Sept 30/Deutsche bank on the ropes:needed a little rescue today/China’s oil reserves are double than what was expected/Dutch giant bank Ing to lay off “thousands”: European economy must be real peachy!/Atlanta Fed lowers 3rd quarter estimate on GDP to only 2.4%

Gold $1314.30 down  $7.40

Silver 19.14 up 3  cents

In the access market 5:15 pm


Gold: 1316.00

Silver: 19.17



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 30 (10:15 pm est last night): $  1327.19


Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1327.50




London Fix: Sept 30: 5:30 am est:  $1327.90   (NY: same time:  $1326.90:    5:30AM)

London Second fix Sept 16: 10 am est:  $1322.50  (NY same time: $1323.00 ,    10 AM)

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

Also why would mining companies hand in their gold to the comex and receive constantly lower prices.  They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.


For comex gold:The front September contract month we had 30 notices filed for 3000 oz

the total number of notices filed for the month:  2706 for 270600 oz (8.4167 tonnes)

and that should complete September

For silver:  the front month of September we have a total of 0 notices filed for nil oz

September is now complete.

for the Oct contract month:  5 notices for 25,000 oz.


Let us have a look at the data for today



In silver, the total open interest ROSE by 378 contracts UP to 200,854. The open interest ROSE as the silver price was UP 8 cents in yesterday’s trading .In ounces, the OI is still represented by just MORE THAN 1 BILLION oz i.e. 1.0004 BILLION TO BE EXACT or 144% of annual global silver production (ex Russia &ex China).

In silver for October we had 5 notices served upon for 25,000 oz

In gold, the total comex gold FELL by 8,647 contracts despite the fact that the price of gold rose by $2.30 YESTERDAY . The total gold OI stands at 565,759 contracts. The bankers have done a great job fleecing longs and as usual the entire gold comex OI obliterates as we enter first day notice.


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



Total gold inventory rests tonight at: 949.14 tonnes of gold


we had no changes at 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 ROSE by 378 contracts UP to 200,854 as the price of silver rose by 8 cents with yesterday’s trading.The gold open interest FELL by 8,647 contracts DOWN to 565,759 as the price of gold rose $2.30 IN YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report



2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg



i)Late  THURSDAY night/FRIDAY morning: Shanghai closed UP 10.63 POINTS OR .30%/ /Hang Sang closed UP 119.82 POINTS OR 0.51%. The Nikkei closed UP  228.31 POINTS OR 1.39% Australia’s all ordinaires  CLOSED UP 1.09% /Chinese yuan (ONSHORE) closed UP at 6.6672/Oil FELL to 46.91 dollars per barrel for WTI and 48.27 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.6771 yuan to the dollar vs 6.6672 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS A BIT  AS MORE USA DOLLARS ATTEMPT TO  LEAVE CHINA’S SHORES





none today


In reality China has more than double the amount of oil in its SPR: 700 million barrels and thus they can really dictate the price by basically stop buying or if the price rises, they can sell excesses

( zero hedge)


i)Germany: Deutsche bank

We can boil down how much liquidity DB has into two sections:

a) it’s retail brokerage accounts at 71 billion euros

b) its depositors at 550 billion euros.

Total liquidity available today is around 215 billion euros.  If the depositors flee the game is over!

( zero hedge)

ii)Deutsche bank total liquidity is now down to 215 billion euros from June’s 225 billion euros.  However the depositor base is the key worry at 550 billion.  If they run, the game is over:

( zero hedge)

iii)This morning DB’s yield curve inverts as many counterparties to DB seek protection through credit default swaps etc. We are also witnessing many counterparties removing excess liquidity from bank accounts.

Ladies and Gentlemen: this is important@! DB may not have a solvency issue but it certainly has a liquidity problem.

( zero hedge)

iv  a.)The rumour this morning was that there is going to be a settlement with respect to the criminal activity of Deutsche bank in the mortgage scandal.  The fine is a lot less than the 14 billion USA desired.

I would like to point out to you that the fine is a minor problem for DB.  The major issue is not a solvency one but that of liquidity

( zero hedge)


iv  b)In an obvious move to slow down depositors/counterparties leaving DB, the French Press confirms a supposed 5.4 billion USA settlement. The market is acting as if this is the major problem for DB, measly 5 billion dollars.  The real problem is a total lack of liquidity

( zero hedge)

v)The Netherlands: ING BANK

Just after Germany’s second largest bank confirmed the restructuring and that it would layoff nearly 10,000 employees or 20% of its workforce, ING announced that thousands of job cuts was in store for Monday:

(courtesy Het Financieele Daglad/Holland/zero hedge)



none today


Rig count rises which must increase uSA oil production;

( zero hedge)


none today


i)Russia is on tap to buy another 200 tonnes of gold this year.

( Sputnik/GATA)

ii)Yellen for the first time states that the Fed could buy stocks only if Congress authorizes it:

( ETF daily news/GATA)

iii)Alasdair Macleod’s important paper today where he discusses how the fall of the American empire will cause a great rush into gold:

( Alasdair Macleod)

iv)The following is discussed today on various commentaries in my report tonight and is extremely important: DB clients are reducing collateral with the bank due to counterparty risks:

( Bloomberg/GATA)

v) trading in gold and silver early this morning spiking on news of problems with DB

(zero hedge)

vi)Private holders of military bunkers in Switzerland are using these facilities to store gold. And because they are private and not banks, these guys do not have to declare to USA authorities the gold they store.


i)Trading early morning 9:30 am est: dollar shortage intensifies coupled with huge funding pressure!

( zero hedge)

ii)USA spending is a big part of GDP.  August spending is a big disappointment as the savings rate rises for the 2nd month in a row.  The consumer is:

a) tapped out

b) worried especially on witnessing problems over at Deutsche bank

(courtesy zero hedge)

iii)The national Chicago Fed report shows the USA appears to have picked up a little at the end of the 3rd quarter with reading of 54.2 on expectations of 52.0. However the all important employment sector falters;

(National Chicago Fed report/zero hedge)

iv)The Atlanta Fed lowers its Q3 estimate of GDP from 2.9% down to 2.4%.  The culprit; dismal consumer spending

( Atlanta Fed/zerohedge)
v)Today, it is Illinois’ turn to suspend billions of dollars of investment activity with Well Fargo.These guys are being bled to death by 1,000 cuts

( zero hedge)

Let us head over to the comex:

The total gold comex open interest FELL BY AN HUGE 8,647 CONTRACTS to an OI level of 565,759 despite the fact that the price of gold rose by  $2.30 with YESTERDAY’S trading.

The contract month of Sept is now off the board. The next delivery month is October and here the OI lost 2311 contracts DOWN to 7393.  This is huge for October as 22.99 tonnes is standing for physical metal.  This compares to last years 9.66 tonnes.

The next delivery month is November and here the OI fell by 40 contracts down to 2252 contracts. The next contract month and the biggest of the year is December and here this month showed an decrease of 6,399 contracts down to 440,956. The estimated volume today at the comex: 97,138 which is EXTREMELY WEAK.  Confirmed volume yesterday: 169,315 which is good.

Today we had  2470 notices filed for 247,000 oz of gold.(7.68 tonnes)

And now for the wild silver comex results.  Total silver OI ROSE BY 378 contracts from 200,476 UP TO 200,854 as the  price of silver ROSE  to the tune of 8 cents yesterday.  We are moving  CLOSER TO the all time record high for silver open interest set on Wednesday August 3:  (224,540). The September contract month is now off the board. The next non active delivery month is October and here the OI fell by 37 contracts down to 437. The November contract month saw its OI rise by 6 contracts up to 395.   The next major delivery month is December and here it FELL BY 287 contracts DOWN to 171,065. The ESTIMATED volume on the comex today (just comex) came in at 38,835 which is FAIR.  The confirmed volume yesterday (comex and globex) was huge at 58,219 . Silver is not in backwardation.  London is in backwardation for several months.

today we had 5 notices filed for silver: 25,000 oz

INITIAL standings for OCTOBER
 SEPT 30.
Withdrawals from Dealers Inventory in oz  


Withdrawals from Customer Inventory in oz  nil
96.45 oz
3 kilobars
Deposits to the Dealer Inventory in oz nil oz


Deposits to the Customer Inventory, in oz 
 34,034.596 oz
incl 20  kilobars
No of oz served (contracts) today
2470 notices 
247000 oz
No of oz to be served (notices)
4923 contracts
Total monthly oz gold served (contracts) so far this month
2470 contracts
247,000 oz
7.6827 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month    oz
Total accumulative withdrawal of gold from the Customer inventory this month    96.45 oz
 Today; very good activity at the gold comex and 2 kilobar entries
We had 0 dealer deposit:
Total dealer deposits; nil oz
We had 0 dealer withdrawals:
total dealer withdrawals; NIL oz
we had 2 customer deposit:
i) Into Manfra:  643.000 oz 5 kilobars
ii) Into Scotia:  33,391.596 oz
Total customer deposits: 34,034.596 oz.
 We had 1 customer withdrawals:
i) Out of Manfra: 96.45 oz
total customer withdrawals: 96.45 oz
Today we had 1  adjustments:
i) Out of Scotia: a massive 204,951.63 oz of gold was transferred out of the customer and this landed into the dealer account of Scotia:
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
 For September we had 30 notices filed for 3000 oz.  The total number of notices filed for the entire month:  2706 for 270600 oz.  Thus the final standing for gold in September is 270600 oz or 8.4167 tonnes
For October:

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 2470 contract  of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped (received) by jPMorgan customer account.

To calculate the initial total number of gold ounces standing for the Oct contract month, we take the total number of notices filed so far for the month (2470) x 100 oz or 247,000 oz, to which we add the difference between the open interest for the front month of OCT (7393 contracts) minus the number of notices served upon today (2470) x 100 oz per contract equals 739,300 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 (2470) x 100 oz  or ounces + {OI for the front month (7393) minus the number of  notices served upon today (2470) x 100 oz which equals 739300 oz standing in this non active delivery month of Oct  (22.99 tonnes).
Total dealer inventor 2,311,300.256 or 71.89 tonnes
Total gold inventory (dealer and customer) =10,572,568.400 or 328.85 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 328.85 tonnes for a  gain of 26  tonnes over that period. However since August 8 we have lost 25 tonnes leaving the comex.(corrected total from yesterday and today)
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. ALSO TODAY THE LIQUIDATION OF 96 CONTRACTS HAVING STOOD FOR THE ENTIRE MONTH AND THEN ROLLING MAKES ABSOLUTELY NO SENSE

And now for silver
OCT INITIAL standings
 SEPT30. 2016
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
420,010.27 oz
CNT, Scotia
Deposits to the Dealer Inventory
 nil OZ
Deposits to the Customer Inventory 
594,448.400 oz
No of oz served today (contracts)
(25,000 OZ)
No of oz to be served (notices)
432 contracts
(2,160,000 oz)
Total monthly oz silver served (contracts) 5 contracts (25,000 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  420,010.27 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 2 customer withdrawals:
i) Out of CNT: 420,010.27 oz
ii) Out of Scotia; 60,033.500 oz
Total customer withdrawals: 420,010.27  oz
We had 1 customer deposit:
i) Into Brinks; 594,448.400 oz
total customer deposits: 594,448.400 oz
 we had 2 adjustments and all probable settlements;
i) Out of Brinks:  429,862.800 oz was adjusted out of the dealer and this entered the customer account of Brinks
ii) Out of CNT: 369,321.11 oz was adjusted out of the customer account and this landed into the dealer account of CNT
The total number of notices filed today for the Oct contract month is represented by 5 contracts for 25,000 oz. To calculate the number of silver ounces that will stand for delivery in OCT., we take the total number of notices filed for the month so far at (5) x 5,000 oz  = 25,000 oz to which we add the difference between the open interest for the front month of OCT (437) and the number of notices served upon today (5) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the OCT contract month:  5(notices served so far)x 5000 oz +(437 OI for front month of SEPT ) -number of notices served upon today (5)x 5000 oz  equals  2,185,000 oz  of silver standing for the OCT contract month. THIS IS ALSO A HUGE SHOWING FOR SILVER AS OCTOBER IS A VERY WEAK DELIVERY MONTH.
Total dealer silver:  30.362 million (close to record low inventory  
Total number of dealer and customer silver:   173.321 million oz
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.
At 3:30 pm we receive the COT report which gives us position levels of our major players;
Let us now head over to the gold COT


Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
358,972 67,068 47,925 123,156 437,750 530,053 552,743
Change from Prior Reporting Period
32,646 -3,079 -3,070 2,842 26,821 32,418 20,672
193 86 82 50 63 286 196
  Small Speculators      
  Long Short Open Interest    
  53,108 30,418 583,161    
  -8,048 3,698 24,370    
  non reportable positions Change from the previous reporting period  
COT Gold Report – Positions as of Tuesday, September 27, 2016
Quite a crime scene
Our large speculators;
those large speculators that are long in gold liked what they saw and they bought a huge increase of 32,646 contracts of gold.
those large speculators that are short in gold covered 3079 contracts from their short side
Our commercials
those commercials that have been long in gold added 2842 contracts to their long side
those commercials that have been short in gold added a whopping 26,821 contracts to their short side.
Our small specs;
Those small specs that have been long in gold pitched 8048 contracts from their long side??
Those small specs that have been short in gold added 3698 contracts to their short side??
what?? the small specs are mimicking the commercials?
conclusions:  the boat is getting really lopsided with the specs all loaded to the left of the boat and the commercial loaded on the short side to the right of the boat. the commercials go net short by a huge 23,979 contracts..very bearish for more raids.
And now for our silver COT:
Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
116,948 32,086 8,572 48,161 148,979
3,381 1,154 233 2,252 6,125
117 50 36 32 41
Small Speculators Open Interest Total
Long Short 201,486 Long Short
27,805 11,849 173,681 189,637
2,119 473 7,985 5,866 7,512
non reportable positions Positions as of: 169 111
  Tuesday, September 27, 2016   ©
Our large specs:
Those large specs that have been long in silver added 3381 contracts from their long side
those large specs that have been short in silver added 1154 contracts to their short side.
Our commercials;
Those commercials that have been long in silver added 2252 contracts to their long side
those commercials that have been short in silver added another 6125 contracts to their short side.
Our small specs:
those small specs that have been long in silver added 2119 contract to their long side
those small specs that have been short in silver added 473 contracts to their short side.
commercials go net short by another 3875 contracts and the boat as in gold becomes completely lopsided
And now the Gold inventory at the GLD
SEPT 30/no changes at the GLD/Inventory rests at 949.14 tonnes
SEPT 29/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 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 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
SEPT 30/ Inventory rests tonight at 949.14 tonnes


Now the SLV Inventory
SEPT 30/no change at the SLV/inventory rests at 362.909 million oz/
SEPT 29/we had no changes at 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 22/no change in inventory at 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 30.2016: Inventory 362.909 million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 5.4 percent to NAV usa funds and Negative 5.3% to NAV for Cdn funds!!!! 
Percentage of fund in gold 59.5%
Percentage of fund in silver:39.4%
cash .+1.1%( SEPT 30/2016).
2. Sprott silver fund (PSLV): Premium RISES to +1.19%!!!! NAV (SEPT 30/2016) 
3. Sprott gold fund (PHYS): premium to NAV  falls TO  1.05% to NAV  ( SEPT 30/2016)
Note: Sprott silver trust back  into POSITIVE territory at 1.19% /Sprott physical gold trust is back into positive territory at 1.05%/Central fund of Canada’s is still in jail.


