citing a source so don’t be surprised if everything is denied in a few minutes) at its Algiers meeting, when it announced that a deal to limit oil production has been reached, however the execution won’t take place for another two months.

  • OPEC REACHES DEAL TO LIMIT OIL PRODUCTION, EXECUTION IN NOV – OPEC SOURCE
  • AFTER REACHING TARGET, OPEC WILL GO TO NON-OPEC FOR OUTPUT SUPPORT – ONE OPEC SOURCE

We also learned what the output cap would be: 32.5 mmbpd, or about 1.2mmbpd below the August production record of 33.7 million:

  • OPEC AGREES TO LIMIT OIL PRODUCTION TO 32.5 MLN BPD – TWO OPEC SOURCES

Amusingly, the “cap” would put OPEC production at about the highest it has ever been.

 

That said, as the WSJ carefully phrased it, “OPEC Has Reached and Understanding on Output Cut”  adding that:

OPEC on Wednesday reached an understanding that a crude-oil-production cut is needed to lift petroleum prices, people familiar with the matter said, but the cartel will wait until November to finalize a plan to tackle a supply glut that has lasted longer than expected.

 

The consensus was reached after a 4½ hour meeting in the Algerian capital. It represents the first acknowledgment from the Organization of the Petroleum Exporting Countries that it needed to take action to alleviate an oil-price slump that has wreaked havoc on the economies of oil producers. OPEC, the 14-nation cartel that controls over a third of world oil output, has been producing at record levels as its members compete among themselves for buyers.

In other words, nothing will actually happen for at least two more months, and in the menatime, everyone will be pumping as much as they can.

Some more details: the WSJ cites a person familiar with the matter who said the cartel was considering cutting production to between 32.5 million barrels a day and 33 million barrels a day—down from August levels of 33.2 million barrels a day.

And then this:

  • OPEC TO SET UP COMMITTEE TO DECIDE LEVEL OF CUT FOR EACH MEMBER.

The one issue is that while OPEC has agreed to cut as an organization, none of OPEC’s members have actually agreed to individual cuts.

Oil, as expected on this latest attempt to spark a headline driven buying frenzy, has surged on the news, and was up 4% at last check, some $1.75 higher, trading at $46.40 even though it remains unclear just how – if at all – a “supply freeze” takes place when practically all members who are not producing at capacity such as Iran and Nigeria will be granted an exemption.

The Energy sector is likewise surging.

Incidentally, the “deal” which is really an agreement to meet again in November as nothing will be “executed” until then, comes at a time when Russia, the world’s largest energy exporter, just reported it is on course to pump a post-Soviet record amount of oil in September, adding as much as 400,000 barrels a day to the country’s production. The output surge comes as OPEC nations meet in Algeria, with discussions to curb a global surplus at the top of their agenda.

Russian crude and condensate production is set to average 11.1 million barrels a day this month, compared with 10.7 million barrels a day in August, according to preliminary Energy Ministry data compiled by Bloomberg. That would surpass the 10.9 million barrels a day January production level, which officials considered as a potential cap during failed talks among producer nations in April.

This means that as OPEC is padding itself on the back for pushing the price of oil higher, what is really happening is that both OPEC and non-OPEC producers are on pace to “freeze” production at all time high levels, and meanwhile shale production is also set to ramp up now that the price of oil may once again trend higher.

As to Russian production, it has every opportunity to continue growing, potentially adding another 2-3 percent over the next 12 months if the government doesn’t raise taxes on the industry, according to Artem Konchin, an oil analyst at Otkritie Capital in Moscow. Rosneft and Lukoil, the nation’s two largest producers, have shifted their guidance on output to positive territory as they start new fields and increase spending on core production in Siberia, he said in an e-mail.

“If the freeze happens at current levels, then the bar is obviously higher,” Konchin said. “Technically, I’m not sure how that whole thing will be implemented — no one is sure.”

The details don’t matter: for now the algos are buying because other algos are buying.

