Gold at (1:30 am est) $1175.10 up $8.20

silver  at $16.75:  up 32 cents

Access market prices:

Gold: 1176.50

Silver: 16.74



The Shanghai fix is at 10:15 pm est last night and 2:15 am est early this morning

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:

THURSDAY gold fix Shanghai

Shanghai morning fix Dec 2 (10:15 pm est last night): $  1197.17

NY ACCESS PRICE: $1173.95 (AT THE EXACT SAME TIME)/premium $23.27


Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1197.17



China rejects NY pricing of gold  as a fraud  


London Fix: Dec 2: 5:30 am est:  $1171.65   (NY: same time:  $1172.15    5:30AM)

London Second fix Dec 2: 10 am est:  $1173.50 (NY same time: $1174.60    10 AM)

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

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


For comex gold: 


For silver:


Let us have a look at the data for today



In silver, the total open interest FELL by 155 contracts DOWN to 159,091 with YESTERDAY’S trading.    In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .795 BILLION TO BE EXACT or 113% of annual global silver production (ex Russia & ex China).


In gold, the total comex gold FELL by 3105 contracts WITH THE  FALL IN THE PRICE GOLD ($3.00 with YESTERDAY’S trading ).The total gold OI stands at 397,995 contracts. The bankers have done a good job of eviscerating gold (and silver) longs. We are very close to the bottom with respect to OI.  Generally 390,000 should do it.

we had a 216 notices filed upon for 21,600 oz of gold.


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


We had a huge changes in tonnes of gold at the GLD, a massive withdrawal of 13.64 tonnes of gold.  It looks like this is real gold heading to Shanghai taking advantage of the huge spread!!

Inventory rests tonight: 870.22 tonnes




THE SLV Inventory rests at: 345.955 million oz


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

1. Today, we had the open interest in silver FELL by 3,105 contracts DOWN to 159,091 despite the fact that the price of silver ROSE by $.02 with YESTERDAY’S trading.  The gold open interest FELL by 3,105 contracts DOWN to 397,995  as the price of gold FELL BY  $3.00 WITH YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report



2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

2c) FRBNY foreign gold movement


2c) COT report



i)Late  THURSDAY night/FRIDAY morning: Shanghai closed DOWN 29.47 POINTS OR 0.90%/ /Hang Sang closed DOWN 313.41  OR 1.37%. The Nikkei closed DOWN 87.04 OR 0.47%/Australia’s all ordinaires  CLOSED DOWN 1.04% /Chinese yuan (ONSHORE) closed DOWN at 6.8880/Oil FELL to 50.47 dollars per barrel for WTI and 53.06 for Brent. Stocks in Europe: ALL IN THE RED.  Offshore yuan trades  6.8768 yuan to the dollar vs 6.8880  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS HUGELY AGAIN AS CHINA ATTEMPTS TO STOP MORE USA DOLLARS  LEAVING CHINA’S SHORES / CHINA SENDS A CLEAR MESSAGE TO THE USA AND JANET  TO NOT RAISE RATES IN DECEMBER.



none today







Italy votes on Dec 4.  A NO vote is expected and that would probably cause Renzi to quit and in a short order of time Beppo Grilli’s 5 star movement will come to power, hold a referendum on leaving the Euro and that would absolutely kill the euro project

( Nick Giambruno/

ii)Deutsche bank

Deutsche bank cutting off 3,400 trading clients?  This will certainly have a devastating effect on the stock markets.  Underneath the hood something must be seriously wrong with DB;s health:  no doubt the huge run up in interest rates

( zero hedge)


i)The battle for Aleppo is now over and now the real battle begins but it will be hopeless for the USA as they are losing influence in that part of the region.

a must read…


( Ton Luuongo/PlanetFree Will)

ii)The Turkish lira plummets to 3.60 to the dollar.  Erdogan wants it’s central bank to lower rates not raise it to protect the currency.  Surprisingly he tells his citizens to buy gold with their lira and dollars

( zero hedge)

iii)Then this came out of nowhere:  the USA senate passed a bill to extend the Iran sanctions.  This jeopardizes the Iran/USA nuclear deal.  Oil shoots up! Iran furious!

(courtesy zero hedge)


Norway admits it has problems as it switches 130 billion dollars worth of funds into global equities from bonds.  They expect an additional 2.5% rate of return.  Good luck to them.


( zero hedge)



i)Former Saudi Oil Minister on the OPEC deal:  We tend to cheat:

Oil reverses trend:

( zero hedge)

ii)With oil production cuts supposedly coming in 2017, the USA is increasing production (higher rig counts) which is causing Saudi Arabia/other OPEC and NON OPEC nations crazy:

( zero hedge)


none today


i)John Embry interviewed by Chris Waltzek: the Indian situation/the huge flooding of paper gold and the attempt by the bullion banks to cover/

( GATA/john embry)

ii)Alasdair Macleod with his weekly message to us on gold: this is a must read!!

I have highlighted the most important aspects to this commentary!!

( Alasdair Macleod/

iii)I highlighted this to you yesterday and I will repeat it as it is extremely important for you to understand

( Lawrie Williams/GATA)

iv)From our good friend Jessie, of Amercain Cafe:

a massive 28.652 tonnes of gold was withdrawn (equals demand) from the SGE over in Shanghai, the highest on record over there. Note the incremental rise each and everyday day as China tries to assert its authority in gold.  In one year: demand equals 2200 tonnes or approx. equal to global demand for gold minus China and Russia

(courtesy Jessie/Americain/cafe)


i)This was highlighted to you late yesterday and worth repeating as the “Bond King” moves markets.  He has accurately predicted the bottom to the USA 10 year yield and now he was warned everybody that the Trump trade is over.

( zero hedge/Jeff Gundlach)

ii)Bill Gross the former bond king echoes Gundlach completely stating the Trump rally is toally misguided:

( zero hedge)



A jobs gain of 178,000.  Unemployment tumbles  (because more leave the labour force) to 4.6%.  The important average hourly earnings worst since 2014 dropping by .1% instead of the rise of .4% of last month and the expected .2% rise.

( BLS/zerohedge)

iv) Now for the real report:

 Wow!! a biggy:  Americans not in the labour force soar to 95.1 million a huge jump of 446,000 poor souls in one month:
( zero hedge)

v) Wow!!  The number of multiple job holders in the USA has now hit a high of 8 million. The non seasonable adjustment shows that we had a drop of 628,000 full time jobs and an addition of 6 78,000 part time jobs. No wonder the uSA labour scene is in a mess( zero hedge)


viThe quality of the jobs are just not there:  the Nov gains were in accountants, nurses waiters and government workers and as noted above, part time workers

( zero hedge)

vii)The following kind of highlights the nonsense in the figures that the BLS gives us every month.  Since 2014: the USA has added 571,000 waiters and bartenders but lost 34,000 manufacturing jobs.

( zero hedge)

viii)The Birch group comments on how Trump may change the dynamics of the Fed:

( Birch Group)

Let us head over to the comex:

The total gold comex open interest FELL BY 3,105 CONTRACTS to an OI level of 397,995 DESPITE THE FACT THAT GOLD FELL $3.00 with YESTERDAY’S trading. We are now in the contract month of December and it is the biggest of the year. here the front month of December showed a DECREASE of 2571 contracts DOWN to 4261.We had 1569 notices served upon yesterday so as I promised we lost 1002  contracts or 100,200 oz will not stand for delivery and no doubt where paper settled.

For the next delivery month of January we had a GAIN of 82  contracts UP to 2468.  For the next big active delivery month of February we had a LOSS of 178 contracts up to 273,718.

We had 216 notices filed upon today for 21,600 oz



And now for the wild silver comex results.  Total silver OI FELL by 155 contracts FROM 159,246 DOWN TO 159,091  even though the price of silver ROSE BY $0.02 with YESTERDAY’S trading. We are moving  further from the all time record high for silver open interest set on Wednesday August 3/2016:  (224,540). We are now in the next major delivery month of December and here it FELL BY 269 contracts DOWN to 2484 CONTRACTS .  We had 322 notices served upon yesterday so we again gained 53 contracts or an additional 265,000 oz will stand for delivery. They must badly need some silver somewhere. Generally on the first two or three days of the active month the amount standing is reduced as they cash settle.  Not in silver this month!

The next non active delivery month is January and here the OI rose by 72 contracts up to 3715.

The next big active delivery month is March and here the OI FELL by 241 contracts DOWN to 129,001 contracts.

We had 407 notices filed for 2,035,000 oz for the December contract.

Eventually at the end of December 2015: 6.4512 tonnes of gold stood for delivery

Eventually at the end of December 2015: 18.84 million oz of silver stood for delivery.

VOLUMES: for the gold comex

Today the estimated volume was 170,963  contracts which is fair.

Friday’s confirmed volume was 241,067 contracts  which is good

Initial standings for DECEMBER
 Dec 2.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 341,269.75 oz
(includes 9000.279 kilobars)
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
80,3787.500 oz
2500.077 kilobars
No of oz served (contracts) today
216 notices
21600 oz
No of oz to be served (notices)
4045 contracts
404,500 oz
Total monthly oz gold served (contracts) so far this month
6723 notices
672,300 oz
20.91 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month   nil oz
Total accumulative withdrawal of gold from the Customer inventory this month     3,427,486.7 oz
Today we HAD 2 kilobar transaction as A NET 6500 kilobars left the comex vaults.
ladies and gentlemen: I am telling you that the data is corrupt!
Today we had 0 deposits into the dealer:
total dealer deposits:  nil  oz
We had nil dealer withdrawals:
total dealer withdrawals:  nil oz
 we had 1 customer deposit(s):
Into Brinks:  80,377.500 oz  (this works out to 2500.077 kilobars as each kilobar is 32.15 oz.  How could this be?
total customer deposits; 80,377.500 oz (2500 kilobars)
We had 2 customer withdrawal(s)
 i) out of Brinks;  51,910.75 oz  (probably accurate)
ii)  out of HSBC 289,359.000 oz  (9,000.279 kilobars…garbage!!)
total customer withdrawal: 341,269.75 oz  oz  (10.61 tonnes)
We had 2  adjustment(s)
i) out of Brinks:  81,616.39 z was adjusted out of the dealer and this landed into the customer account
ii) Out of Scotia:  34,547.075 oz was adjusted out of the dealer and this landed into the customer account of Scotia.
Total dealer inventor 2,102,222.521 or 65.38 tonnes
Total gold inventory (dealer and customer) = 9,742,020.379 or 303.01 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 303.01 tonnes for a  gain of 0  tonnes over that period.  Since August 8 we have lost 51 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!
For December:

Today, 0 notices were issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 216 contract(s)  of which 17 notices were stopped (received) by jPMorgan dealer and 79 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

To calculate the initial total number of gold ounces standing for the DECEMBER. contract month, we take the total number of notices filed so far for the month (6723) x 100 oz or 672,300 oz, to which we add the difference between the open interest for the front month of DEC (4261 contracts) minus the number of notices served upon today (216) x 100 oz per contract equals 1,076,800 oz, the number of ounces standing in this non  active month of DECEMBER.
Thus the INITIAL standings for gold for the DEC contract month:
No of notices served so far (6723) x 100 oz  or ounces + {OI for the front month (4259) minus the number of  notices served upon today (216) x 100 oz which equals 1,076,800 oz standing in this non active delivery month of DEC  (33.493 tonnes).
I have now gone over all of the final deliveries for this year and it is startling.
First of all:  in 2015 for the 12 months: 51 tonnes delivered upon for an average of 4.25 tonnes per month.
Here are the final deliveries for 2016:
Jan 2016:  .5349 tonnes  (Jan is a non delivery month)
Feb 2015:  7.9876 tonnes (Feb is a delivery month/deliveries this month very low)
March 2015: 2.311 tonnes (March is a non delivery month)
April:  12.3917 tonnes (April is a delivery month/levels on the low side
And then something happens and from May forward deliveries boom!
May; 6.889 tonnes (May is a non delivery month)
June; 48.552 tonnes ( June is a very big delivery month and in the end deliveries were huge)
July: 21.452 tonnes (July is a non delivery month and generally a poor one/not this time!)
August: 44.358 tonnes (August is a good delivery month and it came to fruition)
Sept:  8.4167 tonnes (Sept is a non delivery month)
Oct; 30.407 tonnes complete.
Nov.    8.3950 tonnes.
DEC.   33.493 tonnes
total for the 12 months;  225.04 tonnes
average 18.753 tonnes per month vs last yr 51 tonnes total for 12 months or 4.25 tonnes average per month. From May 2016 until Dec 2016 we have had: 201.80 tonnes per the 8 months or 25.224 tonnes per month (which includes the non delivery months of May, June and Sept).  In essence the demand for gold is skyrocketing.
Something big is going on inside the gold comex.
Just take a look at Nov 2016 deliveries at 8.3950 tonnes compared to last yr 0.6656 tonnes
December so far:  33.493 tonnes vs last year’s 24 tonnes on first day notice and 6.45 tonnes on the completion of the December delivery month.

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 at MF Global.
And now for silver
 Dec 2. 2016
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
863,917.25 oz
Deposits to the Dealer Inventory
nil  OZ
Deposits to the Customer Inventory 
nil oz
No of oz served today (contracts)
(2,035,000 OZ)
No of oz to be served (notices)
2077 contracts
(10,375,000  oz)
Total monthly oz silver served (contracts) 1446 contracts (7,230,000 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  960,475.5 oz
today, we had nil deposit(s) into the dealer account:
total dealer deposit: nil oz
we had nil dealer withdrawals:
 total dealer withdrawals: nil oz
we had 2 customer withdrawal(s):
i) Out of Scotia: 603,094.540 oz
ii) Out of CNT:  260,822.710 oz
Total customer withdrawals: 863,917.250  oz
 we had 0 customer deposit(s):
total customer deposits; nl  oz
 we had 2 adjustment(s)
i) Out of Scotia:  1,765,756/186 oz was adjusted out of the customer and this landed into the dealer account of Scotia.
ii) out of CNT: 134,761.800 oz was adjusted out of the customer and this landed into the dealer account of CNT
Volumes: for silver comex
Today the estimated volume was 60,756 which is huge
TUESDAY’S  confirmed volume was 66,089 contracts  which is huge
The total number of notices filed today for the DEC. contract month is represented by 407 contracts for 2,035,000 oz. To calculate the number of silver ounces that will stand for delivery in DEC., we take the total number of notices filed for the month so far at  1446 x 5,000 oz  = 7,230,000 oz to which we add the difference between the open interest for the front month of DEC (2,484) and the number of notices served upon today (407) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the DEC contract month:  1446(notices served so far)x 5000 oz +(2484) OI for front month of DEC. ) -number of notices served upon today (407)x 5000 oz  equals  17,615,000 oz  of silver standing for the DEC contract month.
Strangely on third day notice we actually gained 265,000 oz and that has not happened for years, a gain in the amount standing at the beginning of the delivery cycle month.
Total dealer silver:  33.150 million (close to record low inventory  
Total number of dealer and customer silver:   177.752 million oz
The total open interest on silver is NOW moving away from  its all time high with the record of 224,540 being set AUGUST 3.2016.