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

Trading in gold and silver overnight in Asia and Europe

Why Krugman, Roubini, Rogoff And Buffett Hate Gold

Why Krugman, Roubini, Rogoff And Buffett Dislike Gold

By Jan Skoyles  Edited by Mark O’Byrne 

A couple of weeks ago an article appeared on Bitcoin Magazine entitled ‘Some economists really hate bitcoin’.

I read it with a sigh of nostalgia. As someone who has been writing about gold for a few years, I am used to reading similar criticisms as those bitcoin receives from mainstream economists, about gold.

gold price performance

As with bitcoin, gold is just a step too far for many economists. Criticism is often, as with bitcoin, targeted at the people who invest in it, rather than the asset’s own track record, fundamentals and safe haven attributes – classic attacking the ball and not the man.

This frequently involves name calling and the pejorative ‘goldbug’ label. This is used to try and discredit anyone who says anything positive about gold including being bullish on the price or seeing it as an important diversification. Often some of the gold naysayers refuse to distinguish between gold as a diversification in an investment or pension portfolio and gold’s role as a hedge against currency devaluations on one side and on the other calls for a gold standard.

Two completely separate matters – one pertaining to monetary policy and the other to investing, saving and personal finances.

In my experience to invest in gold is seen by the critics as the ultimate rejection of central banks, financial systems and government. These critics believe that faith in something that just gets mined out of the ground is baseless compared to something that ‘involves human endeavors (like stocks)’ as Joe Weisenthal of Bloomberg argued.

This ignores the fact that the production of gold, refining of gold, minting and fabricating of coins and bars and indeed the brokering, delivery and storage of bullion, and the running of the myriad of different precious metal companies involved in this quite large industry involves human energy, innovation and endeavours.

Below I touch upon some of those critics who continue to dismiss either gold as an investment or as a form of money which may play some role in the monetary system.

Nobel Prize Winning Krugman

If anyone could be accused of having a caricature of gold, it would be Paul Krugman. For him, gold investment is a push for the gold standard and anyone who advocates diversifying into gold is a lunatic, right wing “gold bug”.

Krugman most recently riled fans of gold when he went after Republicans during candidate nominations and mocked their apparent desire to return to a gold standard. (Despite it being a Republican who ended the gold standard).

What Krugman failed to acknowledge was that the push for gold in the financial system is not just coming from a the “Tea Party” movement and a bunch of Republican voters, but rather it is coming from the East – from China and the People’s Bank of China and indeed the Russian central bank who are buying up all the gold they can.

It’s coming from Western investors who are looking for a hedge against economic risk and for portfolio diversification. It is coming from countries who still see gold as a form of money and a safe haven, such as the people of India and people in Germany and Switzerland in Europe.

When asked why he celebrated the fall of the gold price in 2013 he told Business Insider:

“Well, the inflationistas/goldbugs are really, really annoying — all this air of having the secret wisdom when they actually haven’t a clue. And they have been a real destructive factor in policy debate, standing in the way of effective policy by raising fears of Weimar and Zimbabwe. So seeing the one thing they got right — betting on higher gold prices — turn sour is cause for a bit of celebration.”

To be fair, the gold price had fallen sharply in 2013 but Krugman ignored the performance over the medium and long term – a cardinal sin in investing which should always be about the long term.

Even at the end of 2015 when a few of us were doing some soul-searching and asking ‘did we miss something? It wasn’t as though we had returned to the days of a few hundred dollars per ounce. Gold and silver were some of the best assets to hold before, during and after the global financial crisis. Gold rose every single year from 2001 through to 2012, prior to the sharp correction in 2013. Gold rose in all fiat currencies – none of which acted as a safe haven during the financial crisis.

Gold acted as a hedge during the crisis when most property, stock and bond markets had seen sharp falls. When these markets stabilised and began to recover, gold prices fell. Exactly what a hedge should do.

This year gold and silver prices were up 26% and 38% respectively, in the first half of the year and have consolidated on those gains in Q3, 2016.

Stocks in many markets have come under pressure in 2016 – especially in Japan and Germany and some currencies have been devalued including the British pound after Brexit. Gold is acting as a hedge again in 2016 – exactly when investors around the world need a hedge.

To my knowledge Krugman is yet to address this year’s gold performance. The last time he did try to explain the bull-market in gold (early September 2011) he dismissed the idea that it was because of inflationary concerns. But for some reason used numbers that exclude inflation to support his argument.

He did, however make the valid point (which I entirely agree with) that “because expected returns on other investments have fallen” is why more people were buying gold. Yet given near negative and negative interest rates today, and the fact the “expected returns” on deposits, bonds and indeed the entire pensions complex “have fallen”, you would think that Krugman might now understand and concede the value of diversification an allocation to gold in a diversified portfolio.

Ideologues of the right and the left never allow the facts to get in the way of their arguments.

Oracle of Omaha, Warren Buffet

Warren Buffett is not an economist but you can guarantee that more investors pay attention to the Oracle of Omaha’s views than the majority of those economists – particularly statist ideologues.

Buffet has even debated with Marc Andreeson over bitcoin. Many believe that he dislikes bitcoin, but this may not be the case, he may just see it as a development in the world of payments – an upgrade from writing a cheque or sending a wire transfer. It is not ground-breaking stuff.

Where Buffet’s problem with bitcoin lies is exactly where it lies with gold – he fails to see the intrinsic value of it. Bitcoin is ‘not a currency’ it is a ‘mirage’ according to Buffett.


When interviewed by CNBC in 2009 he said of gold “… it’s a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that,” he said. “The idea of digging something up out of the ground, you know, in South Africa or someplace and then transporting it to the United States and putting into the ground, you know, in the Federal Reserve of New York, does not strike me as a terrific asset.”

At the beginning of the year Berkshire Hathaway increased its shareholding in oil refining company Philips 66 to 13.7%. This was seen as a bet on oil prices. The company had chosen to ignore the current top performing commodities that were gold and silver, and the shares of Berkshire Hathaway were underperforming in comparison.

In 2009, prior to gold going parabolic from 2010 to 2012, GoldCore also pointed out how gold has performed Berkshire Hathaway over a 4 year and a 10 year period. We pointed out and were quoted by Bloomberg how gold’s utility was simply “in balancing a portfolio.” We said that the point is that gold had “preserved a chunk of wealth that would have been otherwise taken down with other financial instruments,” see here.

The Daily Reckoning also pointed out “an investor who purchased gold at any time after January of 1998 would have received a higher investment return over the following 10 years than an investor who purchased Berkshire Hathaway.”

This is not to suggest that Berkshire Hathaway has not been a great investment for its owners – it has. Rather it shows that there are periods of time when gold outperforms most, and frequently all, other investments and hence its importance as a hedging instrument and a safe haven asset.

Dr. ‘Doom’ Roubini

We have some respect for Dr Roubini as a macroeconomist and have indeed shared many of his concerns in many years and shared them with our clients and the wider public as long ago as 2005 and 2006 when he and we warned that the US would soon follow in Iceland’s footsteps and have its own financial crisis. However, giving financial advice is not his expertise and he may be better suited focusing on his strengths.

As Roubini is regarded as a guru by many experts and opinion makers internationally, there is a real risk that his opinions regarding gold could lead to poor and imprudent investment decisions.

In December 2009, when gold was at $1,100/oz, he said that “all the gold bugs who say gold is going to go to $1,500, $2,000, they’re just speaking nonsense.”

In the following years gold rose to over $1,500/oz and nearly reached $2,000/oz when it surged to $1,915/oz in 2011.

One of our clients actually sold their gold allocation on the basis of this statement. Despite gold being the one asset class that had protected them in the early stages of the crisis in 2007, 2008 and 2009. Gold nearly doubled after Roubini’s pronouncement.

gold_chartGold in USD – 10 Years

In August, 2013, when gold has already fallen in price and was trading at $1,300/oz, Roubini predicted that gold would fall another 23%, back to $1,000. Not only that but he said that this would happen “at the end of next year”.

Reasons given were that: “Now with the economy recovering, nobody wants to be in rocks that don’t pay any dividends. Real interest rates are rising. That kills gold…Governments with debt issues are selling gold…Gold was juiced by right-wing fanatics in the US. That boom is over… gold remains John Maynard Keynes’s “barbarous relic,” with no intrinsic value and used mainly as a hedge against mostly irrational fear and panic.”

Where to start with this logic and poor analysis? There has not been an economic recovery of real substance, real interest rates do not appear to have risen and the gold price has performed quite well over the medium and long term. Gold has gone sideways after a period of multiple annual yearly gains.

To be fair, it is difficult to call Roubini an all out gold-hater as he does suggest that “all investors should have a very modest share of gold in their portfolios as a hedge against extreme tail risks.” However, he doesn’t think it’s crucial and that “other real assets can provide a similar hedge, and those tail risks – while not eliminated – are certainly lower today than at the peak of the global financial crisis.” Given the deteriorating financial position of systemic Deutsche Bank, Roubini may need to revise that assumption soon.

Roubini has been very vocal in his anti-gold stance. Indeed, he has even engaged in Twitter wars with GoldCore’s Mark O’Byrne and James Rickards, over the gold standard.

There is little doubt that Roubini is a very smart economist, however he just cannot get to grips with the role of gold. Describing those who like gold as ‘gold bugs – a combination of paranoid investors and others with a fear-based political agenda.’He likes to throw gold and bitcoin fans into the same category. He tried to engage Jim Rickards and goldbugs in Twitter war back in April 2013. When Rickards pointed out a few truths about the gold price he turned his attentions “Gold-bug suckers found another irrational useless bubble fad, the Bitcoin, the bubble flavor of the day. So they are dissin gold 4 Bitcoin.”

Roubini has also resorted to the silly old argument that “you can’t eat gold” and said that: “If you want to hedge against inflation, stock up on Spam or other canned food”

Ignoring the somewhat obvious fact that you cannot eat any investment or currency – whether that be stocks, bonds or dollars, euros or pounds. Unlike, spam and canned food, gold is one of the most traded assets and liquid investments in the world – especially in a crisis. There is always a market for gold and it can always be exchanged for cash or indeed used to buy food, farms, property and businesses. A cursory analysis of gold’s performance in economies suffering financial and economic crisis would show Roubini the value of gold as a currency hedge and indeed a hedge against systemic contagion in an economy.

Thus, Roubini has a questionable track record when it comes to gold and his arguments against it are poor.


In many ways I have saved the best until last, but at the same time wish to not say too much here as I have a further article planned around the Grand Chess master, American economist, Kenneth Rogoff.

Many of you will recognise the name as his latest book ‘The Curse of Cash’ was released over the summer. As someone who straddles both the fintech world as well as the gold world I am used to the push for a cashless society.

Going cashless is seen as the new sexy side to financial services as it is purported to prevent bad things happening with money and will allegedly empower the poor of the Developing World and the unbanked. Save your scoffing, I’ll deal with those claims in my later article.

For Rogoff the clamp down on cash would be beneficial because of its impact on money laundering and tax evasion. Why would this mean that he is against gold? It might not. In fact he has quite prominently appeared to support gold (or at least not dismiss it) earlier this year.

In May, writing on Project Syndicate he outlined how emerging economies should shift their US dollar reserves entirely into gold, praising it as ‘an extremely low-risk asset with average real returns comparable to very short-term debt.’. He argued that emerging economies should ignore the West’s push to demonetise gold, ‘There has never been a compelling reason for emerging markets to buy into the rich-country case for completely demonetizing gold. And there isn’t one now.’

But, in a recent interview to promote his book he told CNBC that there was a need to clamp down on assets that could be used instead of good, sturdy fiat money, ‘“You have to play whack-a-mole with all these things,” he stated during a recent appearance on CNBC. “There are always going to be these other things: gold coins, uncut diamonds, [and] now bitcoin.”

