Oct 20/almost 28 tonnes of gold standing for October/Exodus of gold continues from the comex/Shanghai continues to lead in the pricing of gold as Dubai agrees to use the Shanghai fix and not the London fix/Donald Trump indicates that he may not accept election decision/Existing home sales down/Philly mfg index down/

Gold $1265.60 DOWN  $2.30

Silver 17.50 DOWN 12 cents

In the access market 5:15 pm

Gold: 1266.00

Silver: 17.50

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 18 (10:15 pm est last night): $  1276.80

NY ACCESS PRICE: $1271.50 (AT THE EXACT SAME TIME)

Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1274.31

NY ACCESS PRICE: 1269.70 (AT THE EXACT SAME TIME)

HUGE SPREAD TODAY!!  5 dollars

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

London Fix: OCT 20: 5:30 am est:  $1269.20   (NY: same time:  $1269.30:    5:30AM)

London Second fix OCT 20: 10 am est:  $1271.65  (NY same time: $1271.70 ,    10 AM)

Shanghai premium in silver over NY:  87 cents.

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: 

10  NOTICES FILED FOR 1000 OZ

For silver:

for the Oct contract month:  85 notices for 425,000 oz.

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Let us have a look at the data for today

.

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In silver, the total open interest ROSE by 3,939 contracts UP to 193,168. The open interest ROSE DRAMATICALLY EVEN as the silver price was UP ONLY 3 cents in yesterday’s trading .In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .966 BILLION TO BE EXACT or 138% of annual global silver production (ex Russia &ex China).

In silver for October we had 85 notices served upon for 425,000 oz

In gold, the total comex gold ROSE by 6554 contracts with the RISE  in price of gold( $7.10 YESTERDAY) . The total gold OI stands at 503,615 contracts.

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

GLD

TODAY WE HAD A HUGE CHANGE AT THE GLD: A DEPOSIT OF 2.94 TONNES

Total gold inventory rests tonight at: 970.17 tonnes of gold

SLV

we had a good sized deposit of .855 million oz at the SLV/

THE SLV Inventory rests at: 363.140 million oz

.

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

1. Today, we had the open interest in silver ROSE by 3,939 contracts UP to 193,168 as the price of silver ROSE by 3 cents with yesterday’s trading.The gold open interest ROSE by 6,554 contracts UP to 503,615 as the price of gold ROSE $7.10 IN YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

end

3. ASIAN AFFAIRS

i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 0.261 POINTS OR 0.01%/ /Hang Sang closed UP 69.43 POINTS OR 0.30%. The Nikkei closed UP 236.59 POINTS OR 1.59% Australia’s all ordinaires  CLOSED UP 0.12% /Chinese yuan (ONSHORE) closed DOWN at 6.7380/Oil FELL to 51.03 dollars per barrel for WTI and 52.15 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.7425 yuan to the dollar vs 6.7380  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS  A BIT  AS MORE USA DOLLARS   LEAVE CHINA’S SHORES

REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

3a)THAILAND/SOUTH KOREA

none today

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

The USA has just lost a major ally in the Philippines

( zero hedge)

4 EUROPEAN AFFAIRS

i)Bank of England’s chief economist admits that QE is only a temporary benefit and it is more effective as a plunge protection item for stock markets.

 

( Andy Haldane/Bank of England/zero hedge)

ii)In the bailout agreements, the self employed has higher taxes to pay along with higher social security contributions.  Many northern Greek businesses moved their corporations over to Bulgaria where the contributions are lower and the corporate tax is 10% instead of 29%.  No wonder Greece is going nowhere!

( zero hedge)

iii)As expected, the ECB keeps its rates unchanged.  Now comes the press conference:

( zero hedge)

iv)The Euro jumps higher as stocks fall as Draghi suggests that QE cannot last forever.  He stated that the ECB has not discussed an extension of QE beyond March.( zero hedge)

v)Just take a look at the ECB’s balance sheet:  a massive bubble!

( zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

 none today

6.GLOBAL ISSUES

none today

7.OIL ISSUES

Nigeria caught in a bind as they lower their official oil price by $1.00.  They state that there is a huge cargo glut playing havoc to the oil market

(courtesy zero hedge)

8.EMERGING MARKETS

none today

9.PHYSICAL STORIES

i)The ECB is urging the EU to curb virtual money e.g. bitcoin for fear of losing control:

( Canepa/Reuters)

ii)This story was brought to your attention before but it is worth repeating: Gold in India trades at a premium for the first time in 9 months

( Reuters/gata)

iii)Lawrie Williams states the following facts;

  1. the SGE is gaining in strength and they are now leading the pact in gold price
  2. the Dubai gold exchange is now contracted with the SGE in gold pricing and not the London Bullion Association
  3. Shanghai and India has seen their premiums to spot gold rise
  4. Shanghai is negotiating with other exchanges to use their fix as opposed to the London fix.

looks like the London fix is doomed!

( Lawrie Williams/Sharp’s Pixley)

iv)An update on the Chinese inclusion into the iMF’s SDR  currency pricing:

( Steve St Angelo/Tom Cloud/SRSRocco report)

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

i)The key event at last night’s debate was Trump suggesting that he may not accept the decision of voters on Nov 8

( zero hedge)

ii)California’s Attorney General launches a criminal probe into Wells Fargo over fake identity theft and other stuff

( zerohedge)

iii)Strange@!! Initial claims jump over 5% this week to 260,000. Finally the poor data on the USA economy is finally catching up to the BLS’s faulty data releases over the past year:

( BLS/zero hedge)

iv)USA consumer confidence tumbles to its lowest levels since 2015:

( zero hedge)

v)Another indicator showing low growth in the USA” existing home sales down:

( zero hedge)

vi)The Philly Mfg index trends lower

(courtesy investing.com)
vii)Now it is Ambrose Evans Pritchard that is sounding the alarm bells for a huge USA recession:

He sites these important points:

1.the USA has engaged in multiple reverse repos as they remove liquidity from the system (as they prepare for raising rates in Dec).  He claims that this is not a good time to raise rates.

2.Global GDP has been in a steady fall these past 2 yrs.

3. total debt denominated in dollars outside the UDS has risen to 9.8 trillion this yr.

4. and this has caused 3 month euro dollars rates to rise to almost 1%.

storm clouds gathering!

(courtesy Ambrose Evans Pritchard/UKTelegraph).

 

end

Let us head over to the comex:

The total gold comex open interest ROSE BY 6,554 CONTRACTS to an OI level of 503,615 as the price of gold ROSE $7.10 with YESTERDAY’S trading.

We are in the delivery month is October and here the OI GAINED 180 contracts UP to 180. We had 11 notices filed yesterday so we GAINED 191 contract or 19,100 additional oz will  stand  for delivery.

The next delivery month is November and here the OI FELL by 143 contract(s) DOWN to 2861 contracts. This level is extremely elevated as generally November is a very poor delivery month.To give you an idea of size, on Oct 19 2015, we had an OI of only 266 contracts.The next contract month and the biggest of the year is December and here this month showed an increase of 4991 contracts up to 372,212.

Today we had  10 notices filed for 1000 oz of gold.
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And now for the wild silver comex results.  Total silver OI ROSE BY 3,939 contracts from  189,229 up to 193,168 as the  price of silver ROSE  to the tune of 3 cents yesterday.  We are moving  further from 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 rose by 5 contracts up to 168. We had 0 notices filed yesterday so we gained 5 contracts or 25,000 additional oz will stand for delivery.The November contract month saw its OI LOSE 1 contract DOWN to 328.   The next major delivery month is December and here it ROSE BY 1,746 contracts UP to 150,923.

we had 85 notices filed for 425,000 oz

VOLUMES:

Today the estimated volume was 141,102 contracts which is fair.

Yesterday, the confirmed volume was 149,892,006 which is also fair.

today we had 1 notice filed for 5,000 oz of silver:

INITIAL standings for OCTOBER
 Oct 20.
Gold
Ounces
Withdrawals from Dealers Inventory in oz  NIL
Withdrawals from Customer Inventory in oz  nil
4800.17 oz
Manfra
SCOTIA
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
 NIL oz
No of oz served (contracts) today
10 notices 
1000 oz
No of oz to be served (notices)
291 contracts
 29,100
oz
Total monthly oz gold served (contracts) so far this month
8545 contracts
854,500 oz
26.578 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month    oz
Total accumulative withdrawal of gold from the Customer inventory this month    318,473.3 oz
Today we had 1 kilobar transactions,  and MORE GOLD leaving the comex
Today we had 0 deposit into the dealer:
total dealer deposits:  nil oz
We had zero dealer withdrawals:
total dealer withdrawals:  nil oz
.
We had 0 customer deposit;
total customer deposits;NIL
We had 2 customer withdrawal(s)
i) Out of MANFRA; 64.30 oz  (2 KILOBARS)
ii)Out of Scotia:  4733.87 OZ
total customer withdrawal: 4800.17  oz
We had 3 adjustment(s)
i) Out of DELAWARE: 6627.853 oz was adjusted from the dealer and this entered the customer account of Delaware
ii) Out of HSBC: 497.25 oz was adjusted from the dealer and this entered the customer account of HSBC
iii) Out of Scotia: 46,403.384 oz was adjusted out of the dealer and this entered the customer account of Scotia
total leaving the dealer:  53,528.487 oz in an obvious settlement for the huge amount of gold standing in October.
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Total dealer inventor 2,236,180.879 or 69.559 tonnes
Total gold inventory (dealer and customer) =10,463.561/480. or 325.460 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 325.460 tonnes for a  gain of 22  tonnes over that period.  Since August 8 we have lost 29 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best.
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 10 contracts  of which 0 notices were stopped (received) by jPMorgan dealer and  3 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 (8545) x 100 oz or 854,500 oz, to which we add the difference between the open interest for the front month of OCT (301 contracts) minus the number of notices served upon today (10) x 100 oz per contract equals 883,600 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 (8545) x 100 oz  or ounces + {OI for the front month (301) minus the number of  notices served upon today (10) x 100 oz which equals 864,500 oz standing in this non active delivery month of Oct  (27.483 tonnes).
we GAINED additional 19,100 oz standing in this active delivery month of October and I believe that this is a record standing for October. To give you an idea of size from last yr, we had only a little over 2 tonnes standing at the conclusion of Oct 2015!
The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine
 
IN THE LAST TWO MONTHS  29 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
 
OCT INITIAL standings
 Oct 20. 2016
Silver
Ounces
Withdrawals from Dealers Inventory NIL
Withdrawals from Customer Inventory
61,697.55 oz
CNT
Scotia
Deposits to the Dealer Inventory
421,138.110 OZ
CNT
Deposits to the Customer Inventory 
 187,820.600 oz
CNT
No of oz served today (contracts)
85 CONTRACT(S)
(425,000 OZ)
No of oz to be served (notices)
83 contracts
(415,000 oz)
Total monthly oz silver served (contracts) 441 contracts (2,205,000 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  5,191,804.6 oz
today, we had 1 deposit into the dealer account:
i) into CNT: 421,138.100  oz
total dealer deposit: 421,138.100 oz
we had 0 dealer withdrawals:
 total dealer withdrawals: nil oz
we had 2 customer withdrawals:
i) Out of CNT:: 1025.65 oz
ii) out of Scotia: 60,671.900 oz
Total customer withdrawals: 61,697.55  oz
We had 1 customer deposits:
 i) Into CNT: 187,820.600 oz
total customer deposits;  187,820.600 oz
 
 
 we had 0 adjustment(s) 
Volumes:
Today the estimated volume was 59,240 which is VERY GOOD.
Yesterday the confirmed volume was 47,978 which is GOOD
The total number of notices filed today for the Oct contract month is represented by 85 contract(s )for 425,000 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  441 x 5,000 oz  = 2,205,000 oz to which we add the difference between the open interest for the front month of OCT (168) and the number of notices served upon today (85) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the OCT contract month:  441(notices served so far)x 5000 oz +(168) OI for front month of SEPT ) -number of notices served upon today (85)x 5000 oz  equals  2,620,000 oz  of silver standing for the OCT contract month. THIS IS STILL A HUGE SHOWING FOR SILVER AS OCTOBER IS GENERALLY A VERY WEAK DELIVERY MONTH.
We gained 25,000 additional silver ounces THAT WILL STAND.
 
Total dealer silver:  29.707 million (close to record low inventory  
Total number of dealer and customer silver:   174.037 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
OCT 20/A HUGE CHANGE IN GOLD INVENTORY AT THE GLD OF 2.94 TONNES/INVENTORY RESTS AT 970.17 TONNES
OCT 19/no change in gold inventory at the GLD inventory/inventory rests at 967.21 tonnes
OCT 18/A DEPOSIT OF 1.78 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT967.21 TONNES
OCT 17/ A DEPOSIT OF 3.86 TONNES OF GOLD INTO THE GLD/INVENTORY RESTS AT 965.43 TONNES/IN 10 DAYS 16.29 TONNES DEPOSITED
Oct 14./NO CHANGE IN INVENTORY AT THE GLD
OCT 13/a deposit of 2.67 tonnes of gold into the GLD/inventory rests  at 961.57 tonnes
Oct 12/No changes in inventory/inventory rests at 958.90 tonnes
Oct 11/ what!!! we had a gigantic 9.76 tonnes of inventory increase today/inventory rests at 958.90 tonnes.  (this was done with gold down?)
Oct 7:  949.14 tonnes
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Oct 20/ Inventory rests tonight at 970.17 tonnes
*IN LAST 14 DAYS:  21.04 TONNES ADDED INTO THE GLD

end

Now the SLV Inventory
oCT 20/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 363.140 MILLION OZ
oCT 19/a good sized change at the SLV inventory: a deposit of 855,000 oz/rests at 363.140 million oz/
OCT 18/NO CHANGES AT THE SLV INVENTORY RESTS AT 362.285 MILLION OZ
OCT 17/NO CHANGES AT THE SLV/INVENTOR RESTS AT 362.285 MILLION OZ/
oCT 14: A HUGE ADDITION (DEPOSIT) OF 1.138 MILLION OZ INTO THE SLV/INVENTORY RESTS AT 362.285 MILLION OZ
OCT 13/ NO CHANGES  in inventory at the SLV/Inventory rests at 361.147 million oz
Oct 12:NO CHANGES  in inventory at the SLV/Inventory rests at 361.147 million oz
Oct 11/ a withdrawal of 1.762 million oz of inventory from the SLV/Inventory rests at 361.147 million oz/
.
Oct 20.2016: Inventory 363.140 million oz
 end

NPV for Sprott and Central Fund of Canada

Central fund data not available today.