At 3:30 pm est we receive the COT report which gives up position levels of our major players.


First our gold COT

COT Gold, Silver and US Dollar Index Report – December 2, 2016
 — Published: Friday, 2 December 2016 | Print  | Disqus

Gold COT Report – Futures
Large Speculators Commercial Total
Long Short Spreading Long Short Long Short
229,731 78,161 37,735 92,628 260,451 360,094 376,347
Change from Prior Reporting Period
-11,915 3,600 -31,011 -5,347 -29,696 -48,273 -57,107
144 78 73 48 47 220 175
  Small Speculators      
  Long Short Open Interest    
  45,567 29,314 405,661    
  -7,128 1,706 -55,401    
  non reportable positions Change from the previous reporting period  
COT Gold Report – Positions as of Tuesday, November 29, 2016
Par for the course with respect to our crooked bankers;
Our large specs:
Those large specs who have been long in gold were liquefied to the tune of 11,915 contracts
those large specs who have been short in gold added 3600 contracts to their short position in celebration with the crooked bankers
Our crooked bankers (commercials)
those commercials who have been long in gold pitched 5347 contracts from their long side.
those commercials who have been short in gold covered a whopping 29,696 contracts from their short side.
Our small specs;
those small specs that have been long in gold pitched (or were liquefied) by 7128 contracts.
those small specs that have been short in gold added 1706 contacts to their short side.
conclusions:  commercials go net long by 35,043 contracts and that is bullish and the boat is now longer lopsided
And now for silver COT
Silver COT Report: Futures
Large Speculators Commercial
Long Short Spreading Long Short
79,485 20,445 9,044 41,906 117,351
-2,350 -1,223 -2,449 -4,898 -7,685
88 44 37 35 38
Small Speculators Open Interest Total
Long Short 156,626 Long Short
26,191 9,786 130,435 146,840
-3,338 -1,678 -13,035 -9,697 -11,357
non reportable positions Positions as of: 141 106
  Tuesday, November 29, 2016   © SilverS
Our large specs;
those large specs that have been long in silver pitched 2350 contracts from their long side.
those large specs that have been short in silver covered 1273 contracts from their short side.
Our crooked commercials;
those commercials that have been long in silver pitched 2449 contracts from their short side
those commercials that have been short in silver covered 4898 contracts from their short side
Our small specs;
those small specs that have been long in silver pitched 3338 contracts from their long side
those small specs that have been short in silver covered 1678 contracts from their short side.
Conclusions; commercials go net long by 2449 contracts and that is bullish but the commercials did not liquefy the amount of longs that they desired compared to gold
And now the Gold inventory at the GLD
Dec 2/a huge withdrawal of 13.64 tonnes of gold leaving the GLD vaults/no doubt this is heading to Shanghai taking advantage of the huge premium/inventory rests tonight at 870.22 tonnes
Dec 1/no change in gold inventory at the GLD/Inventory rests at 883.86 tonnes
Nov 29/no changes in gold inventory at the GLD/inventory rests at 885.04 tonnes
Nov 28/no change in gold inventory at the GLD/Inventory rests at 885.04 tonnes
Nov 25 We had a massive 19.87 tonnes of gold leave the GLD/this would be a paper loss not real gold (they only have paper gold in their inventory/total inventory: 885.04 tonnes
Nov 23/a huge withdrawal of paper gold from the GLD equal to 4.66 tonnes/inventory rests at 904.91 tonnes
NOV 22/no changes at the GLD/Inventory rests at 908.76 tonnes
Nov 18/no changes at the GLD/Inventory rests at 920.63 tonnes
Nov 16/ changes in gold inventory at the GLD/Inventory rests at 927.45 tonnes
NOV 15/  we had 2 monstrous withdrawal of 5.63 tonnes of gold from the GLD in the morning and another 1.48 tonnes this afternoon/Inventory rests at 927.45 tonnes
Nov 14/another monstrous withdrawal of 7.12 tonnes of gold from the GLD/Inventory rests at 934.56 tonnes
Nov 9/no change in gold inventory at the GLD/Inventory rests tonight at 949.69 tonnes
Dec 2/ Inventory rests tonight at 870.22 tonnes


Now the SLV Inventory
Dec 2 a tiny withdrawal of 155,000 oz and this is probably to pay for fees/inventory rests at 345.995 million oz/
Dec 1/no changes in silver inventory at the SLV/inventory rests at 346.150 million oz/
Nov 29/no changes in silver inventory /inventory rests tonight at 346.150 million oz/
Nov 28/no change in silver inventory/inventory rests tonight at 346.150 million oz/
Nov 25/we had another withdrawal of 949,000 oz from the SLV/Inventory rests at 346.150 million oz
Nov 18/no changes in silver inventory at the SLV/Inventory rests at 356/253 million oz
Nov change in silver inventory at the SLV/Inventory rests at 356.253 million oz/
NOV 15/a withdrawal of 474,000 oz (.474 million oz) from the SLV inventory/inventory rests at 356.253
Nov 14/a withdrawal of 1.329 million oz from the SLV/Inventory rests at 356.727 million oz
Nov 11/a withdrawal of 1.379 million oz from the SLV/Inventory rests at 358.056 million oz
Nov 10/an addition of 949,000 oz added into the SLV/Inventory rests at 359.435 million oz
Nov 9/no change in silver inventory at the SLV/Inventory rests at 359.435 million oz/
Dec 2.2016: Inventory 345.995 million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6/2 percent to NAV usa funds and Negative 6.3% to NAV for Cdn funds!!!! 
Percentage of fund in gold 61.2%
Percentage of fund in silver:38.5%
cash .+0.3%( Dec 2/2016)
2. Sprott silver fund (PSLV): Premium FALLS to +.06%!!!! NAV (Dec 2/2016) 
3. Sprott gold fund (PHYS): premium to NAV RISES TO – 0.42% to NAV  ( Dec 2/2016)
Note: Sprott silver trust back  into POSITIVE territory at +0.06% /Sprott physical gold trust is back into NEGATIVE territory at -0.42%/Central fund of Canada’s is still in jail.



Last month I reported to you that 5 tonnes of gold moved out of the FRBNY which was much smaller than before as Germany was not getting its required amount of gold.

Now this month:

FRBNY gold holdings Sept:  7841

FRBNY gold holdings Oct:  7841

all figures are million dollars worth of gold at the official rate of 42.22 dollars per oz

amount leaving: 0

Amount repatriated:  zero

Germany must be royally angry!



Major gold/silver stories for FRIDAY


Gold and Silver Will Protect From Coming Financial Crash – Rickards

Gold and silver coins will protect from the coming financial crash – James Rickards, author of The Road to Ruin told Sean O’Rourke in a must listen to RTE Radio interview this week.

Rickards is the best selling author on finance and money and advises the US intelligence community on international economics and financial threats.

His advice to people with savings or investments to protect from the coming crash? Buy gold and silver coins.

“For savers and investors at any level, modest or wealthier – put 10% of your invest-able assets in physical gold or silver, for smaller amounts, silver might do very well.”  

“It’s the future of money… Here is why . First of all it is non-digital. Everyone thinks they have money; what they have are electrons in banks…” You can have confiscation, negative interest rates, bank closures. 

If you have physical gold you are outside of the digital system – that money cannot be frozen by the government. It cannot be hacked by Vladimir Putin…”

“Even if you have €10,000 (euros), out a thousand euros buy one ounce of gold put it in a safe place. If the banks are shut you will have a valuable asset. Or buy 50 ounces of silver – thats also about €1,000. 50 ounces of silver coins, one ounce coins in a safe place.

You will have something of value, even if the system collapses or not. “

Other key points made in interview:

“Financial Crashes are like earthquakes: we know that they are coming, but we know not the day or the hour. The next one is close and is likely to be severe, even epochal.” 

“In 1998, Wall Street bailed out the hedge funds. In 2008, the central banks bailed out Wall Street. In 2018 – if not sooner – who’s going to bail out the central banks?”

Financial crises are cyclical and the next one is close. Not only that, but global elites have a secret plan for the next financial crisis.

It was decided at the G20 meeting in Australia in 2014 that there would be no more bail-outs. Instead, there would be bail-ins: when a bank is in distress, the rescue money comes from the stakeholders including depositors and savers.

“So depositors’ money is at risk, bondholders can take haircuts, stockholders can see their stock go to zero. That’s the new template.”

And this new template means that when the next crisis comes, the whole financial system will be shut down while the rescue is organised. People won’t be able to get their money from banks, they won’t be able to sell their shares. This is pretty scary stuff.

Rickards predicted that Donald Trump would be president and he says that Trump is using the Ronald Reagan playbook to try to boost the US economy, but it won’t work because the world is too different today from the way it was in the 1980s.

“Reagan had a lot of tailwinds: inflation had to come down, interest rates had to come down. He had fiscal space to run up the debt. Trump has headwinds.”

There’s a war going on between national leaders and the heads of major corporations, according to Rickards, and corporation tax will play a major part in the struggle.

“In a financial panic, everyone wants their money back… People say, oh I’ve money in stocks, money in bonds. No you don’t, you have stocks and bonds, but that’s not money. You have to sell them to get your money.”

Rickards’ distressing vision has happened before, he says. In 1933, President Roosevelt closed every bank in America. It’s also happened recently in Cyprus, Greece and in India today.

“It’s the future of money… It’s non-digital. Everyone thinks they have money; what they have are electrons in banks…”

Listen to Rickards Interview Here

Gold and Silver Bullion – News and Commentary

Gold rises from 10-month lows, heads for fourth consecutive weekly drop (

Fed may face unnerving shake-up under Trump administration (

US Construction Spending up 0.5 Percent in October (

Asian Shares Drop as Trump Effect Fades (

China gold premiums hold near 3-year high (

Doublelines Gundlach likes bonds, gold (

10-year Treasury yield hits fresh 17-month high (

$4.1 billion pulled from U.S.-based taxable mutual bond funds during week: Lipper (

Diana Choyleva: the unravelling of globalisation (

Can the Trump rally last? (


Gold Prices (LBMA AM)

02 Dec: USD 1,171.65, GBP 929.00 & EUR 1,100.88 per ounce
01 Dec: USD 1,168.75, GBP 930.09 & EUR 1,099.68 per ounce
30 Nov: USD 1,187.40, GBP 952.06 & EUR 1,115.44 per ounce
29 Nov: USD 1,187.30, GBP 952.45 & EUR 1,119.98 per ounce
28 Nov: USD 1,189.10, GBP 956.51 & EUR 1,117.99 per ounce
25 Nov: USD 1,187.50, GBP 953.30 & EUR 1,121.83 per ounce
24 Nov: USD 1,187.25, GBP 953.60 & EUR 1,125.04 per ounce

Silver Prices (LBMA)

02 Dec: USD 16.35, GBP 12.95 & EUR 15.36 per ounce
01 Dec: USD 16.30, GBP 12.91 & EUR 15.35 per ounce
30 Nov: USD 16.67, GBP 13.39 & EUR 15.66 per ounce
29 Nov: USD 16.54, GBP 13.26 & EUR 15.61 per ounce
28 Nov: USD 16.68, GBP 13.45 & EUR 15.73 per ounce
25 Nov: USD 16.47, GBP 13.21 & EUR 15.55 per ounce
24 Nov: USD 16.31, GBP 13.09 & EUR 15.43 per ounce

Recent Market Updates

– RBS Fail Bank of England Stress Test
– Peak Silver – Supply Deficits Mean Higher Prices
– Bail In Risk – €4 Trillion Banking System In Italy Poses Contagion Risk as Referendum Looms
– Gold Down 13.5% In 13 Days – Trump Bearish For Gold?
– War On Cash Just Got Real – India and Citibank In Australia
– Russia Gold Buying In October Is Biggest Monthly Allocation Since 1998
– Stocks, Bonds, Pension Funds “Will Be Wiped Out…” – Rickards
– Physical Gold Is A “Long-Term Position” as “Hedge Against Governments”
– Gold Sell Off On Fed Noise – “Interesting Times” To “Support Gold”
– Islamic Gold – Vital New Dynamic In Physical Gold Market
– Peak Gold Globally – “Bullish For Gold”
– Gold Price Should Go Higher On Global Risks and Trump – Capital Economics
– President Trump – Why Market Loves Him and Experts Wrong

Mark O’Byrne
Executive Director





John Embry interviewed by Chris Waltzek: the Indian situation/the huge flooding of paper gold and the attempt by the bullion banks to cover/

(courtesy GATA/john embry)


GoldSeek Radio’s Chris Waltzek interviews Sprott’s John Embry


3:15p ET Thursday, December 1, 2016

Dear Friend of GATA and Gold:

Interviewed by GoldSeek Radio’s Chris Waltzek, Sprott Asset Management’s John Embry discusses the enormous amount of “paper gold” recently dumped on the futures market, the possibility that the bullion banks are trying to cover their short positions, and the Indian government’s attempt to destroy the country’s cash economy, among other topics. The interview is 14 minutes long and can be heard at GoldSeek here:

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





Alasdair Macleod with his weekly message to us on gold: this is a must read!!

I have highlighted the most important aspects to this commentary!!

(courtesy Alasdair Macleod/

Credit cycles and gold

The Trump shock produced some unexpected market reactions, partly explained by investors buying into a risk-on argument,equities over bonds and buying dollars by selling other currencies and gold.

This is because President-elect Trump has stated he will implement infrastructure investment and tax-cut policies. If he pursues this plan, it will lead to larger fiscal deficits, and higher interest rates. The global aspect of the markets recalibration focuses on the strains between the dollar on one side, and the euro and the yen on the other, both still mired in negative interest rates. The capital flows obviously favour the dollar, and are putting the Eurocurrency markets under considerable strain.