‘These other things’ are real, tangible assets (forget bitcoin for now). They allow freedom of movement, of purchases and there can be significantly less counterparty risk than when using fiat money. The push for a cashless society, for all the talk of fighting crime, is really to support the banking system.

As we outline in our upcoming/recent report on bail-ins. The push for a cashless society will help to support the new bail-in regime. With assets such as gold, bail-ins become trickier and not as straightforward as using customer deposits to prop up a failing bank system.

Rogoff dislikes gold because it removes power from the banking system within reach of tax strapped governments, and puts it back in the hands of the saver who opts to save in gold bullion rather than fiat, electronic currency.

In this vein, libertarian academic economist, Saifedean Ammous, wrote on Twitter

“Statist economists hate Bitcoin for same reason taxi drivers hate Uber: it frees the rest of us from their bull$h*t …”

How true. Substitute the words Bitcoin for gold and it reads just as well if not better:

“Statist economists hate gold for same reason taxi drivers hate Uber: it frees the rest of us from their bull$h*t …”


Keynes once argued “gold has become part of the apparatus of conservatism and is one of the matters which we cannot expect to see handled without prejudice.” This is certainly true with regards to gold today and the many prejudices and lack of evidence based research regarding gold and its role as a hedging instrument and safe haven diversification.

“The modern mind dislikes gold because it blurts out unpleasant truths” said economist and political scientist Joseph Schumpeter. The unpleasant truth today is that today’s financial and monetary system is fragile in the extreme and likely to suffer another financial crisis very soon.

For all of those mentioned above the main dislike for gold appears to be due to a combination of a lack of understanding and the desire to keep the unsustainable status quo going. A surging gold price frequently makes their analysis and prognosis look bad. In the case of Buffett, were a the ‘chunk of metal’ gold to outperform his Berkshire Hathaway shares his God-like ‘Oracle’ status would be questioned.

In the words of my karaoke go-to Taylor Swift “Haters gonna hate, hate, hate …”

Gold and Silver Bullion – News and Commentary

“Given strong fundamentals of increasing geopolitical and economic risk … gold should move higher in Q4” (MarketWatch)

Gold Advances as Deutsche Bank Concerns Stoke Demand for Haven (Bloomberg)

Gold rises as stocks slip, on track for weekly loss (Reuters)

Is another German bank in trouble? Commerzbank to cut 9,600 jobs and suspend dividend (Telegraph)

Russian Central Bank To Continue Diversifying Into Gold (Reuters)


HEDGE FUND LEGEND JULIAN ROBERTSON: Everything is a bubble – Will end in ‘chaos’ (YahooFinance)

HSBC Warns Of 1987-Like Crash (Investing)

The New Banking Crisis — In Two Frightening Graphs (WallstreetOnParade)

Chinese Property is ‘Biggest Bubble in History’ – Billionaire (CNNMoney)

TOP FOUR PRECIOUS METALS: Which Will Be The Best Investments During The Next Financial Crash (Silverseek)

Gold Prices (LBMA AM)

30Sep: USD 1,327.90, GBP 1,025.01 & EUR 1,187.67 per ounce
29Sep: USD 1,320.85, GBP 1,016.92 & EUR 1,177.14 per ounce
28Sep: USD 1,324.80, GBP 1,020.10 & EUR 1,181.06 per ounce
27Sep: USD 1,335.85, GBP 1,031.01 & EUR 1,187.84 per ounce
26Sep: USD 1,336.30, GBP 1,033.23 & EUR 1,188.91 per ounce
23Sep: USD 1,335.90, GBP 1,027.17 & EUR 1,192.16 per ounce
22Sep: USD 1,332.45, GBP 1,019.59 & EUR 1,186.68 per ounce

Silver Prices (LBMA)

30Sep: USD 19.35, GBP 14.92 & EUR 17.33 per ounce
29Sep: USD 19.01, GBP 14.61 & EUR 16.95 per ounce
28Sep: USD 19.12, GBP 14.69 & EUR 17.05 per ounce
27Sep: USD 19.42, GBP 14.99 & EUR 17.26 per ounce
26Sep: USD 19.44, GBP 15.04 & EUR 17.29 per ounce
23Sep: USD 19.82, GBP 15.28 & EUR 17.66 per ounce
22Sep: USD 19.88, GBP 15.22 & EUR 17.69 per ounce

Recent Market Updates

– ECB Refused “To Answer Questions” – Deutsche Bank “Systemic Threat” Is “Not ECB Fault”
– Euro “Might Start To Unravel” If Collapse Of Deutsche Bank
– 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”

Mark O’Byrne
Executive Director



Russia is on tap to buy another 200 tonnes of gold this year.

(courtesy Sputnik/GATA)

Russian central bank buys gold because it can do it with depreciating rubles


Russia’s Adding Another 200 Tons of Gold to Its Treasury and Here’s Why

From Sputnik News, Moscow
Thursday, September 29, 2016

Russia plans to stock up on about 200 tons of gold this year, nearly matching the 208 tons it purchased in 2015. That’s according to Anton Navoi, the deputy head of the statistics department at the Russian Central Bank. Navoi explained that it’s profitable for the state to buy the precious metal, since Russia is a world leader in its production.

Speaking at a conference on Wednesday, the official said that “last year the central bank purchased 208 tons of gold. This year it will purchase around 200 tons.” Gold currently accounts for around 16 percent of the country’s foreign exchange reserves, Navoi noted. And while there is no direct effort to increase the precious metal’s share in Russia’s reserves, it seems likely to happen, as the purchase of gold is profitable for the country.

“The central bank is buying gold because it is profitable. We are a country that is third in the world in terms of gold production, and we have the ability to buy it using our national currency, in contrast to other countries, which do not have such an opportunity,” the banker concluded. …

… For the remainder of the report:…






Yellen for the first time states that the Fed could buy stocks only if Congress authorizes it:

(courtesy ETF daily news/GATA)

Yellen says Fed could buy stocks if Congress authorized it


From ETF Daily News, Coronado, California
Thursday, September 29, 2016

For the first time the Federal Reserve has openly spoken about expanding its monetary policy toolbox to include the purchase of stocks — not just bonds and mortgage securities — and the implications could be huge.

Amid Fed chairperson Janet Yellen’s testimony before the House Financial Services Committee yesterday, South Carolina Republican Mick Mulvaney asked very directly about the cartel’s potential to buy stocks to prop up the economy. Mulvaney said:

“There’s been some attention in the last few months about the recent decision by the Bank of Japan to start purchasing equities and my question to you is fairly simple. Is the United States Federal Reserve looking at the possibility of adding the purchase of equities to its tool box as it looks at monetary policy?”

Most Fed watchers would have expected Yellen to deflect the question, or to simply say no. But then Yellen dropped a bombshell with her response:

“The Federal Reserve is not permitted to purchase equities. We can only purchase U.S. treasuries and agency securities. I did mention in a speech in Jackson Hole, though, where I discussed longer-term issues and difficulties we could have in providing adequate monetary policy. Accommodation may be somewhere in the future, down the line that this is the kind of thing that Congress might consider, but if you were to do so, it’s not something that the Federal Reserve is asking for.” …

… For the remainder of the report:…






Alasdair Macleod’s important paper today where he discusses how the fall of the American empire will cause a great rush into gold:

(courtesy Alasdair Macleod)

Alasdair Macleod: America is on a slippery slope


4:05p ET Thursday, September 29, 2016

Dear Friend of GATA and Gold:

The decline of the American empire, GoldMoney research director Alasdair Macleod writes today, will increase the strategic necessity of gold and the risk of war. Macleod’s commentary is headlined “America is on a Slippery Slope” and it’s posted at GoldMoney here:…

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


The following is discussed today on various commentaries and is extremely important: DB clients are reducing collateral with the bank due to counterparty risks:

(courtesy Bloomberg/GATA)

Some Deutsche Bank clients reduce collateral on trades


By William Canny
Bloomberg News
Thursday, September 29, 2016

Amid mounting concern about Deutsche Bank’s ability to withstand pending legal penalties, about 10 hedge funds that do business with the German lender have moved to reduce their financial exposure. The shares slumped.

The funds, which use the bank’s prime brokerage service, have moved part of their listed derivatives holdings to other firms this week, according to an internal bank document seen by Bloomberg News. Among them are Izzy Englander’s $34 billion Millennium Partners, Chris Rokos’ $4 billion Rokos Capital Management, and the $14 billion Capula Investment Management, said a person familiar with the situation who declined to be identified talking about confidential client matters.

Deutsche Bank’s New York-listed shares fell as much as 9.1 percent today to a record low, and traded 6.8 percent down at $11.46 by 2:45 p.m. …

… For the remainder of the report:…






Gold and silver spikes in early trading due to the Deutsche bank fall in price and rise in credit default swaps and a huge shortage of USA dollar liquidity! However options expiry is still in the mix as our banker friends manipulate gold/silver southbound to make those options worthless.  Such criminals!!

(courtesy zero hedge)

Gold & Silver Are Spiking

With USDollar liquidity demand soaring in Europe, and Lehman-esque systemic risk concerns re-emerging from the shadows, it appears the safe haven bid for protection from the folly of politicians and central planners is alive and well…

Silver surged above $19.68 (50DMA) and gold is pushing towards $1337 (50DMA)…

Since Deutsche’s hedge fund run began, bonds & bullion are bid…

Secret Swiss Military Bunkers Being Filled With Gold By Billionaires Seeking “Alternatives To Bank Deposits”

For decades, Switzerland had a reputation for bank secrecy that made it the most sought after tax haven for billionaires from around the globe.  But, after more than 80 years of secrecy, a series of bilateral agreements with countries around the world, including America’s Foreign Account Tax Compliance Act (FATCA), have forced the private-banking industry in Switzerland to embrace an entirely new era of transparency that requires a full exchange of tax-relevant information with more than a hundred countries.

Which, as Bloomberg points out, has been a huge boon for Swiss operators of private vaults which are not subject to the same transparency and reporting requirements as banks.  In fact, these super-secret, privately operated storage facilities buried around the Swiss Alps can basically store anything from anybody because they’re not even required to report suspicious activity to Switzerland’s Money Laundering Reporting Office.

“There is growth in gold,” Wipfli says. “Since 2008 there has been a real interest inalternatives to bank deposits.” The company explicitly taps into that demand. Swiss Data Safe “is independent from the banking system and any other organization or interest group,” according to a PowerPoint presentation Wipfli shows clients. The company and its anonymous rival aren’t regulated by the Swiss financial-services regulator Finma.


Nor do such companies have to report suspicious activity to Switzerland’s Money Laundering Reporting Office. In the past, submissions to the agency have led the Swiss attorney general to open investigations into corruption at FIFA, the global soccer body, and banking ties to Brazil’s Petrobras bribery scandal.



Moreover, American citizens aren’t required under FATCA to declare gold stored outside of financial institutions either.  So perhaps it’s no surprise that, according to the Swiss defense department, of the roughly 1,000 former military bunkers still in existence across Switzerland, several hundred of them have been sold to private individuals who are now operating them as private storage sites for the gold stash of the world’s wealthiest of billionaires.

“The gold trade is a huge part of the Swiss economy,” says John Cassara, a former U.S. Treasury special agent and the author of books on money laundering.


“I’m not surprised that there are not more effective efforts in Switzerland to better monitor its misuse. The powers that be don’t want to crack down.” In the first half of this year, 1,357 metric tons of gold—worth about $40 billion—were imported into Switzerland, according to the Swiss customs office, putting the year on course to be the biggest since a record in 2013.

Swiss Safe


And, of course, when you’re storing billions of dollars worth of gold bars, secrecy is a must.  As one unanimous vault operator told Bloomberg, his vault sits adjacent a private landing strip which allows quick access to his former military bunker buried in the granite face a mountain deep in the Swiss Alps.

Deep in the Swiss Alps, next to an old airstrip suitable for landing Gulfstream and Falcon jets, is a vast bunker that holds what may be one of the world’s largest stashes of gold. The entrance, protected by a guard in a bulletproof vest, is a small metal door set into a granite mountain face at the end of a narrow country lane. Behind two farther doors sits a 3.5-ton metal portal that opens only after a code is entered and an iris scan and a facial-recognition screen are performed. A maze of tunnels once used by Swiss armed forces lies within.


The owner of this gold vault wants to remain anonymous for fear of compromising security, and he worries that even disclosing the name of his company might lead thieves his way. He’s quick to dismiss questions about how carefully he vets clients but says many who come to him looking for a safe haven for their assets don’t pass his sniff test. “For every client we take, we turn one or two away,” he says. “We don’t want problems.”

Swiss Safe


Billionaire Tax Evaders: 1; Internal Revenue Service: 0.




We have highlighted the story to you already this month but it is worth repeating. It is obvious that the importing of Swiss gold into the USA is to cover holes in those guys which want delivery of their gold.


