Gold at (1:30 am est) $1167.60 down $6.40

silver  at $16.74:  DOWN 8 cents

Access market prices:

Gold: 1169.60

Silver: 16.73




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:

TUESDAY gold fix Shanghai

Shanghai morning fix Dec 6 (10:15 pm est last night): $  1198.73

NY ACCESS PRICE: $1173.70 (AT THE EXACT SAME TIME)/premium $25.03


Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1195.62



China rejects NY pricing of gold  as a fraud  


London Fix: Dec 6: 5:30 am est:  $1171.15   (NY: same time:  $1171.20    5:30AM)

London Second fix Dec 6: 10 am est:  $1172.50 (NY same time: $1172.40    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 ROSE by 392 contracts UP to 159,866 with respect to YESTERDAY’S trading.    In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .799 BILLION TO BE EXACT or 114% of annual global silver production (ex Russia & ex China).


In gold, the total comex gold FELL by 4,748 contracts WITH THE FALL IN  THE PRICE GOLD ($1.10 with YESTERDAY’S trading ).The total gold OI stands at 394,694 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 37 notices filed upon for 3700 oz of gold.


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


We had no changes in tonnes of gold at the GLD,

Inventory rests tonight: 869.90 tonnes



we no changes in silver inventory tonight

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 ROSE by 392 contracts UP to 159,866 as the price of silver ROSE by $.07 with YESTERDAY’S trading.  The gold open interest FELL by 4,748 contracts DOWN to 394,694 as the price of gold FELL BY  $1.10 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


i)Late  MONDAY night/TUESDAY morning: Shanghai closed DOWN 5.06 POINTS OR 0.16%/ /Hang Sang closed UP 169.60  OR 0.75%. The Nikkei closed UP 85.55 OR 0.47%/Australia’s all ordinaires  CLOSED UP 0.52% /Chinese yuan (ONSHORE) closed UP at 6.8790/Oil FELL to 51.09 dollars per barrel for WTI and 54.43 for Brent. Stocks in Europe: ALL IN THE GREEN.  Offshore yuan trades  6.8773 yuan to the dollar vs 6.8790  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS 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


none today


lack of global demand is hurting China and they admit that by slashing salary guidelines:

(courtesy zero hedge)


i)It looks like we are heading for early elections in Italy which will have considerable problems for the EU in stay intake.

( zero hedge)

ii)This is a biggy! Monte Paschi has been told to prepare to a state bailout. The risk in this story is Paschi but a fallout for all the other Italian banks. The next question will be how will Germany feel on a state assisted bailout.  They will demand a bail in but that will hurt bondholders (Italian bonds are almost all held by Italian citizens–many moms and pops who bought these insolvent items thinking that they were good)

(zero hedge)


iii)To complicate matters, the Italian constitutional court will  hold a January 24 hearing on new electoral law.  It is unclear if they will rule immediately allowing changes which would hurt chances for the 5 star party forming a government:

( zero hedge)

iv)Another complication to the mix;  Fitch cuts the outlook for the Italian banks citing their huge bad debt and the referendum vote risks:

( zerohedge)


We now have proof that Erdogan and sons were dealing with ISIS as the conduit to taking Iraqi and Syrian oil through Turkish ports:

( zero hedge)


none today


i)The following article shows how Putin outsmarted OPEC again

( I Slav/Oil

ii)API drawdown in crude/gasoline and distillate a major build and a huge buildup in inventories at Cushing.

WTI strangely rises on that news:

(courtesy zero hedge)


none today


i)As we pointed out to you on several occasions, Muslims can now buy gold as long as it is gold backed with real metal:

(courtesy Carpenter/bloomberg)

ii)Now they are worried about gold supply as miners caught off funding for new exploration targets.  The author then asks:  who needs real metal if paper will do?

( Sanderson/London’s Financial times)

iii)Mike Kosares with his insight into the uSA election

( Mike Kosares/GATA)

iv)Mark Mobius states that gold will rise as the Fed goes slow on its rate hikes

(courtesy Mark Mobius/


i)It sure looks like Dallas is headed for bankruptcy court with respect to deficiencies in their police and fire pension fund.

( Mish Shedlock/Mishtalk)

ii)This is not good:  USA productivity from its workers suffers its first two quarter annual decline

( zero hedge)

iii) The trade deficit came in much larger than expected rising to 42 billion from 36 billion. This was due to the strong dollar which causes exports to decline and imports to rise. This will cause 4th quarter GDP to fall.

( zero hedge)

iv)Factory orders surge prior to the USA election as government spending increased dramatically.  This happens all the time before an election so do not extrapolate the data thinking that it will continue:

( zero hedge)

v)However for the 22nd straight month, USA durable goods orders declined on a year over year basis

( zero hedge)

vi)Donald does like the huge costs to AirForce ONE Boeing 747s. He states costs are out of control and ordered them cancelled.

( zero hedge)
vii)A great commentary by David Stockman on Sears and how Steve Mnuchin et al helped destroy the company.  David Stockman warns us on how Mnuchin will fair in the Trump cabinet:

( David Stockman)

Let us head over to the comex:


The total gold comex open interest FELL BY 4,748 CONTRACTS to an OI level of 394,694 AS THE PRICE OF GOLD FELL $1.10 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 1,682 contracts DOWN to 1,590.We had 1612 notices served upon yesterday so we lost another 70 contracts or 7000 oz will not stand for delivery and  no doubt these were paper settled. This should end the paper settlements and probably from tomorrow on we will see gains in amount standing.

For the next delivery month of January we had a GAIN of 26 contracts UP to 2572. For the next big active delivery month of February we had a LOSS of 4016 contracts down to 271,766.

We had 37 notices filed upon today for 3700 oz


And now for the wild silver comex results.  Total silver OI ROSE by 392 contracts FROM 159,474 UP TO  159,866  as the price of silver ROSE BY $0.07 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 75 contracts DOWN to 1988 CONTRACTS . We had 23 notices served upon yesterday so we lost 52 contracts or an additional 260,000 oz will not stand for delivery.

The next non active delivery month is January and here the OI fell by 281 contracts down to 3141. This level seems highly elevated. Maybe we are going to see the same huge metals gains in silver as we have witnessed in gold.

The next big active delivery month is March and here the OI fell by  581  contracts down to 129,504 contracts.

We had 52 notices filed for 260,000 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 131,304  contracts which is fair.

Friday’s confirmed volume was 235,519 contracts  which is GOOD

Initial standings for DECEMBER
 Dec 6.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 29,417.25 oz
915 kilobars
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
nil oz
No of oz served (contracts) today
37 notices
3700 oz
No of oz to be served (notices)
1553 contracts
155,300 oz
Total monthly oz gold served (contracts) so far this month
8372 notices
837,200 oz
26.06 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     3,463,333.9 oz
Today we HAD 1 kilobar transaction as A NET 933 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 0 customer deposit(s):
total customer deposits; nil oz
We had 1 customer withdrawal(s)
 i) out of Scotia;  29,417.25 oz  (915 kilobars)
total customer withdrawal: 29,417.25 oz
We had 2  adjustment(s)
i) out of Brinks:  44,902.13 oz was adjusted out of the dealer and this landed into the customer account of Brinks
ii) Out of Scotia:  33,005.583 oz was adjusted out of the dealer and this landed into the customer account of Scotia
Total dealer inventor 2,071,755.948 or 64.440 tonnes (where are the settlements)
Total gold inventory (dealer and customer) = 9,706,173.129 or 301.90 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 301.90 tonnes for a  loss of 1  tonnes over that period.  Since August 8 we have lost 52 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 37 contract(s)  of which 2 notices were stopped (received) by jPMorgan dealer and 16 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 (8372) x 100 oz or 837,200 oz, to which we add the difference between the open interest for the front month of DEC (1590 contracts) minus the number of notices served upon today (37) x 100 oz per contract equals 1,092,400 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 (8372) x 100 oz  or ounces + {OI for the front month (1590) minus the number of  notices served upon today (37) x 100 oz which equals 1,092,500 oz standing in this non active delivery month of DEC  (33.981 tonnes). corrected from yesterday
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.   33.981 tonnes
total for the 12 months;  225.525 tonnes
average 18.793 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: 202.286 tonnes per the 8 months or 25.28 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:  33.981 tonnes are standing vs last year’s  24 tonnes on first day notice and 6.45 tonnes on the completion of it’s 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 6. 2016
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
90,169.06  oz
Deposits to the Dealer Inventory
nil  OZ
Deposits to the Customer Inventory 
1,118,382.703 oz
No of oz served today (contracts)
(260,000 OZ)
No of oz to be served (notices)
1936 contracts
(9,680,000  oz)
Total monthly oz silver served (contracts) 1521 contracts (7,605,000 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  1,066,092.7 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 1 customer withdrawal(s):
i) Out of SCOTIA:  90,169.06 oz
Total customer withdrawals: 90,169/06  oz
 we had 2 customer deposit(s):
 i) Into CNT:  600,498.303 oz
ii) Into HSBC: 517,884.400 oz
total customer deposits; 1.118,382.703  oz
 we had 1 adjustment(s)
i) Out of CNT: 19,859.26 oz was adjusted out of the dealer and this landed into the customer account of CNT
Volumes: for silver comex
Today the estimated volume was 46,415 which is VERY GOOD
YESTERDAY’S  confirmed volume was 59,813 contracts  which is EXCELLENT
The total number of notices filed today for the DEC. contract month is represented by 52 contracts for 260,000 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  1521 x 5,000 oz  = 7,605,000 oz to which we add the difference between the open interest for the front month of DEC (1988) and the number of notices served upon today (52) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the DEC contract month:  1521(notices served so far)x 5000 oz +(1988) OI for front month of DEC. ) -number of notices served upon today (52)x 5000 oz  equals  17,290,000 oz  of silver standing for the DEC contract month.
we lost 52 contracts or an additional 260,000 oz will not stand.
Total dealer silver:  35.1460 million (close to record low inventory  
Total number of dealer and customer silver:   178.778 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.