Gold has been caught in the cross-fire, being a simple way for US-based hedge funds to buy into a rising dollar by selling gold short. While this pressure may persist, particularly if the euro weakens further ahead of the Italian referendum, it is essentially a temporary market effect. This article explains why this is so by analysing the next phase of the credit cycle, and the implications for interest rates and prices, which will be fuelled by higher US fiscal deficits in addition to China’s stockpiling of raw materials. It concludes that there are factors at work which were originally identified by Gordon Pepper, who was acknowledged as having the finest analytical mind in the UK Gilt market in the 1960s and 1970s.

Pepper observed that banks were consistently bad investors in short-maturity gilts, almost always losing money. The reason, he explained, was banks bought gilts when they were averse to lending, and sold them when they become more confident. This meant banks bought government bonds when economic confidence was at its lowest, bad debts in the private sector had risen, and interest rates had fallen to reflect the recessionary environment. These were the conditions that marked the high tide in bond prices.

As surely as day follows night, recovery followed recession. As trading conditions improved, corporate takeovers became common as businesses repositioned themselves for better trading prospects, and a period of increasing industrial investment followed. The banks began belatedly to sell down their gilt positions to provide capital for economic expansion. By the time banks felt confident enough to lend, markets had already anticipated higher demand for credit, as well as a more inflationary outlook. Inevitably, banks ended up selling their gilts at a loss.

Pepper had identified the mechanics behind bank credit flows between financial and non-financial sectors, an important topic broadly overlooked even today. Currently, the credit cycle has become prolonged and distorted, because most of the accumulated malinvestments that would normally be eliminated in the downturn phase of the credit cycle have been allowed to persist, thanks to the Fed’s aggressive suppression of interest rates. Consequently, bank credit was never reallocated from unproductive to more productive use, but has been added to and extended in the name of financial engineering.

Things are about to change. President-elect Donald Trump has stated that he will expand government spending on infrastructure and at the same time cut taxes, in which case he will set in motion a new expansionary phase for the US economy, leading to an additional increase in bank credit. The immediate effect has been to drive up bond yields and increase expectations of higher dollar interest rates.

Working from Gordon Pepper’s thesis, the banks are only in the initial stages of mark-to-market bond losses, since they have yet to sell down their bond holdings to create lending room for infrastructure expansion and a sharply higher fiscal deficit. That will not happen before next year, assuming Trump follows through on his economic plans. But markets can be expected to increasingly discount future bond sales by the banks and other financial intermediaries before then, and given that yields fell to unusually low levels ahead of Trump’s expansionary plans, bond losses can be expected to be correspondingly greater.

The new expansionary phase

President-elect Trump is in effect advocating a substantial fiscal stimulus to the economy. The difference between monetary stimulus and fiscal stimulus is found in price inflation. Simply put, monetary stimulus tends to inflate asset prices, while fiscal stimulus tends to inflate consumer prices. Therefore, fiscal stimulus leads with greater certainty to rising interest rates and bond yields, because of the price inflation effect, inflicting painful losses for banks invested in bonds.

The change from monetary to fiscal stimulus can be expected to undermine asset prices, for reasons that will become clear. The following table illustrates the flows that can arise from fiscal stimulus of the economy, and puts Pepper’s theses in a clearer light.
monetary flows fiscal stimulous

Government spending increases over the cycle, reflecting fiscal stimulus, in this example from 35% to 37% of the economy. And because the fiscal stimulus is spent in the non-financial private sector, that increases as well. Inevitably, the financial sector, representing money that’s employed in purely financial activities, gets squeezed, in this case falling from 30% to 25% of the economy. Financial activities can be said to deflate.

While actual numbers will differ from this theoretical example, it illustrates that in the expansionary phase money must leave purely financial activities. You cannot have both fiscal stimulus and a reallocation of economic resources into the non-financial private sector without creating a powerful deflationary effect on financial assets. Consequently, not only will bond yields rise, but equity markets will be impacted as well, at the very point where fundamentals for equities appear to be at their best. Today’s equity market euphoria is therefore a reflection of improved sentiment, ahead of the reality.

Keynesians would argue that the strains faced by the financial sector can be offset by credit expansion. Initially, this may be the case, so long as banks have room on their balance sheets for additional credit growth. However, the inflationary effects of fiscal expansion on consumer prices become a considerable and relatively immediate force, rapidly dominating monetary policy considerations. This is due to the fiscal deficit being directly translated into increased demand for goods and services through government spending, driving up prices as the extra money created out of thin air is spent. The result is interest rates are inevitably raised by the central bank to protect the purchasing power of the currency.

Probably the clearest example in living memory of this effect was the UK economy in the first half of the 1970s, which prompted Pepper’s analysis. From 1970 onwards, the Heath government reflated aggressively by depressing interest rates and increasing fiscal stimulus. The result was a stock market boom that ended in May 1972, gilt yields having bottomed earlier that year. As the economy improved, gilt yields rose further, and equities entered a deep bear market. The Bank of England increased interest rates, while gilt yields rose, equity prices fell, and price inflation increased. Speculation migrated from equity markets into commercial property, when rents and capital values responded to expanding office demand, driven by the artificial economic boom.

Eventually price inflation accelerated to the point where interest rates had to be raised further, triggering a collapse in the commercial property market, necessitating the rescue of the lending banks associated with it. Over the course of the cycle, the Bank of England’s base rate had increased from 5% in September 1971 to 13% in November 1973, precipitating the commercial property crash. Long-dated gilt yields had more than doubled to over 15%, and the equity market lost 75% of its value by the end of 1975. The British Government’s financial position was so bad, she had to borrow money from the IMF.

All the signs of a similar cycle are emerging today but on a grander scale, with Donald Trump intending to pursue the expansionary fiscal policies of Edward Heath. But there are obvious differences, particularly the high burden of debt in the private sector. In the 1970s private sector debt levels were low, so much so that residential property prices in the UK were broadly unaffected by rising interest rates. Today, residential property prices at the margin typically reflect 80% loan-to-value mortgages. Indeed, the level of private sector debt in America is now so great that a rise in the Fed Funds Rate to between two and three percent may be enough to crash both residential property prices and the US financial sector with it.

Another important difference is the interconnectedness of markets. Rising yields for US Treasuries are certain to be transmitted into rising yields in other currencies, particularly for the Eurozone. The Eurozone’s banks, whose currency’s very survival could be threatened by these developments, will face bond losses potentially so great that the whole European banking system could collapse. The ECB is likely to continue to pump money into the financial sector in a desperate attempt to save the banks, but it can only do so much before the price-inflation effect of a falling euro forces it to raise interest rates as well.

Britain, along with everyone else in the seventies, as well as the US in the coming years, also had a specific problem in common, rising commodity and energy prices. Artificial demand generated by fiscal expansion in the US in the 1970-74 era contributed to a significant increase in the general level of commodity prices. Most notable was the increase in the price of oil, as OPEC ramped it up from $3 to $12 per barrel in 1973 alone. Rising commodity prices were paid for by monetary expansion, just like today. And today, China is pursuing vast infrastructure plans for all Asia, which requires her to stockpile and use unprecedented quantities of industrial raw materials and energy. Trump’s expansionary plans will clash with China’s far larger plans, driving up commodity prices measured in dollars even further. This is in addition to the substantial gains seen so far, making a bad price outlook even worse.

The effect on gold

The chart below shows how the gold price behaved in the 1970s.

london gold AM fix USD

Gold rose from $35 to $197.50 between 1970 and the end of 1974, an increase of more than four times. During that period, as mentioned above, the Bank of England’s base rate rose from 5% to 13%. The Fed’s discount rate was 4.5% in 1972 and rose to 8% in August 1974. So, a rising gold price was accompanied by a rising interest rate, contradicting the conventional wisdom of today. Gold went on to hit a peak price of $850 at the afternoon fix of 21 January 1980, when the Fed’s discount rate was at an elevated 12%.

The current belief that rising interest rates are bad for gold was disproved by those events. The reason gold rose had little to do with interest rates, and everything to do with accelerating price inflation. The only way a rising gold price could be halted was to raise interest rates high enough and sharply enough to collapse economic activity, which is what Paul Volcker did in 1980-81. In other words, until the Fed abandons all pretentions to supporting economic growth, people will continue to increase their preferences for owning goods over holding dollars, thereby continuingly reducing its purchasing power.

Another way of looking at the prospective gold price is to think of it in terms of raw material prices, which tend in the long run to be more stable when measured in gold, than when measured in fiat currencies. Given the outlook for commodity prices, as both China and America compete for raw materials and expand the quantity of money to pay for them, the gold price is more likely to maintain a level of purchasing power against rising commodity prices, instead of it declining with paper currencies. China has prepared herself for this event, having embarked on a longstanding policy of stockpiling gold since 1983. The amount she has accumulated in addition to declared reserves is a state secret, but my estimate is at least 20,000 tonnes. In 2002, the State had presumably secured enough physical gold for itself to allow its own citizens to join in, because that is the year the Peoples Bank established the Shanghai Gold Exchange, and the ban on private ownership of gold in China was lifted.

Over the last fourteen years, private individuals and businesses in China have accumulated at least another 10,000 tonnes, and China has become the largest producer and refiner of gold by far. We can truly say that China has prepared herself and her citizens well in advance for the collapse in purchasing power of the paper currencies that her demand for commodities is likely to engender. The only thing she must do is to get rid of her accumulation of US Treasuries before they become worthless, which she is now doing.

America, by contrast, is wholly unprepared for higher commodity prices. Her gold reserves, assuming they are as stated, are insufficient to underwrite a declining dollar, and in any event conversion into gold is not on offer to holders of dollars. In terms of commodity demand, America will be playing second fiddle to China in the coming years anyway, only making a bad price situation potentially worse.

Because of continuing non-cyclical Chinese demand for commodities, there is a significant risk that not even a debt-liquidating slump brought about by significantly higher interest rates will kill price inflation in western currencies. Unlike the 1970s, when the dollar was the tune to which all the others danced, China Russia and all nations tied to them by trade no longer dance exclusively to the dollar’s tune. Consequently, US monetary policy no longer exercises absolute control over global price inflation, measured in fiat currencies.

Price inflation pressures could therefore persist, despite a US debt-liquidating slump. The possibility that the price environment for the dollar will continue to be inflationary in a US economic slump, despite the Fed’s monetary policy, cannot be ruled out. But before that possibility is put to the test, the likelihood of a systemic collapse in the Eurozone is a more immediate and threatening risk.


We currently face the prospect of a reallocation of capital from America’s financial sector into government and non-financial activities, driven by President-elect Trump’s expansionary plans. These plans, if pursued, will lead to money flowing from purely financial activities and will have a profoundly negative effect on asset prices. Furthermore, price inflation, the result of fiscal expansion, will raise consumer prices to unanticipated levels, forcing the Fed to raise interest rates more than expected today. This article has pointed out why rising interest rates in the expansionary phase of the credit cycle do not undermine the gold price, unless, and this is no longer certain, interest rates are raised to the point where the US economy is driven into a slump. However, the world is no longer dependant solely on US economic and monetary factors, because Asian demand for industrial materials has become the principal engine of commodity demand. We can therefore no longer be sure a Volcker-style shock from the Fed will kill price inflation at the end of the upcoming expansionary credit cycle.

As all experience from the past clearly demonstrates, it is a mistake to believe that the gold price is set solely by dollar interest rates, or its relative strength in other currencies. This being the case, the current weakness of the gold price is simply a reflection of temporary dollar shortages, and nothing more.


I highlighted this to you yesterday and I will repeat it as it is extremely important for you to understand

(courtesy Lawrie Williams/GATA)

Lawrie Williams: Major gold price divergence between Shanghai and London


7p ET Thursday, December 1, 2016

Dear Friend of GATA and Gold:

Sharps Pixley gold market analyst Lawrie Williams today takes note of the increasing divergence between prices in London and Shanghai, where premiums recently have risen to astounding levels. Williams’ commentary is headlined “Major Gold Price Divergence between Shanghai and London” and it’s posted at Sharps Pixley’s internet site here:…

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




From our good friend Jessie, of Amercain Cafe:

a massive 28.652 tonnes of gold was withdrawn (equals demand) from the SGE over in Shanghai, the highest on record over there. Note the incremental rise each and everyday day as China tries to assert its authority in gold.  In one year: demand equals 2200 tonnes or approx. equal to global demand for gold minus China and Russia


(courtesy Jessie/Americain/cafe)

01 DECEMBER 2016

China Buying the Dip – 28.652 Tonnes of Physical Gold Taken Off the Shanghai Gold Exchange In One Day

The top of the chart is cumulative, the bottom portion is the daily volume.

Yesterday was easily the biggest day of this year for physical gold withdrawals in Shanghai.


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




2. Nikkei closed DOWN 87.04 POINTS OR 0.47% /USA: YEN FALLS TO 113.97

3. Europe stocks opened ALL IN THE RED     ( /USA dollar index FALLS TO  100.94/Euro DOWN to 1.0649


3c Nikkei now JUST BELOW 17,000

3d USA/Yen rate now well below the important 120 barrier this morning

3e WTI::  50.57  and Brent: 53.06.

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 TO +.331%   

3j Greek 10 year bond yield FALLS to  : 6.45%   

3k Gold at $1171.30/silver $16.41(7:45 am est)   SILVER BELOW RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 29/100 in  roubles/dollar) 64.27-

3m oil into the 50 dollar handle for WTI and 53 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 SMALL   DEVALUATION UPWARD from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  1.0112 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0769 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.225%

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


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

4. USA 10 year treasury bond at 2.43% early this morning. Thirty year rate  at 3.074% /POLICY ERROR) GETTING DANGEROUSLY HIGH

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

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


Global Stocks, Futures, Commodities, Dollar Fall Ahead Of Payrolls, Italy Vote


Did Jeff Gundlach do it again? Shortly after the DoubleLine manager told Reuters yesterday afternoon that the Trump rally is ending, that “stocks have peaked” and that it is “too late to buy the Trump trade”, US stocks tumbled to session lows, and have continued to drop overnight, with S&P futures down 0.3%, alongside sliding Asian and European markets; oil and the dollar are also down with the only asset class catching a bid are 10Y TSYs, whose yields are lower at 2.43% after reaching an 18 month high of 2.492% overnight ahead of today’s nonfarm payrolls report. The dollar was on course for its first weekly decline in four weeks as investors trimmed bets following recent gains.

However, the big risk event is not the job report, but Sunday’s Italian referendum, which has cast a blanket of concerns over Europe, and especially its banks, and has prompted financial markets to end the week the way they started, “overshadowed by caution as stocks fall with commodities, the yen advances and a selloff in Treasuries abates” in the words of Bloomberg.