(courtesy Nathan Macdonald/Sprott Money)


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




2 Nikkei closed DOWN 243.87 OR 1.46%   /USA: YEN RISES TO 101.23

3. Europe stocks opened ALL IN THE RED (     /USA dollar index UP to 95.84/Euro DOWN to 1.1172

3b Japan 10 year bond yield: FALLS TO     -.089%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 101.23/ 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::  47.73  and Brent: 49.51

3f Gold UP /Yen DOWN

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” 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 DOWN for WTI and DOWN for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund FALLS QUITE A BIT to -.148%   

3j Greek 10 year bond yield FALLS to  : 8.24%   

3k Gold at $1323.75/silver $19.33(8:45 am est)   SILVER FINAL RESISTANCE AT $18.50 WILL BE DEFENDED 

3l USA vs Russian rouble; (Russian rouble DOWN 11/100 in  roubles/dollar) 63.19-

3m oil into the 47 dollar handle for WTI and 49 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT a  DEVALUATION DOWNWARD from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9746 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0875 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 10 Year German bund now NEGATIVE territory with the 10 year FALLS to  -.148%

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


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

4. USA 10 year treasury bond at 1.546% early this morning. Thirty year rate  at 2.267% /POLICY ERROR)

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

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


Global Stocks Slide As Deutsche Bank Fears Rise: Flight To Safety Boosts Bonds, Bullion

Global stocks continued their selloff this morning, driven by surging speculation about the liquidity, solvency and viability of Deutsche Bank, which plunged 9% after opening in German trading today, dropping to a new all time single-digit low of €9.90, its credit default swaps soared to new all time highs, and its Additional Tier 1 notes fell to record lows (the €1.75BN of 6% bonds dropped five cents on the euro to 70 cents), although losses were cut in half after yet another memo  by CEO John Cryan sought to reassure the bank’s employees and investors…

Morning Note: 1. Some DB clients reduce exposure. 2. Cryan says everything is ok. 3. Investors remain clueless

... although we doubt this latest pep talk will lead to a sustained rebound, since there has been no talk yet of what the undercapitalized (by as much as €8 billion according to Citigroup) Deutsche Bank) need most of all, namely a capital raise. “Deutsche certainly weighs on sentiment, and the declines are concerning,” said James Woods, a strategist at Rivkin Securities in Sydney. “Being named the number one bank for global systemic risk, it’s entwined with everyone.”

“Following the report about clients moving to reduce exposure on Deutsche Bank, the possibility of other financial institutions facing similar moves has surfaced,” said Hideyuki Ishiguro, a senior strategist at Daiwa Securities Co. in Tokyo. “Investors, especially foreigners, are moving to cut down on positions in the face of risks arising from European banks.”

The rebound in DB also helped US equity futures rise from session lows, when they slid as much as half a percent, before rebounding to -0.2% at last check. More troubling for the global financial system is that the DB contargion has now well and truly spread, as banking shares across Europe led losses in global stocks. Meanwhile, the dollar strengthened with government bonds while gold rose for the first time in four days as investors poured into haven assets.

As Bloomberg summarizes the last day of Q3, “what’s set to be the best quarter of the year for global stocks is ending on a sour note as concern mounts over Deutsche Bank’s ability to withstand pending legal penalties and hedge funds reduce their financial exposure. While its shares have more than halved in value this year and cross-currency swaps show the biggest weekly increase in two years, systemic concerns have a way to go to reach levels sparked by the collapse of Lehman Brothers Holdings Inc. in 2008 after regulators and central banks took steps to shore up the financial system.”

The tension in the markets is well-known and was summarized by Valentin Marinov, the head of G10 currency strategy at Credit Agricole, who told Bloomberg that “Markets are spooked by the stories about clients cutting exposure to the troubled German lender. The risk is that, with the European Central Bank running out of options to ease, they may struggle to contain another market turmoil.”

Elsewhere across global markets, the MSCI All-Country World Index slid 0.6 % as of 6 a.m. in New York, paring this quarter’s advance to 4%. The Stoxx Europe 600 Index slid 0.9 percent. Commerzbank AG lost 5.4%, as HSBC Holdings Plc downgraded the lender to hold, saying its new strategy announced Thursday isn’t convincing. ING Groep NV dropped 2.5% after a report that the largest Dutch lender will announce thousands of job cuts next week.

Telefonica SA lost 4.6 percent after canceling an initial public offering of its infrastructure unit Telxius Telecom SA, amid weak investor demand. S&P 500 Index futures were little changed. Investors will look Friday to data on consumer spending, sentiment and Chicago-area manufacturing for indications of the health of the world’s biggest economy. Hong Kong shares led losses in Asia with the city’s stock-exchange link to Shanghai having already closed before a week-long holiday in China. Inflows via the channel helped drive a 12 percent gain in the Hang Seng Index this quarter, the region’s best performance.

Looking at the bond market, Europe’s highest rated bonds advanced as investors opted for their relative safety. German bunds were set for their third week of gains. The yield on the 10-year bund fell three basis points, or 0.03 percentage point, to minus 0.15 percent, having earlier reached minus 0.16 percent which matched the lowest since July. The yield has dropped 15 basis since the week ended Sept. 9. Gains in euro-area bonds have driven the total number of securities in the region yielding less than the European Central Bank’s deposit rate of minus 0.4 percent to more than $2 trillion, which is more than a third of the total number of bonds comprising the Bloomberg Eurozone Sovereign Bond Index.

Market Snpashot:

  • S&P 500 futures down 0.2% to 2145
  • Stoxx 600 down 0.9% to 339
  • FTSE 100 down 1% to 6851
  • DAX down 1.2% to 10286
  • German 10Yr yield down 3bps to -0.15%
  • Italian 10Yr yield up less than 1bp to 1.21%
  • Spanish 10Yr yield down less than 1bp to 0.91%
  • S&P GSCI Index down 0.7% to 360.9
  • MSCI Asia Pacific down 1% to 140
  • Nikkei 225 down 1.5% to 16450
  • Hang Seng down 1.9% to 23297
  • Shanghai Composite up 0.2% to 3005
  • S&P/ASX 200 down 0.6% to 5436
  • US 10-yr yield down 2bps to 1.54%
  • Dollar Index up 0.19% to 95.72
  • WTI Crude futures down 1.1% to $47.31
  • Brent Futures down 1.2% to $48.66
  • Gold spot up 0.5% to $1,326
  • Silver spot up 0.8% to $19.27

Top Global Headlines

  • Deutsche Bank Slumps as Some Hedge Fund Clients Reduce Exposure: Millennium, Capula among counterparties shifting positions. Bank’s CEO Cryan has ruled out state aid, capital increase
  • Volatility Hedge Fund Sees Bull Market in Fear as VIX Bets Jump: Trading of VIX futures is on course for a record year. Investors are paying highest prices since 2012 for protection
  • Salesforce to Urge Regulators to Examine Microsoft-LinkedIn: Deal threatens innovation and competition, Salesforce says. Extended review of acquisition could delay approval for months
  • Qualcomm Stock Surges on Report of Interest in Acquiring NXP: NXP would allow Qualcomm to diversify away from smartphones. Target is largest maker of semiconductors used in cars

* * *

Looking at regional markets, we start in Asia where stocks traded mostly lower following the losses on Wall St. where sentiment was dragged down by further Deutsche Bank woes. This dampened the financial sectors in ASX 200 (-0.7%) and Nikkei 225 (-1.5%) with the latter also suffering after slew of mostly discouraging data in which Unemployment rose, CPI remained subdued and Household Spending fell by the most in 5 months. Chinese markets were mixed with Hang Seng (-1.9%) conforming to the widespread downbeat tone, while Shanghai Comp. (+0.2%) was resilient as participants digested a mild improvement in activity with China Caixin PMI figures printing in line with estimates at 50.1 (Prey. 50.0). 10yr JGBs traded lower despite the risk averse sentiment in Japan with pressure seen after a weaker bond buying operation by the BoJ.

Top Asian News

  • PBOC Pulls Most Funds Since July Amid Leverage Curb Speculation: Adds to pressure from quarter-end, holiday demand for money
  • China’s Big Political Gambit Hinges on a Remote Arabian Sea Port: Mountains, disputed territory and armed rebels lie in the way of China’s route
  • Alarm Bells Sound in New York as Duterte’s Audit Roils Mines: OceanaGold CEO says “investors are very worried” about country
  • India Seeks to Curb Tensions After Raid Over Pakistan Border: No plan to escalate situation by scrapping Pakistan treaties
  • Data Deluge Shows Japan’s Economy Sputters on as Prices Fall: Industrial production offered bright spot for Japan in August

The sell-off in Deutsche Bank (-7%) has dragged the share price to 30 year lows leading financials and European bourses (Dax -1.5%) into the red, the most recent sell-off came after hedge funds had reportedly reduced their exposure to the lender. This has subsequently led the Co.’s CEO to state that market forces are attempting to undermine the bank in a letter to employees. The woes for Deutsche haven’t been isolated to Deutsche with the likes of Commerzbank, Barclays, Credit Suisse and Santander all feeling the squeeze, to name a few. Elsewhere, energy names are softer amid the pullback seen in WTI and Brent but losses are modest in comparison to those seen in the banking sector. In fixed income, the main theme on the menu has been risk-aversion which has subsequently supported prices with little in the way of supply for today’s session.

Top European News

  • Fate of Italy’s Economy at Risk If Renzi’s Key Referendum Fails: Growth harmed without budget measures, prime minister signals. Finnish central bank says Rome weakness worrying like Brexit
  • H&M Warns Weak September Sales May Erode Fourth-Quarter Profit: Revenue growth slows to 1%, slowest pace in 13 months. Retailer plans to introduce as many as 2 brands next year
  • Apple, Irish Said to Claim EU Kept Them in Dark Over Tax: Duo to argue in court that EU failed to explain probe U- turn. EU says it communicated fully and didn’t change tack in case
  • ING Shares Fall After Report Thousands of Jobs to Be Cut: ING Groep NV, the largest Dutch lender, fell the most in two months in Amsterdam trading after a report that the company will announce thousands of job cuts next week

In FX, The Bloomberg Dollar Spot Index rose 0.2 percent. The pound advanced against most of its major peers and was on course for its first weekly gain versus the euro since Sept. 2. The yen appreciated 0.3 percent to 113.03 to the euro extending a three-week advance of 2.3 percent since Sept. 2. India’s rupee was the best-performing emerging-market currency as the nation and Pakistan moved to contain military tensions after Prime Minister Narendra Modi’s administration announced it killed terrorists just across the border. The cost for European banks to fund in dollars, a gauge of risk in the region’s financial system, rose to the most expensive level in more than four years amid Deutsche Bank’s woes. The three-month cross-currency basis swap, the rate for banks to convert euro payments into dollars, fell to 57 basis points, or 0.57 percentage point, below the euro interbank-offered rate, according to data from ICAP Plc. That’s the most negative reading on a closing basis since July 2012. The measure reached as much as 154.5 basis points below Euribor in November 2011. While so-called FRA/OIS spreads, a measure of bank risk, were set for their biggest weekly jump since June, the front contract was at a record low as recently as two weeks ago.

In commodities, gold rose 0.4 percent to $1,326.30 an ounce. Following the best first half in 40 years, interest in the metal has waned as prices barely budged in the second quarter. The 60-day volatility is near the lowest in more than a year and the amount of metal added to exchange-traded funds has slowed. Holdings backed by gold have climbed 4 percent this quarter after jumping 21 percent in the first three months of the year and 11 percent in the second quarter. Crude oil fell 1.3 percent to $47.22 a barrel in New York, after gaining more than 7 percent over the last two days. While Wednesday’s agreement among Organization of Petroleum Exporting Countries imposed an overall production cap on the group of 14 oil producers, it didn’t assign individual limits — that was left to a committee that will report back at OPEC’s next meeting in November. “It’s good that OPEC is going to limit production but sticking to the deal is the big headwind facing the organization,” said David Lennox, a resources analyst at Fat Prophets in Sydney. “We’re yet to get the exact details on which countries will contribute the cut, but the Saudis could handle that on their own without too much hassle.”

* * *

Bulletin Headline Summary from RanSquawk and Bloomberg

  • Deutsche Bank woes continue to grip the market, sending European equites lower once again
  • Risk off has been then running theme in FX this morning, with the likes of AUD and CAD under pressure while JPY and CHF buying has followed suit
  • Looking ahead, Highlights include Chicago PMI, University of Michigan Sentiment & a Speech from Fed’s Kaplan
  • Treasuries slightly higher in overnight trading while global equities and oil sell off amid concerns over Deutsche Bank and the European banking sector in general; UST extension for month-end 0.08yrs, according to Bloomberg Barclays Index.
  • Deutsche Bank AG shares dropped to a record and its riskiest bonds declined amid concerns about the lender’s ability to withstand mounting legal costs, with some hedge funds moving to reduce their financial exposure
  • Deutsche Bank has plenty of readily available funds even if some clients pull deposits, according to analysts, responding to a drop in the bank’s shares after some hedge funds reduced their exposure
  • As the saga unfolds, here are 10 people who will be instrumental in deciding Deutsche Bank’s fate
  • The U.K. current-account deficit widened in the second quarter as the trade gap hit a 2 1/2-year high and Britain continued to record heavy outflows of investment income
  • U.K. consumers appear to be shrugging off some initial Brexit concerns as their worst fears about the economy are allayed. GfK said Friday that its confidence index increased 6 points to minus 1 in September, regaining the ground lost after the vote to leave the European Union in June
  • The ECB has been been holding U.S. dollar-providing operations since the weeks after the collapse of Lehman Brothers; this week 12 banks sought $6.348 billion in liquidity, the most in four years
  • Wall Street strategists’ trepidation about everything from election politics to interest rates and valuations has left them in an unusually bearish mood before this year’s holidays
  • Inflation in the euro area accelerated to 0.4% y/y, the fastest since late 2014 in September, the European Union’s statistics office in Luxembourg said
  • The U.S. short-term financing markets and the $2.6 trillion money-fund industry are grappling with one of the most chaotic quarter-end stretches since the financial crisis partly because of the looming Oct. 14 deadline for the overhaul of rules governing money funds

DB’s Jim Reid completes the overnight wrap

As the dust settled yesterday from the OPEC news it seemed to become fairly clear quite quickly that there is still plenty of doubt amongst investors about the actual willingness of OPEC to follow through on their word and agree on the finer details. While Oil (+1.66%) edged a bit higher yesterday, and at one stage saw WTI break above $48/bbl for the first time in two weeks, markets elsewhere have seemingly moved on to other things as negative headlines around the European banking sector reverberated across the wires and so sent financials lower, and the healthcare sector buckled under pressure on lingering regulatory concerns. The end result saw the S&P 500 (-0.93%) more than wipe out the previous day gain, while the Stoxx 600 (+0.04%) wiped out an early rally of more than 1%, despite the energy sector surging nearly 5%. The bid continued for Treasuries with the 10y yield down another basis point to 1.561% while the Greenback and Gold also bounced off the early intraday lows.