1. Central Fund of Canada: traded at Negative 3.8 percent to NAV usa funds and Negative 3.9% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.9%
Percentage of fund in silver:38.1%
cash .+1.0%( Oct 20/2016).
2. Sprott silver fund (PSLV): Premium FALLS to +0.80%!!!! NAV (OCT 20/2016) 
3. Sprott gold fund (PHYS): premium to NAV  RISES TO  1.03% to NAV  ( OCT 20/2016)
Note: Sprott silver trust back  into POSITIVE territory at 0.80% /Sprott physical gold trust is back into positive territory at 1.03%/Central fund of Canada’s is still in jail.
 
 
 

end

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

Trading in gold and silver overnight in Asia and Europe

Cashless Society – War On Cash to Benefit Gold?

Cashless Society – Risks Posed By The War On Cash
by Jan Skoyles, Editor Mark O’Byrne

Introduction 

Cash is the new “barbarous relic” according to many central banks, regulators, and some economists and there is a strong, concerted push for the ‘cashless society’.

cashless_society

Developments in recent days and weeks have highlighted the risks posed by the war on cash and the cashless society.

The Presidential campaign has been dominated for months and again this week by the power of information that has been gathered through unconventional means – whether due to email hacks, leaked microphone tapes or even late-night twitter rants.

Both presidential candidates have got things to say when it comes to the gathering of information and both are for it. Hillary Clinton sees a thin line between national security and your personal privacy. Donald Trump has openly said that he is open to mass surveillance and as he puts it, putting the country before personal liberty.

Neither candidate is afraid to say that they support information snooping and gathering for the sake of national security. In the ‘punch and judy’ show that has been the U.S. election, important financial and economic matters have been eschewed in favour of salacious allegations regarding alleged sexual advances etc.

Access to your information is one thing, it is how it is read and what is done with it that is pertinent. In a cashless society information replaces cash. How that information is interpreted is entirely subjective and the chances of any recourse when someone has misread your cash transaction seem to be increasingly slim.

Trump_&_Clinton

This information gives more power to unaccountable banks and corporations. It removes power and liberty from individuals and small to medium enterprises.

Opinion is divided among economists and there are many economists who share our concerns about the risks of the cashless society.

One such economist is Doctor Constantin Gurdgiev.  Dr. Gurdgiev is the Professor of Finance (Visiting) at Middlebury Institute of International Studies in California. He was previously Adjunct Professor of Finance with Trinity College, Dublin, worked as editor of Ireland’s Business and Finance magazine and was a non-executive member of the Investment Committees of GoldCore. Here is his view regarding the risks of a cashless society:

“Central banks, Governments and regulatory authorities are too often keen to highlight the benefits of the cashless society, e.g. efficiency and speed of transactions, ease of compliance and reporting, etc. However, the same agencies promoting cashless society evolution never mention the downsides or costs associated with creating a market structure in which private transactions become fully public through electronic trace-ability and centralised storage of information.

In most basic terms, cashless society removes anonymity of using cash in private transactions, such as gifts, small transfers and small private payments in transactions not involving use of public resources, e.g. tips. Other key drawbacks of cashless payments systems is that they de facto undermine the key role of money as a store of value. Electronic accounts can and will be bailed in (expropriated) by the Governments.

Cash and monetary assets, such as gold, cannot be expropriated or bailed-in as long as they are held in physical form and under proper storage. Cashless accounts amplify the importance of monetary assets, such as gold, in fulfilling the function of being safe havens against systemic risks – risks that are associated with high probability of Government expropriation.

Finally, cashless / electronic accounts represent a significant, and ever expanding in scope and size threat of cyber attacks and cyber crime. Here too, monetary assets, such as physical gold, offer both hedge and a safe haven opportunities to protect wealth.

Governments’ push toward electronic accounts and transactions is ultimately driven by the desire of the modern States to exert maximum control over private wealth and incomes. The only forms of protection against such policies that individual investors and savers have today are gold, silver and platinum held as a part of well-diversified and legally protected portfolios.”

How Close Are We To the Cashless Society?

There is little denying it, we are edging closer and closer every year. Here are some key facts

  • In the UK over half of all payments in 2015 were cashless
  • Many EU countries have capped the amount that can be legally paid in cash
  • In India a radio address from Prime Minister Modhi urged citizens to stop using cash
  • In Kenya about a quarter of it’s GNP is through mobile payments app M-Pesa
  • In the U.S. the economist Kenneth Rogoff’s latest book ‘The Curse of Cash’ has put the quest to reduce cash firmly on the agenda of many central banks and governments.

Why the sudden strive to eliminate coins and more importantly paper money or cash? Is it environmental? Of course not. There environmental benefit of eliminating cash use is absolutely minimal.

cashless_table
Rather, it is to do with government control and distrust of markets and individual freedom and it is to do with uber Keynesian economics and corporatism which supports banks and large corporations at the expense of the individuals, small and medium size enterprises and the wider society.

However, it is presented under the guise of efficiencies and crime-fighting. Central bankers and governments state a cashless society, or even just currency controls, will help to drive out criminal activity, money laundering and tax evasion, all whilst saving the economy time and money.

But really, as you’ll see, there’s little real benefit to society in reducing the physical cash we have available. Aside from the cash management and cyber security aspect, you need to ask what’s in it for the banks and governments and to also consider how it’s dangerous and creates unappreciated risks when you don’t get to choose how you spend and hold your wealth.

How is the cashless society coming about?

Right now a number of governments, fintech entrepreneurs and economists have declared that we should move to a cashless society. Being told how we can spend our money is always an emotive topic, but now that going cashless is actually happening in the background of a struggling financial system, it is proving to be a real threat to our very sovereignty and freedom.

Cashless has been legitimised in the minds of the electorate by the rise of the trendy industry of ‘fintech’, an industry that I am normally proud to be associated with. Like all new technological movements the intention is to improve systems, economies and the standard of living, but at the same time they can be misused, creating suspicion and undesirable consequences.

New technology that changes the status quo is something that will always be met with some resistance and a belief that more harm than good will come from it.

In 1858 people said the transatlantic telegraph was ‘too fast for the truth.’ In 1904 The Times accused the telephone of creating a ‘race of left-eared people—that is, of people who hear better with the left than with the right ear’! In 1994 the same paper asked if the internet had been ‘overhyped’.

Prior to fintech, which has expanded the means in which we can spend money day-to-day, it was not practical (either physically or financially) to suggest society no longer use physical cash when spending. But in a world seeking financial efficiencies and where there are officially more mobile devices in the world than people, it is not surprising that there are devices and apps to make your money easier to manage, spend and invest popping up throughout the world.

The cashless society is unlikely to become an official thing i.e. cash is unlikely to be suddenly outlawed overnight. More likely, is that cash will be made so inconvenient that people will first live with less cash. But slowly but surely we may find ourselves (and the societies we live in) cashless – like a frog in a pot of cold water slowly coming to the boil.

Efficient to be cashless?

Like all technological developments, we are encouraged to adopt them as it will vastly improve our lives/save money/protect our grandchildren/cure cancer etc. So, is this the case with going cashless?

Cash does obviously cost money. In 2015 the Danish government ruled that businesses were no longer obligated to accept cash payments. The ‘aim’ was to reduce costs of managing and securing money whilst on the premises.  Whether you assess the time you spend waiting at the ATM, the cost of transporting the money between banks and businesses or even the cost to count it.

According to a 2014 study commissioned by PayPal the cost of cash, in terms of counting and depositing, to small businesses in the UK, is £2.5 billion per year and about a fortnight in terms of time lost.

And we’re already savvy to the efficiencies of going cashless as it is estimated that there is approximately £800m in lost sales due to businesses not accepting cards.

But do these efficiencies stack up against the true cost of going cashless?

Crime prevention

One of the many arguments for going cashless is that the removal of cash from society will help to prevent criminal activity and money laundering. According toEuropol ‘the use of cash is the main reason triggering suspicious transaction reports, accounting for more than 30% of all reports.’

Money laundering is big deal. According to Diane Francis, between 2002 and 2011, ‘some $880.96 billion was spirited out of Russia, $461.86 billion left Mexico, $370.38 billion left Malaysia, $343.93 billion left India, $266.43 billion left Saudi Arabia, and $192.69 billion left Brazil. The total outflow, among 20 emerging economies, was $5.9 trillion, equivalent to $49 billion a month.’

Following the Charlie Hebdo attacks France’s Finance Minister Michel Sapin declared war on cash, placing the terrorists’ ability to buy dangerous goods with cash as one of the main reasons for the murders. There is now a €1000 cap on cash payments, down from €3000 previously.

But it’s not just money-laundering thanks to big drugs cartels (as facilitated by some banks) or terrorism that is a risk when dealing with financial crime. Going cashless is a concern for individuals who will be forced to use cards as a means of payment, a growing target for cybercriminals.

Some rightly believe that the concerted push by banks to end the use of cash is to boost profits.

In ‘Card on the Table’ Bjorn Eriksson presents the move to a cashless society as a moneymaking move by the banks who are benefitting from the low incident of bank robberies, whilst their client details are hacked by cybercriminals.

In 2015 the UK contributed 43% of the total card losses seen across Europe. Losses through card fraud totalled £88.5 million, attributed to the ‘growth in online spend and the digital revolution’ . Credit card fraud and attacks on food and beverage transactions climbed by 116% (yoy) in the last quarter, according to the Global Fraud Attack Index.

This can happen in a number of ways: skimming, when your card is physically scanned by the thief; if your card is contactless enabled then a close-range scanning device will do the trick; and, do you think you’re so techie because you pay on your mobile? Well, look out for the near-field communication (NFC) devices that are an easy target to hack by criminals.

It’s not only a money-making move by banks. The nascent cyber security industry will also hugely benefit. Cybercrime will benefit the Fraud Detection and Prevention market which is estimated to grow from $14.36 bn in 2016 to $33.19 bn by 2021. Within this, the retail sector is the highest growing area, i.e. you and I using our innovative cashless payments as a way to spend, spend, spend.

Yet as much as economists and governments would like to blame cash-based money-laundering as a reason to go cashless, in the UK it is not as big a problem as cyber money laundering. The Treasury and Home Office believe that they ‘know about most cash-based money laundering’ but the big problem lies in ‘high-end’ money laundering, such as from bank accounts:

“The size and complexity of the UK financial sector means it is more exposed to criminality than financial sectors in many other countries, including abuse enabled by professional enablers in the legal and accountancy sector.” It is here that the intelligence agencies see ‘significant gaps’ in their knowledge.

The digital sector is by no means more secure for the average citizen and, if anything, puts your money more at risk of criminal activity than previously.

In April 2016, SWIFT — the Society for Worldwide Interbank Financial Telecommunication – the vital global financial network that western and most international financial services companies, institutions and banks use for all payments and transfer billions of dollars every day, warned its customers that it was aware of cyber fraud and a number of recent “cyber incidents” where attackers had sent fraudulent messages over its system and $81 million was stolen from a central bank.

SWIFT acknowledged that it wasn’t just the $81 million stolen from Bangladesh’s central bank that alerted them to cybersecurity issues, these attacks have been attempted on several other institutions as well. SWIFT acknowledged that the cyber-attack on the New York Federal Reserve Bank was not an isolated incident but one of several recent criminal schemes that aimed to take advantage of the global payments platform used by some 11,000 financial institutions and all of us.

This in itself shows the vulnerability of our modern online and digital international payments system.

Banks and governments will try force you to be cashless 

And how are we being persuaded to ‘go cashless’? Not by whipping out the debit card, but instead through our mobiles. There is no doubt that the ability to turn mobile phones into both your bank branch and your wallet will empower a huge number of people but this does not mean it is safer than carrying cash. There was a three-fold increase in mobile malware in the last year, according to the FT, as hackers target mobile-banking applications and payment apps.

In Sweden, the bastion of the cashless society, banks have done such a great job in making cash appear so suspicious that:

“In general, the rule of thumb in Scandinavia is: ‘If you have to pay in cash, something is wrong,’” writes Mikael Krogerus for Credit Suisse. Arvidsson explains that “At the offices which do handle banknotes and coins, the customer must explain where the cash comes from, according to the regulations aimed at money laundering and terrorist financing,” The hassle, for the depositor, is enough to make them go cashless.

Surely the risks of holding cash are for you, the individual, to manage. And the risks of criminal activity, if facilitated by cash or even diamonds, is for the police to manage. Why are the two conflated?

How much does cash matter?

Despite the joy of spending on a mobile app or whipping your contactless card out to pay for public transport, the attachment to cash in society, even if it is becoming decreasingly obvious each day, has been under appreciated.

According to David Wolman, author of The End of Money: Counterfeiters, Preachers, Techies, Dreamers—and the Coming Cashless Society, those of us who have access to both physical cash and the electronic banking system truly believe that having some cash is a good thing.

The demand for cash is still very real. Whilst cash transactions might be falling the demand for banknotes is climbing. The Telegraph reports, ‘the demand for banknotes has risen faster than the total amount of spending in the economy, a trend that has only become more pronounced since the mid-1990s.’  and in the last decade the number of ATMs has increased by 20%, in the UK.

In the UK, the Bank of England found that 18% of people hoard cash mainly “to provide comfort against potential emergencies”. Around £3bn- £5bn is thought to be being “hoarded” or prudently saved to be less pejorative.

This cash is under the proverbial “mattress” meaning hidden in a safe place in a house – possibly a home safe or up in the attic. Burglars rarely go up in the attic. Alternatively the cash is stored in safety deposit boxes or in vaults.

The world’s largest insurance company, Munich Re, has opted to store some of their cash reserves in vaults – and a little bit of gold for good measure. Indeed, even banks including Commerzbank in Germany are considering holding actual bank notes in their vaults again.

As interest rates turn negative and the risk of bail-ins grows closer by the day, holding cash appears increasingly attractive

As calls to remove high denomination bills from circulation sweep across both Europe and the US, two Swiss politicians have called for the opposite to happen.

Philip Brunner and Manuel Brandberg are asking for the creation of a 5,000 Swiss franc note, in order to protect both the currency and the liberty of the citizens. In their motion to parliament they argue that “cash is comparable to the service firearm kept by Swiss citizen soldiers.” Indeed the pair go as far as to argue that they both “guarantee freedom”.

Guarantee might be a strong word in this regard but most would accept that they protect personal privacy, property rights and by extension our freedom. Totalitarian regimes of all colours and especially communist regimes are quick to confiscate wealth, including gold and property.

Chairman Mao confiscated gold and then banned gold ownership in China. In Stalin’s Russia, merely owning gold coins or bars would result in being sent to jail or worse the Gulag. We digress but you get the point.

Interestingly in Sweden, the first country that will seemingly go completely cashless, sees only 40-60% of its circulating cash in regular circulation with the remainder believed to be being saved by citizens outside the banking system – “under the mattress”, in home safes and in safety deposit boxes.