 

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   1.1209 DOWN .0007/REACTING TO NO DECISION IN JAPAN AND USA + Deutsche bank problems) 

USA/JAPAN YEN 100.71  UP 0.226(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 AND DECISION ON SEPT 21 DISAPPOINTS WITH STIMULUS/OPERATION REVERSE TWIST

GBP/USA 1.3020 UP .0012 

USA/CAN 1.3217 up .0009

Early THIS WEDNESDAY morning in Europe, the Euro FELL by 7 basis points, trading now well above the important 1.08 level FALLING to 1.1209; 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 10.31 OR   0.34%   / Hang Sang  CLOSED UP 47.75  POINTS OR 0.20%     /AUSTRALIA IS HIGHER BY 0.12% / 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 218.53 POINTS OR 1.31%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 47.75  OR 0.20%  ,Shanghai CLOSED  UP 17.74 POINTS OR .60%   / Australia BOURSE IN THE GREEN: /Nikkei (Japan)CLOSED IN THE RED   INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: $1325.60

silver:$19.13

Early WEDNESDAY morning USA 10 year bond yield: 1.575% !!! DOWN 7in basis points from TUESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield  2.295, DOWN 5 IN BASIS POINTS  from YESTERDAY night.

USA dollar index early WEDNESDAY morning: 95.33 UP 7 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: 3.33% DOWN 8 in basis point yield from TUESDAY  (does not buy the rally)

JAPANESE BOND YIELD: -.090% DOWN 2 in   basis point yield from TUSEDAY

SPANISH 10 YR BOND YIELD:0.897%  PAR IN basis point yield from  TUESDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.18 DOWN  3 in basis point yield from TUESDAY 

the Italian 10 yr bond yield is trading 28 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: -0.145% DOWN 1  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 1.1217 UP .0005 (Euro UP 5 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 100.79 UP: 0.301 (Yen DOWN 30 basis points/POLICY ERROR ON BANK OF JAPAN

Great Britain/USA 1.3021 UP 0.0013( POUND UP 23 basis points

USA/Canada 1.3102 DOWN 0.0106 (Canadian dollar UP 106 basis points AS OIL ROSE SHARPLY (WTI AT $47.11). Canada keeps rate at 0.5% and does not cut!

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This afternoon, the Euro was UP by 5 basis points to trade at 1.1217

The Yen ROSE to 100.79 for a LOSS of 3- 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  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND ROSE 13 basis points, trading at 1.3021/

The Canadian dollar ROSE by 106 basis points to 1.3 102, WITH WTI OIL AT:  $47.11

The USA/Yuan closed at 6.6725

the 10 yr Japanese bond yield closed at -.090%  DOWN 1  IN BASIS POINTS / yield/ AND THIS IS BECOMING BOTHERSOME TO THE BANK OF JAPAN

Your closing 10 yr USA bond yield: DOWN 5 IN basis points from TUESDAY at 1.5650% //trading well below the resistance level of 2.27-2.32%) very problematic

USA 30 yr bond yield: 2.284 DOWN 6 in basis points on the day /*very problematic as all bonds globally rose in yield (lowered in price)

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

Your closing USA dollar index, 95.45 DOWN 1 CENT  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: 2:30 PM EST

London:  CLOSED UP 41.71 POINTS OR 0.61%
German Dax :CLOSED UP 76.86 OR  0.74%
Paris Cac  CLOSED UP 33.77 OR 0.77%
Spain IBEX CLOSED UP 52.20 OR 0.60%
Italian MIB: CLOSED UP 87.50 POINTS OR 0.54%

The Dow was UP 111.94 points or 0.61%  4 PM EST

NASDAQ  UP 12.84 points or 0.24%  4 PM EST
WTI Oil price;  47.11 at 4:00 pm; 

Brent Oil: 48.42   4:00 EST

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  63.75(ROUBLE DOWN 8/100 ROUBLES PER DOLLAR FROM FRIDAY)  2:30 EST

TODAY THE GERMAN YIELD FALLS TO -0.145%  FOR THE 10 YR BOND  2:30 EST

END

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

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

WTI CRUDE OIL PRICE 5 PM:$47.16

BRENT: $48.83

USA 10 YR BOND YIELD: 1.572%

USA DOLLAR INDEX: 95.43 down 4 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.3014 up 0.0006 or 6 basis pts.

