Oct 3

Gold $1310.10 down  $4.30

Silver 18.80 down 34  cents

 

THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON

.

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

The fix for London is at 5:30  am est (first fix) and 10 am est (second fix)

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

And now the fix recordings:

Shanghai morning fix Oct 3 (10:15 pm est last night): $  holiday

NY ACCESS PRICE: $

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

NY ACCESS PRICE: 

 

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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.

end

For comex gold:

the total number of notices filed on 2nd day notice:  3005 for 300500 oz (9.347 tonnes)

 

For silver:

for the Oct contract month:  11 notices for 55,000 oz.

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Let us have a look at the data for today

 

I will update the comex inventory data much later tonight.

.

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In silver, the total open interest ROSE by 846 contracts UP to 201,700 The open interest ROSE as the silver price was UP 3 cents in Friday’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 11 notices served upon for 55,000 oz

In gold, the total comex gold FELL by 4,423 contracts as the price of gold fell by $7.40 ON FRIDAY . The total gold OI stands at 561,336 contracts. The bankers have done a great job fleecing longs and as usual the entire gold comex OI obliterates

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

GLD

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

Total gold inventory rests tonight at: 949.14 tonnes of gold

SLV

we had 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 846 contracts UP to 201,700 as the price of silver rose by 3 cents with yesterday’s trading.The gold open interest FELL by 54,423 contracts DOWN to 561,336 as the price of gold fell $7.40 IN FRIDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

end

Let us head over to the comex:

The total gold comex open interest FELL BY 4423 CONTRACTS to an OI level of 561.336 the as price of gold fell by  $7.40 with FRIDAY’S trading.

The contract month of Sept is now off the board. The next delivery month is October and here the OI lost 2935 contracts down to 4458.  We had 2470 notices filed on Friday so we lost 465 contracts or 46,500 oz will not stand AND no doubt that most of these were cash settled. 

The next delivery month is November and here the OI fell by 20 contracts down to 2232 contracts. The next contract month and the biggest of the year is December and here this month showed an decrease of 3,533 contracts down to 437,423.

Today we had  3005 notices filed for 300,500 oz of gold.(9.347tonnes)
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And now for the wild silver comex results.  Total silver OI ROSE BY 846 contracts from 200,854 up to 201,700 as the  price of silver ROSE  to the tune of 3 cents yesterday.  We are moving  CLOSER TO the all time record high for silver open interest set on Wednesday August 3:  (224,540).  The next non active delivery month is October and here the OI fell by 235 contracts down to 202. We had 301 notices filed on Friday so we gained 66 contracts or 330,000 additional oz will stand for delivery.The November contract month saw its OI rise by 4 contracts up to 399.   The next major delivery month is December and here it FELL BY 192 contracts DOWN to 170,873.

today we had 11 notices filed for silver: 55,000 oz

 I will update the comex inventory data much later tonight
INITIAL standings for OCTOBER
 Oct 3
Gold
Ounces
Withdrawals from Dealers Inventory in oz  

NIL

Withdrawals from Customer Inventory in oz  nil
 xxxx
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
 xxx oz
No of oz served (contracts) today
3005 notices 
300,500 oz
(9.347 tonnes)
No of oz to be served (notices)
1453 contracts
 145,300
oz
Total monthly oz gold served (contracts) so far this month
5475 contracts
547,500 oz
17.029 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 xxx activity at the gold comex and xxx kilobar entries
We had xxx dealer deposit:
Total dealer deposits; xxxx oz
We had xxx dealer withdrawals:
total dealer withdrawals; xxx oz
we had xxx customer deposit:
Total customer deposits: xxxx oz.
 We had 0 customer withdrawals:
total customer withdrawals: xxx oz
Today we had 0  adjustments:
 
Note:
If anybody is holding any gold at the comex, you must be out of your mind!!!
since comex gold storage is unallocated , rest assured any gold stored at the comex will be compromised!
I also urge all of you do not place any option trades at the comex as these gangsters will gun you down.
If you are taking delivery of gold/silver please remove it from comex banks and place it in private vaults
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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 3005 contract  of which 225 notices were stopped (received) by jPMorgan dealer and 6 notice(s) was (were) stopped (received) by jPMorgan customer account.