And now the Gold inventory at the GLD
Dec 6/no changes in gold inventory/inventory rests at 869.92 tonnes.
Dec 5./ a tiny withdrawal of .32 tonnes and this is probably to pay for fees/inventory rests tonight at 869.92 tonnes
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 6/ Inventory rests tonight at 869.92 tonnes


Now the SLV Inventory
Dec 6/no changes in silver inventory at the SLV/inventory rests at 345.995 million oz
Dec 5/no changes in silver inventory at the SLV/inventory rests at 345.995 million oz/
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 6.2016: Inventory 345.995 million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 7.2 percent to NAV usa funds and Negative 7.1% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.5%
Percentage of fund in silver:39.2%
cash .+0.3%( Dec 6/2016)
2. Sprott silver fund (PSLV): Premium FALLS to -.15%!!!! NAV (Dec 6/2016) 
3. Sprott gold fund (PHYS): premium to NAV FALLS TO – 0.82% to NAV  ( Dec 6/2016)
Note: Sprott silver trust back  into NEGATIVE territory at -0.15% /Sprott physical gold trust is back into NEGATIVE territory at -0.82%/Central fund of Canada’s is still in jail.


Major gold/silver stories for TUESDAY


Jan discusses the new Shariah gold standard

Shariah Gold Standard Approved for $2 Trillion Islamic Finance Market

Shariah Gold Standard Approved for $2 Trillion Islamic Finance Market

by Jan Skoyles, Editor Mark O’Byrne

The Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) and the World Gold Council have made an important decision which was announced yesterday at the World Islamic Banking Conference in Bahrain.

This decision is about one of the most important markets in the world: the gold market, an invest-able market worth an estimated $2.4 trillion and is also of significance for the world of Islamic finance.

The AAOIFI, in collaboration with the World Gold Council (WGC) and Amanie Advisors, has approved what will become known as the Shariah Gold Standard. This is a set of guidelines that will expand the variety and use of gold-based products in Islamic Finance.

As many as 1.6 billion Muslims in the world, 25 per cent of the population, will have far greater access to the gold market than they have since the birth of modern finance, which has been primarily structured towards Western ideals.

More details were announced at the World Islamic Banking Conference including details of the gold products that are likely to be permissible.

The sharia gold standard announced yesterday allows the over 110 million investors in the Islamic world to invest in

a) vaulted gold

b) gold savings plans (such as GoldCore’s GoldSaver)

c) gold certificates

d) physical gold ETFs including “probably” the SPDR Gold Trust, the biggest exchange-traded gold (GLD)

e) gold mining shares (within certain Shari’ah parameters)

We know three things that the new Shariah gold-standard will achieve:

a) Increase diversity in the number of available Shariah gold compliant investment products

b) Greater emphasis on the role of physical gold in gold transactions

c) Islamic finance will have greater say in the setting of the gold price

To some, this may appear to be an unnecessary formality taken by the body whose guidelines are followed by Islamic finance institutions across the world. After all, physical gold is Shariah-compliant and holds a unique status for Muslims.

AAIOFI states, “From the perspective of Islamic Fiqh and the Islamic economic system, gold has its specific significance. This significance arises from the specific principles provided for gold and silver as Thaman in Shari’ah.”

According to Islamic texts, gold is a ribawi item, which means that it must be sold on weight and measure, and cannot be traded for future value or for speculation. In order for a gold instrument to be Shariah-compliant, the precious metal must be the underlying asset in related transactions.

However there has been a need for clarification for how gold bullion can be used for investment purposes by Muslims, for a long time.

This uncertainty has kept Shariah-compliant offerings at a minimum and many investors restricted by the type of gold bullion transactions they are able to partake in, with most focused on jewellery and coin offerings. Daud Bakar, chairman of Amanie Advisors, agrees, “.the existing Islamic standards for gold are fragmented, hampering product development and market demand.”

Currently in the gold market, the majority of activity regarding gold financial instruments is based almost entirely on speculation. This is due to the overwhelming size of both the London and COMEX (Chicago Mercantile Exchange) gold markets, which together have the greatest influence on the spot price of gold.

Whilst Islamic investors have always had access to the gold market through jewellery and coins, this guidance will vastly increase the number and diversity of investment products available. There are very few Shari’ah-compliant gold offerings today. Using its deep sector knowledge, GoldCore, and its Islamic partners, have been working on a comprehensive solution for two years and will provide the solution to qualifying Islamic financial institutions in early 2017.

With gold investment platforms such as GoldCore able to offer segregated, allocated gold bullion accounts with the option of physical delivery, Muslims are now able to invest in gold bars and coins.

The new ‘gold standard’ will affect the gold market globally as 1.6 billion people will be able for the first time to use gold bullion products and platforms that offer physical delivery, allocated and segregated gold ownership.

“For a number of years we have been working on an institutional gold platform and indeed a Sharia compliant gold bullion solution for the institutional market. As a market leader in precious metal storage, we have been consulting with major institutions and our strong partners to deliver allocated and segregated gold storage services to investors throughout the world”, said GoldCore CEO, Stephen Flood.

If Islamic Finance institutions were to allocate just one per cent of assets into new gold products then we would expect to see demand climb by about 500-1000 tonnes, per annum. Given that recent demand and supply figures showed a surplus of just 172 tonnes of gold in the market, we could begin to see some tightening with the increase of Shariah-compliant gold instruments, which will have a positive impact on the price.

It is not unreasonable to expect a minimum one per cent move of Islamic finance assets into gold, especially when you look at how it has performed. WGC data shows that in the last eight years the major Islamic asset classes (including REITs, the Takaful index, the Dow Jones Islamic Equities Index and the Dow Jones Sukuk Index) have all underperformed compared to gold, as have the major currencies used in the Islamic world.

Few appreciate that the launch of a Shari’ah gold or Islamic goldstandard signals a changing dynamic in the gold market. Gold bullion  will be additionally appealing to Islamic banks due to Basel III rules that require banks own high liquidity and quality, low counter party risk assets such as physical gold in allocated and segregated storage.

Until now, no group as influential as the AAOIFI has issued guidelines stating that gold must be the underlying asset in all gold transactions as we suspect they will do shortly.

Whilst the likes of the COMEX gold market are able to grow to multiple times the size of the underlying physical market, with little impact on physical demand or price, this will no longer be case.

Jan Skoyles is a research executive at GoldCore, a gold investment platform and this is a version of an article that first appeared in the Khaleej Times, the UAE’s best selling English newspaper and highest circulated English language newspaper in the Gulf

Gold and Silver Bullion – News and Commentary

Gold nudges up after falling to 10-month lows (

Gold at 10-month low on higher shares (

Asian markets pick up speed, put Italy vote in rear-view mirror (

3 more gold coins found in Salvation Army red kettles (

New Islamic finance guidance on gold emphasises “physical gold” (

Gold Double-Slammed As ‘Traders’ Puke $3.5 Billion Notional Through Futures Markets (

FT: Fears Rise over Future Supply of Gold (

A pensions time bomb spells disaster for the US economy (

Another battle between insiders and outsiders (DavidMCWilliams)

What happens next, now that Italy has voted ‘no’ (


Gold Prices (LBMA AM)

06 Dec: USD 1,171.15, GBP 918.18 & EUR 1,086.94 per ounce
05 Dec: USD 1,164.90, GBP 915.84 & EUR 1,095.36 per ounce
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

Silver Prices (LBMA)

06 Dec: USD 16.79, GBP 13.17 & EUR 15.63 per ounce
05 Dec: USD 16.62, GBP 13.05 & EUR 15.54 per ounce
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

Recent Market Updates

– Potential “Systemic Crisis In Eurozone” After Italy Votes No, Renzi Resigns
– Gold and Silver Will Protect From Coming Financial Crash – Rickards
– 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”

Mark O’Byrne
Executive Director




As we pointed out to you on several occasions, Muslims can now buy gold as long as it is gold backed with real metal:

(courtesy Carpenter/bloomberg)

Now Muslims can help bullion banks undermine gold investments with GLD


Gold Standard Approved for Islamic Finance, Opening New Market

By Claudia Carpenter
Bloomberg News
Monday, December 5, 2016

Gold is acceptable for the first time as an investment in Islamic finance after the group that sets standards for the industry adopted Shariah-compliant rules for trading the metal.

The rules, approved Nov. 19, allow gold to be used in the $1.88-trillion Islamic finance business, the Accounting and Auditing Organization for Islamic Financial Institutions said Monday in a statement. The organization developed the standards with help from the producer-funded World Gold Council, which has said the new rules could spur demand for “hundreds of tons” of gold.

The SPDR Gold Trust, the biggest exchange-traded fund backed by bullion traded under stock symbol GLD, will probably qualify, and the standard may open new demand to central banks, Mohd Daud Bakar, a Shariah scholar, said at a press conference in Dubai today. Comex gold futures wouldn’t qualify because of a physical backing requirement, he said.

“We fully expect to announce imminently that GLD does qualify,” Natalie Dempster, a managing director of the World Gold Council, said at the conference. Physical gold bars and coins may also qualify, she said. The rules require that a bank selling gold has to offer same-day settlement or has to demonstrate it can provide the exact gold being sold within one day, Dempster said. The standard also applies to silver, according to Hamed Hassan Merah, secretary general of the Islamic finance group. …

… For the remainder of the report:…





Now they are worried about gold supply as miners caught off funding for new exploration targets.  The author then asks:  who needs real metal if paper will do?

(courtesy Sanderson/London’s Financial times)

Who needs real metal if paper will do?


And who needs gold miners if they can never figure out why the metal’s price doesn’t behave as it should?

* * *

Fears Rise over Future Supply of Gold

By Henry Sanderson
Financial Times, London
Monday, December 5, 2016

“For the first time in history, gold supply into the future is under enormous pressure.”