Before we go any further, it’s been a busy morning in Asia and especially in Japan where a flurry of data has been released alongside the BoJ summary of opinions from the meeting last week. Starting with the data, there is little sign of deflationary pressures abating for the BoJ with headline CPI nudging further lower last month to -0.5% yoy from -0.4% in July. That’s the lowest reading since April 2013. The core remained at -0.5% yoy (vs. -0.4% expected) and the core-core fell one-tenth to +0.2% yoy as expected. On a seasonally adjusted month on month basis, headline CPI was -0.1% while the two core readings were flat. Overall household spending (-4.6% yoy vs. -2.1% expected) also disappointed. Meanwhile, the jobless rate crept up to +3.1% in August from +3.0% although it continues to hover around historically low levels, while the one bright spot of this morning’s data dump was industrial production (+1.5% mom vs. +0.5% expected).

In terms of the BoJ minutes, the summary of opinions showed that the board will continue to examine an appropriate shape of the yield curve at every monetary policy meeting. The text also revealed that the BoJ felt that it was ‘imperative’ to ensure the sustainability of monetary easing and that the ‘inflation-overshooting commitment’ and ‘yield curve control’ are a paradigm shift in monetary easing policy.
There should continue to be more focus on Japan this morning when, at about 9am BST, the BoJ is set to announce its outline of outright purchases of JGB’s for October. This will likely attract more interest than normal given that it is the first monthly JGB purchase plan since the introduction of QQE with yield curve control last week. Our strategists in Japan believe that it will be difficult for the Bank to keep its annual JGB balance increase at ¥80tn in 2017 and so they expect to see the start of gradual passive tapering in the near future. That said, they also expect the BoJ to maintain its October JGB purchase plan, adopting a wait and see attitude for next month. Any reduction in purchases though would likely be extensively seen as a start of tapering, which our strategists say risk yen appreciation and a decline in stocks. The October JGB purchasing plan is an important event to measure the BoJ’s stance for yield curve targeting, so it’s worth keeping an eye on the details.

In terms of what markets have done in Asia this morning, bourses in Japan are generally leading losses following that data with the Nikkei and Topix -1.55% and -1.51% respectively with financials in particular under pressure. Those losses have actually come despite a -0.40% weakening for the Yen. Meanwhile the Hang Seng (-1.19%), Kospi (-0.94%) and ASX (-0.67%) have also dipped lower. China is outperforming with the Shanghai Comp (+0.13%) a smidgen higher. That has come after the private Caixin manufacturing PMI for September edged up to 50.1 from 50.0. Elsewhere, Oil has given back about half a percent this morning.

Back to yesterday. In terms of the data, the main focus in the US was on the third revision to Q2 GDP. Growth was revised up from +1.1% to +1.4% qoq primarily as a result of slightly higher non-residential fixed investment and also less inventory destocking than what was previously reported. Meanwhile initial jobless claims (+3k to 254k) continued to underscore decent strength in the labour market with the four-week average ticking down now to 256k which is the joint lowest since November 1973. Elsewhere the advance goods trade deficit for August narrowed very modestly to $58.4bn while pending home sales came in a fair bit softer than expected last month (-2.4% mom vs. 0.0% expected).

There was a bit of Fedspeak yesterday too but once again nothing that appeared to be much of a change of view or market moving. The Atlanta Fed’s Lockhart (centrist) said that ‘a change in policy could occur before too long’ but that also ‘I did support the consensus view that, before taking the next move, it makes sense to see a little more evidence of progress toward our statutory policy objectives’. Meanwhile Philadelphia Fed President Harker said that ‘I tend to be in the camp of normalizing sooner, rather than later’ which is consistent with his more hawkish leaning.

Over in Europe yesterday, Germany reported a +0.1% mom increase in consumer prices this month after expectations were for no change, although the harmonized measure did come in at 0.0% mom. Euro area confidence indicators generally edged up this month with the economic confidence reading in particular printing 1.4pts higher at 104.9 (vs. 103.5 expected). Finally in the UK mortgage approvals (60.1k vs. 60.2k expected) were more or less in line but did decline from 60.9k in July and to the lowest level in nearly two years. Net consumer credit (£1.6bn vs. £1.4bn expected) remained fairly strong last month though.

Staying with Europe, yesterday DB’s Marco Stringa published a note on the key recent developments in Italy. He highlights that ahead of the Senate reform on December 4th, opinion polls remain too close to call and the proportion of undecided voters is also very large. He notes that some have interpreted Renzi’s recent statements as a sign that even if the Senate reform is rejected he will not resign. Hence, a “No” vote would have less significant consequences than previously thought. Marco disagrees. He says that if the Senate reform is rejected, his central case scenario is that Renzi will resign and then he will either lead or just support a new government with limited scope – writing a new electoral law – and limited duration. The low likelihood but potentially high impact scenario in the case of a rejection of the Senate reform would be an immediate early election in Q1 2017 which would favour the anti-establishment 5SM. On the other hand, an approval of the Senate reform would probably be, at least in the short term, the most market friendly outcome, but it would be no panacea.

Looking at the day ahead, there’s a fair bit of data to get through in the European session this morning. In Germany the August retail sales data will be released a short time after this hits your emails, followed closely by UK house price data for September. CPI reports for France and also the Euro area will be due this morning along with the final Q2 GDP revisions in the UK. This afternoon in the US the highlight will likely be the personal income and spending reports for August (market consensus is for +0.2% mom and +0.1% mom respectively) along with last month’s August PCE core and deflator prints. We’ll also get the latest regional manufacturing survey in the form of the Chicago PMI, followed lastly by the final September revision for the University of Michigan consumer sentiment reading. Away from the data, the Fed’s Kaplan is due to speak this evening at 6pm BST.

Before we wrap up, early tomorrow morning the official manufacturing and non-manufacturing PMI’s will be released in China. Also of potential interest is Sunday’s scheduled referendum in Hungary where Hungarians will vote on the resettlement of refugees. The referendum is backed by Prime Minister Orban and will be the latest test of populist power. A 50% turnout is needed for the final outcome to be legally binding.


i)Late  THURSDAY night/FRIDAY morning: Shanghai closed UP 6.23 POINTS OR .21%/ /Hang Sang closed DOWN 442.32 POINTS OR 1.86%. The Nikkei closed DOWN  243.87 POINTS OR 1.46% Australia’s all ordinaires  CLOSED DOWN 0.64% /Chinese yuan (ONSHORE) closed UP at 6.6730/Oil FELL to 47.73 dollars per barrel for WTI and 49.51 for Brent. Stocks in Europe: ALL IN THE RED   Offshore yuan trades  6.6767 yuan to the dollar vs 6.6730 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS QUITE A BIT  AS MORE USA DOLLARS ATTEMPT TO  LEAVE CHINA’S SHORES


none today


none today


c) Report on CHINA

In reality China has more than double the amount of oil in its SPR: 700 million barrels and thus they can really dictate the price by basically stop buying or if the price rises, they can sell excesses

(courtesy zero hedge)

Satellite Imagery Reveals China’s Strategic Petroleum Reserve Is Vastly Greater Than Disclosed

At the end of August, we did a follow up article on what we believe is a far bigger marginal driver to the price of oil than OPEC production (which may or may not be reduced by up to 750kbpd in November), namely the Strategic Petroleum Reserve of China, a major importer of oil in recent years, along with India, taking advantage of low prices and largely supporting global oil demand growth at a time of rampant oversupply, and which we profiled most recently in “A Chinese “Mystery” Has Become The Biggest Wildcard For The Price Of Oil.”

The simplest reason why Chiina’s SPR capacity (and storage) is of key importance, is that it determines the ongoing demand China has for oil – of which much ends up in storage –  and also allows analysts to calculate how much more oil China would need, in order to fill up its SPR. While China has traditionally kept any data about its SPR inventory as opaque as possible, in a rare release this month, Beijing reported adding about 43 million barrels of crude to its strategic reserves between mid-2015 and early this year. Reserves totaled 31.97 million tons in early 2016,equivalent to about 234 million barrels,the National Bureau of Statistics said in a statement that was the first government update on reserves since December.


A guard stands before the oil SPR tanks at Zhoushan

As Bloomberg confirmed, emergency stockpiles of the second-biggest oil user have been a source of speculation among analysts and traders, who rely on customs figures and infrequent construction updates to estimate how much of the country’s imports go into strategic inventories, and for how long they will continue to fill.

A few days ago, S&P discussed the critical topic of Chinese reserves, when earlier this week, Jodie Gunzberg, global head of commodities at S&P Dow Jones said at a S&P Global briefing on oil markets in London that “regardless of what happens on the supply side, there’s this wildcard factor of the strategic petroleum reserves.”  Oddly, she used our precisely wording.

As she further explained, “now that China has bought so much cheap oil to fill their SPR, which nobody really knows how much there is (in it), if OPEC does freeze and tries to bring the price back up, China may push it back down because they might choose not to buy it at a higher price and just choose to use their SPR or start exporting it themselves – like they did with other commodities.”

“So I feel that that is, right now, more of a factor influencing how long the low oil prices might stick around,” Gunzberg added.

Not only that but as JPM estimated earlier in the year, the closer China gets to filling its Chinese SPR, logically the less its import demand for crude will be, and as a reminder, JPM speculated that we are now approaching a period when – according to the bank’s calculations – Chinese SPR will proceed to rapidly wane, effectively offsetting any supply reduction by OPEC. As we reported in June, JPM estimated the country built up a total of about 400 million barrels by mid-2016 out of a targeted 511 million barrels.

Perhaps the reason why JPM’s concerns that China was approaching its SPR capacity dissipated, is that when China revealed its far lower number in SPR storage earlier in September, it telegraphed that it has much more “pent up demand.”

However, in retrospect it appears China may have been lying, again.

According to satellite images by  geospatial analytics startup Orbital Insight, China, has not only misrepresented how much oil it has stored, it has done so at a massive scale, with the real number dwarfing even JPM own estimate: the real amount of Chinese oil in storage, according to Orbital, was a whopping 600 million barrels as of May. Assuming JPM’s estimated rate of SPR accumulation of about 1mmbpd, the 600 million number as of May would have grown to well over 700 million barrels as of September. 

Orbital’s figure as first reported by Bloomberg, is well over two times larger than China’s official estimates for strategic petroleum reserves and for commercial stocks, said Orbital Chief Executive Officer James Crawford.

There were about 2,100 strategic and commercial petroleum reserve tanks capable of storing 900 million barrels as of the end of 2014, according to calculations derived from photos tracking the depth of shadows visible on top of the floating lids of the giant tanks. They don’t include underground caverns.

The company’s estimates also exceed projections from forecasters including Energy Aspects Ltd., and help shed light on oil reserves that puzzle commodities traders worldwide. China’s record purchases this year have helped oil prices recover from the worst crash in a generation.

Bloomberg also notes that “the findings are also the latest example of how private technology firms are using big data and machine learning to better measure the second-largest economy, where some official data are incomplete and private gauges have vanished without explanation.”  That is a polite way of actually getting some data out of China that isn’t totally made up.

So why are China’s vastly greater than admitted SPR holdings important, especially in the aftermath of the OPEC “deal”? As Dave Ernsberger, global head of oil content at S&P Global Platts, told the S&P briefing, China’s SPR is a challenge for markets. “The SPR in China is one of a number of unknown factors that mean you can never get too comfortable assuming any set of circumstances in the global oil markets.”

He said the exact size of China’s SPR was unknown, however, making it a risk that was hard to quantify.

“It never suits any buyer, or bulk buyer, to flag to the market how much they want to buy so we’re likely to get a lot of misinformation around that for quite some time to come. SPRs are strategic, as the name suggests, so the government isn’t going to talk about it.”

Which explains why China has been so eager to keep its true SPR holdings secret or simply misrepresent them.

Furthermore, while China might have millions of barrels of oil stockpiled for either its own emergency use or to sell, demand growth from the country is ebbing. The IEA warned this month that “recent pillars of demand growth China and India are wobbling.” S&P Global Platts’ Ernsberger, cited by CNBC, said that the slowdown in Chinese demand was worrying for major oil producers.

“The demand picture is very unsettling for OPEC and for all producers of crude and refined products (and this is seen most significantly in) the slowdown in growth in the Chinese market.China has returned more incremental demand for the oil market in the last five years than any other country in the world and more than almost any of the counties combine. But this year demand growth in China has stalled and that represents a significant change in the environment for producers both in OPEC and outside it.”

“The successors to China who will pick up the slack in demand growth aren’t quite of a size yet to have the impact that Chinese growth has had. So the demand picture is fairly frightening from a producers’ point of view.”