German 10 yr bond yield at 5 pm: -0.145%

END

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

TRADING IN GRAPH FORM

OilPECalypse Sparks Stock-Buying Panic

Something is up… everyone and their pet rabbit was speaking today (and there’s more tomorrow)

 

More crappy macro data today... but all that mattered was Yellen never screwed up totally, Deutsche Bank didn’t actually declare bankruptcy, and ‘sources’ said some short-squeeze-creating statements in Algiers…

 

A big gasoline build (DOE data) sparked RBOB/WTI selling at 1030ET but as Europe closed the USD turned around and then “sources” from Algiers sparked buying panic in crude… which then took out stops, dragged stocks and bond yields higher… before OPEC headlines late on faded the gains…

 

While some other sectors gained, the big move was in the Energy Sector….

 

Small Caps and The Dow outperformed on the day and Nasdaq lagged…(notice the panic buying as Nasdaq dared to go red late on…

 

Notably Small Cap remains red on the week despite panic squeeze efforts late on…

 

VIX was stomped back down to a 12 handle, filling the gap from Friday’s close...

 

Treasury yields ended the day up around 1bps across the curve as early buying gave way to kneejerk selling as OPEC headlines hit…

 

Oil’s gains sparked panic-buying in HYG (high yield bond ETF), sending it to 13- month highs…

 

The USD Index slid from the European close (back to unch on the week) with CAD/AUD strength (on oil’s surge) helping to take the dollar lower…

 

Of course, crude dominated commodity-land with copper up also and OPMs flat...

 

Some context for the WTI move – not all that impressive really…

 

But once again – it slooks like major hedging being done into this spike in oil prices…

 

Charts: Bloomberg

end

 

Wow!! Former Philly President Charles Plosser on Bloomberg just  admitted that Trump is correct on Yellen in that they are always conjuring up reasons not to act. He admitted that the Fed has basically no credibility

(courtesy zero hedge)

“There’s A Real Problem Here” – Did Fed’s Plosser Just Admit Trump Is Right About Yellen?

 

end

 

This kind of shows you how the uSA economy is really behaving:  for the 20th consecutive month, core durable goods orders contract:  this is the longest non recessionary strak in USA history

(courtesy zero hedge)

Core Durable Goods Orders Contract For 20th Straight Month – Longest Non-Recessionary Streak In US History

(courtesy zero hedge)

 

California Sanctions Wells Fargo – Suspends Up To $2 Trillion Banking Relationship For Next 12 Months

Treasurer John Chiang says in letter to Wells Fargo’s John Stumpf, board that he’s ordered suspension of WFC’s participation in “its most highly profitable business relationships” with California.

Bloomberg reports:

The California Treasurer oversees ~$2t in annual state banking transactions; manages $75b investment pool; is largest U.S. issuer of municipal debt

  • Sanctions include:
    • Suspending investments by Treasurer’s office in all WFC securities
    • Suspending using WFC as broker-dealer for purchasing investments
    • Suspending WFC as managing underwriter on negotiated sales of Calif. state bonds (where Treasurer appoints underwriter)
  • Sanctions take effect immediately, will remain in place for next 12 months
    • WFC may face tougher sanctions “up to and including complete and permanent severance of all ties” with Treasurer’s Office if WFC fails to demonstrate compliance with consent orders or “evidence surfaces” has engaged in same behavior
  • Calif. will work with Calpers, Calstrs to pursue governance reforms ensuring “this type of behavior and systemic corruption” doesn’t reoccur
    • Notes the 2 pension systems have >$2.3b invested in WFC fixed income securities, equity
  • Chiang will seek:
    • Separation of CEO/chair positions
    • Appointment of consumer ombudsman
    • Development of anonymous ethics reporting process/whistleblower protection program
    • Review of WFC compensation practices
    • Clawbacks
  • WFC admission thousands of bank employees opened >2m fraudulent consumer accounts is “a legal and ethical outrage that cannot go unpunished”: Chiang
    • ‘‘How can I continue to entrust the public’s money to an organization which has shown such little regard for the legions of Californians who have placed their financial well-being in its care?”

It appears Rounds 1 and 2 have gone to Elizabeth Warren.

 

end

Well that is all for today

I will see you tomorrow night

h.

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