The warning from Mark Bristow, chief executive of London-listed Randgold, encapsulates the gold-mining sector’s woes.

Bullion’s only modest price recovery this year compared with other commodities has led the industry to cut spending on exploration dramatically to less than $4 billion from almost $10 billion in 2012.

Petropavlovsk, a gold miner with assets in Russia, is a case in point. It has cut its exploration budget by two-thirds.

“There is a chronic shortage of exploration money and as usual the gold price is not acting in the way everyone thought it would do,” says Peter Hambro, chairman of the company.

This backdrop has left many in the industry forecasting a supply shortage by the end of the decade.

Mr. Bristow believes this supply shortage will be inevitable unless some major discoveries of large, high-grade ore bodies are suddenly made, “Which frankly seems a remote possibility.” …

… For the remainder of the report:





Mike Kosares with his insight into the uSA election

(courtesy Mike Kosares/GATA)

USAGold: Reflections on the election


1p ET Monday, December 5, 2016

Dear Friend of GATA and Gold:

USAGold’s December News & Views newsletter, edited by Michael Kosares, contains some pretty insightful observations on the economy and the U.S. presidential election from a dozen or so market analysts, many of them bearing heavily on gold. It’s headlined “Reflections on the Election” and it’s posted at USAGold here:

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





Mark Mobius states that gold will rise as the Fed goes slow on its rate hikes

(courtesy Mark Mobius/


Mobius Says Gold Will Gain In 2017 As Fed Goes Slow On Hikes

gold ve dollar

Gold is set to advance by as much as 15 percent before the end of next year as the Federal Reserve goes slow on increasing interest rates and the dollar remains subdued, buoying bullion demand, according to Templeton Emerging Markets Group.

“The Fed is going to increase the rates by a little bit but not excessively and there is no guarantee that a rise in interest rates will put people off,” Executive Chairman Mark Mobius said in an interview at a Bloomberg event in Mumbai. “A lot will depend on the real rates.”

Bullion has rallied 19 percent in 2016 as concern over the health of the global economy, loose monetary policies and the U.K.’s vote to leave the European Union fanned demand. After raising rates last December for the first time in almost a decade, Fed policy makers have stood pat on borrowing costs in the six meetings since. While the dollar gained to the highest since March on Monday on speculation that rates may soon climb, it remains lower this year.

“The U.S. dollar is not that strong and may even decline,” said Mobius, who also highlighted prospects for increased central bank buying of bullion. “So if that happens, gold gets more expensive.”

Gold for immediate delivery traded 0.2 percent lower at $1,263.67 an ounce at 11:54 a.m. in Singapore after rising last week, according to Bloomberg generic pricing. It surged to $1,375.34 in July after the aftermath of the Brexit vote in the U.K., the highest since March 2014.

While Fed funds futures show the odds of a rise in December have climbed, investors are still plowing funds into gold-backed exchange-traded funds, with holdings at the highest in more than three years last week. The probability of a December hike is about 68 percent, from 59 percent at the start of the month.

Mobius’s forecast for a higher gold price in 2017 even as the Fed proceeds to raise rates is similar to the outlook from participants at last week’s London Bullion Market Association conference in Singapore. Bullion will trade at $1,347.40 in a year’s time, according to a survey of people at the gathering.

Federal Reserve Bank of San Francisco President John Williams said on Friday he’d support one increase in 2016 and a few more next year. Central bank officials met Nov. 1- 2, the week before the U.S. presidential election, and again in mid-December. Williams — who doesn’t vote on policy this year — also said he would have supported a September increase.

‘GoldSafe provides regular commentary and analysis of gold, currencies and the global economy. All articles published here are to inform, not influence. Only you can decide the best place for your money, and any decision you make or don’t may put your money at risk. GoldSafe’s fundamental strategy requires the ownership of physical gold and does not recommend gold derivatives, ETFs or any paper substitute.’ goes-slow-hikes/


Your early TUESDAY 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 UP 85.55 POINTS OR 0.47% /USA: YEN RISES TO 113.92

3. Europe stocks opened ALL IN THE GREEN     ( /USA dollar index RISES TO  100.28/Euro DOWN to 1.0733


3c Nikkei now JUST BELOW 17,000

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

3e WTI::  51.09  and Brent: 54.43

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 +.351%/Italian 10 yr bond yield FALLS 5 full basis points to 1.97%    

3j Greek 10 year bond yield RISES to  : 6.627%   

3k Gold at $1172.20/silver $16.85(7:45 am est)   SILVER BELOW RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP 1/100 in  roubles/dollar) 63.81-

3m oil into the 51 dollar handle for WTI and 54 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   REVALUATION 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  1.0095 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0836 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  +.351%

/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 2.391% early this morning. Thirty year rate  at 3.067% /POLICY ERROR) GETTING DANGEROUSLY HIGH

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

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


Global Stocks Rise As Oil Dips; US Stock Futures And Dollar Flat

European and Asian markets rose, while U.S. index futures were little changed, with the Dow Jones Industrial Average pushing for yet another record, as traders digested the Italian referendum news, await the ECB’s Thursday announcement and reflect in a notably quieter overnight session.  Oil slipped from a 16-month high after 4 straight days of gains, as doubts emerged about how OPEC will implement the first supply curbs in eight years. European bonds gained with stocks.

The euro held firm on Tuesday, having seen a wild 3-cent swing in the wake of Italy’s referendum, while the region’s bond yields dipped in line with U.S. peers as oil saw its first fall for five days. Asian stocks saw their strongest day for 2 weeks overnight after Wall Street’s Dow Jones index hit a record high, and Europe’s main bourses struggled into positive territory as bumper German data helped settle an early wobble.

As concerns about Italy subsided for the time being, Italian bond yields were back below levels seen before Sunday’s referendum defeat for the government, while the euro held at $1.0767 having bounced strongly from as low as $1.0505 on Monday, two days ahead of an ECB decision in which Mario Draghi is expected to extend QE by 6 months with little other adjustments.  “The referendum result could put the ECB under pressure not to taper the asset purchase program but to extend it for six months beyond March (in its current form),” ING strategist Benjamin Schroeder said.

European shares rose on news that German industrial orders soared at the fastest pace for more than two years, stoking hopes that Europe’s largest economy is set for an acceleration in the coming months.  Factories saw demand climb 4.9 percent on the month despite bulk orders being lower than usual, the German economy ministry said. That was the biggest increase since July 2014 and far above the Reuters consensus forecast for a 0.6 percent rise.  “The reading was very strong even without large-scale orders and that suggests it’s more than just a flash in the pan,” BayernLB economist Stefan Kipar said, noting that some firms might have brought orders forward.

The Stoxx Europe 600 Index gained 0.3%, adding to its 0.6% advance from Monday. Italy’s FTSE MIB Index gained ground, up 1.3%, helped by gains of more than 3 percent each by UniCredit SpA and Mediobanca SpA. Stoxx 600 energy producers tracked declines in oil prices, which retreated from the highest close in 16 months. The MSCI Emerging Markets Index jumped 0.9 percent.  Financial shares in China weakened again, however, after the country’s insurance regulator suspended an unlisted firm from selling some products a day after a warning about “barbaric” share acquisitions by asset managers.

In emerging markets, Turkey, where the lira has slumped to record lows in recent weeks, saw a warning from the head of the central bank that the weakness could cause the bank to miss its inflation targets early next year. In Asia, gold nudged off a 10-month low. MSCI’s broadest index for the region bounced 0.7 percent, its biggest daily rise since Nov. 22, as Korea climbed 1.4 percent and Japan rose 0.4 percent. The Australian dollar led declines among major economies, falling 0.5 percent to 74.38 U.S. cents, after the nation’s central bank central bank kept interest rates unchanged and Governor Philip Lowe said “some slowing in the year-ended growth rate is likely.”

In an otherwise quiet session, where E-minis are currently unchanged before Tuesday’s release of factory and durable goods orders, which may confirm the U.S. economy is gaining strength and giving the Federal Reserve more reason to raise interest rates, and after the Dow Average swung back to gains Monday, increasing 0.2 percent to an all-time high, early trader focus was on crude.

Ending a 4-day winning streak, oil prices slipped on Tuesday as crude output rose in virtually every major export region despite plans by OPEC and Russia to cut production, triggering fears that a fuel glut that has dogged markets for over two years might last well into 2017. Brent futures were trading at $54.64 per barrel at 0935 GMT, down 30 cents from Monday’s close; WTI was at $51.39 a barrel, down 40 cents. Traders and analysts cited by Reuters said the boost from last week’s decision by OPEC to cut crude production had faded and the cartel’s promise had been undermined by data showing rising production from within its member countries and Russia.

“Most of the position adjustments that the OPEC decision forced upon traders have now run their course and it leaves the market exposed to profit taking,” said Ole Hansen, head of commodities strategy at Saxo Bank, citing surveys pointing to record production from OPEC during November. “What’s troubling is that the rise is coming from African producers, two of which are exempt from cutting production,” he said. “The meeting on Saturday between OPEC and non-OPEC producers will be crucial in order to maintain the bullish sentiment seen since last Wednesday.” OPEC’s oil output set another record high in November, rising to 34.19 million barrels per day (bpd) from 33.82 million bpd in October, according to a Reuters survey based on shipping data and information from industry sources.

“It’s a headache for OPEC in terms of increase in production for Libya and Nigeria, definitely that’s a tricky part,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets. “A lot of buying went on following the OPEC decision and now it’s sort of taking it quietly.”

In rates, Italy’s 10-year bond yield declined six basis points to 1.93 percent, almost erasing Monday’s increase of eight basis points. Yields on Portugal’s bonds with a similar due date decreased nine basis points to 3.61 percent, while Germany’s rose one basis point to 0.34 percent. Almost all economists surveyed by Bloomberg expect the ECB to announce on Thursday that its bond-buying program will be extended after March, and most foresee an extension of about six months at the current 80 billion euros ($85 billion) a month. Treasury 10-year yields were little changed at 2.39%.