Which, much more than anything, is why OPEC was “willing” to reach a production cut (non) deal: it is aware that its until recently fastest growing client is about to slam the brakes, and the only option for Saudi Arabia and its minions was to produce less ahead of this inflection point. That said, with both supply and demand declining, the overall impact on price will be virtually nil, unless of course price does go up, in which case US shale production is about to go into major overdrive.

And speaking of shale, US producers are already scrambling to take advantage of the recent price spike: as Bloomberg reported moments ago, OPEC is “is throwing a lifeline” to U.S. shale oil producers who have sought to hedge production due to the price rise spurred by the group’s deal Wednesday to cut output, BNP Paribas head of commodity strategy Harry Tchilinguirian said by phone.  “What this OPEC meeting has done is actually throw a lifeline to producers, and in particular U.S. shale oil, that as a result of the spot move and the move in the rest of the curve have come in in droves to hedge production,” Tchilinguirian said.

Tchilinguirian says BNP has “seen many queries coming through as a result of the OPEC decision” which has lifted the WTI curve “to levels acceptable where U.S. producers can hedge.”

Which is good news for shale and gas consumers, and bad news for Saudi Arabia. OPEC, the petrodollar and risk assets.


Germany: Deutsche bank

We can boil down how much liquidity DB has into two sections:

i) it’s retail brokerage accounts at 71 billion euros

ii) its depositors at 550 billion euros.

Total liquidity available today is around 215 billion euros.  If the depositors flee the game is over!

(courtesy zero hedge)

This Is How Much Liquidity Deutsche Bank Has At This Moment, And What Happens Next

It is not solvency, or the lack of capital – a vague, synthetic, and usually quite arbitrary concept, determined by regulators – that kills a bank; it is – as Dick Fuld will tell anyone who bothers to listen – the loss of (access to) liquidity: cold, hard, fungible (something Jon Corzine knew all too well when he commingled and was caught) cash, that pushes a bank into its grave, usually quite rapidly: recall that it took Lehman just a few days for its stock to plunge from the high double digits to zero.

It is also liquidity, or rather concerns about it, that sent Deutsche Bank stock crashing to new all time lows earlier today: after all, the investing world already knew for nearly two weeks that its capitalization is insufficient. As we reported earlier this week, it was a report by Citigroup, among many other, that found how badly undercapitalized the German lender is, noting that DB’s “leverage ratio, at 3.4%, looks even worse relative to the 4.5% company target by 2018” and calculated that while he only models €2.9bn in litigation charges over 2H16-2017 – far less than the $14 billion settlement figure proposed by the DOJ – and includes a successful disposal of a 70% stake in Postbank at end-2017 for 0.4x book he still only reaches a CET 1 ratio of 11.6% by end-2018, meaning the bank would have a Tier 1 capital €3bn shortfall to the company target of 12.5%, and a leverage ratio of 3.9%, resulting in an €8bn shortfall to the target of 4.5%.

When Citi’s note exposing DB’s undercapitalization came out, it had precisely zero impact on the price of DB stock. Why? Because as we said above, capitalization – and solvency – tends to be a largely worthless, pro-forma concept. However, when Bloomberg reported today that select funds have withdrawn “some excess cash and positions held at the lender” the stock immediately plunged: the reason is that this had everything to do with not only DB’s suddenly crashing liquidity, but the pernicious feedback loop, where once a source of liquidity leaves, the departure tends to spook other such sources, leading to an outward bound liquidity cascade. Again: just ask Lehman (and AIG) for the details.

Which then brings us to the $64 trillion (roughly the same amount as DB’s gross notional derivative exposure) question: since DB is suddenly experiencing a sharp “liquidity event”, how much liquidity does Deutsche Bank have access to as of this moment, to offset this event? The answer would allow us to calculate how long DB may have in a worst case scenario if we knew the rate of liquidity outflow.

For the answer, we go to a just released note by Goldman Sachs, which admits that it is now facing “crisis” questions from clients, among which “can a large European bank face a liquidity event” to wit”

Deutsche Bank stands at the center of the European financial system – it is a major counterpart of all relevant European banks, and broader. Recent reports of potential litigation hits have compounded capital concerns, and raised the overall level of market anxiety. “Crisis” questions are being asked: “is there risk of a financial crisis re-run” and “can a large European bank face a liquidity event”?

So what is the answer: how much liquidity does Deutsche Bank have access to? The answer is two fold, with the first part focusing on central bank, in this case ECB, backstops in both $ and €.

Goldman starts with an overview of said back-stops, summarized below. These facilities are available to all Eurozone banks (and, naturally, also to Deutsche Bank) – they are generous in terms of volume (full allotment), price (fixed rate at 0%) and tenure (from short term, all the way to 4-years). These ECB facilities are key to ensuring the bank’s long-term funding stability, in Goldman’s view, and were put in place following the funding market fallout in 2007, in order to contain the effects from the Lehman crisis. They were further bolstered to contain the Eurozone sovereign crisis in 2011-12. All of the liquidity provisions remain in place, and broadly, they fall into the following two categories:

  1. Regular market operations: 1-week Main Refinancing Operations or “MRO” (priced @0%), and 3-month Long Term Refinancing Operations or “LTRO” (@0%);
  2. Non-standard measures, which split between € funding facilities with 4-year Targeted LTROs (@0%, with the option to fall to -0.4% if lending targets are met) and the emergency liquidity assistance to solvent financial institutions and a US$ funding facility: 1-week US$ MRO (@0.86%).

Stepping away from the ECB – because if Deutsche is forced to come crawling to Draghi and beg for central bank liquidity assistance to continue as a going concern, the outcome may be just as dire (recall the stigma associated with US banks using the Fed’s Discount Window) especially since  unlike Lehman, DB has nearly €600 billion in deposits which are susceptible to a retail depositor run what about Deutsche Bank’s own liquidity position? It is this which appears to be concerning the market most, because as Goldman writes, following the Bloomberg report that hedge fund clients have pulled excess cash, the market has reacted aggressively (ADR down 6.7%), indicating concerns have moved from DBK’s equity to question the resilience of the banks’ funding position.

Below, Goldman provides an overview of DBK’s liquidity position, noting that its last reported liquidity reserve stood at €223 bn or ~20% of its total assets. DBK’s high quality liquid assets (or HQLA) balance stood at €196 bn or 16% of its total assets; its liquidity coverage ratio (“LCR”) stood at 124%. DBK’s LCR is above that of many largest European banks (BNP 112%), as well as US banks (Citigroup

Here is the breakdown:

  • Liquidity reserve: €223 bn, or ~20% of total assets. In total, DBK’s liquidity reserve stood at €223 bn, representing ~20% of the banks total net assets (where assets are US GAAP equivalent). The 2Q16 level of liquidity reserve compares to €65 bn in 2007, showing that DBK has grown its liquidity reserve by 3.4x from pre-crisis levels.
  • Cash: €125 bn. The liquidity reserve breaks down between €125 bn of cash and cash equivalents, and €98 bn of securities, available for use at the central banks. As highlighted in Exhibit 2, the € portion of the securities can be used to obtain liquidity of varied duration (between O/N to 4-years) at a cost of 0% (and as low as -40 bp, if lending benchmarks are met).
  • LCR: 124%. DBK’s Liquidity Coverage ratio stood at 124%, which is ~1.5x the current regulatory minimum, and a cut above the 2019 fully-loaded requirement of 100%. This compares favorably to, say, Citigroup (121%), BNP (112%). Other US banks (e.g. JPM, BofA) do not disclose their LCR other than to say that they are “compliant”, suggesting LCR is at or above 100%.

Where does this liquidity come from? Exhibit 3 above examines DBK’s funding composition – this is relevant in the context of media reports highlighting a decline in prime brokerage balances (Bloomberg, September 29). These include:

  • Lowest volatility funding: 57%. Lowest volatility sources of funding – retail deposits, transaction banking balances (corporate and institutional deposits from corporate banking relationships) and equity account for 57% of total funding. Over half of the groups’ funding therefore, stems from this source.
  • Low volatility funds: 15%. Debt securities in issue account for 14% of total funding. Together with the previous category, “lowest” and “low” volatility funding accounts for 72% of total funding.
  • Other customers – this includes prime brokerage cash balance – 7%. The total amount of “other customer” funds, which includes: fiduciary, self-funding structures (e.g. X-markets), margin/Prime Brokerage cash balances (shown on a net basis (see DBK 2015 annual report, p178). Importantly, this represents ~7% of total funding, and is 3.1x covered with the liquidity reserve.
  • Other parts of funding – unsecured wholesale, secured funding – account for the residual.

In other words, all else equal, even in a worst case Prime Brokerage situation, one where all €71 billion in “other customer” funds flee, DB should still have about €152 billion of the €223 billion in liquidity reserve as of June 30, once again assuming there have been no other changes. Stated simply, if the hedge fund outflow accelerates and depletes all the liquidity at the Prime Brokerage division, DB would part with about a third (just over  €70 billion) of its €220 billion liquidity reserve.

Some other observations: even if one assumes the full loss of PB balances, DB would still have a Liquidity coverage ratio (“LCR”) of 124%.  The LCR is equivalent to HQLA/net stressed outflows over 30 day period. This ratio shows the banks’ ability to meet stressed funding conditions over a period of 1 month. For Deutsche bank, the LCR stood at 124% with the ratio composed of:

  1. High Quality Liquid Assets (HQLAs) of €196 bn. These include Level 1 assets (the most liquid securities which include cash and equivalents, bonds issued or guaranteed by a government and certain covered bonds); Level 2A assets, which are subject to a haircut (third country government bonds, bonds issued by public entities, EU covered bonds, non-EU covered bonds, corporate bonds) and Level 2B assets (high quality securitisations, corporate bonds, other high quality covered bonds).
  2. The net stressed outflows: €158 bn as of 2Q16 (YE15 €161 bn). DBK’s net stressed outflows amounted to €161 bn at year-end 2015, and include an assumption of loss of prime brokerage deposits. As per Commission Delegated Regulation (EU) 2015/61 “Deposits arising out of a correspondent banking relationship or from the provision of prime brokerage services shall not be treated as an operational deposit and shall receive a 100 % outflow rate.”
  3. The minimum level is 100% (effective 2018) and is phased in gradually from 2015; the 2016 requirement is 70%.

Of course, the “stressed outflow over a 30 day period” is an assumption, one which can accelerate rapidly, especially if the stock price of DB continues to fall crushing what is any bank’s most critical asset: counterparty confidence, either from retail investors or institutional peers.

Still, what the above calculations reveals is that the Bloomberg report suggest that while substantial, the Prime Brokerage outflow would not be, on its own, deadly.  But therein lies the rub: since any bank’s collapse is a procyclical event in which liquidity flees in all directions, with a speed that is usually inversely proportional to the stock price, the lower the price of DB goes (and the higher its CDS), the more dire its liquidity situation.

However, as noted above, the biggest threat to DB is not so much its hedge fund client base, whose damage potential is limited, but the depositor base. Again: while Lehman failed, it did so as a result of its corporate counterparties suffocating the bank by rapidly pulling out their liquidity lines. Lehman, however, was lucky in that it didn’t have retail depositors: it death would have likely come far faster as the capital panic was not limited to institutions but also included a retail depositor bank run.

This is where Deutsche Bank is very different from Lehman, and far riskier, because if the institutional panic spreads to the depositor base, which as the table below shows amounts to some €566 billion in total, and €307 billion in retail deposits

… then all bets are off.

Which is why it is so critical for Angela Merkel to halt the plunging stock price, an indicator DB’s retail clients, simplistically (and not erroneously) now equate with the bank’s viability, and the lower the price drops, the faster they will pull their deposits, the quicker DB’s liquidity hits zero, the faster the self-fulfilling prophecy of Deutsche Bank’s death is confirmed.

Which ultimately means that DB really has four options: raise capital (sell equity, convert CoCos, which may results in an even bigger drop in the stock price due to dilution or concerns the liquidity raise may not be sufficient), approach the ECB for a liquidity bridge (this may also backfire as counterparties scramble to flee a central bank-backstopped institution), appeal for a state bailout (Merkel has so far said “Nein”) or implement a bail-in, eliminating billions in unsecured claims (and deposits) and leading to a full-blown systemic bank run as depositors everywhere rush to withdraw their savings, leading to a collapse of the fractional reserve banking mode (in which there is only 10 cents in physical deliverable cash for every dollar in depositor claims).

Which of the four choices Deutsche Bank will pick should become clear in the coming days. Until it does, it will keep the market on edge and quite volatile, because as Jeff Gundlach explained today, a “do nothing” scenario is no longer an option for CEO John Cryan as the market will keep pushing the price of DB lower until it either fails, or is bailed out.






Deutsche bank total liquidity is now down to 215 billion euros from June’s 225 billion euros.  However the depositor base is the key worry at 550 billion.  If they run, the game is over:

(courtesy zero hedge)

Deutsche Bank CEO Writes Memo To Employees, Blames “Speculators”, Confirms Liquidity Flight

Instead of doing what many have correctly suggested he should be doing, namely focusing on ways to raise more capital for the undercapitalized Deutsche Bank in order to stem the slow (at first) liquidity leak, first thing this morning CEO John Cryan issued another morale-boosting note to employees of Deustche Bank who have been watching their stock price crash to another record low, dipping under €10 in early trading for the first time ever. In the memo the embattled CEO worryingly did what Dick Fuld and other chief executives did when they felt the situation slipping out of control, namely blaming evil “rumor-spreading” shorts, saying “our bank has become subject to speculation. Ongoing rumours are causing significant swings in our stock price. … Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.