In Germany 79% of transactions are cash based, also for liberty reasons. As the WSJ reported, ‘Germany’s love of cash is driven largely by its anonymity. One legacy of the Nazis and East Germany’s Stasi secret police is a fear of government snooping, and many Germans are spooked by proposals of banning cash transactions that exceed €5,000. Many Germans think the ECB’s plan to phase out the €500 bill is only the beginning of getting rid of cash altogether.’

Even in Sweden there is still an appreciation for holding cash. Niklas Arvidssonpoints to a survey he recently carried out where he found that ‘two-thirds of Swedes think carrying cash is a human-right’.

The problem is, if the government and banks are able to push through an infrastructure that doesn’t support cash then it doesn’t really matter what people think. If their cash is suddenly null and void then their concerns about human rights have become a bigger matter entirely.

What’s it all for then?

In Niklas Arvidsson’s study ‘The Cashless Society’ he states that security and efficiency is the external sales pitch from banks, as it allows banks to ‘avoid complex cash handling and eliminate bank robberies, theft, and dirty money.’ However internally it helps with their main target: individual clients. The fully digitised payment system gives the bank a wealth of information about their clients in terms of what they spend, what they buy, when they shop etc. For advertising purposes this is effectively free market research.

Big data is now very bug business indeed. If the data is used for market research, who else can take advantage of knowing what you’re spending your money on? Even if you live in a politically stable country, with ethical laws you’re still at risk of losing out – that car boot sale you did at the weekend? Get ready for the taxman to benefit. That cheeky McDonalds you had last week? Get ready for your health insurance provider to put up your premium.

Never mind those who still enjoy the occasional cigarette and cigar of God forbid a few glasses of wine of an evening or a few drinks down the local boozer!

It seems logical and quite obvious to most that one of the primary reasons that some central banks are striving for a cashless society is to pave the way for deepening negative interest rates. Once all of your money is in the digital banking system you can get ready for it to be frozen, taken to fund a bail-in and even taxed. And in the meantime, enjoy governments, banks and possibly large corporations knowing what you’re spending your money on.

Negative interest rates

Negative interest rates are seemingly accepted as a way to preserve capital in a banking system. Ostensibly, they are put in place to prevent destabilising movements of money at times of financial crisis and to encourage spending and investment.

Negative interest rates in the UK seem to be an ever-present threat that no-one really believes will happen. But it is very real in the global economy, according to the WSJ, more than a fifth of global GDP is produced in countries with negative interest rates imposed by central banks.

Since 2012, seven countries have experimented with negative interest rates: Hungary being the most recent, Germany, Denmark, Sweden, Switzerland, Bulgaria and of course, Japan. Not all of them have hit depositors, yet. However this does not mean that customers are ready to be charged for lending their money to a bank.

negative_interest_ratesNegative rates are there in part to stimulate spending, but the more negative the nominal rate the greater the chance cash will be hoarded and resulting in a reduced velocity of money. But, how much impact can negative interest rates have when savers and depositors can escape the NIRP environment?

As the Financial Times wrote last month, “As long as people have access to cash, they may be able to avoid negative interest rates, limiting the scope for central banks to cut interest rates much further.”

But, in a cashless society if banks decide to impose negative interest rates account holders will not be able to access their money and this is hugely advantageous, to the banks. When a bank gets into difficulty, a cashless society helps protect the bank from a bank run. However, as negative interest rates become widespread and the risk of bail-ins more widely appreciated, we will likely see even more runs of the banks and the scene of ATM queues around the block.

However if cash is no long common in society how will depositors be able to protect their money? They won’t.

This is common thinking; in a recent report by the ICMB entitled, ‘What else can Central Banks Do?’ ‘If cash ceases to exist, so there is no riskless [sic] asset with a zero nominal return, central banks can make nominal interest rates as negative as needed to spur recoveries from recessions.

At present, with cash flowing around the economy there is a ‘lower bound’ in terms of how low negative rates can be. This zero lower bound issue is quite the problem, with even Benoît Cœuré,  Member of the Executive Board of the ECB suggesting banks either tax physical cash or ban it altogether.

But this can be solved by going cashless, according to the ICMB, “If cash did not exist, there would be no lower bound, and policymakers facing an economic downturn could make rates as negative as needed …” The ICMB thinks this latest monetary experiment would “spur a strong and rapid recovery.”

That’s what the central banks believed quantitative easing (QE) would do. It hasn’t.

This is a scenario that is likely to become reality in the near future. A year ago Credit Suisse analyst Christel Aranda-Hassel told investors, “Crucially, we also expect the ECB to remove the lower bound, leaving the door open to go more negative if needed …”

For Jens Weidmann, president of the Bundesbank, it is a no-brainer:

‘Going cashless would hence allow for greater macroeconomic stability, as well as lower inflation targets, than when monetary policy is at risk of being constrained by the lower bound.’

But, he states it is important that you don’t realise that you soon won’t be able to use cash:

“It would be fatal if citizens got the impression that cash is being gradually taken away from them.” Imagine.

paper_currencySo far negative interest rates haven’t significantly spurned a huge spending increase in the countries that have implemented them. Implementing cash controls, or banning it altogether, it is hoped, will soon see to this. At the moment, cash remains ever present in these NIRP economies.

Another possible motivation for wanting to ban cash, is the belief that it could spur consumer spending.  According to some research, we are more likely to spend when it is not cash that we are using.

Economic and Psychology Professors Drazen Prelec and George Loewenstein havewritten about ‘coupling’ to describe how much we link a consumption and payment experience. They find that there is strong coupling when there is physical cash payment, as opposed to on a credit or debit card. On the latter two options the coupling sensation is less strong, an unsurprising finding given that “credit card financing seems to be a stimulus to spending.”

Cash doesn’t have to be ‘cash’ – Return to gold and silver? Rise of ‘crypto’

We are in a fun place now with cash, a situation that is echoing the warning of Alan Greenspan, “In the absence of the gold standard, there is no way to protect savings from confiscation through monetary inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold.”

Soon, if the central bankers have their way, it will be cash that will be possibly illegal to hold.

At the moment we know cash to be coins and notes but what we really understand it to be is a medium of exchange that can be used in an almost decentralised manner. It doesn’t have to go through any kind of intermediary in order for the shop keeper to accept it as payment for my chocolate bar.

So in a cashless society where there are negative interest rates, ‘cash’ or the medium of exchange will just be something else, and I suspect that will involve gold and silver and possibly cryptocurrency – especially a blockchain-based digital currency.

The idea that negative interest rates will work because of a cashless society is something that will have to be rethought. Rogoff himself agrees that gold will become more popular and rise in price, as the cashless society grows. He uses India as an example of a country that has been through multiple economic traumas  and yet gold remains king, not cash.

The same is true in China and much of the Asian world.

Can you avoid it and how do you manage it?

I don’t believe you will be able to completely avoid the cashless (or even less-cash) society in your day to day life in the coming years.

This summer, I traveled to eight different European countries. For none of them did I withdraw cash before I went, as I perhaps would have done a few years ago. In every one of those countries I was able to use contactless payments, payment apps and even UBER in a couple of them.

Whilst cash still accounts for 85% of all transactions across the globe according to a MasterCard survey, more developed economics and indeed more debt and credit based economies are going through a cash-purge as well as negative interest rates.

The cashless society tries to force us to keep money and our savings in bank accounts. But what can happen when all of your money is in a bank account, aside from negative interest rates? See Cyprus for bail-ins, Greece for capital controls, deposit and ATM withdrawal limits etc., Argentina for the nationalisation of approximately $30 billion in private pensions (2008), and Venezuela’s own limits on card withdrawals and spending.

The threat of banks charging negative interest rates on customer deposits in a cashless society makes the proverbial stashing cash under the mattress more attractive.  Indeed, it becomes more attractive to even the most trusting and sophisticated investor and saver and indeed to companies and institutions.

Whilst you cannot avoid the day-to-day cashless issue you can protect yourself from the cashless society through a diversified portfolio that includes gold and silver – some in your possession and for larger amounts, bullion coins and bars in allocated and segregated storage in the safest vaults in the world.

The problem is thus, monetary policy ‘solutions’ remain a double edged sword. On one hand the push to go cashless looks concerning, but we are reassured that this may be gradual and take time as social inclusion and security issues take hold, but on the other hand banks will likely continue to raise the inflation target as their preferred use of monetary policy.

cashless_faber

In this environment, buying gold is rational behaviour to even the biggest paper-bugs out there. The current monetary experiment of massive QE is no longer the main concern of prudent investors and institutions, it is now combined with negative interest rates and bail-ins. Many are hedging these risks with gold. We have previously reported how some of the wealthiest people in the world are diversifying into gold as seen in gold buying by Lord Rothschild and billionaire investors such as Rogers, Faber, Singer, Dalio, Bass, Einhorn, Odey, Druckenmiller, Paulson and Gross.

And it’s not just individuals, GoldCore reported in March of this year, the world’s second largest reinsurer, Munich Re is stashing both gold and cash as it prepares itself for negative interest rates. And other institutions of note such as the world’s largest asset manager Blackrock Inc. and the increasingly powerful People’s Bank of China, are preparing themselves for a world of negative interest rates by diversifying their balance sheets and foreign exchange reserves into gold.

Proponents of the cashless society claim that this will reduce criminal activity, including money laundering. However, financial criminal activity is not put to bed by making society cashless. In an age of cyber warfare when banks have already been shown to be vulnerable to hacking, we suggest that financial institutions and their clients’ accounts will be more at risk should paper cash cease to exist. This is something that we will explore more in relation to digital security, gold and money.

Like everything with money, going cashless should be the choice of the individual, company or institution. With many financial institutions determined to force us all to use digital fiat currencies in a fragile banking system, holding gold and silver bullion as a means of protecting your privacy, as well as your wealth, is becoming more important.

Conclusion by Mark O’Byrne and Jan Skoyles

The risks of the cashless society were brought home to us this week when RBSbank in the UK decided it would just go ahead and shut-down the bank accounts of news channel Russia Today (RT). They did this with no prior warning and did not even feel the need to give a legitimate reason.

In the UK, as across most of the world, a business is required to have a bank account, and business accounts are expected to hold a minimum amount on deposit. With this in mind, you can see how easy it is for a bank or a government to just ‘switch off’ your business if they don’t like the nature of your business, what jurisdictions you operate in, who the principles are, who you are partners with or indeed what you say. This is made even more likely if a new president, prime minister or other government official, declares that this is a matter of national security.

If governments allow banks to shut down bank accounts of individuals or companies without a fair trial and due legal process, it will create a very dangerous situation indeed.

‘Econgularity’ (h/t Scott A.Shay)  is a word to describe the ‘moment in time when our current technological snooping prowess, the ease of big data manipulation and our sprint to a cashless economy will converge.’ The econgulairty will ‘happen in such a way as to permit governments to exercise incredibly powerful control over all human behavior.’

The singularity is defined as the point in which technology advances will “radically change human civilization and perhaps even human nature itself.” The move to a cashless society could mean that human nature may well be affected. The human desire (and a human right as the Swedish would argue) to hold cash and assets out of the banking system may be suppressed thanks to claims that cash is bad and only used by criminals.

However, we do not believe that we are heading towards a 1984 existence where every decision you make through monetary means is recorded, analysed and used against you. No, common sense and wisdom will hopefully prevail and we will pull back from the brink. People will realise the risks involved and decide that we are not going to tolerate this. We will not allow ourselves to be dependents or victims of a cashless state.

Why build societies which have a scarcity, mono-culture and a complete lack of cash? Much better and safer to opt for abundant bountiful societies with a healthy market and ecosystem with a variety of means of exchange and stores of value. Do we want to live in a society like repressed society like say North Korea or an abundant free society and economy like say Switzerland?

A ban on cash does not remove the issues that the proponents claim it will, instead it exacerbates the issues that already exist and bring them to the forefront of every prudent saver and investors’ mind: liberty, security of assets, protection of wealth against negative interest rates, bail-ins and currency devaluations.

The current drive towards a cashless society shows the importance of being diversified and not having all your savings and assets within the vulnerable financial and banking system.

It underlines the importance of diversification and having direct ownership of some of your wealth – outside the electronic savings and payments systems.

Gold and Silver Bullion – News and Commentary

Gold Hits Two-Week High as Dollar Weakens on Rate Speculation (Bloomberg)

Gold futures mark highest finish in more than two weeks (MarketWatch)

India gold trades at premium for first time in 9 months -dealers (Reuters)

Gold Prices Boosted by Weaker Dollar (WSJ)

Gold pares gains as dollar firms; ECB move awaited (Reuters)

7RealRisksBlogBanner

Why Gold Can Recover From Its Recent Fall (Barrons)

Three Risks to the Global Financial System as Debt Hits Record Levels (WSJ)

Even insiders expect EU’s collapse – Embry (KingWorldNews)

ECB urges EU to curb virtual money, bitcoin for fear of losing control (Reuters)

Debate Post-Mortem: “Bad Hombres”, “Putin Puppets”, Chris Wallace Wins “Bigly” (ZeroHedge)

Gold Prices (LBMA AM)

20 Oct: USD 1,269.20, GBP 1,034.65 & EUR 1,156.75 per ounce
19 Oct: USD 1,269.75, GBP 1,031.29 & EUR 1,154.97 per ounce
18 Oct: USD 1,261.65, GBP 1,031.15 & EUR 1,145.33 per ounce
17 Oct: USD 1,252.70, GBP 1,029.59 & EUR 1,139.58 per ounce
14 Oct: USD 1,256.15, GBP 1,028.79 & EUR 1,140.08 per ounce
13 Oct: USD 1,258.00, GBP 1,029.93 & EUR 1,141.76 per ounce
12 Oct: USD 1,255.70, GBP 1,024.53 & EUR 1,139.05 per ounce

Silver Prices (LBMA)

20 Oct: USD 17.60, GBP 14.35 & EUR 16.03 per ounce
19 Oct: USD 17.69, GBP 14.38 & EUR 16.11 per ounce
18 Oct: USD 17.65, GBP 14.37 & EUR 16.03 per ounce
17 Oct: USD 17.40, GBP 14.30 & EUR 15.83 per ounce
14 Oct: USD 17.47, GBP 14.28 & EUR 15.86 per ounce
13 Oct: USD 17.59, GBP 14.40 & EUR 15.95 per ounce
12 Oct: USD 17.44, GBP 14.23 & EUR 15.83 per ounce


Recent Market Updates

– “Higher Gold Prices” On Global Trade Slowdown – HSBC
– Euro “Will Collapse” As Is “House of Cards” Warns Architect of Euro
– Property Bubble In Ireland Developing Again
– “Gold Is A Great Hedge Against Politicians” – Goldman
– Sell Gold Now – Time To Liquidate Gold ETF, Pooled and Digital Gold
– Gold In GBP Up 43% YTD – “Massive Twin Deficits” To Impact UK Assets
– Ron Paul Says “Gold Going Up” Whether Trump Or Clinton Elected
– Gold Trading COT Report “Means Lower – Then Much Higher – Prices Coming”
– Currency Shock Sees Sterling Gold Surges 5% In One Minute “Flash Crash”
– Top Gold Forecaster: “As Quickly As Gold Fell” May “Rally Back” on Global Risks
– Gold Buying ‘Opportunity’ After Surprise 3.4% Drop
– Deutsche Bank “Is Probably Insolvent”
– GBP Gold Rises 1.3% as Sterling Slumps On ‘Hard Brexit’ Concerns, Up 36% YTD

janskoyles

 

END

 

The ECB is urging the EU to curb virtual money e.g. bitcoin for fear of losing control:

(courtesy Canepa/Reuters)

 

ECB urges EU to curb virtual money for fear of losing control

Section:

By Francesco Canepa
Reuters
Tuesday, October 18, 2016

FRANKFURT, Germany — The European Central Bank wants EU lawmakers to tighten proposed new rules on digital currencies such as bitcoin, fearing they might one day weaken its own control over money supply in the euro zone.