* * *

Bulletin Market Summary From RanSquawk

  • European indices are mixed this morning with more news filtering through from the Italian banking sector
  • A much calmer FX market today, but we continue to see Cable pushing higher, with a view to challenging the post Brexit lows seen just under 1.2800
  • Looking ahead, highlights include US Factory Orders and API Crude Oil Inventories

Market Snapshot

  • S&P 500 futures up 0.1% to 2205.5
  • Stoxx 600 up 0.3% to 342
  • FTSE 100 down less than 0.1% to 6742
  • DAX up 0.1% to 10698
  • German 10Yr yield up less than 1bp to 0.34%
  • Italian 10Yr yield down 7bps to 1.92%
  • Spanish 10Yr yield down 6bps to 1.5%
  • S&P GSCI Index down 0.1% to 389.6
  • MSCI Asia Pacific up 0.8% to 136
  • Nikkei 225 up 0.5% to 18361
  • Hang Seng up 0.8% to 22675
  • Shanghai Composite down 0.2% to 3200
  • S&P/ASX 200 up 0.5% to 5429
  • US 10-yr yield down 1bp to 2.38%
  • Dollar Index unchanged at 100.09
  • WTI Crude futures down 0.4% to $51.59
  • Brent Futures down less than 0.1% to $54.91
  • Gold spot up 0.1% to $1,172
  • Silver spot up 0.4% to $16.82

Top Headlines:

  • Sanofi Said to Mull Counterbid for Actelion Amid J&J Talks: French drugmaker said to work with advisers to weigh options
  • Utilities Entitled to Damages for Germany’s Atomic Exit: German constitutional court issues ruling in landmark case
  • Total, ExxonMobil, Cnooc, Pemex Win Mexico Deep-Water Blocks: Oil majors win blocks in Mexico’s first competitive deep-water oil auction
  • Drugmaker Genfit Said to Explore Options Including a Sale: NASH treatment maker said in talks with other drug companies
  • SoftBank’s Son Said to Plan Meeting With Trump in New York: Japanese tech company had sought to merge Sprint and T- Mobile
  • Fed Officials Eyeing Rate Hike See Path Tied to Fiscal Policies: Fed presidents from New York, Chicago, St. Louis spoke Monday, indicating Fed is close to meeting inflation, job goals
  • South Africa to Allow U.S. GM Corn Imports for First Time: Import clearance comes after worst drought since records began
  • South Korea’s Park Is Willing to Resign in April, Party Says: Opposition lawmakers still pressing for Park’s impeachment
  • United Technologies CEO Says Government Ties Affected Trump Deal: Regulatory, tax reform would benefit company, CEO Hayes says

Looking at Asian markets, stocks carried on the momentum from Wall St where Dow posted fresh record highs amid strength in tech and financials, while contagion fears in Europe had also dissipated. ASX 200 (+0.5%) traded higher and was led higher by the materials and mining sectors, while Nikkei 225 (+0.6%) was underpinned by financials. Chinese markets were mixed with Hang Seng (+0.8%) outperforming, while Shanghai Comp (+0.2%) lagged following a weak liquidity operation by the PBoC. 10yr JGBs traded lower amid the heightened risk appetite in the region, with demand also dampened following an enhanced liquidity auction for 20yr, 30yr and 40yr JGBs which drew a lower b/c and wider spreads. RBA kept the Cash Rate unchanged at 1.50% as unanimously expected and stated that maintaining policy is consistent with sustainable economic growth and achieving the inflation target over time. RBA commented that the economy is continuing its transition from the mining investment boom and that some slowing in the year-ended growth rate is likely, before it picks up again.

Top Asian News

  • Singapore and Australia Margin Rules to Start in March 2017: Australia has six-month transition period for variation margin
  • ICAP Showing Yuan Tumbling 8.8% Against Dollar Fuels Jitters: CFETS data show onshore spot rate rose amid weakening dollar
  • Samsung’s Lee in Crosshairs as Tycoons Grilled Over Scandal: Tycoons testify in connection with influence-peddling case
  • China’s Robot Boom Raises Yaskawa’s Prospects and Profile: Yaskawa President says he’s rejected several deal offers
  • RBA Holds Key Rate as Commodity Upswing Outweighs Slowdown: Annual growth figures predicted to slow in 3Q
  • Half-Point India Rate Cut Seen by Economist Amid Cash Chaos: Call by IIFL’s Datar is more aggressive than consensus outlook

In Europe, indices are slightly higher this morning (EUROSTOXX 50 +0.2%) with more news filtering through from the Italian banking sector, as sources suggest that Monte Paschi (BMPS IM) (-2.2%) board meeting is said to be delayed until Wednesday Or Thursday.Elsewhere, financials are bouncing back after losses seen yesterday, but this did coincide with broker upgrades for HSBC and SocGen. Also in equity markets spreadbetters are taking a hit (IG Group -30%) after FCA look to announce new rules for CFD trading accounts including increased margins and amendments to new customer bonus rules.
In fixed income markets, Bunds trade largely flat this morning as participants await the ECB meeting. Today we have also seen outperformance in peripheral yields and some narrowing of the German/French spread following reports of more French government stability as Bernard Cazeneuve named is French PM.

Top European News

  • EU Said to Mull Seeking Post-Brexit Deal Before Transition Talk: Consensus forming on bloc’s Brexit position, EU officials say
  • ABN Amro to Sell $20 Billion of Private Banking Assets to LGT: ABN Amro agreed to sell its private-banking assets in Asia and the Middle East to Liechtenstein-based LGT to focus on its European operations
  • Monte Paschi Recapitalization Hangs in Balance After Debt Swap: Troubled lender releases final results of debt conversion, set to decide in coming days whether to proceed with plan

In currencies, the Bloomberg Dollar Spot Index, which tracks the greenback against 10 major peers, was little changed after falling 0.4 percent Monday. The euro traded at $1.0773 after ending Monday up 0.9 percent, erasing an earlier slide of as much as 1.5 percent in the wake of the Italian vote. The Australian dollar led declines among major economies, falling 0.5 percent to 74.38 U.S. cents, after the nation’s central bank central bank kept interest rates unchanged and Governor Philip Lowe said “some slowing in the year-ended growth rate is likely.”

In commodities, oil prices slipped on Tuesday as crude output rose in virtually every major export region despite plans by OPEC and Russia to cut production, triggering fears that a fuel glut that has dogged markets for over two years might last well into 2017. Brent futures were trading at $54.64 per barrel at 0935 GMT, down 30 cents from Monday’s close; WTI was at $51.39 a barrel, down 40 cents. Traders and analysts cited by Reuters said the boost from last week’s decision by OPEC to cut crude production had faded and the cartel’s promise had been undermined by data showing rising production from within its member countries and Russia. “Most of the position adjustments that the OPEC decision forced upon traders have now run their course and it leaves the market exposed to profit taking,” said Ole Hansen, head of commodities strategy at Saxo Bank, citing surveys pointing to record production from OPEC during November. “What’s troubling is that the rise is coming from African producers, two of which are exempt from cutting production,” he said. Aluminum fell 1.2 percent to $1,713 a metric ton, the biggest drop in a week. The metal will probably tumble next month as an “irrational” increase in prices prompts companies to restart plants, while new capacity also ramps up in the world’s largest supplier, according to China’s top metals industry group. Copper lost 1.4 percent and zinc slid 0.7 percent.

DB’s Jim Reid concludes the overnight wrap

Had you known in advance the outcomes of all the three big events of the year (Brexit, US elections and the Italian referendum) would it have helped you make money? It’s not obvious that it would, especially if your timing was slightly off. Clearly there are some assets where the impact would have been fairly obvious but the wider markets have been more difficult to second guess. For us the Italy ‘no’ result was relatively well priced in given the likely immediate ramifications but we still would have expected the jitters for longer than the 2 minutes the European markets took to bottom out yesterday morning. With Italy it’s still possible that post the rejection everything stays similar in the government apart from PM Renzi who as we know tendered his resignation yesterday. So the market is giving Italy the benefit of the doubt for now even if there was some underperformance of Italian risk yesterday.

Indeed the FTSE MIB initially dropped -2.20% at the open but that fall proved short lived with the index then rebounding and peaking a shade above +1.50% a short time later. Thereafter, the index swung in and out of positive and negative territory before finishing the day down a modest -0.21%. That was in the context of a +0.56% gain for the Stoxx 600 and an impressive +1.63% jump for the DAX. Unsurprisingly much of the focus was on how banks would fare. While the Stoxx 600 banks index closed up a fairly resilient +0.76% there were notable heavy falls for the likes of Banco Popolare di Milano (-7.91%), Banco Popolare (-7.44%), Mediobanca (-4.24%) and Unicredit (-3.36%) as the market questioned the likelihood of some of the ongoing bank recapitalisation plans going ahead.
It was a similar story in credit markets although the underperformance of financials generally was more obvious. The iTraxx Main index ended the day little changed but did wipe out an early 3bp move wider, while the iTraxx Crossover index finished 5bps tighter. Senior financials did end 3bps wider however while subordinated financials were over 6bps wider by the end of play. Of the four Italian banks within the latter index, Mediobanca spreads were 3bps wider while spreads for Intesa Sanpaolo, Generali and Unicredit were 8bps to 10bps wider. So some underperformance but as we mentioned at the top perhaps some signs that the market is giving Italy the benefit of the doubt for now.