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To calculate the initial total number of gold ounces standing for the Oct contract month, we take the total number of notices filed so far for the month (5475) x 100 oz or 547,500 oz, to which we add the difference between the open interest for the front month of OCT (4458 contracts) minus the number of notices served upon today (3005) x 100 oz per contract equals 692,800 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 (5475) x 100 oz  or ounces + {OI for the front month (4458) minus the number of  notices served upon today (3005) x 100 oz which equals 692,800 oz standing in this non active delivery month of Oct  (21.54 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
 
IN THE LAST MONTH and one half , 25 NET TONNES HAS LEFT THE COMEX.

end
 I will update the comex inventory data much later tonight
And now for silver
 
OCT INITIAL standings
 Oct 3. 2016
Silver
Ounces
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
xxx oz
xxxx
Deposits to the Dealer Inventory
 xx OZ
Deposits to the Customer Inventory 
xx oz
No of oz served today (contracts)
11 CONTRACTS
(55,000 OZ)
No of oz to be served (notices)
191 contracts
(955,000 oz)
Total monthly oz silver served (contracts) 312 contracts (1,560,000 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 xxx deposit into the dealer account:
total dealer deposit: xx oz
we had xxx dealer withdrawals:
 total dealer withdrawals: xxx oz
 we had 0 customer withdrawals:
Total customer withdrawals: nil  oz
We had xxx customer deposit:
total customer deposits: xxx oz
 
 
 
 we had xx adjustments 
The total number of notices filed today for the Oct contract month is represented by 11 contracts for 55,000 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 (312) x 5,000 oz  = 1,560,000 oz to which we add the difference between the open interest for the front month of OCT (202) and the number of notices served upon today (11) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the OCT contract month:  312(notices served so far)x 5000 oz +(202 OI for front month of SEPT ) -number of notices served upon today (11)x 5000 oz  equals  2,515,000 oz  of silver standing for the OCT contract month. THIS IS ALSO A HUGE SHOWING FOR SILVER AS OCTOBER IS GENERALLY A VERY WEAK DELIVERY MONTH. We gained 330,000 additional silver ounces standing.
 
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.
end
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 28/ NO CHANGES AT THE GLD/INVENTORY RESTS AT 949.14 TONNES
SEPT 27/A huge withdrawal of 2.08 tonnes from the GLD/Inventory rests at 949.14 tonnes/
SEPT 26./no changes in gold inventory at the GLD/Inventory rests at 951.22 tonnes
SEPT 23/A SMALL CHANGE IN GOLD INVENTORY AT THE GLD: A DEPOSIT OF .3 TONNES/INVENTORY RESTS AT 951.22 TONNES
Sept 22/a huge deposit of 6.53 tonnes of gold into the GLD/Inventory rests at 950.92 tonnes/this would be a paper deposit entry/
SEPT 21/ A HUGE DEPOSIT OF 5.69 TONNES INTO THE GLD/INVENTORY RESTS AT 944.39 TONNES
SEPT 20/A HUGE CHANGES IN INVENTORY AT THE GLD/: A WITHDRAWAL OF 3.86 TONNES/INVENTORY RESTS AT 938.75 TONNES
SEPT 19/2016: 10.39 TONNES WERE ADDED INTO THE GLD/THIS WOULD BE A “PAPER DEPOSIT”/INVENTORY RESTS AT 942.61 TONNES
Sept 16./no change in gold inventory at the GLD/Inventory rests at 932.22 tonnes
SEPT 15/another paper withdrawal of 3.27 tonnes of “gold” inentory leaves the GLD/Inventory rests at 932.22 tonnes
SEPT 14./A  withdrawal of 4.45 tonnes of gold inventory from the GLD/Inventory rests at 935.49 tonnes
SEPT 13/no changes in gold inventory at the GLD/Inventory rests at 939.94 tonnes
Sept 12/no changes in gold inventory at the GLD/inventory rests at 939.94 tonnes
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SEPT 30/ Inventory rests tonight at 949.14 tonnes