The European Commission’s draft rules, aimed at fighting terrorism, require currency exchange platforms to increase checks on the identities of people exchanging virtual currencies for real ones and report suspicious transactions.

In a legal opinion published on Tuesday, the ECB said EU institutions should not promote the use of digital currencies and should make clear they lack the legal status of currency or money. …

… For the remainder of the report:

http://www.reuters.com/article/us-ecb-bitcoin-eu-idUSKCN12I1HC

 

END

 

This story was brought to your attention before but it is worth repeating: Gold in India trades at a premium for the first time in 9 months

(courtesy Reuters/gata)

Gold in India trades at premium for first time in 9 months, dealers say

Section:

By Rajendra Jadhav
Reuters
Wednesday, October 19, 2016

Gold prices in India swung to a premium for the first time in nine months today as jewellers and dealers in the world’s No.2 consumer of the metal ramped up purchases ahead of major festivals.

Dealers were charging up to $2 an ounce over official domestic prices, the first time premiums have been seen since mid-January, said Bachhraj Bamalwa, director at the All-India Gems and Jewellery Trade Federation.

Gold importers have traditionally charged premiums to mitigate risks they take due to currency and price fluctuations.

But the precious metal had been trading at a discount for most of this year due to weaker-than-usual demand and a rise in smuggling. Discounts hit a record high of $100 an ounce in July. …

… For the remainder of the report:

http://www.reuters.com/article/india-gold-idUST9N0WW042

END

 

Lawrie Williams states the following facts;

  1. the SGE is gaining in strength and they are now leading the pact in gold price
  2. the Dubai gold exchange is now contracted with the SGE in gold pricing and not the London Bullion Association
  3. Shanghai and India has seen their premiums to spot gold rise
  4. Shanghai is negotiating with other exchanges to use their fix as opposed to the London fix.

looks like the London fix is doomed!

(courtesy Lawrie Williams/Sharp’s Pixley)

 


LAWRIE WILLIAMS: SGE leading gold price recovery as positive indicators pick up

OCT
20

It has been noticeable over the past few days that the relatively new Shanghai Gold Exchange (SGE) gold price benchmark has been leading the way in terms of setting the direction of the global gold price level. Since the COMEX opportunists took advantage of the week-long Chinese Golden Week holiday, when the SGE was closed, to bring the gold price down by around $60 over that week (See: Gold price plunges in China’s market absence) the price has at least stabilised and in general has moved upwards a little, although London and New York trading has tended to mitigate this.

My colleague, Julian Phillips, writing on lawrieongold.com and elsewhere, has been pointing out the trend for the SGE to be leading the way on gold pricing virtually ever since the SGE re-opened after the holiday just over a week ago. This has seen the gold price decline halted and trending slowly upwards since. This morning, for example, China set the price in the low $1270s. London appears to be bringing it down a little, but this has been the general pattern of late with the higher SGE benchmark setting the overall trend for the day.

Phillips goes further pointing to the logic that it indeed makes sense for Shanghai to be the pre-eminent benchmark gold price setter. He notes that the Dubai gold exchange has signed a contract to use the Shanghai Fixings in place of the London Fixings. Clearly, the Shanghai physical gold market [the biggest physical market in the world] is thought to better represent physical gold prices than COMEX paper market prices. Shanghai is also negotiating with other exchanges to use Shanghai Fixings in their markets. (see:China leading gold prices higher)

There are also some other currently positive signs for precious price direction. Demand in China and India, the world’s two biggest gold markets, appears to be picking up at last with price premiums re-appearing, while the big gold ETFs continued to see inflows even through the early October price decline. Silver ETFs also seem to be seeing some decently positive activity.

Indian demand has been particularly disappointing so far this year, although official import figures will probably be understating the true position due to anecdotally reported high levels of smuggled gold to avoid high import duties. But the Indian ‘gold season’ is now coming to its peak with the hugely important Diwali Festival coming in at the end of the month, following on from what may have been the best monsoon rains for some years which will have substantially boosted the country’s rural economy, and strong agricultural earnings have historic ally led to high gold jewellery sales and this seems to be being reflected in the return to gold price premiums.

-END-

 

An update on the Chinese inclusion into the iMF’s SDR  currency pricing:

(courtesy Steve St Angelo/SRSRocco report)

 

Tom Cloud Precious Metals Update: Chinese SDR Update & Tom Now Believes In A 33% Allocation In Precious Metals

Filed in News, Precious Metals, Tom Cloud by on October 19, 2016 4 Comments

Tom Cloud provides an update on the Chinese SDR and gold announcement.  He discusses several reasons why the Chinese have not made a public how much gold they hold in their official reserves.  This is the first currency added to the IMF – International Monetary Fund SDR (Special Drawing Rights) in sixteen years.

Tom also shares his thoughts on what would happen if the Fed does get the authority from Congress to start buying stocks.  While I believe the Fed & U.S. Treasury have already been buying stocks via the Presidents Working Group On Financial Markets secretly, once they can do it publicly, then it is a sign the the END IS NEAR.

Lastly, Tom Cloud now believes in owning 33% of ones assets in the precious metals. This is much higher than the standard 5-10% allocation recommended by some of the more well-known gold analysts, such as Jim Rickards.  Tom explains the reasons he believes it is important to have one-third of one’s wealth in the precious metals

Tom al

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

 
 

:

1 Chinese yuan vs USA dollar/yuan UP to 6.7380( DEVALUATION SOUTHBOUND  SLIGHTLY /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN WIDENS TO 6.7425 / Shanghai bourse CLOSED DOWN 0.261 POINTS OR 0.01%   / HANG SANG CLOSED UP 236.59 POINTS OR 0.30%

2 Nikkei closed UP 236.59 OR 1.59%   /USA: YEN RISES TO 103.66

3. Europe stocks opened ALL IN THE GREEN ( /USA dollar index UP to 97.92/Euro UP to 1.0985

3b Japan 10 year bond yield: LOWERS TO    -.065%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 103.96/ 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::  51.03  and Brent:52.15

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 RISES QUITE A BIT to +052%   

3j Greek 10 year bond yield RISES to  : 8.444%   

3k Gold at $1270.65/silver $17.66(7:45 am est)   SILVER FINAL RESISTANCE AT $18.50 WILL BE DEFENDED 

3l USA vs Russian rouble; (Russian rouble DOWN 17/100 in  roubles/dollar) 62.36-

3m oil into the 51 dollar handle for WTI and 52 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.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 103.66 DESTROYING WHATEVER IS LEFT OF OUR YEN CARRY TRADERS

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning .9878 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0850 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT

3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.052%

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

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

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

4. USA 10 year treasury bond at 1.756% early this morning. Thirty year rate  at 2.515% /POLICY ERROR)

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

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

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

Global Stocks, US Futures Modestly Higher As Debate Digested, Draghi Eyed

As US traders went to bed last night, they kept one eye on what had become a traditional debate proxy, one also seen with the past two debates, namely the FX market and particularly moves for the Mexican Peso. The Peso was initially slightly weaker in the first half of the debate, but surprisingly strengthened shortly after the kneejerk drop, then faded again and at last check was precisely where it was heading into last night’s debate. The modest move suggests that there’s not been a great change in view following the debate. Futures likewise failed to repeat their exuberant response from previous debates, and the E-mini was just fractionally higher.

Some commentators disagreed: “The likelihood of Donald Trump becoming President has nose-dived recently to as low as a one in eight probability … (and) last night’s debate has not provided that game-changing moment,” said Lee Hardman, a currency strategist with Bank of Tokyo-Mitsubishi in London. “The reduction in the political risk premium has helped the U.S. dollar to strengthen broadly this month.” According to Reuters a win for Democrat Hillary Clinton next month is also seen as opening the way for a rise in interest rates which a number of U.S. Federal Reserve policymakers have all but promised for December.

So with the debate now out of the way, the focus for the rest of the day ahead will swiftly turn over to the ECB meeting outcome at 7.45am followed by Draghi’s press conference shortly after. As a reminder, most of Wall Street is not expecting any fireworks at the meeting. The central bank is seen leaving policy unchanged, but investors will be looking for any hints of changes to its 1.7 trillion-euro ($1.9 trillion) bond-buying program, particularly the rules governing what debt can be bought. That being said the vague speculation about the ECB wanting to rein in QE means that there will be some focus on the tone of the statement and of course any hints of tapering. On the other hand, the ECB will soon have to unveil the extension of the program set to expire in march 2017, and as DB points out this morning, the ECB needs to solve the eligibility conundrum so that’s another topic to look out for today.

“Draghi will have an expectation-management problem,” former ECB Director General for market operations Francesco Papadia said in a Bloomberg TV interview with Francine Lacqua. “If he doesn’t say anything today that may be seen as a disappointment for the market. He will be asked and will have to say something. My sense is that the ECB may be looking beyond bonds. I have in mind in particular, equities, possibly in the form of exchange-traded funds, and bank loans.”

So with the ECB on deck, here is where we stand as of this moment: European equities declined modestly before Mario Draghi gave his policy update, while investors weigh mixed earnings results. Asian stocks rise, U.S. equity-index futures are little changed. The euro touched its weakest level since July and stocks in the region fell after their first back-to-back gains in two weeks as investors speculated that the European Central Bank may lay the groundwork for future easing of monetary policy.

Overnight implied volatility on the euro against the dollar jumped to a three-month high before the ECB’s policy decision and President Mario Draghi’s explanatory briefing. The dollar rose after Federal Reserve Bank of New York President William Dudley reiterated he sees an interest-rate hike this year. Mexico’s peso reached a six-week high after the final U.S. presidential debate, although it quickly shed the gains in a curious post-kneejerk move which may have been short covering. Saudi Arabia’s bonds rose after a record $17.5 billion sale on Wednesday. European stocks fell amid mixed earnings. Oil slid back to $51 a barrel.

The Stoxx 600 slipped 0.1 percent after rising for two straight days, as investors awaited the ECB and weighed mixed earnings reports. Some notable highlights from Europe’s reporting companies, courtesy of Bloomberg:

  • Nestle SA, the biggest component of the Stoxx 600, dropped 0.8 percent as the world’s largest food company lowered its annual sales forecast.
  • Publicis Groupe SA lost 5.3 percent after the French advertising firm posted third-quarter revenue that missed analysts’ estimates.
  • GEA Group AG sank 19 percent as the German machine maker and food processing company forecast a sales decline in 2016.
  • Deutsche Lufthansa AG led gains among travel-and-leisure stocks, climbing 7.6 percent after raising its profit projection.
  • Pernod Ricard SA climbed 2 percent and as the world’s second-largest distiller reported sales growth that beat estimates.

The MSCI Asia Pacific Index gained 0.2 percent, with a gauge of energy shares surging 0.9 percent. Japan’s Topix index rose 1 percent to record its best close since May, while Taiwan’s Taiex index climbed to a three-month high.

S&P 500 Index futures rose 0.1 percent, after U.S. equities lost 0.2 percent on Wednesday. Investors will look Thursday to data on initial jobless claims and sales of existing homes for further clues on the health of the world’s biggest economy. Earnings will also be in focus as the reporting season gathers steam. American Airlines Group Inc., Verizon Communications Inc., Microsoft Corp., and PayPal Holdings Inc. are among companies reporting Thursday.

U.S. 10Y Treasuries were little changed and yielded 1.75%. The securities have slumped in October as a bond-market gauge of inflation expectations rose to the highest in five months. The  probability of a U.S. rate increase by December has climbed to 64 percent, fed fund futures indicate, from 59 percent at the end of September. “I do expect to see an increase later this year,” the Fed’s Dudley said in response to an audience question after giving a speech in New York, adding that his forecast depends on the economy staying on its current trajectory. German government bonds halted a three-day gain. The 10-year bund yield rose two basis points to 0.045 percent, after touching 0.017 percent Wednesday, the lowest since Oct. 10.

Saudi Arabia’s $5.5 billion of 10-year bonds paying 3.25 percent interest were bid at 99.60 cents on the dollar, compared with an issue price of 98.679, according to data compiled by Bloomberg.

* * *

Bulletin Headline Summary from RanSquawk

  • Equities trade in a relatively tentative manner with all eyes in Europe firmly placed on the ECB rate decision and press conference
  • A quiet morning ahead of the ECB meeting conclusion a little after midday, with some early EUR tests on the lows, notably against the USD as the lead spot rate touched on 1.0951
  • Looking ahead, highlights include UK Retail Sales, ECB Rate Decision, Fed’s Dudley, ECB’s Draghi and BoE’s Shafik

Market Snapshot

  • S&P 500 futures up 0.1% to 2141
  • Stoxx 600 down less than 0.1% to 343
  • FTSE 100 down less than 0.1% to 7016
  • DAX up 0.3% to 10672
  • German 10Yr yield up 2bps to 0.05%
  • Italian 10Yr yield up less than 1bp to 1.39%
  • Spanish 10Yr yield up 2bps to 1.13%
  • S&P GSCI Index down 0.7% to 377
  • MSCI Asia Pacific up 0.3% to 140
  • Nikkei 225 up 1.4% to 17236
  • Hang Seng up 0.3% to 23374
  • Shanghai Composite down less than 0.1% to 3084
  • S&P/ASX 200 up 0.1% to 5442
  • US 10-yr yield up 1bp to 1.76%
  • Dollar Index up 0.06% to 97.98
  • WTI Crude futures down 1% to $51.06
  • Brent Futures down 1% to $52.12
  • Gold spot up less than 0.1% to $1,270
  • Silver spot down 0.1% to $17.66

Global Headline News

  • Wells Fargo Probed for Identity Theft Over Fake Accounts: California attorney general serves search warrant on lender
  • Trump at Debate Won’t Say He’ll Accept Vote If He Loses: Republicans offer mixed reactions to nominee’s statement
  • JPMorgan Dropping China Venture as Dimon Seeks Greater Control: Seeks new partnership, greater control, person familiar says
  • Wal-Mart’s China Revival Strategy Calls in JD and Its Drones: Retailer to offer imported goods from its global stores: CEO
  • Starbucks Opening up to 1,000 Reserve Cafes in Bid to Go Upscale: Coffee chain had previously set a target of 500 locations
  • EBay Issues Holiday Reality Check With Lackluster Forecast: CEO says shift in marketing will take a year to pay off
  • Dell CEO Sees More Acquisitions, Investment in Third ‘Act’
  • Uber Becomes a High Schooler in IPO Prom Timeline, CEO Says

Looking at regional markets, we start with Asia where stocks traded mostly higher following the positive Wall Street where gains in oil and encouraging earnings supported risk sentiment. ASX 200 (+0.1%) was led higher by commodity names after WTI rose to its highest level since July 2015 following a DoE drawdown of 5.2mln barrels, while Nikkei 225 (+1.1%) outperformed alongside a rebound in USD/JPY. Chinese markets were mixed with the Hang Seng (+0.7%) conforming to the positive tone following another firm liquidity injection by the PBoC, while the Shanghai Comp. (-0.1%) traded choppy as reduced hopes of stimulus measures capped gains. 10-yr JGBs traded flat with demand dampened amid firm gains in Japanese stocks, while today’s enhanced liquidity auction for 10yr, 20yr and 30yr JGBs saw an improvement in demand with the b/c increasing from last month.