Over in sovereign bond markets 10y BTP yields finished the day 8.3bps higher at 1.981% which compares to a 5.0bp move higher for similar maturity Bund yields. The remainder of the periphery was actually little changed. Elsewhere the Euro traded in a near 3% range. After tumbling as much as -1.50% early in the Asia session it then rallied as Europe kicked into gear and actually closed up +0.94% on the day. The US session was for the most part a reflection of the reasonably positive sentiment. The S&P 500 closed up +0.58% and 10y Treasury yields ended a modest 1bp higher at a shade below 2.400%.
While we expect the political situation to move fairly swiftly it’s still worth considering the medium-term consequences for Italy in the wake of the result. In his note following the result yesterday, DB’s Marco Stringa made the important reminder that the referendum was a catalyst rather than the cause of Italy’s complex situation. The complexity is due to disappointing growth, concerns about the banking system and the rise of populist and euro-sceptic parties. At least initially, Marco does not expect to revise down GDP projections as the “No” outcome was his central case scenario. The likelihood of a systemic solution for the NPL issue will influence the medium-term evolution of the Italian banking sector and banks’ ability to support investment growth. Marco expects no pro-active systemic solution for the banking sector before the next election. He also expects a new electoral law for both Houses of the Parliament. In his opinion, it is important that a compromise on a new electoral law does not lead to a system that encourages the formation of governments supported by overly heterogeneous coalitions.

Politics was the overwhelmingly dominating theme throughout yesterday. Along with digesting the Italian referendum outcome, there was also some focus on a Sunday Times article confirming the UK Government’s plans to potentially pay into the EU budget for access to the single market, something which PM May is calling a ‘grey Brexit’, i.e. in between the black and white demands of leave and remain hardliners. So further evidence that the UK government is becoming increasingly pragmatic from the early hard line stance. As a reminder the Supreme Court hearing continues today.

Elsewhere, news also tricked in late in the day that Eurozone finance ministers had agreed to provide short term debt relief measures for Greece prepared by the European Stability Mechanism, although they seemingly failed to form a consensus on a broader accord for various reform targets and measures. Significantly, the participation of the IMF in the bailout program appears to still be up in the air with talks breaking up last night over splits in the various reform targets. According to the FT, Eurogroup President, Jeroen Dijsselbloem, confirmed that getting the IMF on board by the end of the year is unlikely and that instead talks will continue into the New Year. Meanwhile over in France, the latest update there is that Prime Minister Manuel Valls has declared that he will run for presidency as had been somewhat expected following the news that Hollande had ruled himself out of contention.

Refreshing our screens this morning it’s been a broadly positive session in Asia this morning. Markets have largely followed the lead from the moves in Europe and on Wall Street last night with the Nikkei (+0.53%), Hang Seng (+0.86%), Shanghai Comp (+0.08%), Kospi (+1.32%) and ASX (+0.81%) all edging higher. EM currencies are also generally a touch stronger, while the Aussie Dollar has weakened modestly (about -0.17% as type) after the RBA left rates on hold as expected.

Moving on. As far as the economic data was concerned yesterday, it was on the whole relatively positive. The primary focus in the US was on the November ISM non-manufacturing print which was reported as rising 2.4pts to 57.2 and well exceeding expectations for a rise to 55.5. That is in fact the best reading since October 2015 and whilst the details revealed a modest decline in new orders (by 0.7pts to 57.0) there were gains across components of business activity, employment and new export orders. It was noted that the employment component in particular, which came in at 58.2, is the 5th largest print since the start of the series in 1997. Meanwhile, the final services PMI reading for November was revised down a modest 0.1pts to 54.6 which puts the composite at 54.9 and unchanged versus October. Lastly the labour market conditions index for November was reported as rising by 1.5pts in November which is the best monthly gain since July.

In Europe the data was focused on the final November PMI readings. There was a bit of disappointment in the final services revision for the Euro area which was revised down from 54.1 to 53.8 largely as a result of a 1pt downward revision in France to 51.6. Putting it in context however that reading for the Euro area is still the highest this year while the composite level of 53.9 is also the highest in 2016. The most interesting takeaway was the data for the non-core and specifically Italy where the services reading printed at a bumper 53.3 (vs. 51.6 expected), up 2.3pts from October and the highest level since February. Our European economists highlighted that, should the data for the Euro area remain unchanged in December, then the composite PMI would point to GDP growth of +0.4% qoq in Q4 and so represents some upside to their current estimate.

Before we look at today’s calendar, yesterday also marked the last day for Fedspeak prior the blackout period kicking in, although again there was little new that could move the dial. NY Fed President William Dudley opined that ‘it is important that fiscal and monetary policy are well aligned going forward’ and that ‘there appears to be few imbalances in the economy that could lead to the current expansion ending’. Perhaps more interestingly, Dudley acknowledged the recent tightening in financial conditions but also suggested that that he does not see this as prompting great concern and instead said that it seems broadly consistent given that it’s being driven by a greater likelihood of stronger near-term aggregate demand and less downside risk to the growth outlook. Meanwhile Chicago Fed President Charles Evans said that the Fed needs to be patient to ‘see what fiscal program emerges’ but that he see’s every reason to think that the economy is to ‘stay strong for the next few years given Trump administration’s planned policies’.

Looking at the day ahead, the early data out this morning in Europe comes from Germany where the October factory orders data will be released. Later this morning we’ll get the final revisions to Q3 GDP in the Euro area along with the growth components. No change from the +0.3% qoq flash print is expected. This afternoon in the US we’ll firstly get the October trade balance reading, with the final Q3 nonfarm productivity and unit labour costs data also scheduled for release. Factory orders data for the month of October is also due along with this month’s IBD/TIPP economic optimism index reading. Lastly, final durable and capital goods orders revisions for October will be released.


i)Late  MONDAY night/TUESDAY morning: Shanghai closed DOWN 5.06 POINTS OR 0.16%/ /Hang Sang closed UP 169.60  OR 0.75%. The Nikkei closed UP 85.55 OR 0.47%/Australia’s all ordinaires  CLOSED UP 0.52% /Chinese yuan (ONSHORE) closed UP at 6.8790/Oil FELL to 51.09 dollars per barrel for WTI and 54.43 for Brent. Stocks in Europe: ALL IN THE GREEN.  Offshore yuan trades  6.8773 yuan to the dollar vs 6.8790  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS 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.




lack of global demand is hurting China and they admit that by slashing salary guidelines:

(courtesy zero hedge)

China Admits “Economic Downturn Just Beginning”, Slashes Salary Guidelines

In what may be the most direct admission that China’s economy is about to grind to a deflationary halt, today China’s Global Times, a newspaper which is seen as a propaganda companion to the official People’s Daily, revealed data showing this year’s proposed salary guidelines according to which there is a broad wage growth declines in virtually every single province on the mainland, which according to the Chinese publication “confirms the country is experiencing an economic slowdown.”

Salary guidelines are issued by local governments as a reference to help firms decide how much they should increase their employees’ salaries. They are based on labor market conditions and economic growth, among other factors.

Global Times notes that compared to 2015 salary guidelines, wages in 2016 have grown at a slower rate in virtually all 19 provinces and regions that have so far published their annual guidelines for firms. Northeast China’s Heilongjiang Province has not released salary guidelines for years as the region has been experiencing a recession and therefore wages are not generally increasing.

Seventeen provinces have seen a decrease in salary standards, including North China’s Hebei Province, South China’s Hainan Province, Northwest China’s Xinjiang Uyghur Autonomous Region and East China’s Jiangxi Province. The only increases were seen in Southwest China’s Guizhou Province and Beijing Municipality.

“2016’s guidelines have seen a slowing of salary growth after years of increases, which means that the speed of wage growth has surpassed economic growth since China’s labor contract law was adopted in 2007,” Wang Jiangsong, a professor at the China Institute of Industrial Relations, told the Global Times on Tuesday.

Confirming that the only way for Chinese wage growth is down, Wang Jiangsong, a professor at the China Institute of Industrial Relations, told the Global Times that “since China’s labor contract law was adopted in 2007, wage increases have surpassed economic growth.”  He said the slowdown reflects China’s economic downturn. It also means that local workers will not be happy.

But more troubling was Wang’s next admission: “the decrease reflects Chinese economic downturn, which is just now beginning and will last a long time since China has passed its economic boom period in which many problems were hidden but now those problems will gradually surface.

In short, declining wage growth, with aggregate 2016 demand driven by the biggest credit impulse and expansion in Chinese history. To all those who truly believe in the global reflation these, we wish you the best of luck.



It looks like we are heading for early elections in Italy which will have considerable problems for the EU in stay intake.

(courtesy zero hedge)

Euro, BTPs Hit On Local Reports Italy May Hold Early Elections

Update: it appears that early elections are indeed coming to Italy, which could be another major calendar event for Italy, and one which would have far more significant consequences for the political make up of the country should M5S win as many expect. From Reuters:


* * *

The Euro has been hit this morning, losing some 50 pips following reports in both La Repubblica and Corriere, that Matteo Renzi may stay in power for several weeks before potential early elections in January-February of 2017. According to La Repubblica, Renzi may ask that early elections are held in near future in return for staying in power until then. As previously reported, the next Italian general election must be held no later than 23rd May 2018.

The move has pressured other Italian assets, with BTP futures retreating from highs and the Italian bank index paring gains as investors focus on potential for Italian elections to be held early next year.

However, there has been some confusion about the date of the snap elections, because President Mattarella reportedly doesn’t see elections in February technically feasible because changes are needed to the country’s election law known as Italicum.

There is another consideration: should snap elections be held soon, they would likely lead to a victory for Italy’s anti-establishment Five Star Movement, which as noted on Sunday has already called for immediate elections after the outgoing prime minister Matteo Renzi’s defeat in a constitutional referendum, saying it was prepared to put forward a new government that could immediately assume power.

While it appears unlikely that Beppe Grillo, a former comedian and co-founder of the populist party, will get his general election wish, the bold demand showed his Movimento Cinque Stelle (M5S) now has its sights on an even greater electoral victory: one that would eventually land it in the prime minster’s residence in Palazzo Chigi.

As the Guardian reported, many analysts pointed out that M5S still faces considerable obstacles, including probable reforms of electoral law that will make it difficult for the party to get a majority. “But even if such manoeuvres keep it at bay temporarily, one thing is clear: the party is now the second most powerful force in Italy behind Renzi’s diminished Democratic party.”