end

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 28/ WE HAD A HUGE WITHDRAWAL OF 1.614 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 362.909 MILLION OZ/
SEPT 27./no change in silver inventory at the SLV/Inventory rests at 364.523 million oz/
SEPT 26./no changes in silver inventory at the SLV./Inventory rests at 364.523 million oz/
SEPT 23./A HUGE CHANGE IN INVENTORY AT THE SLV: AN ADDITION OF 1.044 MILLION OZ INTO INVENTORY/INVENTORY RESTS AT 364.523 MILLION OZ/
Sept 22/no change in inventory at the SLV/Inventory rests at 363.479  million oz/
SEPT 21/NO CHANGES IN INVENTORY AT THE SLV/INVENTORY RESTS AT 363.479 MILLION OZ/
SEPT 20/NO CHANGES IN INVENTORY AT THE SLV/INVENTORY RESTS AT 363.479 MILLION OZ
SEPT 19/A HUGE ADDITION OF 1.045 MILLION OZ WAS ADDED INTO THE SLV/INVENTORY RESTS AT 363.479 MILLION OZ/
Sept 16/no changes in silver inventory/inventory rests at 362.434 million oz/
SEPT 15/no change in silver inventory/inventory rests at 362.434 million oz.
SEPT 14/no change in silver inventory at the SLV/Inventory rests at 362.434 million oz
sept 13/2016: a huge deposit of 1.329 million oz into the SLV/Inventory rests at 362.434 million oz/
Sept 12/a huge withdrawal of 1.614 million oz from the SLV/Inventory rests at 361.105 million oz
.
SEPT 30.2016: Inventory 362.909 million oz
 end

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.
 
 
 

end

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

Trading in gold and silver overnight in Asia and Europe

GBP Gold Rises 1.3% as Sterling Slumps On ‘Hard Brexit’ Concerns, EU Contagion Risk

Sterling gold rose 1.3% today as sterling slumped again after the UK set a March deadline to start their ‘Brexit divorce’ proceedings from the European Union and on deepening nervousness regarding a ‘Hard Brexit’.

gold_GBPGold in GBP – 10 Years

Theresa May’s bombshell deadline by which the UK will exit the EU given at her Conservative party conference, saw gold in sterling terms rise from £1,010/oz to £1,023/oz today and the pound hit a three-year low against the euro.

Sterling fell around 1 percent against the dollar to a seven-week low of $1.285 and a three-year low against the euro of 87.47 pence per euro.

Gold in sterling terms is now just 3.3% below the recent price highs of £1,057/oz seen in early July when gold surged in panic buying after the Brexit vote.

GBP gold is just 13% below the all time record nominal high in sterling terms of £1,161/oz, reached on August 24, 2011. Gold bottomed at £700/oz in July 2015 and has seen a series of higher lows and higher highs since then.

It is 46% higher from those lows and up 36% higher in sterling terms year to date. It is in a new bull market and price dips should be used to accumulate on weakness.

Gold is also being supported by concerns about Deutsche Bank, and whether Europe’s largest bank in the EU’s largest economy, is systemic, and potentially the EU’s ‘Lehman moment.’

Germany’s biggest lender and bank and the bank with the largest derivatives exposure is hoping to reach a settlement with the U.S. Justice Department before next month’s presidential election for mis-selling mortgage-backed securities. It faces a fine of up to $14 billion.

Deutsche shares aren’t trading in Germany today because of a public holiday, but they will be trading on the U.S. market. An unverified media report on Friday settled market jitters and increased risk appetite again. It suggested that Deutsche and the DOJ were close to agreeing a $5.4 billion settlement and lifted the stock 6 percent. The report remains unconfirmed.

Over the long term, gold has performed well for UK buyers and protected them from the risks manifest in recent years. Over 10 years, gold in GBP terms is up more than threefold or by 222% from £317/oz to £1,023/oz. An average annual performance of over 13% per annum.

Gold will continue to act as a hedge against currency depreciation for investors and savers in the UK and indeed for investors and savers in EU and other countries. Indeed, the increasing likelihood of a ‘Hard Brexit’ increases the risks posed to the EU itself and the risk of contagion – posed to both the political and the monetary union.