Top Asian News

  • China Capital Flow Crackdown Sees $148 Billion Underground Bust: Operations were part of crackdown on illegal outflows
  • Australian State Sells Ausgrid to Local Funds for A$6 Billion: AustralianSuper, IFM Investors take 50.4% of Ausgrid lease
  • Foreigners Piling Into Hong Kong Homes Help Drive Price Rebound: Overseas purchases of 250 homes in September, a 14- month high
  • JPMorgan Mulls Selling China Venture Stake as Banks Seek Control: Seeks new partnership, greater control, person familiar says
  • Duterte Says ‘Goodbye’ America Before Meeting With Xi in Beijing: President says nation’s foreign policy “veers now” to China

In Europe, it was a tentative start to trading this morning ahead of the ECB rate decision with equities trading modestly in the green. The theme of the week continues with corporate earnings dictating the state of play, notable gains have been observed in airliners after Deutsche Lufthansa boosted their profit guidance. While energy names have also kept equities afloat with WTI and Brent futures touching the highest since July’15 post the DoE report yesterday, however, crude futures did pull off these levels overnight with oil prices a touch softer this morning. Similarly to equities, fixed income markets have been subdued amid the aforementioned ECB monetary decision where expectations are for the central bank to stand pat. As such, the German benchmark is relatively flat thus far with the yield curve flatter, while Gilts continue to underperform relative to their German counterparts with the 10-yr yield back above 1% amid the concerns regarding Brexit.

Top European News

  • U.K. Retail Sales Stagnate as Prices, Weather Hit Clothing: Underlying trend is ‘one of strength,’ statisticians say
  • Nestle Cuts Full-Year Sales Outlook as Pricing Power Weakens: Forecast is for 3.5% growth, slowest rate in more than decade
  • Roche Revenue Gains as Sales of Breast Cancer Drugs Soar: Breast cancer drug Perjeta sales jumped 26 percent in quarter

In FX, the Bloomberg Dollar Spot Index advanced 0.2 percent, rebounding from a one-week low. The euro fell as much as 0.2 percent versus the greenback and stood at $1.097 at 10:41 a.m. in London. The single currency has slipped 2.3 percent in October, after trading in its tightest quarterly range against the dollar on record in the three months through September.  Mexico’s peso climbed as much as 0.4 percent to 18.4558, the most since Sept. 8, before trading 0.2 percent weaker at 18.5647. The currency has risen more than 4 percent this month as opinion polls pointed to a growing likelihood that Trump will lose the coming election. The peso has been sensitive to the Republican candidate’s fortunes because he’s proposed renegotiating or ending trade deals with Mexico and blocking remittances to force the country to pay for a wall along the U.S. border. The Aussie weakened 0.8 percent after data showed employment fell by 9,800 in Australia last month, compared with an increase of 15,000 forecast by economists in a Bloomberg survey. The MSCI Emerging Markets Currency Index was little changed after rising 0.7 percent in the previous two sessions. South Africa’s rand led decliners, dropping 0.6 percent in its first day of losses this week. The Philippine peso gained 0.4 percent, the best performer among its peers. President Rodrigo Duterte and Chinese President Xi Jinping “agreed to return to track of dialogue” on South China Sea issues in what is “a new stage of maritime cooperation,” Vice Minister for Foreign Affairs Liu Zhenmin said at briefing in Beijing.

In commodities, oil fell after closing at the highest level in 15 months on government data that showed U.S. crude stockpiles unexpectedly declined last week, trimming an overhang of inventories. West Texas Intermediate dropped 1.1 percent to $51.03 a barrel and Brent lost 1 percent to $52.15. Gold was little changed at $1,269.30, holding near the highest level in two weeks. Industrial metals fell, led by a 0.6 percent declined in nickel. U.S. natural gas rose 0.9 percent to $3,198 per million British thermal units, rebounding from the biggest decline in seven weeks on Wednesday amid unseasonably warm weather.

Looking at the day ahead, we’ll get the latest initial jobless claims data (expected to hold around 250k) along with the Philly Fed manufacturing survey (expected to weaken to +5.0), existing home sales (+0.4% mom expected) and finally the Conference Board’s leading index (+0.2% mom expected). Away from the data, the Fedspeak today consists of Dudley at 1.30pm BST. Elsewhere, UK PM Theresa May is due to join the EU leaders’ two-day meeting beginning in Brussels today. On the earnings front there are 28 S&P 500 companies with the highlights including Walgreens Boots and Verizon prior to the open, followed by Microsoft and Schlumberger after the close.

* * *

* * *

DB’s Jim reid concludes the overnight wrap

Only one place to start this morning and that’s with the third and what is the final in a series of memorable US presidential debates. As with the first two there were the usual exchanges of barbs and personal jibes however on the whole the exchange was seen as a bit more constructive, certainly relative to the first two debates, with candidates generally sticking to the topics. Issues debated included abortion rights, the makeup of the Supreme Court, trade, the economy and immigration with both candidates seen as doubling down on their previous views. A lot of the headlines are being dominated by Trump refusing to say whether or not he’ll accept the result of the November 8th election should he lose. As we go to print the CNN/ORC poll is out and has Clinton coming out on top at 52% versus 39% for Trump.
We’ve seen with the past two debates that the most obvious reaction in markets has come in FX and particularly moves for the Mexican Peso which has become a bit of an election proxy. The Peso was initially slightly weaker in the first half of the debate, but has since strengthened and is +0.30% stronger in response. Still, the move is fairly modest and suggests that there’s not been a great change in view following the debate. Elsewhere sentiment in Asia is broadly positive. The Nikkei (+1.03%), Hang Seng (+0.59%), Kospi (+0.05%) and ASX (+0.25%) have all edged higher, with just the Shanghai Comp (-0.14%) languishing with a modest decline.

So with the debate now out of the way, the focus for the rest of the day ahead will swiftly turn over to the ECB meeting outcome at 12.45pm BST followed by Draghi’s press conference shortly after. As a reminder, we’re not expecting any fireworks at the meeting. That being said the vague speculation about the ECB wanting to rein in QE means that there will be some focus on the tone of the statement and of course any hints of tapering. DB’s Mark Wall still expects a 9-12 month extension in December but if the ECB is thinking differently we could get some hints today. Mark thinks that announcing a tapering in December would be premature given that the ECB is still clearly cautious about the economy. In terms of an extension, the ECB needs to solve the eligibility conundrum so that’s another topic to look out for today.

While the ECB may provide a temporary distraction, there’s no sign of Brexit related newsflow abating for now. There were a raft of headlines yesterday but the most important story for us is the High Court decision on the case concerning the government’s right to trigger Article 50 without parliament consent. The legal arguments have concluded and we’re now in waiting mode for the decision from the Lord Chief Justice and Master of the Rolls with some suggestion that the timeframe could be within a week. An appeals process to the Supreme Court is likely in either outcome which means we may have to wait until December for a final outcome however. Sky News ran an interesting article yesterday suggesting that the hearing has not gone particularly smoothly for Theresa May and her Government. The article suggests that the crux of the claimants’ case was that the inevitable consequence of triggering Article 50 ‘is that statutory rights enjoyed by some UK and EU citizens will be taken away’ and that this can only be done by Parliament and ‘not by the executive using the crown prerogative’. The article also goes on to say that the concerning news for the Government is that the High Court judges ‘appeared far more sceptical about its case than many had expected’ and that the Lord Chief Justice said ‘twice that their argument “baffled” him’. The roadmap of a potential outcome against the government is still far from certain however clearly the focus will turn to the timing and nature of the of the process with leverage swinging to favouring the pro-Europeans in parliament.

Making things a bit more interesting is the report released by the House of Lords EU Select Committee overnight. They have urged that Parliament ‘should be actively involved in scrutinizing the forthcoming negotiations on Brexit as they happen rather than after decisions have been taken, as proposed by the Government’. This contrasts with previous comments from PM Theresa May saying that she will not give a running commentary on talks. All interesting developments and worth following closely. As we type, Sterling is modestly firmer this morning (+0.10%).

In terms of markets yesterday, with China offering up few surprises after its Q3 GDP print pointed towards some stability in the economy, the real focus yesterday was on the moves in Oil which saw WTI rally +2.60% to close at $51.60/bbl and the highest since July 2015. That now means that Oil is up nearly 7% in October so far which matches similar gains for September and August. Yesterday’s leg up appears to be driven by the latest US crude inventory data. The EIA reported that US crude stockpiles fell by 5.2m barrels last week which compares to expectations of a 2m barrel increase according to the WSJ. That drawdown in crude stockpiles more than offset an increase in gas stockpiles.

The move in Oil initially helped equity markets in Europe jump into the close with the Stoxx 600 in particular closing +0.34%. Across the pond the S&P 500 ended up with a fairly modest +0.22% gain by the closing bell with the energy sector unsurprisingly leading the way and it finally snapped the nine-session run of alternating gains and losses. Meanwhile the second-best performing sector for the S&P was financials after Morgan Stanley joined the other major US banks in reporting both earnings and revenue numbers for Q3 which exceeded analyst estimates with the theme of strong FICC trading revenues again a major factor. It’s been a strong start to earnings season so far in the US largely as a result of the banks although as we’ve highlighted before, optically results are getting a boost from big analyst downgrades prior to reporting. With the banks now behind us next week we’ll get a number of high profile energy names reporting so that’ll be worth keeping a close eye on.

Staying with earnings, last night after the closing bell eBay reported third-quarter results which more or less matched consensus expectations, however some disappointing guidance for next quarter saw shares plunge as much as 9% in aftermarket trading. In response US equity futures are little changed this morning.

Moving on. In yesterday’s EMR we highlighted the latest Italy constitutional referendum poll numbers which showed the “No” camp as holding a small lead. DB’s Marco Stringa, in a report yesterday, highlighted that he is becoming more pessimistic about the outcome of the referendum on December 4th. He notes that; (i) So far nearly all opinion polls in October have given a lead to the “No” camp, which would mean the rejection of the Senate reform. That said, the proportion of undecided voters is still elevated, hence there is room for the “Yes” camp to regain support. (ii) The economy is unlikely to help PM Renzi to regain support. (iii) Renzi’s party is divided on the Senate reform, while the opposition is united against it. Marco’s view now is that the combination of these factors justifies a change from his 50-50 call to assigning a 55% probability to the rejection in the referendum of Renzi’s Senate reform. His central case in such a scenario is that Renzi will resign and that a new government supported by a similar parliamentary majority with a limited scope – writing a new electoral law – and limited duration will be formed. The main risk is a new period of fragile governments supported by heterogeneous coalitions.

Before we move onto today’s calendar, while yesterday’s data was fairly mixed in the US it failed to really trouble the scorers. Housing starts declined sharply in September (-9.0% mom vs. +2.9% expected) although this was somewhat seen as being balanced out by a bigger than expected jump in building permits during the same month (+6.3% mom vs. +1.1% expected). The Atlanta Fed did revise up their Q3 GDP forecast to 2.0% from 1.9% yesterday although that was as a result of Friday’s Monthly Treasury Statement. Treasuries were a little weaker yesterday with the 10y yield up 1bp to 1.744% although that was largely blamed on that record $17.5bn bond sale from Saudi Arabia – the largest ever from an EM country. Over in Europe the only notable data came from the UK where there were no great surprises in the latest employment figures. The ILO unemployment rate held steady at 4.9% while average weekly earnings dipped one-tenth in the three months to August to 2.3% yoy.

Looking at the day ahead, this morning and shortly after this hits your emails the latest Germany PPI data will be released. Following that we’ll get more September data out of the UK, this time in the form of the latest retail sales numbers (which are expected to have risen modestly). The aforementioned ECB meeting follows that with President Draghi due to give his usual post-statement press conference. Over in the US this afternoon we’ll get the latest initial jobless claims data (expected to hold around 250k) along with the Philly Fed manufacturing survey (expected to weaken to +5.0), existing home sales (+0.4% mom expected) and finally the Conference Board’s leading index (+0.2% mom expected). Away from the data, the Fedspeak today consists of Dudley at 1.30pm BST. Elsewhere, UK PM Theresa May is due to join the EU leaders’ two-day meeting beginning in Brussels today. On the earnings front there are 28 S&P 500 companies with the highlights including Walgreens Boots and Verizon prior to the open, followed by Microsoft and Schlumberger after the close.

3.REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 0.261 POINTS OR 0.01%/ /Hang Sang closed UP 69.43 POINTS OR 0.30%. The Nikkei closed UP 236.59 POINTS OR 1.59% Australia’s all ordinaires  CLOSED UP 0.12% /Chinese yuan (ONSHORE) closed DOWN at 6.7380/Oil FELL to 51.03 dollars per barrel for WTI and 52.15 for Brent. Stocks in Europe: ALL IN THE GREEN   Offshore yuan trades  6.7425 yuan to the dollar vs 6.7380  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS  A BIT  AS MORE USA DOLLARS   LEAVE CHINA’S SHORES

3a)THAILAND/SOUTH KOREA/SOUTHEAST ASIA:

b) REPORT ON JAPAN

none today

c) Report on CHINA

The USA has just lost a major ally in the Philippines

(courtesy zero hedge)

“America Has Lost” – Duterte Announces “Separation” From United States, Alligns With China

After the relentless barrage of verbal abuse and negative sentiment and aimed at Barack Obama and the US, coupled with increasingly complimentary statements toward Beijing, it was only a matter of time before Philippine President Rodrigo Duterte put an end to the speculation if and when he would officially pivot the country’s long-held diplomatic alliance away from the US toward China. He did so today when, during a visit to China’s capital, Duterte announced his “separation” from the United States, declaring he had realigned with China as the two agreed to resolve their South China Sea dispute through talks.