“There is a great deal of trepidation among investors ahead of the vote,” said Ken Odeluga, a market analyst at brokerage firm City Index in London. “Even though we got a bounce yesterday after the OPEC agreement, there is still a huge amount of interest on the earish side and shorts in place. It’s the focus for Europe, and we are going to see more selling out of equities if we get a negative outcome. There is certainly room for more volatility.”

Recent strong economic data from the U.S., including upbeat manufacturing activity and construction spending, have bolstered the view that the Fed will tighten monetary policy faster than expected to keep inflationary pressures in check. U.S. employers probably hired 179K workers in November, up from October, making it almost certain that the Federal Reserve will raise interest rates later this month. However, recent jitters that the ECB may announce a tapering of its own QE program next Thursday has become a bigger source of worry for markets than the Fed’s second rate hike in over a decade.

Today’s payroll number therefore comes at a very interesting time. The market consensus is for a 180k print which follows a 161k gain in October. The range though between economists is anywhere from 140k to 250k. The average YTD print is 181k. As always keep an eye on the other components of the report including the unemployment rate (consensus is for no change at 4.9%) and average hourly earnings (expected to rise +0.2% mom). The report is out at 8.30am.

The Stoxx Europe 600 Index extended its first weekly decline in a month and S&P 500 Index futures signaled further losses in U.S. equities as investors shift focus to a report on American payrolls. Oil led raw materials lower after climbing above $51 a barrel, Japan’s currency gained against all of its 16 major peers and gold rebounded from a 10-month low. While Treasuries edged higher, yields on 10-year notes are still near the highest since July 2015.

“Few investors want to have a strong position either way,” said Mohit Kumar, head of rates strategy at Credit Agricole SA’s corporate and investment-banking unit in London. “Less risk is a good strategy.”

Global stocks are headed for their first weekly decline since Donald Trump’s election victory last month as investors turn more wary about the outlook for higher U.S. rates and potential for rising political risks in Europe. The rally in commodities following Trump’s victory and an OPEC deal this week to cut output has boosted inflation expectations and bets the Federal Reserve will hasten increases. Volatility in European stocks and its single currency has climbed ahead of Italy’s weekend referendum and Austria’s presidential vote.

European shares fell more than 1 percent, led by industrial and financial stocks. They have gained the most since Donald Trump won the U.S. presidential election last month. The Stoxx Europe 600 Index extended its first weekly decline in a month and S&P 500 Index futures signaled further losses in U.S. equities as investors shift focus to a report on American payrolls. Oil led raw materials lower after climbing above $51 a barrel, Japan’s currency gained against all of its 16 major peers and gold rebounded from a 10-month low. While Treasuries edged higher, yields on 10-year notes are still near the highest since July 2015.

The gap between Italian and German bond yields, which shot to a 2 1/2-year high of 188 basis points (bps) last week, fell to 167 bps on Friday. “I suspect on Monday it will be very difficult to have a definitive opinion on what could be the future government in Italy and the appetite for further reform,” said Franck Dixmier, global head of fixed income at AllianzGI, adding that the fund was ‘short’ Italian bonds.

In commodity markets, oil prices eased from the 16-month high they reached after the Organization of Petroleum Exporting Countries agreed to cut output for the first time since 2008. Russia also agreed to reduce production for the first time in 15 years. Brent crude futures eased 0.26 percent to $53.80 a barrel.

Bulletin Headline Summary From RanSquawk

  • As many look ahead to today’s nonfarm payroll report from the US, the European session has kicked off with equities firmly in the red
  • This morning saw flow back into the JPY, which has gained across the board — notably the EUR this morning after rejecting 122.00 key resistance
  • As well as US NFP report, Today’s highlights include Canadian Jobs figures, as well as comments from Fed’s Brainard and Tarullo

Market Snapshot

  • S&P 500 futures down 0.3% to 2186
  • Stoxx 600 down 1.1% to 337
  • FTSE 100 down 0.9% to 6692
  • DAX down 1% to 10426
  • German 10Yr yield down 3bps to 0.34%
  • Italian 10Yr yield down 6bps to 1.99%
  • Spanish 10Yr yield down 4bps to 1.57%
  • S&P GSCI Index down 0.3% to 383.5
  • MSCI Asia Pacific down 0.5% to 136
  • Nikkei 225 down 0.5% to 18426
  • Hang Seng down 1.4% to 22565
  • Shanghai Composite down 0.9% to 3244
  • S&P/ASX 200 down 1% to 5444
  • US 10-yr yield down 1bp to 2.43%
  • Dollar Index down 0.14% to 100.9
  • WTI Crude futures down 0.4% to $50.86
  • Brent Futures down 0.6% to $53.59
  • Gold spot up 0.3% to $1,175
  • Silver spot up 0.2% to $16.54

Top Headline News

  • Starbucks’ Schultz to Hand CEO Role to Lieutenant Kevin Johnson: 33-year veteran of tech industry starts in April
  • Exelon Gets $235 Million-a-Year Nuclear Lifeline in Illinois: Legislation secures payments for power from nuclear reactors
  • Goldman’s Gary Cohn Said to Meet With Trump’s Team This Weekend: A cabinet appointment is said to be unlikely as talks continue, some advisers are concerned about too many Goldman picks
  • Trump Says He’ll Appoint Mattis as Sec. of Defense; Trump Supports Completion of Dakota Access Pipeline: Reuters
  • Workday Falls After CEO Warns of Big Deal Delays on Uncertainty: CEO cites Brexit, elections among concerns of customers
  • Viacom’s Bakish Said to Be Interested in Buying Vice Stake: NYP
  • Apollo, FXI Said to Make Bid for Innocor: New York Post

Looking at Asian markets, stocks traded lower across the board following the mostly negative lead from US where tech names underperformed, with participants also tentative ahead of today’s key NFP. ASX 200 (-1.0%) and Nikkei 225 (-0.7%) declined from the open as investors booked profits, with the latter further weighed by JPY strength as USD/JPY pulled back below 114.00. In China, Hang Seng (-1.3%) and Shanghai Comp (-0.9%) conformed to the subdued tone amid higher money market rates in which despite the overnight SHIBOR snapping 16 consecutive daily increases, 14-day to 1-year term rates continued to rise and the 3-month HIBOR gained to its highest since May 2009. Finally, 10yr JGBs traded were supported amid the risk averse sentiment in the region, while the BoJ’s buying operations for a total JPY 1.23tr1 in maturities ranging from 1yr-10yr also underpinned. PBoC injected CNY 160bIn 7-day reverse repos, CNY 60bIn in 14-day reverse repos, CNY 25bn in 28-day reverse repos for a net weekly injection of CNY 70bIn vs. CNY 40bIn net injection last week.  PBoC set mid-point at 6.8794. South Korean opposition parties agreed to propose motion for the impeachment of President Park, with the vote on motion to be held on December 9th.

Top Asian News

  • Singapore Sanctions Ex-Goldman Banker Leissner After Probe: Standard Chartered, Coutts fined combined S$7.6m
  • Rural China Banks With $4 Trillion Assets Facing Debt Test: Guiyang Rural sparked concern about risks at smaller lenders
  • PBOC Headache Worsens as New $50,000 Conversion Quota Looms: Central bank focus for yuan seen shifting as FX reserves bleed
  • Singapore Wealth Fund Prompts GLP to Start Strategic Review: No assurance any transaction will materialize, GLP says
  • Crown Prince Becomes First New Thai King in Seven Decades: New monarch inherits control of fortune worth tens of billions

As many look ahead to today’s nonfarm payroll report from the US, the European session has kicked off with equities firmly in the red. European stocks have followed on from their Asian counterparts, with profit taking seen in energy and material names after the recent OPEC inspired upside. Further to this, IT stocks are also among the worst performers today, moving in tandem to the recent downside seen in US IT names, with the NASDAQ vastly underperforming over the past 48 hours. Elsewhere, price action remains relatively tight — fixed income markets have seen Bunds close the opening gap and pare earlier downside, which comes in tandem with the exacerbation of risk off sentiment given the softness seen in stocks. From a European standpoint, many are looking ahead to the Italian referendum on Sunday, with the GE/IT spread tightening so far this morning

Top European News

  • Italian Banks Flirt With Disaster Again as Renzi Teeters: Markets have priced in impact of a ‘No’ vote in referendum
  • Hollande’s Exit Gives Valls Space to Seek French Presidency: Socialist Valls faces tough fight against Fillon and Le Pen
  • Aixtron Tumbles as Obama Said Poised to Block Chinese Takeover: Aixtron rejection would be second China deal stopped by Obama

In currencies, markets have been dominated by risk sentiment this morning, with equity markets coming off better levels on Wall Street in recent sessions and Asia sporting modest losses overnight. All of this has served to pull some flow back into the JPY, which has gained across the board — notably the EUR this morning after rejecting 122.00 key resistance. USD/JPY has also suffered as a result, though buyers still stepping in in anticipation of a strong US jobs report this afternoon, but there may be other areas to express USD strength as stocks could dominate. The Italian referendum this weekend will also prompt some risk pairing to some degree, despite some suggesting the negative impacts may be overstated in the run up. EUR/USD looks the obvious sell given the immediate focus, but as we have seen in the past week or so, there has been stubborn support coming in ahead of 1.0550 on each test lower amid continuous bouts of USD strength. GBP may have softened a little vs the USD, but against the EUR stays strong as the soft Brexit perceptions have been strengthened by EU comments regarding Britain’s access to the single market. Cable looks support into the mid to low 1.2500’s, while sellers in EUR/GBP resolute ahead of .8500. Commodity FX continues to favour the CAD; unsurprising given the OPEC deal this week. Outperformance vs the AUD and NZD in evidence, but all 3 could come unstuck vs both the USD and JPY if equity market losses start to accelerate. AUD a little more buoyant than NZD, courtesy of the better than expected Oct retail sales read. The Turkish Lira crashed to an all time low of 3.5935 after Erdogan called for lower interest rates.

In commodities, it has been a mixed market as base metals have been trading lower in recent sessions, while Oil has risen in the latter part of the week in the aftermath of the OPEC meeting. Gains here are now tailing off a little with risk sentiment souring, and in turn, has seen Gold recoup some ground as emerging market weakness and the upcoming Italian referendum divert some trade into the safe havens. Dampened interest for Copper out of China looks to have been the latest catalyst for USD29 drop in the 3m contract. WTI hit highs around USD51.80, but is a little over a cent
down on these levels this morning. Gold hit USD1160.0 or so, but was up USD20.0 earlier this morning.

DB’s Jim Reid concludes the overnight wtap

Bond markets must feel like my knee at the moment. Attacked from all directions. After a two-day +15.7bps rise in US 10yr yields and a +12.89% rise in WTI Oil over the same period, today’s payroll number therefore comes at a very interesting time. The market consensus is for a 180k print which follows a 161k gain in October. The range though between economists is anywhere from 140k to 250k. Our US economists are at the lower end of the market and are forecasting a 150k reading which is below the 181k YTD and consistent with their view of a slower pace of economic activity in the current quarter. As always keep an eye on the other components of the report including the unemployment rate (consensus is for no change at 4.9%) and average hourly earnings (expected to rise +0.2% mom). The report is out at 1.30pm GMT.

That move in rates yesterday actually saw 10y Treasury yields look at 2.5% at one stage (reaching a high of 2.492% intraday) before then settling into the end of the session to close at 2.448% (and +6.7bps on the day). Still, that’s the highest closing yield since July 2015. 2y Treasury yields were also up a little more than 3bps at 1.149% while 30y yields broke past 3.10% to close up nearly 8bps higher at 3.109%. There were similar moves also in Europe where 10y Bund yields in particular sold off 9.2bps to 0.364%. That was actually the biggest move higher for Bund yields since December 2015. BTP’s outperformed again in relative terms (10y +6.2bps to 2.046%) while EM had a day to forget with hard-currency bond yields in Brazil, Argentina and Columbia +20.1bps, +22.8bps and +11.6bps higher respectively.

A few factors seemed to be in play yesterday contributing to the moves. Clearly the sharp move higher again for Oil continues to challenge markets’ outlook for inflation, while some better than expected manufacturing data in the US also helped at the margin. The ISM manufacturing print rose to 53.2 (vs. 52.5 expected) in November from 51.9 in October with the new orders component also rising, while the final manufacturing PMI was revised up from 53.9 to 54.1 – a level last matched in October last year. A bumper day for corporate issuance across the pond was also said to have been a factor although much of chatter was about another ECB article on Reuters. The article suggested that the ECB will extend bond purchases beyond March but at the same time ‘consider sending a formal signal after its policy meeting next Thursday that the program will eventually end’. The suggestion was that much of the prep staff work has focused on a six-month extension at the continued 80bn purchase rate but that some have indicated that they would favour an extension at lower volumes. The article quoted ‘senior sources’ which raises the usual validity question about such a story. In any case it seemed to have some impact on markets.

Meanwhile in equity land there was a bit of a déjà-vu feeling for US equities in particular where another decent day for energy and financials stocks – reflecting the moves for Oil and rates – was more than offset by weakness across rate sensitive and defensive sectors and to a great extent, the tech sector with the Nasdaq (-1.36%) suffering its worst one-day fall since October 11th with the sector seemingly plagued by continued sector rotation post the US election. In Europe the Stoxx 600 closed -0.33% but the FTSE MIB (+0.99%) rallied for the third successive day, in which time it is up more than 5%. Like the moves for bonds, EM equities also struggled with bourses in Brazil, Mexico and Argentina down -3.88%, -0.95% and -1.97% respectively.

Alongside payrolls, Italy will continue to attract attention with the referendum being held on Sunday. In terms of timing, we’re expecting to get provisional turnout results from 7pm GMT with exit polls then expected around 10pm GMT on Sunday night (although these have proved unreliable in the past) with the first projections by Italian pollsters based on counted votes at around 10.45pm GMT. The final result could come in around 2am on Monday and we’ll have a full wrap up of it in Monday’s EMR.

Ahead of this, our European equity strategists have published a note this morning suggesting that a rebound in the Italian equity market should be largely restricted to financial stocks in case of a “Yes” vote. Although the FTSE MIB is trading at a 15% discount relative to its 10-year average vs. Europe, valuations look substantially less attractive once banks are excluded from the index. The relative P/E of the FTSE MIB ex banks is trading in line with its long-term average vs. Europe ex banks. Several Italian sectors are even trading at a premium vs. their European peers, showing no signs yet of a spillover of banking sector risks.