Just as important, Cryan confirms the Bloomberg report that a few of our hedge fund clients have reduced some activities with us. That is causing unjustified concerns.” As we explained last night, the concerns are very much justified if they spread to the biggest risk-factor for the German bank: its depositors, which collectively hold over €550 billion in liquidity-providing instruments.

He then tries to sweep the concerns under the rug saying that “We should consider this in the context of the bigger picture: Deutsche Bank overall has more than 20 million clients.” Of course, however by the time the “context” switches over to the rest of the clients, or even a small portion of them, namely the depositors, it would be too late as by then the retail bank run will have begun.

Finally, Cryan confirms that there has been a liquidity outflow, when he says that the bank’s liquidity reserves currently “amount to more than 215 billion euros.” Considering just last night we estimated the liquidity reserves were €223 billion as of June 30, it appears there has been a modest outflow, even when accounting for the recent disposal of the British insurer Abbey Life.

In other words, Cryan once again fails to provide a clear plan how he will short up the bank’s deteriorating liquidity, no mention of a capital raise or approach of the ECB, and most importantly, no specifica plan how to recover crumbling trust in the world’s “most systematically important bank.”

Cryan concludes by saying “You will hear back from me soon.” On this he is absolutely correct.

Cryan’s full memo to employees released early this morning below:

John Cryan, Deutsche Bank CEO, sent out the following message to the Bank’s employees on September 30, 2016

Dear Colleagues,

You will have seen speculation in the media that a few of our hedge fund clients have reduced some activities with us. That is causing unjustified concerns. We should consider this in the context of the bigger picture: Deutsche Bank overall has more than 20 million clients.

I understand if you feel concerned by the extensive coverage on this issue. Our bank has become subject to speculation. Ongoing rumours are causing significant swings in our stock price.

It is our task now to prevent distorted perception from further interrupting our daily business. Trust is the foundation of banking. Some forces in the markets are currently trying to damage this trust.

Deutsche Bank has strong fundamentals. Let me mention some of the most important facts at this point:

1. We fulfil all current capital requirements and our restructuring is well on track. We completed the disposal of the British insurer Abbey Life this week and the sale of our stake in the Chinese Hua Xia Bank will be finalised soon. This will further improve our capital ratio.

2. We have significantly decreased our market and credit risk in recent years. At no point in the last two decades has the balance sheet of Deutsche Bank been as stable as it is today.

3. Despite low interest rates and a difficult environment we posted a pre-tax profit of about 1 billion euros in the first half of 2016. Before extraordinary items like restructuring costs, we earned about 1.7 billion euros. This demonstrates the operating strength of Deutsche Bank.

4. In a situation like this, the most important factor is our liquidity reserves. Currently they still amount to more than 215 billion euros. This is an extremely comfortable buffer. This is clear proof of how conservatively we have planned. This is acknowledged by numerous banking analysts.

There is therefore no basis for this speculation. Nor can uncertainty about the outcome of our litigation cases in the US explain this pressure on our stock price, if we take the settlements of our peers as a benchmark.

You have all done a tremendous job over the past few days. You are the ones who are in constant contact with our clients and making it clear how Deutsche Bank is really doing. You are Deutsche Bank – that is impressively clear. All of us in the Management Board highly appreciate it.

You will hear back from me soon. Please keep working as you have been doing so far. We are and we remain a strong Deutsche Bank.

Yours sincerely,
John Cryan

And here, for the new generation of “traders”, is Dick Fuld’s famous “squeeze the shorts” speech:


This morning DB’s yield curve inverts as many counterparties to DB seek protection through credit default swaps etc. We are also witnessing many counterparties removing excess liquidity from bank accounts.

Ladies and Gentlemen: this is important@! DB may not have a solvency issue but it certainly has a liquidity problem.

(courtesy zero hedge)

Deutsche Bank Yield Curve Inverts As Counterparty Risk Hedging Spikes Despite DoJ Rumors

As the mainstream media attempts to mollify the ignorant masses with rumors of reduced DoJ fines for DB (as if that the problem now), professionals are buying counterparty risk protection at the fastest pace in history.

If you are a leveraged fund with client relationships with Deutsche Bank, you have a number of options including: 1) Reduce excess cash (already saw yesterday as hedge funds begin run), 2) Demand tri-party arrangements (i.e. force DB to allow you not to face them as a counterparty – which we have also already seen), or 3) Reduce risk (unwind positions or hedge potential for loss from counterparty risk)

And now that final hedging of Counterparty Risk is occurring at a rapid pace.

While the stock price bounces on completely unconformed reports of DOJ reducing its DB fines (which is irrevelant now that DB has become a liquidity issue), Professionals are ploughing into protection, pulling cash, and demanding tri-party.

This has inverted the DB yield curve – a very ominous sign.

It took a global coordinated money flood to save the world systemically in Feb… what happens next?





The rumour this morning was that there is going to be a settlement with respect to the criminal activity of Deutsche bank in the mortgage scandal.  The fine is a lot less than the 14 billion USA desired.

I would like to point out to you that the fine is a minor problem for DB.  The major issue is not a solvency one but that of liquidity

(courtesy zero hedge)

This Is The Rumor Causing The Spike In Deutsche Bank Shares

In the past few hours, DB stock has staged a dramatic rebound, surging from its overnight -9% lows, to green on the day. What is causing it: after all, aside from a trivial “Dick Fuld-esque” letter by John Cryan to his employees blaming speculators for the plunge, there has been no actual news.

The catalyst for the spike is again a rumor.  As Bloomberg writes, “there has been trader unsubstantiated speculation – launched on Twitter – that the bank may reach a lower RMBS settlement with the U.S. DoJ than feared.”

unverified handles on Twitter speculate the DoJ fine may be $5.4b, vs reports earlier this month the DoJ had sought $14b. Unverified handles including @fiatcurrency, @Fxmacro Tweet or retweet the speculation.”

The rumor got extra significance after some traders repeated and “justified it” in the process, to wit: “Deutsche Bank stock is being helped by speculation the DoJ settlement could be lower than feared,” Sylvain Loganadin, market analyst at FXCM, told Bloomberg by phone. “People don’t want to stay short on Deutsche Bank going into the weekend in case there’s a statement”: Loganadin

Putting the rumored $5.4 billion number in context, earlier today JPM said that there is a possibility that “DB settles US RMBS at an amount inline with our expected level of $3-4bn leading to no capital raise” however it admitted that another alternative is that “the DOJ demands significantly more than c$4bn which DB would be reluctant to accept in ourview as it would otherwise trigger a capital raise.”

* * *

The catalyst for the rumor is a phone conversation held earlier today between the US president and German chancellor although as Bloomberg reported just before 6am, President Barack Obama and German Chancellor Angela Merkel didn’t discuss U.S. Justice Department’s case against Deutsche Bank AG during phone call, according to German government spokeswoman Ulrike Demmer.

Adding some color to potential regulatory intervention, Bloomberg also noted that when asked about concerns over Deutsche Bank, chairman of the White House Council of Economic Advisers Jason Furman says Obama administration is monitoring banking system daily.

Furman, speaking at a Bloomberg breakfast in Washington, says Europe made less progress than U.S. in protecting banks. “They’ve made less progress in terms of increasing capital for their financial institutions, less progress in putting in place some of the mechanisms we have for resolving them,” Furman says about Europe.

However, he adds that “there are a lot of mechanisms both within Europe and within the U.S.” to protect the financial system, Furman says.

It was not clear if that included bailouts.

* * *

Naturally, Deutsche Bank has refused to comment on speculation around the level of the DoJ fine.

Which means that should the DOJ make no announcement on Sunday, any buying spree today in DB may promptly turn into another selloff. Making matters worse, with German trading closed for holiday on Monday, only the far more illiquid US tracking stock will be open, which may accentuate any potential selling.

*  *  *

As a reminder, there were “fixes” galore in 2008
and rumors sent Lehman stock soaring over 10% in at least 6 weeks
during the last few months…




In an obvious move to slow down depositors/counterparties leaving DB, the French Press confirms a supposed 5.4 billion USA settlement. The market is acting as if this is the major problem for DB, measly 5 billion dollars.  The real problem is a total lack of liquidity

(courtesy zero hedge)

Stocks Soar After French Press “Confirm” Deutsche Bank Near Settlement With DOJ

Seemingly confirming the rumor,Agence France Press reports that Deutsche Bank is nearing a $5.4 billion settlement with the US Justice Department. This has catalyzed another leg higher in Deutsche Bank stock and lifted the whole market as it would appear that unconfirmed sources have ‘fixed’ the world’s most systemically dangerous bank (despite the fact that short-dated counterparty risk is soaring).

Here is the tweet…

Deutsche Bank near $5.4 bn US settlement over mortgage bonds: source

And the response in the stock…

Which is lifting all stocks…

And now AFP is walking back their comment…


We look forward to the 1605ET denial from The DOJ. Once again we remind readers that Monday is a bank holiday in Germany.

For now, the professionals know exactly what is afoot – anything to slow the outflows of cash… and counterparty risk hedges are soaring…

* * *

Naturally, Deutsche Bank has refused to comment on speculation around the level of the DoJ fine.


Which means that should the DOJ make no announcement on Sunday, any buying spree today in DB may promptly turn into another selloff. Making matters worse, with German trading closed for holiday on Monday, only the far more illiquid US tracking stock will be open, which may accentuate any potential selling.

*  *  *

As a reminder, there were “fixes” galore in 2008 and rumors sent Lehman stock soaring over 10% in at least 6 weeks during the last few months…




And today’s last word on Deutsche bank

(courtesy Dave Kranzler/IRD)


Short All Bounces In Deutsche Bank Stock – It’s Still Involvent

Deutsche Bank has never had as safe a balance sheet in the past two decades and there is no basis for media speculations on clients leaving.  –  DB CEO, John Cryan in Bloomberg

So John, are you willing to make those statements under oath?  The funniest  report I saw today was that Deutsche Bank gave Tesla a $300 million credit line to fund Tesla’s vehicle leasing program (LINK).   No wonder DB is insolvent.  It’s willing to lend against collateral that spontaneously combusts.  Not to mention the fact that Tesla back-end loads the terminal value of its vehicles on its leases in order the minimize monthly lease payments.  Whoever approved that deal at DB is smoking strong weed.

Rumors about Justice Department multi-billion dollar fine settlements do not fix big bank insolvency. DB was insolvent before the Justice Department mortgage securities fine was conceived. Any legal fines levied by any Government will end up in line with the rest of Deutsche Bank’s creditors. Unless, of course, Grandma Merkel and her band of merry thieves agree to bailout the technically bankrupt bank. But that won’t occur until DB stock is well below $10.

We saw this same trading with Enron, Bear Stearns and Lehman when those stocks approached $10. I was short and made a lot of money on Enron and Bear – and I held my shorts through rumor-driven bounces in the stock like the one propelling DB’s stock today.

This trading activity with the stock is designed to trigger aggressive short-cover buying which enables position-dumping by the big boys who are still heavily long DB stock. The rumor that drove DB stock over $13 was tweet from a French press agency which “confirmed” that the DB was near a settlement with the Justice Department for $5.4 billion instead of the original $14 billion levied. A short-while later the French press agency back-pedaled on the assertion.

The more relevant information to consider is the signal being flashed in the market for DB’s credit default swaps.   The cost of insure DB’s junior bonds for one year surged to 625 basis points today.   This inverted the “curve” for the cost to insure DB’s bonds, as the cost to insure the bonds for five years was 505 basis points.   The same is true for one yr. vs. five yr. swaps on DB’s senior debt, which were trading at 270 basis points vs 241 basis points respectively:   DB Stress Signal Reemerges – Bloomberg

A credit default swap the costs over 600 basis points to purchase is analogous to a triple-C rated U.S. corporate bond.  Company’s with the “triple-hook” credit rating in the current insane financial system are semi-dead corpses with electric stimulation paddles being applied in an attempt restart the heart.  These are bonds that have a greater than 70% chance of eventually defaulting.   In other words, investors who are willing to pay over 600 basis points for one year of default protection on their DB junior bond position believe that the risk of DB defaulting in the next 12 months is exceptionally high.

If the German Government was not lurking in the background, these credit default swaps would be priced at well over 1000 basis points over the equivalent Treasury yield.  On the other hand, DB CEO, John Cryan, stated on Friday that DB’s balance sheet is safer than at any point in the past two decades.  That at least the third time DB liquidity rumors have been denied and we know what that means…

I don’t know if this reminds more of Jim Cramer pounding the table on Bear Stearns stock at $62 shortly before it plunged to $2 or Lehman CEO, Richard Fuld, proclaiming that Lehman had billions on highly liquid assets about 5 weeks of ahead of the stock plunging to near-zero (graphic from Zerohedge):



The Netherlands: ING


Just after Germany’s second largest bank confirmed the restructuring and that it would layoff nearly 10,000 employees or 20% of its workforce, ING announced that thousands of job cuts was in store for Monday:

(courtesy Het Financieele Daglad/Holland/zero hedge)

Largest Dutch Bank To Fire Thousands

One day after Germany’s second largest lender confirmed reports of a massive restructuring when it announced it would lay off nearly 10,000 employees, or about 20% of its entire workforce while slashing the bank’s dividend for the rest of the year, the Dutch newspaper Het Financieele Dagblad reported that ING Groep, the largest Netherlands lender, will announce thousands of job cuts at its investor day on Monday.

The reorganization will result in more central management and may generate billions of euros in savings, the paper said cited by Bloomberg. Raymond Vermeulen, a spokesman for the Amsterdam-based bank, declined to comment on the report. The bank employs about 52,000 people, according to its website.