Gold and Silver Bullion – News and Commentary

China’s Yuan Joins IMF Reserves in First Revision Since 1999 (Bloomberg)

Brexit Trigger News Sends British Pound Lower (WSJ)

Gold up on short covering as Deutsche Bank concerns ease (Reuters)

Gold Holds Weekly Decline as Deutsche Bank Concerns Ebb (Bloomberg)

LBMA Said to Enter Talks With Autilla, Boat on Gold Platform (Bloomberg)

7RealRisksBlogBanner

Silver Way Undervalued (Silverseek)

Investing in gold is the best ‘speculative’ bet there is today (Marketwatch)

The Biggest Scandal (Silverseek)

Quantitative easing has pernicious effects that favour the wealthy (The Guardian)

Europe’s Perfect Dollar Storm (Bloomberg)

Gold Prices (LBMA AM)

03 Oct: USD 1,318.65, GBP 1,023.40 & EUR 1,173.99 per ounce
30 Sep: USD 1,327.90, GBP 1,025.01 & EUR 1,187.67 per ounce
29 Sep: USD 1,320.85, GBP 1,016.92 & EUR 1,177.14 per ounce
28 Sep: USD 1,324.80, GBP 1,020.10 & EUR 1,181.06 per ounce
27 Sep: USD 1,335.85, GBP 1,031.01 & EUR 1,187.84 per ounce
26 Sep: USD 1,336.30, GBP 1,033.23 & EUR 1,188.91 per ounce
23 Sep: USD 1,335.90, GBP 1,027.17 & EUR 1,192.16 per ounce

Silver Prices (LBMA)

03 Oct: USD 19.18, GBP 14.89 & EUR 17.07 per ounce
30 Sep: USD 19.35, GBP 14.92 & EUR 17.33 per ounce
29 Sep: USD 19.01, GBP 14.61 & EUR 16.95 per ounce
28 Sep: USD 19.12, GBP 14.69 & EUR 17.05 per ounce
27 Sep: USD 19.42, GBP 14.99 & EUR 17.26 per ounce
26 Sep: USD 19.44, GBP 15.04 & EUR 17.29 per ounce
23 Sep: USD 19.82, GBP 15.28 & EUR 17.66 per ounce


Recent Market Updates

– Why Krugman, Roubini, Rogoff And Buffett Hate Gold
– 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?”

 

end

 

The yuan officially joins the IMF reserves on Oct 1

(courtesy Bloomberg)

China’s yuan joins IMF reserves in first revision since 1999

Section:

By Robin Ganguly
Bloomberg News
Saturday, October 1, 2016

The yuan took on the mantle of a global reserve currency Saturday, a milestone that is seen breathing life into China’s bond markets by prompting estimated inflows of as much as $1 trillion over the next five years.

The currency’s entry into the International Monetary Fund’s Special Drawing Rights — alongside the dollar, euro, pound, and the yen — comes amid China’s efforts to boost its international usage and ambitions of providing an alternative to the dollar. Describing the inclusion as a “historic milestone,” IMF Managing Director Christine Lagarde said in a statement Friday that it reflects the progress that the Asian country has made in reforming its financial systems and liberalizing markets.

“SDR entry will pave the way for closer interaction between China’s capital market and that of the rest of the world,’ Tommy Xie, an economist at Oversea-Chinese Banking Corp. in Singapore, said on Saturday. “The first impact will be on the yuan, which the authorities are likely to keep stable for the next few weeks as any sudden volatility spike will damp the yuan’s image.” …

… For the remainder of the report:

http://www.bloomberg.com/news/articles/2016-10-01/china-s-yuan-joins-imf…

Major stories I am highlighting
Deutsche bank individuals charged by Italian prosecutors  for manipulation and creating false accounts in the major Monte di Pasci scandal.
(courtesy zero hedge)

Deutsche Bank Charged By Italy For Market Manipulation, Creating False Accounts

 

There are only 4 scenarios with respect to what is going to happen to Deutsche bank at this point:

 

i) raise capital through share offering or conversion of their CoCo bonds etc. However that would dilute the shareholders badly. The now have approximately 1.35 billion shares outstanding. A 14 billion settlement just for the mortgage fiasco will cost them over 1 billion shares and there  are many more settlements in the wings.This would force their shares down in value and again a run would start.

 

ii)go to the ECB for bridge financing  (again this would probably scare investors away from the stock)

iii) bail-out using taxpayer money (Merkel said no)

iv) bail in (all hell would break loose across the globe..

(courtesy zero hedge.

According To JPMorgan, This Is The Biggest Risk Facing Deutsche Bank At This Point

Deutsche Bank uncertainties were added to concerns about BoJ tapering spooking global equity markets over the past week. Widespread press reports about Deutsche Bank clients and counterparties reducing their financial exposure to the bank, including their derivatives exposures, alarmed market participants.

At the same time, JPMorgan warns, the amount borrowed by euro-area banks at the ECB’s USD auction this week spiked to $6.35bn raising fears about funding.