Vincenzo Scarpetta, a senior policy analyst at the thinktank Open Europe, said M5S would have a fair chance of winning the next general election under current electoral rules, but those rules are likely to change in coming months under the current Democratic-controlled parliament, which may be the impetus behind delaying elections as much as possible, and why today’s report of early snap elections has led to Euro weakness.

The decision to call immediate elections ultimately falls with Italy’s president, Sergio Mattarella.





This is a biggy! Monte Paschi has been told to prepare to a state bailout. The risk in this story is Paschi but a fallout for all the other Italian banks. The next question will be how will Germany feel on a state assisted bailout.  They will demand a bail in but that will hurt bondholders (Italian bonds are almost all held by Italian citizens–many moms and pops who bought these insolvent items thinking that they were good)

Italy’s Monte Paschi Told To “Prepare For State Bailout”

On Sunday night, when we commented on the results of the Italian referendum, we said that while the Italian political limbo may or may not be an issue in the near term, a bigger problem for Italy will be the fate of Monte Paschi, whose 3rd bailout was likely doomed to failure after the failed referendum, which could unleash contagion upon the Italian banking sector at a very precarious time for Italy and Europe.

Overnight, we got confirmation of that from not one but two sources, with Italian Il Sole 24 reporting that the Italian treasury is considering “precautionary” direct state intervention to rescue the bank, a plan that has already been sketched out by Rome and Brussels. The lender’s executives are meeting with European Central Bank officials today and may ask for a delay to a non-performing loan sale that’s part of the bank’s capital increase plan, the newspaper said.

In an interview with Bloomberg TV, Marcello Messori, economics professor at Luiss University said that “the probability of finding a natural market solution is very very low currently, due to the fact that instability implies that international investors have a lot of difficulties to decide in the short term for a very important recapitalization” and added that the ECB may give more time “if there is a solution on the horizon.”

There may not be a solution, as both the company’s stock price, which fell for the fourth consecutive day, down 2.5% and plunging 85% YTD, and as the FT adds. According to the Nikkei’s subsidiary, “bankers are running out of private-sector solutions for Monte dei Paschi di Siena and have told the Italian lender to prepare for a state bailout this weekend after prime minister Matteo Renzi was felled by a referendum defeat.

While financial markets responded relatively calmly to the referendum result, people briefed on the situation said the political upheaval made it “more difficult” to secure a €1bn investment from Qatar on which Monte dei Paschi’s €5bn capital-raising plan hinges. Senior bankers fear that a failure to shore up the bank, which was the worst loser of this summer’s European bank healthcheck, could damage already jittery investor confidence about Italy’s overall banking sector, which is hobbled by €360bn of bad loans and weak profitability.

Ironically, the bad news comes just as there was finally some good news for the bank: on Monday, bondholders agreed to convert almost a quarter of the 4.3 billion euros of debt offered subject to the swap, in line with expectations according to final results released Tuesday. The problem is that this won’t be enough.

The swap was “a very good result, but is just one part of the overall bank recap: what’s crucial for the success of the deal is the commitment from anchor investors,” Fabrizio Spagna, managing director at Axia Financial Research in Padua, Italy, said by phone. “I’m skeptical that there are subjects available to subscribe the equity, and the outcome of the referendum may add pressure.”

And it is the anchor investors who have gotten cold feet. According to the FT, JPMorgan and Mediobanca, advisers to Monte dei Paschi, have been working with Pier Carlo Padoan, Italy’s finance minister, to persuade the Qatar Investment Authority to pump money into Italy’s third-largest lender. But hope is fading that they can secure a deal by this week’s deadline.

Without the cornerstone investment from Qatar, the other parts of the complex plan to fill the bank’s €5bn capital shortfall are likely to collapse.

As a result, the FT cites a senior banker who said that if the private-sector solution proved impossible, the bank and its supervisors at the European Central Bank were likely to favour a “precautionary recapitalisation” — involving an injection of state funds and the conversion of subordinated debt into equity.

Which means another taxpayer-funded bailout is imminent.

The rest of the “Plan B” alternative is largely familiar: “Whatever solution is found for Monte dei Paschi, I believe there is a significant risk of contagion to other Italian banks in particular,” said Megan Greene, chief economist at Manulife Asset Management.

To avoid the politically unpalatable option of imposing losses on the €2bn of retail bondholders in Monte dei Paschi, a plan is being drawn up to guarantee full repayment of the first €100,000 to every junior bondholder, according to senior bankers.

Senior bonds and deposits would be left unscathed. The bank is also likely to press ahead with plans to hive off €28bn in soured loans to a securitisation vehicle supported by a government guarantee.

Should the worst case scenario play out, the biggest risk is not Monte Paschi, it is what happens at other Italian banks: “If Monte dei Paschi’s plan fails, then that spells bad news for the other Italian banks that need recapitalising,” said Patrick O’Donnell investment manager at Aberdeen Asset Management. “If Italy can’t sort out its banks, then they will be in a real mess. Once again Europe finds itself in a position where politics, the ECB and the banks are dangerously entwined.

Finally, it’s not just Italian banks who are on the hook. In a letter to employees Monday, Deutsche Bank CEO warned that events in Italy are “a harbinger of renewed turbulence that could spill over from the political arena to the economy – with Europe particulary endangered.”  Not only Europe: Deutsche Bank too. Which is why when push comes to shove, Merkel and Schauble, who have both been vocal opponents of a state bailout will quickly close their eyes and ignore what is going on if the alternative means Italy’s banking contagion jumping across the border and slamming Germany’s largest bank which this summer saw its own stock price plunge to all time lows.


To complicate matters, the Italian constitutional court will  hold a January 24 hearing on new electoral law.  It is unclear if they will rule immediately allowing changes which would hurt chances for the 5 star party forming a government:

(courtesy zero hedge)

Another complication to the mix;  Fitch cuts the outlook for the Italian banks citing their huge bad debt and the referendum vote risks:
(courtesy zerohedge)


We now have proof that Erdogan and sons were dealing with ISIS as the conduit to taking Iraqi and Syrian oil through Turkish ports:

(courtesy zero hedge)

WikiLeaks Documents Reveal Sinister Relations Between Erdogan And ISIS

Back in November 2015, when the world (or at least parts of it) was trying to answer one simple question: where does ISIS get its money, we first provided the answer in “Meet The Man Who Funds ISIS: Bilal Erdogan, The Son Of Turkey’s President.” Subsequent articles such as “ISIS Oil Trade Full Frontal: “Raqqa’s Rockefellers”, Bilal Erdogan, KRG Crude, And The Israel Connection” only shed more light on the illegal cash-for-oil transfer taking place between Turkey’s ruling family and the Islamic State. Ultimately, the highly illegal bilateral trade (which the west had quietly averted its attention away from) faded and eventually stopped entirely following the expansion of the Russian bombing campaign which cut off the main trade routes between Turkey and Islamic State oil producers, which in some ways was good news for Turkey, as it avoided being shamed internationally for its role in supporting the terrorist organization.

That, however, changed today following today’s article by the Press Project which has found WikiLeaks evidence highlighting “sinister relations between Erdogan and ISIS” and transformed yet another conspiracy theory into non-conspiratorial fact.

As author Thanos Kamilialis writes, the connection of the Turkish president Recep Tayyip Erdoga?s family with the oil smuggling of the “Islamic State” is revealed after Wikileaks? revealing of emails from the Turkish energy minister, and Erdogan?s son-in-law, Berat Albayrak. Albayrak?s emails seem to confirm the not-so-recent accusations, since the energy minister is appealing to be the “unofficial” owner of the oil company Powertrance which is importing oil from the Isis land in Northern Irak to Turkey.

This is the full story of the relationship between Turkey and the Islamic State:

WikiLeaks documents highlight sinister relations between Erdogan and ISIS

At the end of September 2015 a Turkish Marxist hacking organization, Red Hack, claimed that it has access to almost 20 gigabyte of data from  Albayrak’s personal email accounts. Information and articles regarding the email’s content began to go online, however the Turkish justice  system decided against the publication and reproduction of the emails, thus implying their authenticity. The newest accusations that the Turkish government – and, specifically,  members of Erdogan’s family- has an active role in the oil smuggling from areas that are controlled by the “Islamic State”, were between the most important subjects that were temporarily released. The leaking of all the emails from the Turkish energy minister by Wikileaks seem to confirm these allegations.

The accusations against the Turkish government -and most specifically, Albayrak- became even more intense after the shooting down of the Russian aircraft by the Turkish forces on the 24th of November 2015. As well as imposing sanctions to Turkey, Russia also accused Erdogan and his family of involvement in the oil smuggling. In order to support those accusations, Russia delivered satellite images which reveal the routes of the oil from the ISIS grounds to Turkey.  A similar researchwas conducted by the ministry of Foreign Affairs of Norway and came to the conclusion that the oil transported from the “Islamic State’s” territories to Turkey is sold in low price. Meanwhile, the American government has also mentioned the ISIS’ oil ends up, through a process, in Turkey. The Turkish president vowed to resign if these allegations correspond to reality.

Albayrak’s emails do indeed prove the Russian accusations, and so do the various international media features which connected him to the oil smuggling. Albayrak appears to act as the unofficial consultant of the oil company Powertrans, which by law is the only oil company allowed to import and export oil to and from Turkey. In about 32 subjected Powertrans emails which he has received, he is asked for his opinion regarding the future actions of the company and his approval in matters such as the organization chart, and the hiring and wages of new executives.

Powertrans’ oil monopoly

The ownership of Powertrans is not clear. As World Policy analyzes, the equities of the company have weirdly “travelled” from Istanbul to Singapore  and from there to the Virgin Islands. The published  information suggests that the real owner of Powertrans is now Calik Holding, behind which stands Albayrak.