ING sees opportunities in Belgium, the Netherlands, Germany and Poland, Het Financieele Dagblad said. The lender has doubts about its presence in Turkey, where it lacks scale, according to the report.

Chief Executive Officer Ralph Hamers has transformed ING into a bank focused on Europe and is seeking to expand lending to consumers and companies outside its home market as record-low interest rates and regulatory demands to bolster capital threaten to erode profit.

With all European banks struggling to generate profits under Europe’s NIRP policy which makes net interest margin-based revenue virtually non-existent, we expect many more banks will be forced to lay off tens of thousands of more high paying jobs in the months ahead, leading to further declines in consumption, which in turn will pressure Europe’s deflationary forces, even though earlier today Eurostat reported that inflation in the European Union rose to 0.4% in September, in line with expectations, and the highest since 2014.




What a relief!! Greece says that it is safe from the DB turmoil. I guess with a DEBT to GDP ratio of 280, they are in the ballpark of a “massive recovery”


(courtesy zero hedge)


Greece Says It’s “Safe” From Deutsche Bank Turmoil

“We now have the tools, which didn’t exist in the past, to tackle difficult situations,” Bank of Greece Governor Yannis Stournaras tells reporters in Athens, when asked about developments in European banking system. Phew…

Bloomberg reports that

“Greek banks not at risk from turmoil in European banks,” says Stournaras, who is also a member of the Governing Council of the ECB, after meeting with Greek PM Alexis Tsipras.

The Greek economy showing positive signs, Tsipras reassured that next bailout review will be concluded promptly.

Stournaras, Tsipras also discussed conditions for Greece’s inclusion in ECB’s QE program.

*  *  *







none today


none today


Rig count rises which must increase uSA oil production;

(courtesy zero hedge)

US Oil Rig Count Rises Most In Q3 Since 2009

Q3 ends with a 29% rise in US oil rigs – this is the biggest rise since Q4 2009.


Oil rigs have risen 14 weeks in a row (up 7 this week to 425, the highest since Feb 2016).


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


Euro/USA   1.1172 DOWN .0046/REACTING TO NO DECISION IN JAPAN AND USA + huge Deutsche bank problems 


GBP/USA 1.2956 DOWN .0008 

USA/CAN 1.3158 up .0006

Early THIS FRIDAY morning in Europe, the Euro FELL by 46 basis points, trading now well above the important 1.08 level FALLING to 1.1229; 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,  THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE AND NOW THE HUGE PROBLEMS FACING TOO BIG TO FAIL DEUTSCHE BANK / Last night the Shanghai composite CLOSED UP 6.22 OR   0.21%   / Hang Sang  CLOSED DOWN 442.32  POINTS OR 1.86%     /AUSTRALIA IS LOWER BY 0.65% / EUROPEAN BOURSES ALL IN THE RED

We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;

1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.

2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)

3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.

These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>

The NIKKEI: this FRIDAY morning CLOSED DOWN 243.87 POINTS OR 1.46%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 442.32  OR 1.86%  ,Shanghai CLOSED  UP 6.22 POINTS OR .21%   / Australia BOURSE IN THE RED: /Nikkei (Japan)CLOSED IN THE RED   INDIA’S SENSEX IN THE RED

Gold very early morning trading: $1325.00


Early FRIDAY morning USA 10 year bond yield: 1.546% !!! UDOWN2in basis points from THURSDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%. The 30 yr bond yield  2.267, DOWN 2 IN BASIS POINTS  from YESTERDAY night.

USA dollar index early FRIDAY morning: 95.84 UP 31 CENTS from THURSDAY’s close.

This ends early morning numbers FRIDAY MORNING



And now your closing FRIDAY NUMBERS

Portuguese 10 year bond yield: 3.33% UP 2 in basis point yield from THURSDAY  (does not buy the rally)

JAPANESE BOND YIELD: -.089% DOWN 1 in   basis point yield from THURSDAY

SPANISH 10 YR BOND YIELD:0.880%  DOWN 3 IN basis point yield from  THURSDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.19 DOWN 2  in basis point yield from THURSDAY 

the Italian 10 yr bond yield is trading 30 points HIGHER than Spain.





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

Euro/USA 1.1232 UP .0014 (Euro UP 14 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 101.41 UP: 0.214(Yen DOWN 21 basis points/POLICY ERROR ON BANK OF JAPAN

Great Britain/USA 1.2968 UP 0.0004( POUND UP 4 basis points

USA/Canada 1.3114 DOWN 0.0038 (Canadian dollar UP 38 basis points AS OIL ROSE SHARPLY (WTI AT $48.11). Canada keeps rate at 0.5% and does not cut!


This afternoon, the Euro was UP by 14 basis points to trade at 1.1232


The POUND ROSE 4 basis points, trading at 1.2968/

The Canadian dollar ROSE by 38 basis points to 1.3114, WITH WTI OIL AT:  $48.11

The USA/Yuan closed at 6.6685

the 10 yr Japanese bond yield closed at -.089%  DOWN 1  IN BASIS POINTS / yield/ AND THIS IS BECOMING BOTHERSOME TO THE BANK OF JAPAN

Your closing 10 yr USA bond yield:UP 4  IN basis points from THURSDAY at 1.601% //trading well below the resistance level of 2.27-2.32%) very problematic

USA 30 yr bond yield: 2.334 UP 5 in basis points on the day /*very problematic as all bonds globally rose in yield (lowered in price)


Your closing USA dollar index, 95.49 DOWN 4 CENTS  ON THE DAY/4 PM 

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for FRIDAY: 2:30 PM EST

London:  CLOSED DOWN 70.04 POINTS OR 1.02%
German Dax :CLOSED UP 105.48 OR  1.01%
Paris Cac  CLOSED UP 4.42 OR 0.10%
Spain IBEX CLOSED DOWN 16.90 OR 0.19%
Italian MIB: CLOSED UP 62.22 POINTS OR 0.38%

The Dow was UP 164.70 points or 0.91%  4 PM EST

NASDAQ  UP 42.85 points or 0.81%  4 PM EST
WTI Oil price;  47.99 at 4:00 pm; 

Brent Oil: 49.96   4:00 EST




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

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


BRENT: $49.99

USA 10 YR BOND YIELD: 1.598%

USA DOLLAR INDEX: 95.43 DOWN 9 cents

The British pound at 5 pm: Great Britain Pound/USA: 1.2975 UP 0.0012 or 12 basis pts.

German 10 yr bond yield at 5 pm: -0.119%




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


Rumor Rescues Deutsche From Banking Bloodbath But Gold Tops Stocks In September



Let’s get this Deutsche Bank debacle out of the way first. A rumor – started by Jim Cramer, expanded by a number of twitterati, picked up by Bloomberg, then reported by AFP somehow managed to create a short squeeze rip higher in Deutsche ADRs...


Some context for the ‘recovery’


But the yield curve wasn’t supportive…


And CDS wasn’t buying it…


And that was enough to spark a buying panic is US equities…


And just in case you didn’t think th emachines were in charge…S&P futures tumbled into the close to perfectly end at VWAP…


So, let’s get back to the rest of the markets (and wait for the DOJ denial)

*  *  *

For Q3 Overall, Silver & Stocks lead Q3 performance as oil lags (but overall it was a subdued quarter)…


Nasdaq was the quarter’s big winner, The Dow and S&P lagged…


Even as rate-hike odds soared…


Treasury yields were all up on the quarter, but we note a 14bps bear flattening in the curve


The USD Index ended Q3 down very modestly (-0.4%) with Yen strength offset by cable weakness…


Oil actually legged on the quarter with silver best…

*  *  *

For September, crude led but PMs outperformed stocks and bonds lagged…


Notably The Dow was red on the month and the S&P scrambled to try and breakeven but failedas Trannies soared in September…


Energy stocks outperformed in September as homebuilders and financials lagged…


Intersstingly, while the curve flattened markedly on the quarter, it steepened dramatically in September…


The USD Index drifted notably on the month, once again as cable weakness was trumped by Yen strength…


Copper and Crude outperformed in September, gold lagged…


*  *  *

Finally, on the week, today’s bounce pulled most stocks into the green but Small Caps lagged (even though they outperformed today)…UGLY CLOSE


Futures show just how crazy this week was…


Banks managed to scramble back to unchanged on the week…


Nothing was stopping stocks today  not even a giant 8k block… which as @RockHowse explains was absorbed like a champ…


On the week, Treasuries were mixed with 2Y 1bps higher and 30Y 3bps lower…


The flatness of 2Y yields is reflected in the perfectly unchanged close of the USD index on the week… (mostly driven by DB’s recovery and exodus from USD safe haven)


WTI Crude had a massive week – best in 2 months – gold and silver pumped and dumped today and copper ended the week green…


Jones Trading sums up the week…

US Equities are poised to close a touch higher on the week while Asia and Europe were generally lower. It was a decent week in terms of catalysts – we had OPEC’s “consultation” that yielded a production cap starting in November, a Presidential debate that yielded several memes and sound-bites, Deutsche Bank made headlines as impending fines by the US DoJ created questions around liquidity and capital. In the end – it all amounts to the S&P500 closing higher by 20bps – and flat for the month of September. It wasn’t really a macro-narrative shifting week – economic data continued to fall in-line and Central Bank speak didn’t do much to wow investors either. As we highlighted in the past, most market participants appear to be poised for a pull-back, yet this tape continues to move higher. It won’t be the first or last time that we prescribe to the idea that this market will continue on the path of most pain. In terms of technical – this market did struggle to break and hold above the 50-day MA this week. As we are writing this on Friday afternoon, the S&P500 is a couple of points above the 50-day MA – which is 2168. A few weeks ago we noted that we could likely find ourselves right back between 2150 and 2200 in short-order; this range will likely continue to hold.

Translated – no matter WTF happens, stocks inch higher or are rescued… because “wealth creation” and “election”

Charts: Bloomberg

Bonus Chart: Do you believe in 2016 GDP growth miracles?



Trading early morning 9:30 am est:

dollar shortage intensifies coupled with huge funding pressure!

(courtesy zero hedge)

As Europe’s Dollar Shortage Intensifies, Funding Pressure Surges Most In 4 Years

As the world wakes up to the fact that Deutsche Bank is not Lehman – it’s massively bigger, and massively more systemic, oh and it has depositors –  contagion is spreading through global funding and asset markets.

DB share price just hit single-digits…

And the expectations of a major debt haircut soar (CoCos hit record lows)

With Deutsche Bank Sub CDS now at record highs (remember Senior still supressed a little via ECB buying systemically)

And that has crushed the European banking system… (with European bank credit risk soaring, despite the ECB’s bond-buying overlay)

EUR FRA/OIS spreads shot up 280bps in the last 2 weeks – from record lows! (the biggest percentage surge in counterparty risk since 2011’s crisis began)

2016 and 2017 euribor contract prices underperform rest of the curve as funding pressures weigh on these contracts and broader risk-off sentiment sees deferred yields edge lower.

As demand for USD liquidity explodes to 4-year highs: at a peak of -61bps, this is the highest since July 2012, the middle of the European financial crisis)

USD funding demand also seen in CHF, JPY and GBP, with 3-mo. implied yields moving 5bps, 4bps and 3.5bps lower, amid patchy liquidity, according to a London-based trader.

Which confirms that this week’s massive spike in ECB Liquidity facility usage.

Was not enough.

For now the world remains mired in the first of Kubler-Ross five stages of grief – denial! Expectations of a state bailout remain far too high given the massive political problem that would ensue – read, European mutiny – should Germany bailout its banking system while Cypriot, Greek, and Italian banks have been forced to fend for themselves, confirming the widely held impression that Europe is being run by and for Germany.

h/t @StockBoardAsset



Next comes ‘anger‘… remember Monday is a bank holiday in Germany.





USA spending is a big part of GDP.  August spending is a big disappointment as the savings rate rises for the 2nd month in a row.  The consumer is:

a) tapped out

b) worried especially on witnessing problems over at Deutsche bank

(courtesy zero hedge)

US Spending Disappoints In August As Savings Rate Rises For Second Month

After personal spending growth slowed modestly one month ago, rising 3.8% Y/Y, in August US consumption once again disappointed, staying flat in the month, below the 0.1% expected sequential rebound, although this was offset by an upward revision to the last month’s data from 0.3% to 0.4%. On an inflation adjusted basis, as feeds into the GDP beancount, Real PCE dipped -0.1% in August, well below July’s 0.3% bounce, missing the expectation of a 0.1% rise while the Core PCE Index was inline with the 1.7% expected on a Y/Y basis.

At the same time, Personal Income was in line with expectations, rising 0.2% sequentially, half the July growth rate of 0.4%, or a nominal increase of $39 billion, down from $66 billion last month, of which wages comprised just $13.3 billion while personal current transfers, aka government benefits mostly in the form of Medicaid, contributed over $10 billion in income.

As the chart below shows, the trendline in income and spending remains fixed in its long-running channel:

And since incomes rose more than spending, the personal saving rose to $808 billion from $782 billion a month ago, resulting in another monthly pickup in the savings rate, which rose from a revised 5.6% to 5.7% in July, the highest since May, suggesting the the dramatic spending spree observed in Q1 and part of Q2 has so far to make any notable comeback.

Expect some modest downward revisions to Q2 GDP estimates as a result of today’s data.





The national Chicago Fed report shows the USA appears to have picked up a little at the end of the 3rd quarter with reading of 54.2 on expectations of 52.0. However the all important employment sector falters;

(National Chicago Fed report/zero hedge)

Chicago Fed Bounces But Employment Slips

These guys are being bled to death by 1,000 cuts

(courtesy zero hedge)










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