We need to wait for next week to see if this elevated dollar borrowing by euro area banks persists beyond quarter-end. But as JPMorgan’s Nikolaos Panigirtoglou warns,

In our opinion it is not so much funding issues but rather derivatives exposures that more likely to trouble markets going forward if Deutsche Bank concerns continue.

 

This is especially true if these concerns propagate into a confidence crisis inducing more rapid unwinding of derivative contracts.

As we have detailed previously, Deutsche has the world’s largest so-called derivatives book—its portfolio of financial contracts based on the value of other assets. As Forbes notes, it peaked at over $75 trillion, about 20 times German GDP, but had shrunk to around $46 trillion by the end of last year. That’s around 12% of the total notional value of derivatives outstanding worldwide ($384 trillion), according to the Bank for International Settlements.

As a reminder, if the liquidity run forces DB to start unwinding or being forced to novate derivatives, it could get ugly.

JPMorgan bank analysts confirm the size of DB’s book, and note that BIS data provide an alternative but indirect way to gauge the size of derivatives exposures. According to BIS data the exposure of foreign banks to German counterparties via derivatives contracts stood at $312bn as of Q1 2016.


Source: BIS

This is significantly lower than the $408bn reported for Q1 2015, suggesting that foreign banks have cut their derivatives exposures to German counterparties significantly over the past year.

But at $312bn this exposure is still large even if Deutsche Bank accounts for a fraction of this.

*  *  *

As we have noted previously, Deutsche Bank has around EUR 560 billion in deposits (for now) and so theoretically they do not have a funding issue.

But as we have seen numerous times in Deutsche’s history above (and obviously in many other banks), when the runs start, they seldom end peacefully (and funding sources disappear very quickly). Which perhaps explains this from Germany’s financial regulator…

The head of Germany’s financial regulator warned on Saturday of “negative perceptions that could lead to downward spirals on the markets”, at the end of a week that saw Deutsche Bank shares battered by a crisis of confidence.

 

In an interview with the Frankfurter Allgemeine Sonntagszeitung newspaper due to be published on Sunday, the head of Bafin, Felix Hufeld, declined to comment specifically on Deutsche Bank, Germany’s biggest bank.

 

But he said: “I warn people not to let themselves be drawn into a kind of downward spiral of negative perception. Not every nervous market reaction is backed by objective facts.”

Roughly translated as “Don’t panic, we have everything contained.” Now where have we heard that before?

One thing is clear: Friday’s desperate rumor-driven ramp saved some of that deposit base as going out at record lows into a long-weekend would not have been confidence-inspiring for the deposit base.

But, as JPMorgan makes clear – and we have reiterated numerous times, it’s the derivatives that matter and as the chart below shows, counterparties were piling into protection en masse – even as speculators bid up the stock on a quiet Friday afternoon.

Remember how many times investors were told that Lehman had no liquidity or funding problems?

However, as noted previously, Lehman failed 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’s 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.

 

end

 

Secular investor highlights the derivative problems facing DB

(courtesy Secular Investor)

 

Deutsche Bank ’s Problems Could Snowball… As Soon As Next Week!

Secular Investor's picture

Last week, the situation of Deutsche Bank kept the entire financial world busy as a $14B fine was hanging like a sword of Damocles over the company’s virtual head. We have to admit we had a good chuckle when the mainstream media were falling over themselves to report on Deutsche Bank’s problems, because most open-minded people in this sector already knew the company was one of the weakest links in the entire financial system, with the possibility to infect dozens of other players.

deutsche-bank-3

Source: armstrongeconomics.com

A weak link indeed, but most definitely not an unimportant link considering Deutsche Bank isn’t just ‘too big to fail’ but ‘waaaaay too big to be allowed fail’, and the existing problems very likely are just the tip of the iceberg. The markets were suddenly spooked by a potentially massive fine related to the sale of toxic mortgage bonds, but the concerns seemed to alleviate after the CEO of the bank published an open letter emphasizing the bank still has plenty of liquidity and reserves of in excess of 215B EUR.