Over now to a recently forgotten theme – namely Brexit. Remember that? Yesterday Brexit secretary David Davies and Chancellor Hammond suggested that Britain may be prepared to pay into the EU budget for access to the single market. This is the first time such a view has been expressed in official channels. Obviously it’s still fairly early stages and also hypothetical but the UK government is seemingly becoming increasingly pragmatic from the hard line stance that was taken at the Conservative party conference back in October. Whether Europe has any interest in also being pragmatic is a debate for another day but overall the development certainly aided Sterling which climbed +0.68% vs. the Dollar to $1.2591 albeit well off the intraday high of $1.2696.

While we’re on the theme of politics, last night we also heard the slightly surprising announcement that French President Hollande will not run for re-election next year. The Socialist party will now choose its candidate through a two-round primary on the 22ndand 29th of January. The suggestion is that the door is now open for Prime Minister Valls to be in the running, as well as ex-economy minister Montebourg. It’s worth noting that the polls aren’t giving much of a chance for any Socialist candidate qualifying for the second round of the Presidential election and it appears extremely challenging for the centre-left to prevent a Fillon-Le Pen play-off in the second round and final round.

Refreshing our screens now where markets in Asia this morning are largely following the lead from the losses in Europe and on Wall Street yesterday. The Nikkei (-0.47%), Hang Seng (-0.98%), Shanghai Comp (-0.30%), Kospi (-0.75%) and ASX (-0.70%) are all currently in the red, while sovereign bond yields in the antipodeans are 7-8bps higher and a few basis higher in Asia. Oil (-0.30%) has edged a touch lower while US equity index futures are also modestly lower.

A quick wrap up of the remaining data yesterday. In the US the other data out included construction spending which rose a tad less than expected (+0.5% mom vs. +0.6% expected) but did include material upward revisions to prior months. In fact it was enough to see the Atlanta Fed revise up their Q4 GDP forecast to 2.9% from 2.4%. Initial jobless claims were reported as rising 17k last week to 268k while finally total vehicles sales in November fell as expected to an annualized rate of 17.8m from 17.9m.

Meanwhile in Europe the final manufacturing PMI’s for November didn’t throw up any real surprises. There was no change to the Euro area print at 53.7, while a 0.1pt downward revision for Germany to 54.3 was somewhat offset by a 0.2pt increase in France to 51.7. The non-core was where most interest lay though and as expected the data was reasonably strong. Italy rose 1.3pts to 52.2 (vs. 51.3 expected) and Spain rose 1.2pts to 54.5 (vs. 53.7 expected). The UK was a little more disappointing after printing at 53.4 (vs. 54.4 expected), down from 54.2 in the month prior. The final data to mention is the Euro area unemployment rate print which came in at 9.8% and a new post-financial crisis low.

Looking at the day ahead now. It’s a pretty quiet end to the week in Europe today with the sole release being the October PPI print for the Euro area. As mentioned earlier the main focus for markets today will of course be the November employment report in the US including the nonfarm payrolls number. Also due to be released is the ISM NY print for last month. Away from the data the BoE’s Haldane is scheduled to speak around lunchtime while the Fed’s Brainard (at 1.45pm GMT) and Tarullo (at 6pm GMT) are also on the cards for today. Meanwhile, along with obvious focus on the Italy referendum, a reminder also to keep an eye on the results of the Austrian presidential election re-run. Voting ends at 4pm GMT on Sunday with initial projections expected soon after.


i)Late  THURSDAY night/FRIDAY morning: Shanghai closed DOWN 29.47 POINTS OR 0.90%/ /Hang Sang closed DOWN 313.41  OR 1.37%. The Nikkei closed DOWN 87.04 OR 0.47%/Australia’s all ordinaires  CLOSED DOWN 1.04% /Chinese yuan (ONSHORE) closed DOWN at 6.8880/Oil FELL to 50.47 dollars per barrel for WTI and 53.06 for Brent. Stocks in Europe: ALL IN THE RED.  Offshore yuan trades  6.8768 yuan to the dollar vs 6.8880  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS HUGELY AGAIN AS CHINA ATTEMPTS TO STOP MORE USA DOLLARS  LEAVING CHINA’S SHORES / CHINA SENDS A CLEAR MESSAGE TO THE USA AND JANET  TO NOT RAISE RATES IN DECEMBER.



c) Report on CHINA


Italy votes on Dec 4.  A NO vote is expected and that would probably cause Renzi to quit and in a short order of time Beppo Grilli’s 5 star movement will come to power, hold a referendum on leaving the Euro and that would absolutely kill the euro project

(courtesy Nick Giambruno/

How December 4th Could Trigger The “Most Violent Economic Shock In History”

Submitted by Nick Giambruno via,

It was the one moment that convinced Hitler suicide was better than surrendering.

On the morning of April 29, 1945, the bodies of Italian dictator Benito Mussolini and his mistress were dumped like garbage into Milan’s Piazzale Loreto.

A large mob of Italians quickly gathered. They pelted the former leader’s corpse with vegetables. They spat on it. They urinated on it. Some even emptied their pistols into his lifeless body.

After a few hours, the crowd hung the bodies from a metal girder at a nearby gas station for all to see.

The corpse of Benito Mussolini

I walked through Piazzale Loreto during a recent trip to Italy, which is suffering its worst economic downturn since 1945. And I realized that Italians are angrier now than they’ve been since they hung Il Duce up by his heels.

Italy has had no productive growth since 1999. Real GDP per person is smaller than it was at the turn of the century.

That’s almost two decades of economic stagnation. By any measure, the Italian economy is in a deep depression. And things will probably get much worse.

It’s no surprise Italians are in a revolutionary mood…

The Five Star Movement (M5S) is Italy’s new populist political party. It’s anti-globalist, anti-euro, and vehemently anti-establishment. It doesn’t neatly fall into the left–right political paradigm.

M5S has become the most popular political party in Italy. It blames the country’s chronic lack of growth on the euro currency. A large plurality of Italians agrees.

M5S has promised to hold a vote to leave the euro and reinstate Italy’s old currency, the lira, as soon as it’s in power. That could be very soon.

Given the chance, Italians probably would vote to return to the lira. If that happens, it would awaken a monetary volcano.

The Financial Times recently put it this way:

An Italian exit from the single currency would trigger the total collapse of the eurozone within a very short period.

It would probably lead to the most violent economic shock in history, dwarfing the Lehman Brothers bankruptcy in 2008 and the 1929 Wall Street crash.

If the FT is even partially right, it means a stock market crash of historic proportions could be imminent. It could devastate anyone with a brokerage account.

Here’s how it could all happen…

On December 4, Italian Prime Minister Matteo Renzi’s current pro-EU government is holding a referendum on changing Italy’s constitution.

In effect, a “Yes” vote is a vote of approval for Renzi’s government.

A “No” vote is a chance for the average Italian to give the finger to EU bureaucrats in Brussels.

Given the intense anger Italians feel right now, it’s very likely they’ll do just that.

According to the latest polls, the “No” camp has 54% support and all of the momentum. Even prominent members of Renzi’s own party are defecting to the “No” side.

If the December 4 referendum fails, Renzi has promised to resign. Even if he doesn’t, the loss would politically castrate him. In all likelihood his government would collapse. (Italian governments have a short shelf life. There have been 63 since 1945. That’s almost a rate of a new government each year.)

One way or another, M5S will come to power. It’s just a matter of when. If Renzi’s December 4 referendum fails—and it looks like it will—M5S will likely take over within months.

Once it’s in power, M5S will hold a referendum on leaving the euro and returning to the lira. Italians will likely vote to leave.

Italy is the third-largest member of the Eurozone. If it leaves, it will have the psychological effect of yelling “Fire!” in a crowded theater. Other countries—notably France—will quickly head for the exit and return to their national currencies.

Think of the euro as the economic glue holding the EU together. Without it, economic ties weaken, and the whole EU project unravels.

The EU is the world’s largest economy. If it collapses, it would trigger an unprecedented global stock market crash. That’s how important Italy’s December 4 referendum is. It would be the first domino to fall.

December 4 referendum fails >> M5S comes to power >> Italians vote to leave the euro currency >> European Union collapses

Almost no one else is talking about this. That’s why I just spent several weeks in Italy, taking the pulse of the country.

Italy’s December 4 referendum could make or break your wealth this year. If it fails, the EU, which has the world’s largest economy, will likely fall apart… triggering an epic stock market crash.





Here is what the Italian referendum is all about and what would happen if no is the result (likely) or a yes vote (unlikely)

(courtesy zero hedge0


Everything You Need To Know About The Italian Referendum (& Should Be Afraid To Ask)

Update: The market was modestly spooked as Transport Minister Delrio appeared to confirm Renzi’s resignation will occur on a ‘no’ vote…

*  *  *

While the post-Trump euphoria in US stocks has been the perfect distraction from the ugly realities elsewhere, this weekend’s Italian Referendum could well be the biggest ‘revolt’ yet, topping Brexit and Trump. Should Italy vote “no”, as polls forecast, PM Renzi may quit, leaving the Italian bank recapitalization would then be in jeopardy and, as Bloomberg’s Mark Cranfield warns “we could be looking at a Greece-like market reaction on steroids.”

Italy’s referendum on Sunday is the biggest risk for markets going into year-end, according to a poll of Citigroup clients, and several risk indicators suggest investors’ concern is growing…

FX hedge costs are soaring (to Brexit highs)

Italian equity protection costs are at 2-year highs relative to Europe…

And Italian government bond spread to Bunds has surged to 3 year highs…


So what are the Italian Referendum implications?

ABN Amro’s Nick Kounis and Aline Schuling explain…

  • The impact of Italy’s referendum on the outlook for its economy and wider financial markets is far from black and white
  • There are a lot of possible scenarios, given the uncertainty about polls and elections, as well as the feedback loops between electoral reforms and the implications for government formation
  • In case of a No vote, an interim government will likely take over and political instability and policy stagnation are likely, but the risks for euro exit in the medium term actually diminish
  • A Yes vote opens up the possibility of a reformist government from 2018, but also for a euro referendum, depending on the election outcome – so it increases the tail risk on both sides
  • The immediate reaction of Italian bonds will be to sell-off in a No and rally on a Yes but in both cases spreads will remain elevated
  • The size of government debt, NPLs and economic stagnation mean the country remains vulnerable in either scenario


Investor concern about European political risk has sharpened further following the surprise outcome in the US presidential elections. That result, following Brexit, is seen as confirming the surge of an anti-establishment movement fuelled by discontent at the impact of globalisation. There are a number of polls coming up, but the Italian referendum on 4 December and its potential ramifications have been in the spotlight recently. Below we tackle the key issues that arise in a Q& A format.

What is the referendum about?

The referendum is on a proposal to change the electoral system of the Senate, which has been already approved by parliament. Italy’s political system would become a single-house system, where only the lower house ratifies a government and approves most ordinary legislation. The current elected Senate would become a House of Regions and Municipalities, with limited and specific legislative powers and no right of veto. The number of MPs in the Senate would fall from 315 to 100.

The reform to the Senate is part of a broader reform to the electoral system that has been on the agenda since Matteo Renzi took office in 2014. Italy has a perfectly symmetrical parliamentary system (a bicameral system), in which the Lower House and the Senate effectively have the same powers. This tends to result in laws bouncing back from one House to the other, often blocking the legislative process and hindering policy making. A reform to the lower house (the Italicum) was already agreed by parliament but a number of appeals have been filed against it at Italy’s Constitutional Court (see box below). If both reforms of the lower house and Senate are passed, it would make government formation easier in the future and make it easier for future governments to implement their policy agenda.



What is the likely result?

The last opinion polls suggest that the No camp has a slight lead. Our running average of the last five polls stands at 40% for No and 37% for Yes. This essentially means that the outcome is too close to call. The gap is within the margins of statistical error. This is especially the case given the recent poor performance of opinion polls in predicting actual outcomes. In addition, there is a large proportion of the population (23%) that is undecided. The way these voters turn will have big implications for the outcome and increase the uncertainty.


What happens in case of a No vote?

There are two significant possible implications of a No. It would reduce the ability of the future governing party or coalition to pass into law its policy agenda. A future government would likely not have control of both chambers. This would make passing ambitious structural reforms more difficult. However, it is uncertain whether Mr Renzi’s Democratic party (PD), or any other party, has such an agenda anyway. On the other hand, a split in the chambers, would also make it difficult for the populist and euro-sceptic Five Star movement (M5S) to push through a referendum on the future of the euro.

The other implication would be political instability. Prime Minister Mateo Renzi has flip-flopped on whether he would stay on in his role in the case of a No vote. However, there is a significant risk he would resign. That could potentially trigger new elections in early 2017. However, we think in that case, it would be more likely that a new Prime Minister would be appointed that would lead an interim government. That government may not last its full term (early 2018) and there could be new elections in the second half of next year in any case. An alternative source of instability in case of a No is that the PD may lose support from smaller groups in the Senate, which could mean that a grand coalition (including Forza Italia) would need to make up the new government.

What happens in case of a Yes vote?

A Yes vote would mean that Prime Minister Renzi’s government would stay in place, likely through to the scheduled election in 2018. An optimistic take is that he would then be free to focus all his energies on a major structural reform programme. However, it remains to be seen whether Mr Renzi wants to pursue aggressive reforms. His track record leaves question marks. Since coming to power, his main achievement on economic policy side is labour market reform, but that was not far-reaching. In addition, the Prime Minister still needs to deal with the Senate in the current state, and he has a waver thin majority. So major reform before new elections does not seem likely. However, if he does win new elections and both the lower house and senate reforms are passed, he would be in a powerful position to implement major reforms in his next term.

There is also another scenario following the Yes vote. The forces of populism are unlikely to go away in a hurry. A new election, even in 2018, could still see the MS5 party win. It would then have (again assuming both parliamentary reforms are passed) the ability to execute its policy agenda, though it may still struggle to push through a euro referendum (see below). So a Yes win may be positive in terms of near term political stability, but could raise the risk of a more dangerous scenario in the not too distant future.

What would be the result of any new election?

A new general election is scheduled in early 2018, but as noted above could occur earlier, given the political instability a No vote could trigger. There are two complications in trying to assess the outcome of any new election. First of all we need to rely on the outcome of the current polls, which may or might not be accurate, and in any case may change up to the election. The second is that outcome will also depend on to whether the electoral system will change (fully or partially).