Duterte is currently in Beijing, where he is visiting with at least 200 business people to pave the way for what he calls a new commercial alliance as relations with longtime ally Washington deteriorate.

“In this venue, your honours, in this venue, I announce my separation from the United States,” Duterte told Chinese and Philippine business people, to applause, at a forum in the Great Hall of the People attended by Chinese Vice Premier Zhang Gaoli. “Both in military, not maybe social, but economics also. America has lost.”

Duterte’s efforts to engage China, months after a tribunal in the Hague ruled that Beijing did not have historic rights to the South China Sea in a case brought by the previous administration in Manila, marks a reversal in foreign policy since the 71-year-old former mayor took office on June 30. As Reuters adds, his trade secretary, Ramon Lopez, said $13.5 billion in deals would be signed during the China trip.

An even more dramatic admission came moments later when Duterte also voiced his desire to expand the newly hachced Asian axis to include Russia as well.

“I’ve realigned myself in your ideological flow and maybe I will also go to Russia to talk to (President Vladimir) Putin and tell him that there are three of us against the world – China, Philippines and Russia. It’s the only way,” Duterte told his Beijing audience.

Still, in keeping with the semi flip-flopping nature of his administration, a few hours after Duterte’s speech, his top economic policymakers released a statement saying that, while Asian economic integration was “long overdue”, that did not mean the Philippines was turning its back on the West.

“We will maintain relations with the West but we desire stronger integration with our neighbours,” said Finance Secretary Carlos Dominguez and Economic Planning Secretary Ernesto Pernia in a joint statement. “We share the culture and a better understanding with our region. The Philippines is integrating with ASEAN, China, Japan and South Korea.”

* * *

Unlike Obama’s final arrival in China in the late summer which was met several very embarrassing logistical and diplomatic snafus, China pulled out all the stops to welcome Duterte, including a marching band complete with baton-twirling band master at his official greeting ceremony outside the Great Hall of the People, which is not extended to most leaders. President Xi Jinping, meeting Duterte earlier in the day, called the visit a “milestone” in ties. Xi told Duterte that China and the Philippines were brothers and they could “appropriately handle disputes”, though he did not mention the South China Sea in remarks made in front of reporters.

“I hope we can follow the wishes of the people and use this visit as an opportunity to push China-Philippines relations back on a friendly footing and fully improve things,” Xi said.

Following their meeting, during which Duterte said relations with China had entered a new “springtime”, Chinese Vice Foreign Minister Liu Zhenmin said the South China Sea issue was not the sum total of relations. “The two sides agreed that they will do what they agreed five years ago, that is to pursue bilateral dialogue and consultation in seeking a proper settlement of the South China Sea issue,” Liu said.

As a result of Duterte’s pivot, China now has a key supporter in the ongoing geopolitical disagreement involving the contested territory in the South China Sea. China claims most of the energy-rich South China Sea through which about $5 trillion in ship-borne trade passes every year. Neighbours Brunei, Malaysia, the Philippines, Taiwan and Vietnam also have claims. In 2012, China seized the disputed Scarborough Shoal and denied Philippine fishermen access to its fishing grounds.

Liu said the shoal was not mentioned and he did not answer a question about whether Philippine fishermen would be allowed there. He said both countries had agreed on coastguard and fisheries cooperation, but did not give details.

Duterte on Wednesday said the South China Sea arbitration case would “take the back seat” during talks, and that he would wait for the Chinese to bring up the issue rather than doing so himself. Xi said issues that could not be immediately be resolved should be set aside, according to the Chinese foreign ministry.

* * *

Meanwhile, anti-US sentiment is building in the Philippines, which is also not surprising, after Duterte previously called Barack Obama a “son of a bitch” and told his to “go to hell”, while alluding to severing ties with the old colonial power. On Wednesday, to the cheers of hundreds of Filipinos in Beijing, Duterte said Philippine foreign policy was veering towards China. “I will not go to America anymore. We will just be insulted there,” Duterte said. “So time to say goodbye my friend.”

As we reported earlier, about 1,000 anti-U.S. protesters gathered outside the U.S. embassy in Manila calling for the removal of U.S. troops from the southern island of Mindanao. As the standoff escalated, the local police ran over protesters who were preparing to storm the embassy.

As a result of this dramatic collapse in US-Philippine relations, the next US president will have their hands full with not only the rapidly escalation standoff between Russia and the US in Syria, but will be rushing the mend relations with one of the oldest US allies in the Pacific rim.

 

end

4 EUROPEAN AFFAIRS

Bank of England’s chief economist admits that QE is only a temporary benefit and it is more effective as a plunge protection item for stock markets.

 

(courtesy Andy Haldane/Bank of England/zero hedge)

Bank Of England Admits QE ‘Economic’ Benefits Are Temporary, More Effective As Plunge-Protection For Markets

Outspoken Bank of England economist Andy Haldane has dropped some uncomfortable truth bombs in his latest working paper about the (in)effectivess of QE.

 In the past decade or so, a number of central banks have purchased assets financed by the creation of central bank reserves as a tool for loosening monetary policy – a policy often known as ‘quantitative easing’ or ‘QE’.

The first half of the paper reviews the international evidence on the impact on financial markets and economic activity of this policy. It finds that these central bank balance sheet expansions had a discernible and significant impact on financial markets and the economy. The second half of the paper provides new empirical analysis on the macroeconomic impact of central bank balance sheet expansions, across time and countries.

It finds three key results. First, it is only when central bank balance sheet expansions are used as a monetary policy tool that they have a significant macro-economic impact. Second,there is evidence for the US that the effectiveness of QE may vary over time, depending on the state of the economy and liquidity of the financial system. And third, QE can have strong spill-over effects cross-border, acting mainly via financial channels. For example, the impact of US QE on UK economic activity may be as large as the impact on US economic activity.

Specifically, Haldane note that the impact of QE is greater the weaker the economy and the more disturbed the state of financial markets.  This state-dependency in the impact of QE is potentially important to our understanding of how QE has worked in the past and the circumstances in which it is likely to be effective in the future.

As Haldane explains, QE is a “confidence” trick…

And what one needs to believe for QE to work

In other words, QE’s greatest benefit is as a plunge protection team mechanism for markets… not the economy

The evidence suggests that QE has often had a significant impact on financial markets, albeit one whose scale has varied over time and across countries. What ultimately matters for monetary policy, however, is the impact of these asset purchases on the economy. There is some existing empirical evidence of a macroeconomic effect of QE. In general, however, estimates are quite uncertain.

As Haldane concludes…

In the past decade or so, central bank balance sheet expansions have been used as a tool for loosening monetary policy. This paper has gathered together empirical evidence on the effectiveness of these policies on financial markets and the wider economy. It finds reasonably strong evidence of QE having had a material impact on financial markets,generating a significant loosening in credit conditions. There is also evidence of QE having served to boost temporarily output and prices, in a way not associated with other central bank balance sheet expansions.

The effectiveness of QE policies does vary, however, both across countries and time. For example, there is some evidence of QE interventions being more effective when financial markets are disturbed. There is also evidence of strong positive international spill-over effects of QE from one country to another.

So QE works best when the market plunges and demands it? But its effect is only ‘real’ in makets not the real economy.

As the following impulse function shows, GDP and CPI ‘reactions’ fade fast but equity gains remain…

*  *  *

Full working paper below:

Haldane QE Effectiveness by zerohedge on Scribd

 

END

 

In the bailout agreements, the self employed has higher taxes to pay along with higher social security contributions.  Many northern Greek businesses moved their corporations over to Bulgaria where the contributions are lower and the corporate tax is 10% instead of 29%.  No wonder Greece is going nowhere!

(courtesy zero hedge)

 

Greek Government Tells Tax-Burdened Self-Employed: “Go To Bulgaria”

It is not a secret that under the bailout agreements, Greece’s self-employed are charged with higher taxes and social security contributions each and every year.As KeepTalkingGreece.com details, many, especially from northern Greece,  have moved their business basis to neighboring Bulgaria for obvious reasons: 10% tax instead of 29%, low social security contributions, incentives. There is talk that 60,000 businesses have moved in the last seven years of austerity.

No wonder that self-employed and freelancers complain about taxation, contributions and cut pensions, no wonder they are furious about the social security contributions hikes that come with the new year.

When Dimitris Tsakiris, governor of Greece’s Self-employed Fund (OAEE), visited Florina and Veria in Northern Greece in order to inform local communities about the upcoming hikes, it was clear that the meeting with self-employed and OAEE-pensioners would turn …explosive.

Tsakiris was appointed governor of OAEE in October 2015. Debts to OAEE are approximately half a billion euro.

Not much is known about his background except that his CV was very poor, “just 11 lines” as New Democracy pointed out at that time.

He was appointed with the votes of SYRIZA, Independent Greeks and Centrists’ Union.

The locals complained that 80% of their turnover will go to the state in form of taxes and contributions.

Apparently Tsakiris had no other idea than to urge them to grab alternative solutions.

“Everyone who fails to pay contributions and considers it patriotic should go to Bulgaria and take his family with him.”

Speaking to daily Kathimerini, Tsakiris said later that his statement was “misinterpreted.”

 He claimed, he wanted to demonstrate that Greeks’ vividness and originality should not be exhausted in ways of tax evasion and contribution avoidance but used for the development of the domestic economy.

While Tsakiris’ statement triggered an outrage, the best comment came from SYRIZA MP, Nikos Manios who urged him “to go to Bulgaria and become a governor there.” Manios added that this is not a way to answer to concerned citizens and that dialogue should take place.

END

As expected, the ECB keeps its rates unchanged.  Now comes the press conference:
(courtesy zero hedge)

ECB Keeps Rates Unchanged

The ECB was not expected to change any of its three main refinancing rates in today’s announcement and it did not disappoint, keeping the Main Refinancing Rate unchanged at 0.0%, and its marginal lending and deposit facility rates at 0.25% and -.40% respectively.

In a statement that was a carbon copy replica of the September 8 release, the ECB also added that “the Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.” Draghi also noted that QE would remain at €80BN until March 2017 or longer if necessary, and previewed that “the considerations underlying these decisions at a press conference starting at 14:30 CET today.”

Full press release:

At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.

Regarding non-standard monetary policy measures, the Governing Council confirms that the monthly asset purchases of €80 billion are intended to run until the end of March 2017, or beyond, if necessary, and in any case until it sees a sustained adjustment in the path of inflation consistent with its inflation aim.

The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.

end

 

The Euro jumps higher as stocks fall as Draghi suggests that QE cannot last forever.  He stated that the ECB has not discussed an extension of QE beyond March.

(courtesy zero hedge)

EUR Jumps And Dumps, Stocks Slide As Draghi Suggests Nothing Lasts Forever

The market is not happy. Hit with a double-whammy of “ECB not discussing an extension of QE beyond March” and that “extraordinary policy support won’t last forever.” EURUSD jumped, stocks dumped, and Bund yields spiked. However, a quick hint that “an abrupt end to QE is unlikely” helped a little…

So on the one hand…

  • DRAGHI SAYS ECB DIDN’T DISCUSS QE EXTENSION BEYOND MARCH TODAY
  • DRAGHI SAYS EXTRAORDINARY POLICY SUPPORT WON’T EXIST FOREVER

And this happened…

And then, on the other hand…

  • ECB DID NOT DISCUSS TAPERING
  • DRAGHI SAYS ECB HELD SEMINAR ON OPTIONS ON QE TWEAKS

end

 

Just take a look at the ECB’s balance sheet:  a massive bubble!

(courtesy zero hedge)

 

Draghi: “So Far We Have Not Seen An Evidence Of Bubbles”

One month ago, during the Fed’s September press release, she was asked if she is “worried about bubbles in the economy because of our prolonged low interest rates?”

This was her response:

Yes. Of course we are worried that bubbles will form in the economy and we routinely monitor asset valuations, while nobody can know for sure what type of valuation represents a bubble, that’s only something one can tell in hindsight, we are monitoring these measures of valuation and commercial real estate valuations are high. Rents have moved up over time, but still valuations are high, relative to rents. And so it is something we’ve discussed. We called this out in our monetary report and in other presentations and we are, in our supervision with banks, and I indicated, we have issued supervisory guidance to make sure underwriting is strong on these loans and this is something that we’ve looked at in stress tests, the larger banks to see what would happen to their capital positions and to make sure that they hold sufficient capital. And of course, I think the soundness and state of the banking system has improved substantially, but of course we are focused on such things.

Or, a shorter version, No, she isn.’t.

Fast forward one month when moments ago Mario Draghi was likewise asked if he was concerned about asset bubbles. His response: “So far we have not seen an evidence of bubbles” which he defined as rising asset prices propelled by rising leverage.

We can only assume he is unaware of the leverage that has been onboarded within his own central bank, which many have over the years called, correctly, the world’s largest hedge fund. At last check it was nearly €3.5 trillion and rising exponentially fast.

That said, we are almost comforted that not a single central banker anywhere can spot an asset bubble in the world, even as the global central bank balance sheet has now surpassed $20 trillion, or roughly a third of global GDP.

 

end

Same rehashed story that Qatar , Abu Dhabi and Chinese investors are going to save DB

nothing will!

(courtesy zero hedge)

Deutsche Bank Spikes 4% On Report Of Possible New Investment By Qatar, Abu Dhabi And China

Moments ago Deutsche Bank stock, which has been well away from the headlines in the past two weeks, spiked following a Manager Magazin report according to which the Qatar and Abu Dhabi  Sovereign Wealth Fund together with Chinese investors would be willing to raise their stake in DB to 25% in the case of a capital increase. This is hardly new, and has been regurgitated in some capacity over the past month, however it was sufficient to move the stock some 4% higher.

The German outlet also reports that the biggest European lender is increasingly confident of paying a fine significantly below $14 billion, thereby avoiding a new for a capital increase.

What is interesting is that according to Manager, the Qatar and Abu Dhabi investors are being advised by the infamous Michele Faissola who recently was charged for market manipulation by Italy in relation to DB’s transactions with Monte Paschi and who may have had a role in some of the recent prominent banker suicides as we reported last week.

The full report, Google translated:

Other Arab investors are keen to enter Deutsche Bank. Should the money house have to increase its capital in order to pay the supposedly billions of fines for legal violations, the state funds of Qatar and Abu Dhabi would be willing to subscribe for shares. An investor from China is also on hand, as manager magazin has learned from bank travel. Read more in our new issue (October 21st).