In spite of this fact though, the Turkish government has offered Powertrans the monopoly in oil importing and exporting, in a case which often reminds the “photographic” laws and amendments that are often met in Greece. In November 2011, the Turkish government voted for a law that bans every kind of oil transport in and outside of the country. In the same law, there was a provision of an exception if the oil transportation would serve the interests of the country. A few months later, Erdogan’s government decided to give the exclusive privilege of oil commerce to Powertrans, which he expanded by law, in 2014, by giving the company the monopoly as well.

In the leaked emails published by The Press Project’s official partner, Wikileaks, the connection between the turkish Energy minister , and Erdogan’s son-in-law, with Calik Holding and Powertrans seems rather clear. There are about 30 emails which Albayrak exchanges with Betül Y?lmaz  -officially the human resources manager of Calik Holding. In almost every conversation between them, the subject is clearly Powertrans, while  Yilmaz is constantly asking for his approval in any company’s staff change, mentioning -for example- the planning of the organization chart, the future hirings and wages. The email exchange between Albayrak and Yilmaz lasts for three years, from 2012 until 2015. In another email, dated August 9th 2015, Albayrak talks with Ekrem Kele? who used to work for Calik Holding and is now a member of the staff of Powertrans, The two men discussed the marketing strategy of the company in Northern Iraq.

Perhaps the most strange result, regarding Albayrak’s relation to Powertrans, in the emails is found in a conversation of the Turkish Energy minister and his lawyer, Mustafa Dogan Inal. The two men talkahead of a rebuttal statement regarding the relations between Albayrak and Powertrans.  Dogan Inal had written that “my client has no longer any ties to the company” and Albayrak corrects him by writing “what is that supposed to mean? I never had any ties to the company!”. The rebuttal statement was going to be published in the end of 2015, while Albayrak denied his connection to the company again in October 2016, after the Redhack attack. There are of course tens of emails which mention the company and prove the opposite. However, given that  any mentioning of Powertrans stop after the conversation with his lawyer about the rebuttal, there is a chance that Albayrak either pulled out of the company, or kept a distance from its management, under the pressure of the allegations.

Oil: Isis’ treasure

Although in the past weeks the reporting of international media mention that, due to its retreat, ISIS has -partially or totally- the control of important oil wells, for more than two years oils smuggling was the basic financing of this terrorist group. In 2014, The Guardian presented a graphic with the oil transporting routes, from the ISIS to Turkey, Iran and Jordan.

In October 2015, the Financial Times revealed that the average production of the ISIS’ oil was 34.000-40.000 barrels per day, which they sold for 20-45 dollars each. This meant that they had 1.5 million dollars daily income from oil, which was used to fund their fighters in military and terrorist operations.  In July 2016, the Washington Post presented satellite photos and claimed that the “Islamic State’s” income from oil have decreased by almost 50% but remain high, at about 20 million dollars per month.

The route of oil from the ISIS-controlled oil wells to Turkey was revealed by satellite photos which were published by Russia in December 2015. According to Russia, the oil is transported by third routes.

  • The west route, which starts at the “capital” of the ISIS, Rakka, and goes through the camp of Azaz in the Turkish border. From there, the oil is transported -according to the Russian Defense ministry- to Reyhanli and then parts of it are channeled to the Turkish market while the rest reaches the Mediterranean via the ports of  Iskenderun and Dortyol.
  • Another central route starts from Deir Ez-zour in Syria, goes through the Al-Qamishli area and from there to the Turkish town of Batman.
  • The third route, according to the Russian ministry, runs from Eastern Syria and West Iraq to the Southeastern corner of Turkey.

The photos and documents presented by Russia and the international Media show that ISIS’ oil ends up in various areas of Turkey and the only company that -based on the Turkish legislation- can realize this transportation is Powertrans. Until today, Albayrak and Erdogan refuse any relation to this company. The emails of the Turkish minister of Energy, prove the opposite.


none today


The following article shows how Putin outsmarted OPEC again

(courtesy I Slav/Oil

How Russia Outsmarted OPEC

Submitted by Irina Slav via,

OPEC’s historical deal to cut production has been sealed, and oil prices have jumped as a result, comfortably above the $50 per barrel mark.According to Lukoil’s vice president, Leonid Fedun, the average price of crude in 2017 could reach US$60 a barrel, thanks in no small part to that agreement.

According to some observers, the effect won’t be so noticeable, and prices will continue to hover around US$50.

In any case, Russia will certainly benefit from the cut agreement, as the chief of VTB, one of the country’s largest banks, said recently. Andrey Kostin said that the decision to cut production will, on the one hand, prop up international prices, which of course is good news for Russia, and on the other hand, it will benefit the ruble, an outcome which was also to be expected given the central place crude oil occupies in Russia’s export mix.

What’s perhaps more interesting is that Russia did not, in fact, obligate itself to cut from essential production. It surfaced last week that the country’s total output had reached a new post-Soviet record of over 11.2 million barrels per day. The precise figure, according to Deputy Energy Minister Kirill Molodtsov, was 11.231 million barrels, and it is from this production level that Russia will take off the 300,000 bpd it agreed to cut to help OPEC in its market rebalancing efforts.

Incidentally, Libya, which has been granted an exemption from the agreement, plans to ramp up its own output by 300,000 bpd by the end of 2016.

To compare, Saudi Arabia pumped 10.6 million bpd in November, and now has to cut 486,000 bpd from that figure. Its friends in the region, including Iraq, Kuwait, Qatar, and the UAE, will cut a combined 510,000 bpd from their output.Iran was actually allowed to increase its output by 107,000 bpd (based on secondary sources from October figures as reported by OPEC), which will bring its daily production close to the target of 4 million barrels of crude set earlier this year at 3.797 million bpd.

Russia will continue to produce crude at the rates it did when prices were lower than they are today – a level that still allowed its oil companies to turn a profit. They might not be too happy about the stronger ruble, as this would negatively affect production costs, but it’s uncertain exactly how big the ruble’s rally will turn out to be.

Russia’s 2017 draft budget had US$40 per barrel as a base scenario for oil prices, according to economist Natalia Orlova from Alfa banking group. Every US$1 above this level translates into around US$2 billion in budget revenues. The budget is currently being discussed.

The country’s budget deficit for 2016 was estimated at over 3 percent by PM Dmitry Medvedev earlier this year, in case oil fell below US$50 again and stayed there long enough. It didn’t, so the budget for the year could be 3 percent or less.

Saudi Arabia, on the other hand, has a deficit that is 20 percent of its GDP for this year despite massive spending cuts.So does Iraq. Kuwait’s deficit is 12 percent and UAE’s is 9 percent. And yet, these four countries will shoulder the bulk of the OPEC cut.

Russia, along with Iran, could turn into the big winner of the agreement, enjoying high output and higher prices, which would allow it to further expand its global market share. Unless, of course, OPEC lies, as former Saudi Oil Minister Ali al-Naimi plainly said at a media event for the promotion of his memoir. “Unfortunately,” he said, “we tend to cheat,”commenting on how OPEC handles its only tool of market rebalancing: production cuts.




API drawdown in crude/gasoline and distillate a major build and a huge buildup in inventories at Cushing.

WTI strangely rises on that news:

(courtesy zero hedge)

WTI Pops Despite Biggest Cushing Inventory Build Since 2008

With OPEC behind us, perhaps the market’s focus will swing back to fundamentals (as opposed to headlines) and following last week’s huge build across products, API reported the second week in a row of crude inventory draws (bigger than the expected 1.37mm drop). However,Gasoline and Distillates saw major builds but Cushing inventories rose over 4mm barrels – the most since 2008. WTI seemed to focus on the crude draw at first…



  • Crude -2.21mm (-1.37mm exp)
  • Cushing +4.01mm (+2.87mm exp)
  • Gasoline +828k (+1.59mm exp)
  • Distillates +4.08mm(+1.24mm exp)

A second week of bigger than expected draws in crude inventories but Cushing saw the biggest weekly build since 2008


The kneejerk reaction was a jump higher in WTI…


none today


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




GBP/USA 1.2735 UP.0013 (Brexit by March 201/UK government loses case/parliament must vote)


Early THIS MONDAY morning in Europe, the Euro FELL by 24 basis points, trading now WELL BELOW the important 1.08 level FALLING to 1.0733; Europe is still reacting to Gr Britain BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and now the Italian referendum defeat/ 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 5.06 0r 0.16%     / Hang Sang  CLOSED UP 169.60 POINTS OR 0.75%   /AUSTRALIA IS HIGHER BY 0.52% / EUROPEAN BOURSES ALL IN THE GREEN 

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

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

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

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

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

The NIKKEI: this TUESDAY morning CLOSED UP 85.55 POINTS OR 0.47%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 169.60 OR 0.75%   Shanghai CLOSED DOWN 5.06 POINTS OR 0.16%   / Australia BOURSE IN THE GREEN /Nikkei (Japan)CLOSED UP 85.55 POINTS OR 0.47%/  INDIA’S SENSEX IN THE GREEN

Gold very early morning trading: $1172.15


Early TUESDAY morning USA 10 year bond yield: 2.392% !!! DOWN 1 IN POINTS from MONDAY 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  3.067, DOWN 1 IN BASIS POINTS  from MONDAY night.

USA dollar index early TUESDAY morning: 100.28 UP 13 CENT(S) from MONDAY’s close.

This ends early morning numbers TUESDAY MORNING



And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield: 3.64% DOWN 7  in basis point yield from MONDAY  (does not buy the rally)

JAPANESE BOND YIELD: +.051% UP 1  in   basis point yield from  MONDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD:1.492%  DOWN 6  IN basis point yield from  MONDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.943  DOWN 4  in basis point yield from MONDAY 

the Italian 10 yr bond yield is trading 45 points HIGHER than Spain.