The latest polls suggest that PD would still be the biggest party. PD is currently polling at 33%, while MS5 is at 28%. Still given the uncertainty of the polls and the potential for swings, MS5 still has a realistic chance of winning. If the electoral reform of the Lower House is passed before the new election, then PD or MS5 would emerge as the dominant force in the lower house as the system ensures that winning party has more than 50% of the vote. If the senate reform has also passed (so in case of a Yes vote in the referendum) the winning party in the lower house would have significant power to pass through its legislative agenda. However, if the reform does not pass, dominance in the Lower House may not amount to much, as the Senate would remain able to frustrate the government.


If the electoral reform of the lower house is blocked by the Constitutional court (or if it is significantly watered down) Italy may well find it very difficult to form a new government. This is because the electoral law under which Renzi’s government was elected, which also had a winner premium to help ensure a majority, was ruled unconstitutional by the Constitutional Court in 2014. If this law is not replaced by the Italicum, any new election would be decided by full proportional representation. This means that the winning party would have to form a coalition given current polling. The next biggest party in the polls is Lego Nord (12.1%) followed by Forza Italia (11.5%). Assuming that PD and MS5 would not want to form a coalition, the other combinations look problematic, and would in any case need to involve a multitude of small parties. In this case, a ‘Spain scenario’ where coalition negotiations are drawn out and new elections become necessary would seem likely.

What is Five Star’s policy on Europe?

The Five Star movement is against Italy’s membership of the euro, but not necessarily of its membership of the EU. Last month, Luigi Di Maio, a MS5 party leader in the lower house of parliament who is often seen as a possible future prime minister, set out the party’s position on the euro in a recent interview. He said he would like to ‘see a European referendum on the euro, to see other countries starting to talk about it’. He added that it would be ‘a consultative referendum’. He also noted that Italy should explore other alternatives to the euro and mentioned a return to the lira, as well as the (more fanciful) idea of splitting the eurozone into different currency areas.

Would a No vote start the countdown for Italy’s euro exit?

We do not think that a No vote would increase the chances of an Italian euro exit. It actually might make it less likely. The nightmare scenario for financial markets in simple terms is that a No triggers early elections, MS5 wins, it holds an in-out euro referendum, which leads to a vote for ITEXIT. However, in case of a No vote, the situation would be more complex. As described above, without parliamentary reform, MS5 would struggle to form a government and to pass the legislation to hold the referendum.

In many ways a YES vote followed by a MS5 win in 2018 could actually be the scenario which implies the bigger risk of ITEXIT. This is because MS5 would have more legislative power. However, even then there would be significant hurdles to overcome. The constitution does not allow referenda on pulling out of international treaties, though it does allow advisory referenda. However, to launch an advisory referendum, there needs to be a two-thirds support in parliament currently (though this could change eventually). Even assuming the Italicum reform sticks and MS5 wins the election, they would still struggle to achieve that. MS5 would then have 340 seats. Given current polling, the other Eurosceptic party Lega Nord would have around 55 seats. So it would need to increase its share of the vote significantly (from the current 12.5% to around 16.5%) to push the combined MS5-Lega Nord to the two-thirds majority necessary. If it does not get that majority, it would need to a referendum to hold the advisory referendum.

If it MS5 were to manage to hold a consultative referendum, then the public would need to vote to leave the euro. Most polls suggest a majority of the Italian public favour staying in, though support has diminished and the gap is now small. If the public did vote to leave, the government could then use that referendum as a mandate to start the process of a euro exit.

What is the most likely scenario?

There are a lot of possible scenarios, given the uncertainty about polls and elections, as well as the feedback loops between electoral reforms and the implications for government formation and policymaking. We have set out a scenario tree in Figure 3. Based on opinion polls, and the anti-establishment trends more generally, we judge that a No outcome (55%) is more likely than Yes (45%). The Italicum law would also most likely be watered down in such a scenario, meaning that future government formation as well as policymaking would be difficult. A Yes outcome would make less likely that the Italicum is watered down, given that Mr Renzi is a stronger supporter of it. However, other reforms before the next election (early 2018) would probably not be likely given that the current situation in terms of parliament would remain in place until then and Mr Renzi would not likely take measures that could hit his popularity in the run up to the poll.

A strong government beyond the next election would be very likely following a Yes vote. Given current opinion polls a strong PD government would be the more likely and it would then have the possibility to be a reformist government that tackled Italy’s economic problems. However, that is not a given, as that also would depend on the willingness of that government to follow an aggressive reform path, which could still lead to strong opposition from trade unions and other vested interests. Alternatively, an MS5 government could win the elections and take power. However, it would be a small probability within that scenario that they could enough support in parliament to hold a referendum on the euro, given the higher hurdle to pass constitutional laws.

How severe are Italy’s economic problems?

Italy badly needs an economic reform programme to boost its potential growth rate. Its potential growth is generally estimated at close to zero due to ageing and weak productivity growth (see Figure 4). Surveys of international competitiveness suggest it is structurally one of the weakest economy’s in the eurozone, with only Portugal and Greece ranked more poorly (Figure 5). The low potential growth rate exacerbates the country’s two other economic problems: its mountains of government debt and non-performing loans.



We have made some debt projections set out in the chart below. In the base case, we assume that nominal growth averages 2.5% in coming years, that the primary surplus gradually rises from 1.5% now to 2.5% and interest payments roughly trend at current levels. That leaves the debt ratio trending down only slightly to around 130% GDP in 2025 from 133% now. Furthermore, Italy’s debt sustainability could come into question in the case of even relatively moderate shocks. For instance, assuming 1% slower nominal growth and 1% higher interest rate, would see the debt ratio rising to 160% GDP over that horizon. Arguably the nominal GDP growth we assume is rather ‘generous’ given current potential growth estimates and trends in inflation.


At the same time, Italy’s banking sector needs more capital given the high level of non-provisioned loans. We estimate that if the banking sector sells its NPLs at 25-35%, given the current provisioning, this would imply a capital short-fall of EUR 88-124bn. This amounts to 5.5-7.8% GDP. This would significantly increase the government debt ratio if there was a direct re-capitalisation following a bail-in. Up until now, the government has been trying to find private sector solutions to re-capitalise its banks, but there are serious question marks about investor appetite.

What are the market implications?

The immediate reaction of Italian government bonds will be to sell-off in a No and rally on a Yes but in both cases spreads will remain elevated. The 10y spread over Italy could move towards 200bp in the first instance in the case of a No, and back towards 140bp in case of a Yes vote. However, these early moves would probably to some extent unwind (especially in case of the initial reaction following a Yes). It would likely become clear that a No vote would not immediately open the door for a MS5  government, while a Yes vote would not lead to much reform in the next year, while it could eventually put MS5 in the driving seat after the next elections. Crucially, we think the key issue is Italy’s economic vulnrabilities, which will remain in place over the next year whatever the result of the poll.

The ECB’s ongoing QE policy should limit the upside for Italy’s government bond yields. Given current sovereign credit ratings, Italy has a quite a buffer before all four agencies place its debt in the sub-investment grade category that would make its bonds ineligible for ECB asset purchases. The ECB bases itself on the highest rating, which currently is given by Fitch, which is three notches away from sub-investment grade (though with a negative outlook).

Reuters reported that the ECB is ready to temporarily step up purchases of Italian government bonds if the outcome of the referendum on Sunday leads to a surge in the country’s bond yields. It cites four unidentified ECB officials who also noted that the move would not necessarily need Governing Council approval. The ECB already deviates from the capital key to make substitute purchases to make up for not being able to make targets for countries where holdings have reached the issuer limit or for other technical reasons. However, this would be a relatively modest and temporary phenomenon because it cannot sharply and persistently deviate from the capital key under the current rules of the programme. Indeed, the Reuters report quotes the officials saying such a policy would be limited to ‘days or weeks to counter any immediate volatility’. If Italy needed long-term support, it would need to officially ask for help according to the report. This would presumably be via the OMT, though that would require Italy entering a reform programme, which would be politically very challenging.

However, an economic shock that leads to a sharp deterioration in the outlook for growth and government debt could increase concerns that there would be significant downgrades in the future.Alternatively, in the scenario where MS5 did get into government following parliamentary reform and did manage to hold a euro referendum, this would also obviously be a major game changer that would see Italy’s spread over Germany explode. An additional element, is that if investors do become worried, a surge in yields would also lead to a sharp deterioration in the government debt outlook, so could become a self-fulfilling prophesy.

On the positive side, following the next elections, a reformist PD government in a reformed parliament, could lead to a rise in growth expectations, leading to a virtuous circle of lower spreads and an improving debt outlook.

*  *  *

So that’s the long version, but we leave it to Doug Casey to sum it all up succinctly:

Italy would be the first domino to fall.


December 4 referendum fails >> M5S comes to power >> Italians vote to leave the euro currency >> European Union collapses

Deutsche bank cutting off 3,400 trading clients?  This will certainly have a devastating effect on the stock markets.  Underneath the hood something must be seriously wrong with DB;s health:  no doubt the huge run up in interest rates

(courtesy zero hedge)

Deutsche Bank Stock Slides After “Cutting Off” 3,400 “Non-Strategic” Trading Clients

In September, headlines of Deutsche Bank trading clients pulling collateral sparked grave concern over the world’s most systemically dangerous bank. Today, the stock is sliding once again as WSJ reports the bank said it would cease providing some coverage for about 3,400 actively trading clients in its global markets division, according to a memo sent to equities staff.

The memo to equity sales, sales trading and structuring staff said the move is with “immediate effect,” according toThe Wall Street Journal.

A Deutsche Bank spokesman confirmed the contents of the memo.

It follows a detailed review by the trading division of the German lender’s client list “to identify clients with whom it is not strategically viable for us to continue to do business,” according to the memo from Dixit Joshi.

The action is aimed at balancing “risk, revenue and profitability,” according to the memo. The cuts affect Institutional Client Group debt and equity sales, sales trading and equity structuring clients, according to the memo.

The question is – what knock-on effect will the liquidation of these 3,400 trading clients’ collateral have on markets… and Deutsche Bank’s risk.

We suspect this slide has further to go…


The battle for Aleppo is now over and now the real battle begins but it will be hopeless for the USA as they are losing influence in that part of the region.

a must read…

(courtesy Ton Luuongo/PlanetFree Will)

The Battle For Aleppo Is Over, Now The Real War Has Begun

Submitted by Tom Luongo via,

The Syrian Arab Army (SAA) has essentially reclaimed the city of Aleppo in the past couple of days.  The failure to break the siege from the Southwest coupled with the Turkish Army not resupplying militants meant the situation wouldn’t hold for long.

Aleppo is the key to the Syrian ‘civil war.’ Now that pro-Assad forces have won the day it touches off a number of responses around the region.  This further breaks down the position of U.S/NATO-backed forces trying to oust Syrian President Bashar al-Assad from power, regardless of what Turkish President Recep Tayyip Erdogan has to say about it.

It also ushers in the next potential escalation of the proxy war between the outgoing Obama administration, doing the bidding of the U.S. Deep State, and its opponents coalescing around Russia and its front-man President Vladimir Putin.

The Aleppo Fulcrum

Aleppo is the strategic key to Assad remaining in power.  This is why it has been fought for with such vigor by all sides.

The only thing left for the U.S./NATO/GCC coalition is a diplomatic solution.  But, given the military facts on the ground there is little hope of that as well.  The time for that was back in February when U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov brokered a cease-fire and Russia announced the removal of military assets from Syria.

That agreement, however, held no more water than the Minsk II agreement over Ukraine or the later ceasefire in September. That one was broken within 24 hours by a ‘mistaken’ U.S. military strike on SAA forces near Deir Ezzor.

And now that the battle for Aleppo is over, the whole regional situation becomes more dangerous, not less.  Because the window for any kind of victory for those within the U.S. and NATO that pushed for this conflict is closing as each day brings us closer to the inauguration of President Trump.

And Trump has all but said that his primary foreign policy goal is to reverse this operation and assist Russia and Iran in wiping out ISIS.

The Responses to Aleppo

Within hours of the news that the Sunni militant resistance in eastern Aleppo collapsed, the U.S. House passed House Bill 5732, authorizing an investigation into creating a No-Fly-Zone over Syria.

In other words, the U.S. House is looking for ways to start a hot war in Syria with Russia.  This may just be more impotent sabre rattling by a fading group of back-bencher neoconservatives – think Lindsay Graham and John McCain– but it is something that bears witness all the same.

The goal of a No-Fly Zone is to implement the ‘Plan B’ strategy to break Syria up into two separate countries.  Then they can create some form of Greater Kurdistan across parts of Syria, Iraq, Iran and eastern Turkey.

Russia’s deployment of S-300 and S-400 missile defense systems around Syria and delivering them as well to Iran is an important counter-move to this plan.

On the other side, Sunni Egypt pledged to send pilots to Syria to help Assad wipe out what remains of the ISIS/Al-Qaeda resistance in the South and East of the country.

When you have Sunni Egyptians fighting alongside Shi’ite Syrians it is time to seriously re-assess any conventional narrative you might have in your head.  Egypt has now openly sided with Russia in stopping the expansion of U.S.-fomented chaos around the Middle East and North Africa.

And it seems the election of Donald Trump was the impetus to break open these old definitions of who is on which side.

Wither Saudi Arabia

When all of this is viewed within the context of the goings-on at the latest OPEC meeting the picture becomes even clearer.

The agreement by OPEC to cut production by 1.2 million barrels was done to prop up oil prices in the medium term. This is an attempt by the Saudis to remain the marginal oil producer in the world, a status they have not held now for the past couple of years with the emergence of U.S. shale production.

But cutting production to raise prices alone will not plug the massive hole in the Saudi’s budget.  So, they threw Indonesia out of OPEC to allow individual GCC members to pump more oil under the rubric of OPEC but cut overall production.

As this situation gets more desperate for the U.S./Saudi forces trying to hold onto power in the region, expect more aggressive counter moves.

We’re seeing provocations by Ukraine into Crimea now.  Erdogan was likely forced to make that statement about Turkey’s invasion of Syria being in service of ousting Assad.

The European Union and Canada are contemplating and/or enacting new anti-Russian sanctions.

All of this means that the likelihood of some ugly false flag incident rises by the hour.  I expect Putin understands this and will not take the bait but there are no guarantees.