Hamad bin Yassim bin Jabor Al-Thani (57) and his cousin Hamad Bin Khalifa Al-Thani (64) want to strengthen their influence. Including options keep the cousins together now around 10 percent in Deutsche Bank stock market chart show . In case of capital on a large scale they would be willing to screw their share up to 25 percent – but together with investors from Qatar, Abu Dhabi and China.

John Cryan (55): The CEO, who is denied leadership, is considered as jeopardized as IT boss Kim Hammonds (49) and other top executives. The two Al-Thanis are advised by Michele Faissola (48), Deutsche Bank’s former asset manager.

Deutsche Bank has set aside 5.5 billion euros for settling further legal disputes. The money is mainly reserved for penalties in connection with the sale of bad mortgage loans and possible money laundering in Russia. Currently, both cases are investigated by supervisory authorities in the USA and Great Britain.

For the dubious sale of credit alone, the US Department of Justice has called for a fine of € 12.5 billion. Deutsche Bank is currently negotiating with the Americans on a significant reduction in the sum; In the Group, the confidence grows, much cheaper and therefore without capital increase. The conclusion of the negotiations is expected before the US presidential elections on 8 November.

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

6. GLOBAL ISSUES

7. OIL ISSUES

Nigeria caught in a bind as they lower their official oil price by $1.00.  They state that there is a huge cargo glut playing havoc to the oil market

(courtesy zero hedge)

Nigeria Slashes Oil Prices, Admits There Is A “Huge” Cargo Glut

Something ironic happened on the way to OPEC’s alleged production cut: the world finds itself drowning in excess oil.

We touched on this first last week when we observed that according to the latest OPEC monthly production numbers, OPEC had produced a record 33.4mmbpd, with some expectations that by the time the November Vinna OPEC summit takes place, there will be another million barrels in output.  And while the market, or at least the marginal price setting algos have been reluctant to admit the excess supply reality and adjust prices accordingly, OPEC member Nigeria has found the hard way that when there is a glut, the only way to gain market share is to underprice the competition.

Nigeria National Petroleum Corporation lowered by at least $1 a barrel its official selling prices (OSPs) for 20 out of 26 oil grades monitored by Bloomberg, according to pricing lists. Qua Iboe, Nigeria’s largest export crude under normal circumstances, was reduced by the most since 2014.

NNPC cut the selling price of Qua Iboe for November to a 17 cent premium to the benchmark Dated Brent, according to the price list, from $1.07. It reduced the price of Bonny Light to a 7 cent premium and Forcados to a 41 cent discount to Dated Brent.

The reason for the dramatic price cuts according to Mele Kyari, group general manager for the oil-marketing division at NNPC, the state oil company, is a  “huge cargo overhang”, the same overhang we cautioned back in March as much of the land-based storage has moved to sea, which is preventing the country from regaining market share.

Over the past year, Nigeria has been hit with a double whammy in its attempt to restore its once vibrant oil exporting industry.

On one hand, the country is grappling with prices that are less than half what they were in July 2014, squeezing the country’s spending programs and leading to an unprecedented currency devaluation. However, what makes the African nation’s situation more acute is a militant campaign that resulted in export flows falling to the lowest in at least 9 years earlier this year. However, now that the outside funding for the infamous Niger Delta Avengers appears to have been cut off, shipments are gradually resuming, and lower prices are a sign Nigeria is seeking to become more competitive in an already oversupplied global market.

It is a bearish signal for the light, sweet market,” Eshan Ul-Haq, principal at KBC Process Technology told Bloomberg, referencing the types of crude Nigeria mostly pumps. “In order to capture a higher share of the market, OSPs have to come down.”

And while so far only the light, sweet market is impacted as Nigeria seeks to recover market share lost to competitors who eagerly took advantage of it being offline for month, as OPEC production continues to rise, the squeeze will hit other grades, forcing upstart producers seeking to reclaim market share – most notably Iran – to follow in Nigeria’s footsteps and cut prices.

end

 

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

 

Euro/USA   1.0985 UP .0012/REACTING TO NO DECISION IN JAPAN AND USA + huge Deutsche bank problems 

USA/JAPAN YEN 103.66  UP .273(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA:  HELICOPTER MONEY  ON THE TABLE AND DECISION ON SEPT 21 DISAPPOINTS WITH STIMULUS/OPERATION REVERSE TWIST

GBP/USA 1.2272 DOWN.0021 (Brexit by March 201/pound clobbered)

USA/CAN 1.3153 UP .0021

Early THIS THURSDAY morning in Europe, the Euro ROSE by 12 basis points, trading now well above the important 1.08 level RISING to 1.0985; 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 DOWN 0.26 OR   0.01%   / Hang Sang  CLOSED UP 69.43 POINTS OR 0.30%     /AUSTRALIA IS HIGHER BY 0.12% / EUROPEAN BOURSES ALL IN THE GREEN

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

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

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

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

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

The NIKKEI: this THURSDAY morning CLOSED UP 236.59 POINTS OR 1.59%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 69.43  OR  0.30%  ,Shanghai CLOSED DOWN 0.261 POINTS OR 0.01%   / Australia BOURSE IN THE GREEN: /Nikkei (Japan)CLOSED IN THE GREEN/  INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: $1270.35

silver:$17.65

Early THURSDAY morning USA 10 year bond yield: 1.756% !!! UP 1 in basis points from WEDNESDAY night in basis points and it is trading WELL BELOW resistance at 2.27-2.32%.

 The 30 yr bond yield  2.515, UP 1 IN BASIS POINTS  from WEDNESDAY night.

USA dollar index early THURSDAY morning: 97.92 UP 8 CENTS from WEDNESDAY’s close.

This ends early morning numbers THURSDAY MORNING

END

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And now your closing THURSDAY NUMBERS

 

Portuguese 10 year bond yield: 3.21% UP 1 in basis point yield from WEDNESDAY  (does not buy the rally)

JAPANESE BOND YIELD: -.065% DOWN 1 in   basis point yield from WEDNESDAY

SPANISH 10 YR BOND YIELD:1.10%  DOWN 1 IN basis point yield from  WEDNESDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.37 DOWN 2   in basis point yield from WEDNESDAY 

the Italian 10 yr bond yield is trading 27 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +003% DOWN 3  IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR TUESDAY

Closing currency crosses for THURSDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/2.00 PM

Euro/USA 1.0928 DOWN .0046 (Euro DOWN 46 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 103.95 UP: 0.558(Yen DOWN 56 basis points/POLICY ERROR ON BANK OF JAPAN

Great Britain/USA 1.2252 DOWN 0.0039( POUND DOWN 39 basis points

USA/Canada 1.3216 UP 0.0082(Canadian dollar DOWN 82 basis points AS OIL FELL TO $50.43

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This afternoon, the Euro was DOWN by 46 basis points to trade at 1.0928

The Yen FELL to 103.95 for a LOSS of 56 basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND FELL 39 basis points, trading at 1.2252/

The Canadian dollar FELL by 82 basis points to 1.3216, WITH WTI OIL AT:  $50.43

The USA/Yuan closed at 6.7439 (SENDING DEFLATION AROUND THE WORLD)

the 10 yr Japanese bond yield closed at -.065%  DOWN 2  IN BASIS POINTS / yield/ AND THIS IS BECOMING BOTHERSOME TO THE BANK OF JAPAN

Your closing 10 yr USA bond yield UP 1/2   IN basis points from WEDNESDAY at 1.749% //trading well below the resistance level of 2.27-2.32%) very problematicUSA 30 yr bond yield: 2.498 DOWN 1  in basis points on the day /*very problematic as all bonds globally rose in yield (lowered in price)

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

Your closing USA dollar index, 98.30 UP 46 CENTS  ON THE DAY/3 PM 

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

London:  CLOSED UP 4.98 POINTS OR 0.07%
German Dax :CLOSED UP 55.71 OR  0.52%
Paris Cac  CLOSED UP 19.82 OR 0.44%
Spain IBEX CLOSED UP 111.10 OR 1.24%
Italian MIB: CLOSED UP 97.04 POINTS OR 0.57%

The Dow was DOWN 40.27 points or 0.22%  4 PM EST

NASDAQ  DOWN 4.58 points or 0.09%  4 PM EST
WTI Oil price;  50.43 at 3:00 pm; 

Brent Oil: 51.34   3:00 EST

USA DOLLAR VS RUSSIAN ROUBLE CROSS:  62.48(ROUBLE DOWN 22/100 ROUBLES PER DOLLAR FROM THURSDAY)  2:30 EST

TODAY THE GERMAN YIELD FALLS TO +.003%  FOR THE 10 YR BOND  2:30 EST

 

END

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

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

WTI CRUDE OIL PRICE 5 PM:$50.37

BRENT: $51.40

USA 10 YR BOND YIELD: 1.756%

USA DOLLAR INDEX: 98.29 UP 44  cents

The British pound at 5 pm: Great Britain Pound/USA: 1.2247 down .0046 or 46 basis pts.

German 10 yr bond yield at 5 pm: +003%

END

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

TRADING IN GRAPH FORM

“Something’s Broken” – VIXnado Sparks Total Chaos In Stocks As Copper & Crude Crumble

What today felt like…

 

Dr.Copper continues to crumble… the 8th day in a row – longest losing streak since Nov 2015

 

But there was total chaos in stocks and the VIX complex today… As one trader noted “something’s broken” pointing to the very diffferent regime in today’s market relative to recent history… S&P 100DMA at 2132ish desperately defended…

 

For the 7th day in a row, the 330ET ramp failed (increasing chatter on desks about probes over index ETF rebalancing shenanigans) – note VIX collapse but stocks going nowhere…

 

Oil closed at the lows of the day but stocks bounced…

 

Futures show the chaos into and around Draghi…

 

But cash index were ramped once again, managing to get Nasdaq green briefly before an ugly close…

 

Trannies turned red on the week…

 

Treasury yields rose modestly on the day with a notable flattening (30Y unch, 2Y +3bps)…notice the pattern every day…

 

The USD Index rose for the 11th of the last 14 days to fresh 7 month highs, led by EUR weakness as Draghi flip-flopped on QE extension… (note CAD major weakness)

 

USD strength did not help but commodities were dumped across the board today…

 

What happens next in copper?

 

Charts: Bloomberg

 

end

 

 

The key event at last night’s debate was Trump suggesting that he may not accept the decision of voters on Nov 8

(courtesy zero hedge)

The Morning After: What All Newspapers Are Leading With After Last Night’s Debate

Ultimately last night’s third and final presidential debate boiled down to just one brief exchange between Donald Trump and Chris Wallace, the one which all newspapers are leading with today: “What I’m saying, I will tell you at the time,” he told moderator Chris Wallace when asked if he would honor the results of the election. “I will keep you in suspense.”  According to the WSJ, that response was “unprecedented and will be the answer for which this debate will be remembered.”

Sure enough:

As AP lead with a story that will be carried across much of America’s newspaper this morning:

Threatening to upend a fundamental pillar of American democracy, Donald Trump refused to say Wednesday night that he will accept the results of next month’s election if he loses to Hillary Clinton. The Democratic nominee declared Trump’s resistance “horrifying.”

Trump’s assertions raise the prospect that millions of his supporters may not accept the results on Nov. 8 if he loses, thrusting the nation into uncharted territory. Free and fair elections, with the vanquished peacefully stepping aside for the victor, have been the underpinning of America’s democratic tradition since the country’s founding 240 years ago.

While Trump carried himself well, and according to most commentators delivered a far better debate than his previous two appearances against Hillary, being constantly on the attack and managing to integrate the Wikileaks releases as part of his remarks, for the mainstream press just one thing mattered:

Donald Trump’s refusal to say that he will accept the presidential election’s outcome overshadowed all else during his third debate with Hillary Clinton, in Las Vegas on Wednesday evening.

While Trump’s phrasing could have been better, and perhaps he was inspired by the recent revelations of vote rigging, brutally no one in the political world argued that the GOP nominee would benefit from the move. Trump’s remarks,  he told moderator Chris Wallace, “I will look at it at the time” and “I will keep you in suspense”, stood in sharp contrast to recent comments from his running mate, Indiana Gov. Mike Pence, and even his daughter Ivanka.

Perhaps he could have phrased it better, referring to the infamous 2000 recount of Florida votes, and Al Gore dissatisfaction with the initial outcome of that election, or even noted that “under extraordinary circumstances I may reassess”, but he did not do that, and instead did what Trump is best known for doing: going a response not couched in political rhetoric.

His stance sent shockwaves through the Republican Party, where criticism of Trump was already running high.  Sen. Jeff Flake quickly tweeted that Trump’s position was “beyond the pale” while Sen. Lindsey Graham released a statement asserting that Trump was “doing the party and our country a great disservice by continuing to suggest the outcome of this election is out of his hands and ‘rigged’ against him.”

Even Trump campaign manager Kellyanne Conway tried to find an escape route from the position her candidate had enunciated, telling CNN moments after the debate ended that “Donald Trump will accept the results of the election because he will win the election.”

For better or worse, Trump’s stance erased any final doubt that he would remain the same candidate he has always been, one who stands defiantly outside the parameters of normal political discourse: a candidate who is at odds with the establishment in every way.

* * *

Perhaps it was a calculated move setting him up for a contentuous November 8, or merely he tried to solidify his core base – which according at least to the latest polls (skewed as they may be) will be insufficient to win Trump the election – but based on the mainstream media’s kneejerk response which still has a huge impact in setting the public mood, it will be difficult for Trump to reach out to independent voters who still are undecided less than three weeks ahead of the election, and whose support Trump urgently needs.

Not surprisingly, a CNN/ORC poll in the immediate aftermath of the Vegas debate found 52% of debate watchers thought Clinton was the winner, compared with 39% who picked Trump, even though CNN once again admitted the respondents once again skewed Democrat.

Among other things, on Wednesday evening Trump reiterated his plan to build a wall along the U.S-Mexico border, promised to deport “some bad hombres” and assailed Clinton as “such a nasty woman.”  But the effectiveness of Trump’s approach looks much more limited with the general electorate than it was in the GOP primaries. Trump trails Clinton by about 7 percentage points in national polling averages and also lags in the battleground states. Some places that are normally Republican redoubts look competitive this year, including Arizona, Georgia and perhaps even Texas and Utah.

* * *

The debate was the last big set piece of the campaign, a TV audience of 60 million or more was predicted, and it was not without some strong moments for Trump. He pressed Clinton again on her positions on free trade and sought to make a broader argument that she was part of a political status quo that was stale and dysfunctional.

“I say the one thing you have over me is experience, but it’s bad experience,” he told her.

Trump also seemed more sure of himself and comfortable in the environment than he had in their previous encounters. Seeking to defend his immigration stance, he reminded Clinton and the audience that “millions and millions of people” had been deported during President Obama’s tenure. He also complained that the president’s signature healthcare law had resulted in “bad healthcare at the most expensive price.”