It does look like the term ‘reserves’ has been used in quite a loose way, considering the majority of these so-called reserves are actually debt, and the market shouldn’t confuse ‘reserves’ with ‘liquidity reserves’. Even if you have 200B+ in liquidity, there will be a point in time when a company has to repay its creditors or refinance the existing debt, so relying on borrowed liquidity is usually just kicking the can further down the road. Indeed, after checking the H1 financial results of Deutsche Bank, the equity portion of the balance sheet is just a fraction of the 215B EUR in claimed reserves. The total shareholders equity was just 62B EUR as of at the end of June, with an equity/total assets ratio of just 3.3% compared to 12.2% at Bank of America and 12.75% at Citigroup. Even Banco Santander’s equity/total assets ratio is twice as high as Deutsche’s!

deutsche-bank-2

Source: Deutsche Bank

Die Zeit reported earlier this week the government and financial authorities were already preparing a rescue plan in case the bank could not meet its commitments by raising cash on the open market, because even selling the Abbey Life insurance group to Phoenix Life holdings for approximately $1.2Blast week won’t move the needle in case of a huge liquidity crunch.

Indeed, the market wasn’t buying CEO Cryan’s optimistic speech, and on the open market the 6% CoCobonds fell to less than 70 cents on the dollar, indicating a lot of debtholders wanted to get out of these CoCo’s as fast as possible, and the price of these bonds recovered slightly after the rumor about a $5.4B settlement was in the making.

deutsche-bank-1

Source: Telegraph.co.uk

We are uncertain about why the market thinks a $5.4B settlement would be good news. Sure, it’s less than the $14B the DoJ was originally seeking from Deutsche Bank, but even if the $5.4B number would be correct (Morgan Stanley thinks the total settlement will be closer to $6B, which we consider to be more likely considering Citigroup was slapped with a $12B fine, but settled for $7B), it would wipe out the entire provision on the balance sheet! Indeed, at the end of the second quarter of this year, the total amount of provisions on Deutsche Bank’s balance sheet was just 5.5B EUR ($6.1B), so a $6B settlement would wipe this out completely.

If you really believe a $5.4-6B settlement would solve all problems, think again. Selling toxic mortgages isn’t Deutsche Bank’s problem, but the exposure to the derivatives market is. And this problem could start snowballing, anytime now.

 

end

 

They haven’t even started the settlement negotiations yet.  The rumour that caused the big rise in DB stock on Friday was false.

(courtesy zero hedge)

About That Deutsche “Settlement” Rumor: Cryan Hasn’t Even Started Negotiations With The DOJ

Friday’s market session was about one thing: will Deutsche Bank stock close the week ahead of a three day holiday at a record low. It did not because, as we reported, the AFP announced that based on “sources” (most likely from Twitter), the DOJ was willing to reduce the $14 billion settlement that sent DB stock on a rollercoaster ride over the past two weeks, to just under $6 billion. The news unleashed a massive short squeeze relief rally, which sent DB stock soaring on Friday, pushing the entire market up 1%.

And while repeated attempts by the likes of Reuters to get additional information from either the DOJ, the German government or Deutsche Bank itself, have proven fruitless, overnight Frankfurter Allegemeine Zeitung reported that Deutsche Bank executives are heading to the United States in the coming days to negotiate the $14 billion settlement over a fine the infamous $14 billion for misselling RMBS.

The FAZ did not cite any sources for its report. Deutsche Bank did not immediately respond to a request for comment on Chief Executive John Cryan’s travel plans.

In other words, not only was the $5.6 billion “agreed upon” number, as “reported” by Twitter and then AFP, bogus, but the actual negotiations have not yet even begun.

It also means that the catalyst for Friday’s ramp was, as we suspected, nothing but the latest attempt at media manipulation meant to push DB stock higher and prevent a concerned German population from pulling its cash out of the bank, of which DB has well over €300 billion in retail deposits.

With Germany closed on Monday and only the far more illiquid US DB stock trading on Monday, we look forward to the market’s reaction to the realization that what it soared on what was nothing more than a media stunt, especially in the aftermath of Saturday’s announcement that Italy is the latest sovereign to take Deutsche Bank to task for its allegedly illegal manipulation and misrepresentation of Monte Paschi’s books.

 

end

 

This did not help over the weekend:  IT outages at DB as customers could not get their cash out of the banks:

 

 

Finally, Wall Street Journal reports that there is no settlement deal between Deutsche bank and the Dept of Justice.  The German economic minister is quite angry at DB

 

(courtesy Wall Street Journal/zero hedge)

 

 

(courtesy zero hedge)
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  1. […] THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON […]

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