The Turkish lira plummets to 3.60 to the dollar.  Erdogan wants it’s central bank to lower rates not raise it to protect the currency.  Surprisingly he tells his citizens to buy gold with their lira and dollars

(courtesy zero hedge)

Erdogan Demands Turks Exchange Their Dollars To Gold, Lira

Early this morning, in yet another session of panicked selling, the Turkish Lira crashed to new record lows to just shy of USDTRY 3.60, momentarily going bidless as the currency plunged nearly 400 pips in seconds, after Turkish President Recep Erdogan said the path for investors will be opened with lower interest rates, and urged the central bank to imitate Japan and U.S. where rates are low: “why should we go around with 14-15 percent?”

The answer is simple: the currency tends to drop when an economy is seen as weak, the political regime unstable, or – yes – a central bank cuts rates, which Turkey, as shown in the chart below, can not afford if it hopes to maintain a stable economy with the lira already at all time lows.

Normally, any other country would find itself in a dilemma: how to lower rates as per the president’s demands to stimulate investment and the economy, without killing the economy… but not Erdogan. As AFP notes, the Turkish president “urged” his fellow Turks on Friday to convert their foreign currencies into gold and lira to stimulate the country’s economy as the lira continued its slide against the dollar.

“For those who have foreign currencies under the pillow, come change this to gold, come change this to Turkish lira. Let the lira win greater value. Let gold win greater value,” he said during a televised speech in Ankara.

It was not exactly clear how a few thousand Turks exchange lira for gold would “let gold win greater value”, nor how the same number of locals converting their dollars to lira would withstand another selling onslaught as soon the the Turkish central bank cut rates again, but that’s not really relevant for the Turkish president, who appears to have a far better understanding of how to wage “failed coups” than simple finance.

“What necessity is there to let foreign currency have greater value?” he asked.

There was no answer, but as he was speaking, the lira lost value against the US dollar, crashing just shy of 3.60. After his address, it stage a modest rebound at 3.55 against the greenback, a loss of over 1.5% on the day. In November alone, the lira has lost more than 10% against the dollar, and December was not starting off on the right foot either.

And no, he wasn’t joking: as Hurriyet reported moments ago, Turkey’s main stock exchange, Borsa Istanbul, became the first institution to convert all of its cash assets into the Turkish Lira a few hours after President Recep Tayyip Erdo?an called on people and institutions to back the struggling currency against the U.S. dollar.  Borsa Istanbul said in a written statement on Dec. 2 that it would convert all of its cash assets into lira and keep them in lira accounts.

Erdogan also warned that there were forces “playing games” against Turkey, which Turks could counter by changing their money. He did not say whom he was referring to. “Don’t worry, in a short while, we will destroy this game“, clearly referring to “evil speculators” who could be destroyed if only mom and pop exchanged the dollars in their mattress for the local currency.

As noted above, the Lira was also reacting to Erdogan’s repeated insistence on lowering interest rates because, he claims, there is “no other remedy”. He referred to the United States, Japan and Europe as examples of where rates are low and questioned why Turkey still had such high rates.

In a surprise to some, after several months of rate cuts, the central bank stepped in with an unexpected hike of 50 basis points in its leading rate last month. This prompted many to wonder how long Erdogan will tolerate the insolence of his central banker who clearly has defied his decree.

To be sure, concerns over Turkey’s political instability, including the government’s race to expand Erdogan’s powers, as well as its cracking relationship with the European Union meant a rally in the lira was shortlived after the bank’s announcement.

Worries over Erdogan’s influence grew after Prime Minister Binali Yildirim said on Thursday the government would bring a bill to parliament next week which proposes to change the constitution and give greater powers to the president. Considering Erdogan’s track record, it is only a matter of time before he appoints himself central bank head too, at which point the Turkish Lira and the Venezuela Bolivar will begin a race which one can reach a value of 0 faster.

Incidentally, anyone who does convert their dollars into gold can simultaneously start a countdown how long it will take for the “authorities” to come knocking and confiscate said gold.





Then this came out of nowhere:  the USA senate passed a bill to extend the Iran sanctions.  This jeopardizes the Iran/USA nuclear deal.  Oil shoots up! Iran furious!

(courtesy zero hedge)


Iran Furious After Obama Said To Extend Iran Sanctions; Oil Jumps To 2016 Highs

A furious Iran threatened to retaliate early Friday against a U.S. Senate vote to extend the Iran Sanctions Act (ISA) for 10 years, saying it violated last year’s deal with six major powers that curbed its nuclear program.  The ISA was first adopted in 1996 to punish investments in Iran’s energy industry and deter its alleged pursuit of nuclear weapons; it was due to expire on Dec. 31. Lawmakers said the extension would make it easier for sanctions to be reimposed if Iran violated the nuclear settlement. The extension was passed unanimously on Thursday.

While US officials said the ISA’s renewal would not infringe on Obama’s landmark nuclear agreement (which may or may not be voided by Trump), and under which Iran agreed to limit its sensitive atomic activity in return for the lifting of international financial sanctions that harmed its oil-based economy, senior Iranian officials took odds with that view. Iran’s nuclear energy chief, Ali Akbar Salehi, who played a central role in reaching the nuclear deal, described the extension as a “clear violation” if implemented.

“We are closely monitoring developments,” state TV quoted Salehi as saying. “If they implement the ISA, Iran will take action accordingly.”

Iran’s most powerful authority, the Supreme Leader Ayatollah Ali Khamenei, warned in November that an extension of U.S. sanction would be viewed in Tehran as a violation of the nuclear accord.

“Iran has shown its commitment to its international agreements, but we are also prepared for any possible scenario. We are ready to firmly protect the nation’s rights under any circumstances,” Foreign Ministry spokesman Bahram Ghasemi said in comments reported by state news agency IRNA.

The Senate’s vote will have political consequences as well: the U.S. Senate vote was a blow to the more moderate and pragmatic Iranian President Hassan Rouhani, who engineered the diplomatic opening to the West that led to the nuclear deal, and may embolden his hardline rivals ahead of presidential election next year. Khamenei and his hardline loyalists, drawn from among Shi’ite Muslim clerics and Revolutionary Guards, have criticized the deal and blamed Rouhani for its failure to deliver swift improvements in living standards since the lifting of international sanctions in January.

It was not immediately clear what form any eventual retaliation for the U.S. Senate vote might take.

Influential Friday prayer leaders, appointed by Khamenei, strongly denounced the ISA extension and called on the government to take action, according to IRNA.

According to Reuters, Iranian lawmaker Akbar Ranjbarzadeh said Iran’s parliament would convene on Sunday to discuss a bill obliging the government to “immediately halt implementation of the nuclear deal” if Obama approves the ISA, the Students News Agency ISNA reported. Another lawmaker quoted by the semi-official Tasnim news agency said Iran’s parliament planned to discuss a bill that would prevent the government purchasing “American products”.

* * *

Until today, the White House had not pushed for an extension of the sanctions act, but had not raised serious objections. Congressional aides, cited by Reuters, said they expected President Barack Obama to sign the extension.

However, moments ago, the White House did opine, and according to a Reuters headline, Obama is expected to extend the Iran sactions, in effect not only jeopardizing his own Nuclear treaty…


But potentially opening the way for the reimposition of oil sanctions on Iran. While it is unlikely that sanctions could return while Obama is still president, after the Trump inauguration it’s a different matter entirely, as explained earlier this month in “Will Trump Send The Price Of Oil Soaring” by eliminating as much as 1 million in Iranian output from the world market.

To be sure, crude oil was certainly excited on the news, jumping to the highest price since July 2015.


Norway admits it has problems as it switches 130 billion dollars worth of funds into global equities from bonds.  They expect an additional 2.5% rate of return.  Good luck to them.


(courtesy zero hedge)

Norway Buying $130 Billion In Global Equities As Sovereign Wealth Fund Continues To Bleed Cash

After being forced to withdraw at least $15 billion to fund 2017 budget deficits, the $860 billion Norwegian sovereign wealth fund has announced that it will change it’s portfolio allocations to try to make up the difference.  The change will result in 75% of the fund’s capital being allocated to global equities, up from the current 60%.  Sure, because funneling another $130 billion to the global equity bubble is just the prudent thing to do for an extra 40bps of “expected average annual real returns.”

The central bank’s board, which oversees the fund, on Thursday recommended an increase in the equity share to 75 percent from 60 percent. That will raise the expected average annual real return to 2.5 percent over 10 years and to 3.5 percent over 30 years, compared with 2.1 percent and 2.6 percent, respectively, under the current setup.

The world’s largest sovereign wealth fund said that it expects an annual return of only 0.25 percent on bonds over the next decade and that the expected “equity risk premium,” or return on stocks over government bonds, will be just 3 percentage points in a cautious estimate.

“In our analyses, this is clearly evident in global data: internationally, growth in firms’ cash flows and equity returns are correlated with growth in the global economy,” Deputy Governor Egil Matsen said in a speech Thursday in Oslo. “Global economic growth in the coming years is expected to be below its historical level. This ‘pessimism’ is partly related to the driving forces behind the low level of the real interest rate.”

Of course, the decision comes after the fund has been forced to withdraw capital over the past two years to fund budget deficits that are expected to reach over 8% of GDP.


The withdrawals accelerated just as the heavily oil-dependent economy of Norway started to absorb the impact of lower oil prices.


In a previous interview with Bloomberg, Egil Matsen, the Deputy Governor at Norway’s Central Bank, said the withdrawals were starting to impact the manner in which the fund manages its risk profile.   

Relevant for how we think about the risk-bearing capacity of the fund.  Say you have a decline in the equity market, and these returns have been partly funding the government, do you want variations in international financial markets to have a direct impact on fiscal policy?

But Finance Minister Siv Jensen dismissed criticism of the withdrawals saying that the administration is using the fund as was intended noting that withdrawals remain below the fund’s annual return target of 4%.

“Now that we are in an extraordinary situation, hit by the biggest oil price shock in 30 years, it would be crazy if we didn’t have an expansionary fiscal policy,” she told Bloomberg. Jensen rejected suggestions that the fund was “vulnerable.” She described it as “rock solid.”

The fund’s managers have warned it’s getting harder to live up to a real return target of 4 percent. It has returned 3.44 percent over the past 10 years. For now, planned withdrawals aren’t big enough to force the fund to sell assets. It estimates income from dividends, real estate and bonds will reach 207.5 billion kroner next year, almost double the amount the government plans to withdraw.

Meanwhile, as Norway admits that it expects “average annual real returns of 2.5 percent over 10 years,” in the U.S., we just wrote abouthow the largest pension fund, CalPERS, is struggling with whether it’s long-term return targets should be 7.5% or 6%.  Sure, good luck with that.

In just a couple of months, the largest pension fund in the United States, the California Public Employees’ Retirement System (CalPERS), will have to decide whether they’ll rely on sound financial judgement and math to set their rate of return expectations going forward or whether they’ll cave to political pressure to maintain artificially high return hurdles that they’ll never meet but help to maintain their ponzi scheme a little longer.  The decision faced by CALPERS is whether their long-term assumed rate of return on assets should be lowered from the current 7.5% down to a more reasonable 6%.

As pointed out by Pensions & Investments, the decision has far-reaching consequences.  First, a lower rate of return will equate to higher contribution levels for municipalities throughout California, many of which are on the verge of bankruptcy already.  Second, given that CALPERS is the largest pension fund in the United States, a move to lower return hurdles could set a precedent that would have to be followed by other funds around the country in even worse shape (yes, we’re looking at you Illinois).

While Norway is at least admitting their problem, somehow we suspect that “math/logic” will continue to lose here in the U.S…better to bury your head in the sand for a couple of more years.



Former Saudi Oil Minister on the OPEC deal:  We tend to cheat:

Oil reverses trend:

(courtesy zero hedge)

Oil Dips After Former Saudi Oil Minister Admits On OPEC Deals, “We Tend To Cheat”

Not really surprising anyone, former Saudi Arabia oil inister Ali Al-Naimitold a forum in Washington that it “remains to be seen” if the OPEC deal is successful, noting that the “market is set to rebalance if everyone cuts production” but added “we tend to cheat.”

Having been replaced in May, former Sauid oil minister Al-Naimi had plenty to say today…


The reaction is practically nothing for now…

(courtesy zero hedge)

US Oil Rig Count Rises To 10-Month Highs

From the 316 rig trough in May, American oil drillers have added 161 to 477 – the highest since January 2016. The rising rig count continues to track lagged oil prices higher and US crude production is following that trend to its highest level since June.

US Oil Rig count is up 3 in the last week to 477 – up 25 of the last 27 weeks…


And with the OPEC deal holding oil prices, is US production set to rise no matter what?



none today

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


Euro/USA   1.0649 down .0013/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP WINS THE ELECTION/USA READY TO GO ON A SPENDING BINGE WITH THE TRUMP VICTORY/


GBP/USA 1.2629 UP.0041 (Brexit by March 201/UK government loses case/parliament must vote)


Early THIS FRIDAY morning in Europe, the Euro FELL by 13 basis points, trading now WELL BELOW the important 1.08 level FALLING to 1.0616; 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 + THE ELECTION OF TRUMP IN THE USA / Last night the Shanghai composite CLOSED DOWN 29.47 0r 0.90%     / Hang Sang  CLOSED DOWN 313.41 POINTS OR 1.37%   /AUSTRALIA IS LOWER BY 1.37% / EUROPEAN BOURSES ALL IN THE RED 

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

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

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

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

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

The NIKKEI: this FRIDAY morning CLOSED DOWN 87.04 POINTS OR 0.47%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 313.41 OR 1.37%   Shanghai CLOSED DOWN 29.47 POINTS OR 0.90%   / Australia BOURSE IN THE RED /Nikkei (Japan)CLOSED DOWN 87.04 POINTS OR 0.47%/  INDIA’S SENSEX IN THE RED

Gold very early morning trading: $1172.40


Early FRIDAY morning USA 10 year bond yield: 2.43% !!! DOWN 1 IN POINTS from THURSDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. THE RISE IN YIELD WITH THIS SPEED IS FRIGHTENING

 The 30 yr bond yield  3.074, DOWN 2 IN BASIS POINTS  from THURSDAY night.

USA dollar index early FRIDAY morning: 100.94 DOWN 1 CENT(S) from THURSDAY’s close.

This ends early morning numbers FRIDAY MORNING



And now your closing FRIDAY NUMBERS

Portuguese 10 year bond yield: 3.70% DOWN 7  in basis point yield from THURSDAY  (does not buy the rally)

JAPANESE BOND YIELD: +.04% UP 1  in   basis point yield from  THURSDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD:1.543%  DOWN 7  IN basis point yield from  THURSDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.90  DOWN 14  in basis point yield from THURSDAY 

the Italian 10 yr bond yield is trading 36 points HIGHER than Spain.