As the debate moved on, the relatively restrained Trump of the debate’s opening stages gave way to a more dissenting and fractious candidate as time wore on.  Trump denied any relationship with Putin and said he would condemn any foreign interference in the election. But he notably declined to back the intelligence community’s assessment that Russia was involved in the hacking of Democratic organizations. The Clinton campaign has said the FBI also is investigating Russia’s involvement in the hacking of a top adviser’s emails.

The businessman entered the final debate facing a string of sexual assault accusations from women who came forward after he denied in the previous contest that he had kissed or groped women without their consent. That Trump denial followed the release of a video of in which he’s heard bragging about exactly that. Trump denied the accusations anew Wednesday night, saying the women coming forward “either want fame or her campaign did it.”

Trump pressed Clinton on immigration, accusing her of wanting an “open borders” policy, a characterization she vigorously disputes. The Republican, who has called for building a wall the length of the U.S.-Mexico border, blamed some “bad hombres here” for drug epidemics around the country, and promised “we’re going to get ’em out.” Clashing on trade, Trump said Clinton had misrepresented her position on the Trans-Pacific Partnership, noting that she had originally called it the “gold standard” of trade agreements. Clinton shot back that once the deal was finished, it didn’t meet her standards.

“I’m against it now. I’ll be against after the election. I’ll be against it when I’m president,” she said.

* * *

Hillary had her share of moments too, issuing plenty of verbal jabs of her own. She hit back on her opponent over outsourcing, asserting that “the Trump hotel right here in Las Vegas was made with Chinese steel.” In a discussion on foreign policy, she poked fun at his reality TV career, saying, “On the day when I was in the situation room monitoring the raid that brought Osama bin laden to justice, he was hosting The Celebrity Apprentice.’ ” Clinton also pressed her advantage when the issue of Trump’s behavior toward women came up again. The GOP nominee has faced accusations of sexual misconduct from several women amid the fallout from a 2005 recording in which he said that his fame allowed him to grab women by the genitals.

Clinton, who began the debate with a lead in nearly all battleground states, forcefully accused Trump of favoring Russia’s leader over American military and intelligence experts after the Republican nominee pointedly refused to accept the U.S. government’s assertion that Moscow has sought to meddle in the U.S. election.

She charged that Russian President Vladimir Putin was backing Trump because “he’d rather have a puppet as president of the United States.”

Hillary has struggled throughout the campaign to overcome persistent questions about her honesty and trustworthiness, only reaffirmed by the recent Wikileaks releases. In the campaign’s closing weeks, she’s begun appealing to Americans to overcome the deep divisions that have been exacerbated by the heated campaign, saying on stage Wednesday that she intended to be a president for those who vote for her and those who do not.

Clinton faced debate questions for the first time about revelations in her top adviser’s hacked emails that show her striking a different tone in private than in public regarding Wall Street banks and trade. But she quickly turned the discussion to Russia’s potential role in stealing the emails.

A summary of the key debate highlights below:

The candidates did not shake hands at the beginning or end of the debate.

* * *

Ultimately it was a familiar story: Trump against the world, and a candidate who – if elected – would break with most conventions expected in the president. The GOP nominee’s remarks on the election’s outcome only cemented that perception.

It remains to be seen if Trump’s biggest gamble from the final debate will pay off. Casting aside the establishment in a shocking protest vote worked for Brexit. Will it work for Donald Trump too?

 

end

 

California’s Attorney General launches a criminal probe into Wells Fargo over fake identity theft and other stuff

(courtesy zerohedge)

California Attorney General Launches Criminal Probe Into Wells Fargo Over Fake

John Stumpf is now gone from Wells Fargo, but his – and the bank’s – problems may be just starting.

According to a report by the LA Times, California Department of Justice is investigating Wells Fargo on allegations of criminal identity theft over its creation of millions of unauthorized accounts, according to a search warrant sent to the bank’s San Francisco headquarters this month. The warrant and related documents, served Oct. 5 and obtained by The Times through a FOIA request, confirm that California AG Kamala Harris, in the final weeks of a run for U.S. Senate, has joined the growing list of public officials and agencies investigating the bank in connection with the accounts scandal.

As Reuters adds, the AG warrant seeks to seize documents at Wells, and cites probable cause that felonies were committed at the bank.

Harris’ office demanded the bank turn over a trove of information, including the identities of California customers who had unauthorized accounts opened in their names, information about fees related to those accounts, the names of the Wells Fargo employees who opened the accounts, the names of those employees’ managers and emails or other communication related to those accounts.  Her office is also requesting the same information about accounts opened by Wells Fargo workers in California for customers in other states.

While on the surface this would be an admirable move, it appears to be merely the latest attempt by a politician to score brownie points with voters. According to the LA Times, Harris has made her combat of wrongdoing in the financial services industry one of the themes of her Senatorial campaign. She has especially pointed to her role in negotiating $20 billion in relief from banks for California homeowners who lost homes or suffered losses in the housing bust. But that deal failed to live up to promises she had made to send those responsible to jail, opening her up to some criticism.

By investigating Wells Fargo, Harris could be trying to burnish her bank-busting credentials, said Jack Pitney, a professor of politics at Claremont McKenna College.

“She’s looking for every advantage she can get,” he said. “Going after a big, unpopular bank can only help her with the electorate. Wells Fargo has gone into Voldemort territory when it comes to popularity.”

As for Wells, it may have to lawyer up as this time a settlement won’t cut it: documents filed along with the search warrant argue that there is probable cause to believe Wells Fargo violated two sections of the state penal code — one outlawing certain types of impersonation, the other outlawing the unauthorized use of personal information. Both violations can be charged as felonies, punishable by imprisonment for more than a year.

Still, it’s not clear as of yet whether Harris’ office is considering charges against individual bank workers, high-level bank executives or the bank itself. The investigation could lead to charges beyond the identity-theft allegations used to secure the search warrant.

In the weeks since Sept. 8, when the Los Angeles city attorney’s office and federal bank regulators announced a $185-million settlement with Wells Fargo over the creation of the accounts, lawmakers and other regulators have questioned whether the bank may have violated fraud, labor and securities laws.

* * *

Meanwhile, indicating just how oblivious the market has become to pretty much any newsflow, Reuters reported that today Wells Fargo has set guidance on its delayed 10-year senior holdco US dollar bond at T+130bp, tighter than initial price thoughts of T+140bp-145bp, a lead on the deal told IFR.  The deal was announced on Tuesday and originally slated to price that day, however it was pushed back perhaps after S&P revised Well’s outlook to negative from stable on Tuesday.

“News of the delay came after investors swarmed the self-lead deal with some US$10bn in orders.”

 

END

 

Strange@!! Initial claims jump over 5% this week to 260,000. Finally the poor data on the USA economy is finally catching up to the BLS’s faulty data releases over the past year:

(courtesy BLS/zero hedge)

Initial Jobless Claims Jump Most In Over 5 Months Off 43 Year Lows

By now we have shown every possible divergence between the ongoing collapse in jobless claims (everything is awesome) as practically every manufacturing and service economy hard data print suggests the exact opposite. So this week, we just notice that initial claims jump over 5% this week to 260k – the biggest weekly rise since May…

Having hit 43 year lows last week, this week’s bounce is like a fart in a hurricane, but still, it’s a potential trende change (as Ford shutters 4 factories)

Probably nothing…

 

 

end

 

USA consumer confidence tumbles to its lowest levels since 2015:

(courtesy zero hedge)

Deplorable!! American Consumer Confidence Tumbles To Lowest Since 2015

Despite all the jobs, all the talk, and all the policy changes, American consumer confidence is unchanged since 2 years ago…

What a bunch of deplorable, pessimistic, whining, skeptics!!

 

 

end

 

Another indicator showing low growth in the USA” existing home sales down:

(courtesy zero hedge)

Existing Home Sales Growth Stalls As Prices Rise For 55th Straight Month

For the 3rd month in a row, sales of previously owned homes are flat year-over-year. Month-over-month saw a better than expected 3.2% rise in September (ahead of the school year) but SAAR sales remain noisily stuck 25% below 2005’s highs. Notably, this is the 55th straight month of year-over-year home price gains.

Going nowehere fast…

Prices continue to rise at more than double the pace of wages: The median existing-home price 2 for all housing types in September was $234,200, up 5.6 percent from September 2015 ($221,700). September’s price increase marks the 55th consecutive month of year-over-year gains. 

Lawrence Yun, NAR chief economist, says the two-month slump in existing sales reversed course convincingly in September.

“The home search over the past several months for a lot of prospective buyers, and especially for first-time buyers, took longer than usual because of the competition for the minimal amount of homes for sale,” he said.

Most families and move-up buyers look to close before the new school year starts. Their diminishing presence from the market towards the end of summer created more opportunities for aspiring first-time homeowners to buy last month.”

 END
The Philly Mfg index trends lower
(courtesy investing.com)
Philly Fed index ticked lower in October

Investing.com – Activity among U.S. manufacturers in the Philadelphia region slowed slightly in October, but the report indicated that regional manufacturing conditions continued to improve.

The Philadelphia Federal Reserve’s index of business conditions came in at 9.7 this month, down from 12.8 in September.

Economists had expected a reading of 5.3 this month.

A reading below zero means more companies are expanding instead of contracting.

The index for new orders rose to 16.3 this month from 1.4 in the prior month.

The shipments index rose by 24 points to 15.3.

Firms reported continued weakness in manufacturing employment. The current employment index edged up slightly to -4.0.

Overall, firms remain optimistic about business conditions over the next six months, and prospects for employment continue to be upbeat. The index for future activity ticked down to 32.6 from 37.5 in September.

-END-

This is not good!  Apple stock sinks after reports of Iphone 7 bursting into flames
(courtesy zero hedge)

Apple Stock Sinks After Reports Of iPhone 7 Bursting Into Flames

end

 

Now it is Ambrose Evans Pritchard that is sounding the alarm bells for a huge USA recession:

 

He sites these important points:

1.the USA has engaged in multiple reverse repos as they remove liquidity from the system (as they prepare for raising rates in Dec).  He claims that this is not a good time to raise rates.

2.Global GDP has been in a steady fall these past 2 yrs.

3. total debt denominated in dollars outside the UDS has risen to 9.8 trillion this yr.

4. and this has caused 3 month euro dollars rates to rise to almost 1%.

storm clouds gathering!

(courtesy Ambrose Evans Pritchard/UKTelegraph).)

Fed risks repeating Lehman blunder as US recession storm gathers

19 OCTOBER 2016 • 9:15PM

Nominal GDP growth in the US has been falling for two years and is close to recessionary stall-speed CREDIT: CONFIDENTIAL PROFIT

The risk of a US recession next year is rising fast. The Federal Reserve has no margin for error.

Liquidity is suddenly drying up. Early warning indicators from US ‘flow of funds’ data point to an incipent squeeze, the long-feared capitulation after five successive quarters of declining corporate profits.

Yet the Fed is methodically draining money through ‘reverse repos’ regardless. It has set the course for a rise in interest rates in Decemberand seems to be on automatic pilot.

“We are seeing a serious deterioration on a monthly basis,” said Michael Howell from CrossBorder Capital, specialists in global liquidity. The signals lead the economic cycle by six to nine months.

“We think the US is heading for recession by the Spring of 2017. It is absolutely bonkers for the Fed to even think about raising rates right now,” he said.

The growth rate of nominal GDP – a pure measure of the economy – has been in an unbroken fall since the start of the year, falling from 4.2pc to 2.5pc. It is close to stall speed, flirting with levels that have invariably led to recessions in the post-War era.

“It is a little scary. When nominal GDP slows like that, you can be sure that financial stress will follow. Monetary policy is too tight and the slightest shock will tip the US into recession,” said Lars Christensen, from Markets and Money Advisory.

If allowed to happen, it will be a deeply frightening experience, rocking the global system to its foundations. TheBank for International Settlements estimates that 60pc of the world economy is locked into the US currency system, and that debts denominated in dollars outside US jurisdiction have ballooned to $9.8 trillion.

The world has never before been so leveraged to dollar borrowing costs. BIS data show that debt ratios in both rich countries and emerging markets are roughly 35 percentage points of GDP higher than they were at the onset of the Lehman crisis.

This time China cannot come to the rescue. Beijing has already pushed credit beyond safe limits to almost $30 trillion. Fitch Ratings suspects that bad loans in the Chinese banking system are ten times the official claim.

The current arguments over Brexit would seem irrelevant in such circumstances, both because the City would be drawn into the flames and because the eurozone would face its own a shattering ordeal. Even a hint of coming trauma would detonate a crisis in Italy.

To be clear, the eight-year old US cycle has not yet rolled over definitively. The picture remains fluid, hard to read in a world where key signals have been distorted by central bank repression. The third quarter will almost certainly look a little better.

“We are getting closer and closer to a recession, but we are not quite there yet, looking at our forward-indicators,” said Lakshman Achuthan from the Economic Cycle Research Institute in New York.

“I can understand why people are getting worried. We have been seeing a ‘growth-rate’ cyclical downturn for the last two years. The longer this goes on, the less wiggle room there is,” he said.

“We are sure there will be no recession this year or into the first two months of 2017, but beyond that there are worrying signs. The deterioration of our leading labour market index is very clear,” he said.

Mr Achuthan thinks it is still possible that US growth will pick up again for another short burst – lifted by a global industrial rebound of sorts – before the storm finally hits.

That was broadly my view earlier this year as the global money supply surged and a string of governments seized on Brexit to crank up stimulus, but what is striking is how little traction it has achieved.

The velocity of M1 money in the US has continued to slow, hitting 40-year low of 5.75 over the summer, and markets are only just awakening to the unsettling thought that China’s latest boomlet has already topped out. Beijing is having to hit the brakes again.

Crossborder said new rules for money market funds that came into force this month have complicated the picture, causing the stock of US commercial paper to shrivel by $200bn. Yet there are ways to filter out some of these effects.

The plain fact is that 3-month lending rates in the off- shore ‘eurodollar’ markets in London have tripled since July to 0.93pc, sharply tightening conditions for global finance. Investors may have been too complacent in discounting these gyrations as part of a regulatory hiccup when something more sinister is emerging.

CrossBorder’s liquidity measure for the US is now at levels comparable to the inflection point a few months before the US recessions of 1990 and 2001, and before the recession starting in November 2007 – and a whole year before Lehman Bank collapsed, nota bene.

Albert Edwards from Societe Generale says gross domestic income (GDI) was the most accurate gauge of the economy as the pre-Lehman crisis unfolded, and this measure has been flat for the last two quarters.

http://www.telegraph.co.uk/business/2016/10/19/fed-risks- repeating-lehman-blunder-as-us-recession-storm-gathers/

-END-

sEE YOU TOMORROW NIGHT

hARVEY

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