Closing currency crosses for FRIDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/2:15 PM

Euro/USA 1.0662 DOWN .0006 (Euro DOWN 6 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 113.71 down: 0.200(Yen up 20 basis points/ 

Great Britain/USA 1.2702 up 0.01147( POUND up 115 5 basis points)

USA/Canada 1.3291 DOWN 0.0017(Canadian dollar UP 17 basis points AS OIL ROSE TO $51.58


This afternoon, the Euro was down by 6 basis points to trade at 1.0666


The POUND ROSE 115 basis points, trading at 1.2702/

The Canadian dollar ROSE by 17 basis points to 1.3291, AS WTI OIL ROSE TO :  $51.58

The USA/Yuan closed at 6.8830
the 10 yr Japanese bond yield closed at +.04% UP 0 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield down 6   IN basis points from THURSDAY at 2.381% //trading well below the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.048 DOWN 6  in basis points on the day /

Your closing USA dollar index, 100.79 DOWN 16 CENTS  ON THE DAY/2.30 PM 

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

London:  CLOSED DOWN 22.21 POINTS OR 0.33%
German Dax :CLOSED DOWN 20.70 POINTS OR 0.20%
Paris Cac  CLOSED DOWN 31.79 OR .70%
Italian MIB: CLOSED DOWN  11.48 POINTS OR 0.07%

The Dow was DOWN 21/51 points or 0.11%  4 PM EST

NASDAQ UP  4.66  points or 0.09%  4.00 PM EST
WTI Oil price;  51.58 at 2:30 pm; 

Brent Oil: 54.29   2:30 EST




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

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


BRENT: $54.56

USA 10 YR BOND YIELD: 2.394%

USA DOLLAR INDEX: 100.63 DOWN 32  cents(huge resistance at 101.80)

The British pound at 5 pm: Great Britain Pound/USA: 1.27274./ UP 137  BASIS POINTS.

German 10 yr bond yield at 5 pm: +.281%


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


Tech, Small Caps Suffer Worst Week In 10 Months As Trump Hangover Hits

 Everyone’s doing it, just follow them…


An interesting week:

  • Nasdaq’s worst week since Feb 2016
  • Small Caps worst week since Feb 2016
  • Bank stocks up 4 weeks in a row to highest since Jan 2008
  • FANG Stocks down 4 of the last 6 weeks
  • Treasuries down 4 weeks in a row, TLT lowest close in a year
  • USD Index down first time in 4 weeks
  • Oil’s best week since Feb 2011 (at highest since July 2015)
  • Gold down 4 weeks in a row to 10 month lows

Stocks on the week stunned investors, with Small Caps and Nasdaq suffering their worst weeks since Feb 2016 (and Dow and Trannies clung to unch)

NOTE: The Dow gained 10 points on the week – just 3 stocks – GS, UNH, and JPM added over 150 points alone.

Since the election, Nasdaq is now red…


But futures show the real action…


Financials (and Energy) remain the biggest post-Election winners (with Utilities and Staples worst) but both banks and energy stocks faded today… (banks worst day in over 2 months)


Just two charts to consider…


Notably VIX flash-crashed on payrolls… but look at Dow Futures swings – desperate to keep green for the week…


Post-payrolls, oil was best but bonds and bullion beat stocks


FANG (Diamondback) outperformed FANG Stocks on the week…


The yield curve steepened on the week (after 2 weeks of flattening), leaving 2Y yields lower on the week and the long-end underperforming…


So bonds and stocks down on the week – as Risk-Parity funds suffer the 7th week of losses in the last 9 weeks…


FX markets were volatile this week withthe USD index ending lower for the first time in 4 weeks led by cable strength…


Crude soared on the week – best week since Feb 2011 (to July 2015 highs) and silver gained as gold and copper slipped lower


Finally we leave you with this – here is your market America…

h/t @Not_Jim_Cramer



This was highlighted to you late yesterday and worth repeating as the “Bond King” moves markets.  He has accurately predicted the bottom to the USA 10 year yield and now he was warned everybody that the Trump trade is over.

(courtesy zero hedge/Jeff Gundlach)

Gundlach Turns Bearish Again: “Stocks Have Peaked, It’s Too Late To Buy The Trump Trade”






Bill Gross the former bond king echoes Gundlach completely stating the Trump rally is totally misguided:

(courtesy zero hedge)

Gross Echoes Gundlach, Says Trump Rally Is Misguided: “Move To Cash”

On the heels of Jeff Gundlach‘s “there’s going to be a buyer’s remorse period” warnings yesterday, the other ‘bond king’ has raised similar fears that the Trump rally is overdone (as are the prospects for growth behind it). Putting aside the book-talking as their bond portfolios suffer, Gross echoes Gundlach’s “Trump’s not the wizard of oz” comments, noting that the next president faces serious structural headwinds and warns investors “should move to cash,” as any fiscal stimulus gains will be temporary at best.

As we noted yesterday, speaking to Reuters, Gundlach, who went “maximum negative” on Treasuries on July 6 when the yield on the benchmark 10-year Treasury note hit 1.32 percent and bottom-ticked what may have been a generational low in rates, said that markets could reverse the recent momentum in equities, and at the very latest by U.S. President-elect Donald Trump’s Jan. 20, 2017 inauguration.

The “new bond king” said that the strong U.S. stock market rally, surge in Treasury yields and strength in the U.S. dollar since Trump’s surprising presidential victory more than three weeks ago look to be “losing steam,” Gundlach told Reuters in a telephone interview.

“The bar was so low on Trump to the point people were expecting markets will go down 80 percent and global depression – and now this guy is the Wizard of Oz and so expectations are high,” Gundlach said. “There’s no magic here.”

Gundlach had warned last month that federal programs take time to implement, rising mortgage rates and monthly payments are not positive for the “psyche of the middle class and broadly,” and supporters of defeated White House candidate Hillary Clinton are not in a mood to spend money.

There is going to be a buyer’s remorse period,” said Gundlach, who voted for Trump and accurately predicted in January the winner of the presidential election.

And now, as Bloomberg reports, “the old bond king” Bill Gross is less than enthusiastic about the future under Trump…

Investors are misguided in betting that promised tax cuts, infrastructure spending and deregulation will spur faster growth, according to an e-mail Thursday from Gross, the billionaire bond fund manager. He said the benefits from such fiscal stimulus likely would be temporary.

Gross said future growth is primarily a function of productivity, which has flat lined for the last several years and shows little promise of accelerating.

“A strong dollar and continuing structural headwinds including aging demographics, de-globalization trade policies, and accelerating debt-to-GDP in almost all countries at now higher interest rates, promise to contain productivity at perhaps 1 percent annual growth rates and therefore real GDP growth at 2 percent,” he wrote.

“An investor should move to cash and cash alternatives,such as high probability equity arbitrage situations,” Gross, who runs the $1.7 billion Janus Global Unconstrained Bond Fund, said. “Bond durations should be far below benchmarks.”

With bonds bid this morning (and stocks suffering broadly the last two days), perhaps they are just talking their books, as Gundlach offers his opinion on what happens next: “The dollar is going to go down, yields have peaked and will move sideways, stocks have peaked as well and gold is going to go up in the short term.”




A jobs gain of 178,000.  Unemployment tumbles  (because more leave the labour force) to 4.6%.  The important average hourly earnings worst since 2014 dropping by .1% instead of the rise of .4% of last month and the expected .2% rise.

(courtesy BLS/zerohedge)

Payrolls Rise 178K As Unemployment Rate Tumbles To 4.6% But Average Hourly Earnings Worst Since 2014

While the headline November payrolls print came in almost on top of expectations at 178K, vs consensus of 180K there were two big surprises in today’s report, one being the unemployment rate which plunged from 4.9% to 4.6%, well below the 4.9% expected, but the biggest negative surprise was that the Average hourly earnings in November dropped by 0.1%, far below last month’s 0.4% rise, and below the 0.2% expected with the annual increase growing by a far more modest 2.5% than the 2.8% expected.

The change in total nonfarm payroll employment for September was revised up from +191,000 to +208,000, but the change for October was revised down from +161,000 to +142,000. With these revisions, employment gains in September and October combined were 2,000 less than previously reported. Over the past 3 months, job gains have averaged 176,000 per month.

One red flag in the report was the 4,000 drop in manufacturing workers, worse than the -3,000 expected, and following last month’s -5,000 print. Also of note, workers unable to work due to bad weather according to the BLS were 19K in Nov. The historical average for Nov. is 72k employees cannot work due to poor weather conditions.  Another 113k workers who usually work full-time could only work part-time due to the weather last month.

The reason for the steep drop in the unemployment rate is that while the number of employed rose from 151,925K to 152,085K, coupled with a decline in the number of unemployed by 387K, the number of people not in the labor force soared to 95.055 million, a new all time high, which in turn pressured the labor force participation rate to 62.7%, the lowest since June and just shy of the 30 year low.

But as noted above, the biggest surprise was the negative print in the average hourly earnings which declined by 0.1%, the first negative print in 2016 and the wrst print since 2014.

More details from the report:

Total nonfarm payroll employment rose by 178,000 in November. Thus far in 2016, employment growth has averaged 180,000 per month, compared with an average monthly increase of 229,000 in 2015. In November, employment gains occurred in professional and business services and in health care.

Employment in professional and business services rose by 63,000 in November and has risen by 571,000 over the year. Over the month, accounting and bookkeeping services added 18,000 jobs. Employment continued to trend up in administrative and support services (+36,000), computer systems design and related services (+5,000), and management and technical consulting services (+4,000).

Health care employment rose by 28,000 in November. Within the industry, employment growth occurred in ambulatory health care services (+22,000). Over the past 12 months, health  care has added 407,000 jobs.

Employment in construction continued on its recent upward trend in November (+19,000), with a gain in residential specialty trade contractors (+15,000). Over the past 3 months, construction has added 59,000 jobs, largely in residential construction.

Employment in other major industries, including mining, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government, changed little over the month.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in November. In manufacturing, the workweek declined by 0.2 hour to 40.6 hours, while overtime was unchanged at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.6 hours.

In November, average hourly earnings for all employees on private nonfarm payrolls  declined by 3 cents to $25.89, following an 11-cent increase in October. Over the year, average hourly earnings have risen by 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory employees edged up by 2 cents to $21.73 in November.


Now for the real report:
Wow!! a biggy:  Americans not in the labour force soar to 95.1 million a huge jump of 446,000 poor souls in one month:
(courtesy zero hedge)

Americans Not In The Labor Force Soar To Record 95.1 Million: Jump By 446,000 In One Month

So much for that much anticipated rebound in the participation rate.

After it had managed to post a modest increase in the early part of the year, hitting the highest level in one year in March at 63%, the disenchantment with working has returned, and the labor force participation rate had flatlined for the next few month, ultimately dropping in November to 62.7%, just shy of its 35 year low of 62.4% hit last October. This can be seen in the surge of Americans who are no longer in the labor force, who spiked by 446,000 in November, hitting an all time high of 95.1 million.

As a result of this the US labor force shrank by 226,000 to 159,486K, down from 159,712K a month ago, and helped the unemployment rate tumble to 4.6%, the lowest level since August 2007.

Adding the number of unemployed workers to the people not in the labor force, there are now over 102.5 million Americans who are either unemployment or no longer looking for work.





Wow!!  The number of multiple job holders in the USA has now hit a high of 8 million. The non seasonable adjustment shows that we had a drop of 628,000 full time jobs and an addition of 6 78,000 part time jobs. No wonder the uSA labour scene is in a mess

(courtesy zero hedge)


The quality of the jobs are just not there:  the Nov gains were in accountants, nurses waiters and government workers and as noted above, part time workers

(courtesy zero hedge)


The following kind of highlights the nonsense in the figures that the BLS gives us every month.  Since 2014: the USA has added 571,000 waiters and bartenders but lost 34,000 manufacturing jobs.

(courtesy zero hedge)

Since 2014 The US Has Added 571,000 Waiters And Bartenders And Lost 34,000 Manufacturing Workers

As another month passes, the great schism inside the American labor force get wider. We are referring to the unprecedented divergence between the total number of high-paying manufacturing jobs, and minimum-wage food service and drinking places jobs, also known as waiters and bartenders. In October, according to the BLS, while the number of people employed by “food services and drinking places” rose by another 18,900, the US workforce lost another 4,000 manufacturing workers.

This is the fourth consecutive month of declining manufacturing workers, and the 7th decline in the past 10 months.

The chart below puts this in context: since 2014, the US had added 571,000 waiters and bartenders, and has lost 34,000 manufacturing workers.

While we would be the first to congratulate the new American waiter and bartender class, something does not smell quite right. On one hand, there has been a spike in recent restaurant bankruptcies or mass closures (Logan’s, Fox and Hound, Bob Evans), which has failed to reflect in the government report. On the other hand, as the National Restaurant Association’s Restaurant performance activity index showed in October, overall industry sentiment is the worst since the financial crisis, due to declines in both same-store sales and customer traffic, suggesting that restaurant workers should now be in the line of fire for mass layoffs.

However, what we find more suspect, is that according to the BLS’ seasonally adjusted “data”, starting in March of 2010 and continuing through September of 2016, there has been just one month in which restaurant workers lost jobs, and alternatively, jobs for waiters and bartenders have increased in 80 out of the past 81 months, with just one month of job losses, something unprecedented in this series history.

Putting this divergence in a long context, since the official start of the last recession in December 2007, the US has gained 1.8 million waiters and bartenders, and lost 1.5 million manufacturing workers. Worse, while the latter series had been growing, if at a slower pace than historically, it has now clearly rolled over, and in 2016, some 60,000 manufacturing jobs have been lost.

Like last month, we remain curious what this “data” series will look like after it is revised by the BLS shortly after the NBER declares the official start of the next recession.

The Birch group comments on how Trump may change the dynamics of the Fed:

(courtesy Birch Group)

Intriguing Predictions On Trump’s Plan For Federal Reserve


Let us close the week out with this wrap up courtesy of Greg Hunter of USAWatchdog

(courtesy Greg hunter/USAWatchdog)


  1. Deliveries fro Dec…Making no difference in the price AGAIN…Every year Harvey gets Excited about the HUGE DEC Delivery Month..and Every Year NOTHING HAPPENS…same old same old…Put a sock in it


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