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

Euro/USA 1.0709 DOWN .0047 (Euro DOWN 47 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 113.99 UP: 0.135(Yen DOWN 14 basis points/ 

Great Britain/USA 1.26750 DOWN 0.0051( POUND DOWN 51 basis points)

USA/Canada 1.3284 UP 0.0010(Canadian dollar DOWN 10 basis points AS OIL FELL TO $50.76


This afternoon, the Euro was DOWN by 47 basis points to trade at 1.0709


The POUND FELL 51 basis points, trading at 1.2675/

The Canadian dollar FELL by 10 basis points to 1.3284, AS WTI OIL FELL TO :  $50.76

The USA/Yuan closed at 6.8790
the 10 yr Japanese bond yield closed at +.051% UP 1 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield DOWN 1/2   IN basis points from MONDAY at 2.398% //trading well below the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.085 UP 1  in basis points on the day /

Your closing USA dollar index, 100.85 UP 40 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 TUESDAY: 1:30 PM EST

London:  CLOSED UP 33.01 POINTS OR 0.49%
German Dax :CLOSED UP 90.49 POINTS OR 0.85%
Paris Cac  CLOSED UP 57.62 OR 1.26%
Spain IBEX CLOSED UP 228.60 POINTS OR 2.64%
Italian MIB: CLOSED UP  707.59 POINTS OR 4.15%

The Dow was UP 35.54 points or 0.18%  4 PM EST

NASDAQ UP  24.11  points or 0.35%  4.00 PM EST
WTI Oil price;  50.76 at 2:30 pm; 

Brent Oil: 54.01   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: $53.84

USA 10 YR BOND YIELD: 2.392%

USA DOLLAR INDEX: 100.47 UP 32  cents(huge resistance at 101.80)

The British pound at 5 pm: Great Britain Pound/USA: 1.2679./ DOWN 47  BASIS POINTS.

German 10 yr bond yield at 5 pm: +.373%



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


Trumpgasm Returns: Dow Hits 11th Record Since Election As Small Caps Soar

Productivity decline most since 1993? … no Problem – Buy the Fucking Bankrupt Bank dip…

The day started off with Italian authorities telling BMPS to prepare for a state bailout, which enabled this total farce...


Once Europe closed, Small Caps continued to explode higher again…To Record Highs

Extremely heavy volume today…

The Dow also saw its 11th record high close since Trump today…Goldman Sachs and JPMorgan account for 36% of the gains in The Dow from 11/4 lows (480 of 1320 points)

Biggest short-squeeze since the day after the election…Does that look human or normal to you?

Before we leave this topic of utter insanity in Small Caps here are 2 more charts and a table

Cost of Funding no longer matters for Small Cap stocks…

Nor does valuation…

On any basis…


Ok – having got that off our chest.

VIX was very chaotic today, smashed down to an 11 handle early on…

Breadth remains anything but supportive…

The divergence between The Dow and S&P narrowed a smidge today but correlation dropped to 6 year lows…

Which was followed by a significant broad market decline the last two times…

And the driver or much of that huge Dow outperformance is Goldman Sachs – which is entirely decoupled from its credit market…

Boeing ended almost unch after Trump’s early tweet…

Bonds went nowhere today (with the long-end very modestly underperforming)…

Decoupled from stocks…

The USD Index limped higher on the day (but remains lower from Friday) as majors were broadly bid…

WTI Crude stumbled lower for the first time since the OPEC deal… “head and shoulders”?

Gold closed down again…

Post-Trump, markets have …cough… diverged…

Finally… it’s been quite a year for stocks…

Trading from Europe today seems to cause many traders to exclaim that markets are in an alternate universe.  I say we have no markets at all just manipulations

Today..from Europe:





Trader Exclaims “Markets Are In An Alternate Universe”

Events were breaking yesterday, but as Bloomberg’s Richard Breslow mocks, not nearly as quickly as the narrative that tried valiantly to explain the price action.

After the fact. We all know what happened. The Italian referendum sent the euro and risk into the sewer in the hours following the result.

Everything stabilized smartly when European markets opened and liquidity was there to be had. Then the Christmas mindset took over and markets decided the calendar was, for now, temptingly free of known black swan events and it was off to the races.

From a trader’s point of view, it was much simpler. They did all the obvious trades they thought they were supposed to do. Added at chart points that screamed lighten up. And then got their eyes ripped out. Why should December break the trading patterns that have played out so many times over the course of the year?

So far we’re on familiar ground. But what struck me was the speed with which the ECB story spun out. Not insignificant ahead of an impending governing council meeting. And one President Draghi will be unlikely to skate through with “mañana”.

We began with Italy and maybe the whole of Europe is in deep trouble. So horrid, at a time when monetary policy is losing its effectiveness. Followed by, buy-the-dip with both hands Eurex action which prompted shamefaced talk of the Draghi put. “How could we have forgotten”? Only to be succeeded by sombre warnings of the impending taper. Capital key changes to tapering at warp speed.

This has been a momentum-driven market rather than one driven by well-reasoned fundamental analysis. It’s amazing what pseudo-intellectual havoc can be caused by a couple hundred points bounce in the DAX and euro.

Two things have indeed importantly changed, however:

1.The charts look very different today. Once again being short EUR/USD near 1.05 has been painfully expensive. Quintuple bottom? The re-test and utter rejection of the 200-day moving average in EUR/JPY is also impressive.



2. The bar for a market panic on any mention of a possible tapering, or even the mere theoretical discussion of a future tapering — no matter if surrounded by APP extension and the like — has been lowered. Markets are on bond yield edge. If global rates continue to nudge higher, those pesky economics models will see inflation expectations lurking everywhere.



It sure looks like Dallas is headed for bankruptcy court with respect to deficiencies in their police and fire pension fund.

(courtesy Mish Shedlock/Mishtalk)

Dallas Pension Showdown: Mayor Seeks To “Target Those Who Got Rich From System”

Submitted by Michael Shedlock via,

The Dallas Police and Fire Pension plan is severely underfunded. Not even a $1.1 billion taxpayer bailout the plan officials request will make the plan whole.

Discussion of a possible freeze in lump sum payments led to a run on withdrawals. The board still has not suspended lump sum payouts.

On Saturday, Dallas Mayor Mike Rawlings proposed targeting those who got rich from the system. This is sure to accelerate the run on assets via lump sum withdrawals.

As background to this story, please consider my October 16 article: Dallas Police Retiring in Droves, Taking Lump Sum Pensions, Fearing the Money Isn’t There (And It Isn’t).

Today, DallasNews reports City’s plan to save Dallas Police and Fire Pension Fund will target those who got rich from the system.

A City Council briefing posted online late Friday night provided the first glimpse into the city’s plan to save the Dallas Police and Fire Pension System from insolvency within the next decade or so. Rawlings and the City Council will discuss the plan Wednesday.

While the presentation is short on details, Rawlings said he can be clear about a few aspects. The city won’t pay the $1.1 billion bailout that pension officials want. Taxpayers will chip in, but he doesn’t want to issue debt to pay for it. Base benefits will be protected. And the city’s general philosophy is that those who profited from the overly generous benefits will have to take part in the banquet of consequences.

Mish Comment: The stance that Dallas will not pony up $1.1 billion is a good one but does not go far enough. Taxpayers should not pay an extra dime.

Pension Board Chairman Sam Friar said he was happy to work with the city but called the proposal a “non-starter.” And although he and Rawlings both say they want to work together, the city’s stance will almost certainly lead to a showdown at the state Legislature next year. Pension officials hope active police and firefighters will vote to support a package of benefit cuts that they believe will pass legal muster.

Friar believes it’s illegal to penalize members for benefits they’ve already received and accrued.

“This is the one issue that we’re just not going there,” Friar said. “We will not do it. The pension board — we will just not go there. … You cannot put toothpaste back into the tube.”

Mish Comment: You either put toothpaste back into the tube, or those standing in line to brush their teeth will discover there is no toothpaste. At the very least, stop squeezing the tube via lump sum payments.

Ultimately, the Legislature is the biggest unknown. The pension system is governed by state law, not city ordinance. The City Council has four of 12 seats on the board but otherwise has no real power over the fund even though taxpayers have been paying more than $110 million into the pension system each year.

Mish Comment: City taxpayers have paid enough, too much actually. Benefit cuts drastically needed.

City officials want the pension system to allow inflation to catch up to the unusually high 4 percent automatic annual cost-of-living increases that the system has awarded since 1989. That means many retirees wouldn’t see another cost-of-living increase for years.

The Deferred Retirement Option Plan, known as DROP, is the city’s biggest target. DROP gave officers and firefighters the right to essentially retire in the eyes of the system while they continued working. Meanwhile, their pension benefit checks were sent to a separate account, which guaranteed them at least 8 percent annual interest for years.

DROP also had few limits on withdrawals. Retirees were also allowed to remain in DROP and continue to accrue interest.

The result was that hundreds of police officers and firefighters became millionaires while insulated from the whims and risks of the markets. Currently, 517 DROP accounts total in excess of $1 million, according to the city’s presentation.

The pension plan guaranteed 8% returns plus a 4% annual inflation benefit. It’s no wonder the system is broke.

The lack of withdrawal restrictions led to a run on the bank once retirees caught wind of the pension system’s proposed benefit cuts, which include new limits on DROP. Since Aug. 11, the fund paid out nearly $500 million in lump sums.

A liquidity crisis remains a risk. If money continues to flow out at that pace, the pension system will have to sell its assets to pay out the withdrawals. That will mean the fund goes insolvent even sooner.

Mish Comment: This is not a liquidity crisis. This is a solvency crisis that one could have easily foreseen more than a decade ago. Some people did see it of course, me included. But nothing ever happens until a crisis hits. Guess what? The crisis hit.

The city’s plan would essentially negate those guaranteed-interest gains by stopping or reducing payments on future monthly benefit checks for DROP recipients for a while.

Rawlings said he knows the plan will face political and legal hurdles. Some officers and firefighters sued the pension system after members voted in 2014 to gradually lower DROP’s guaranteed interest rate.

Mish Comment: The idea that reducing DROP payments or lowering interest for “a while” will fix anything is pie-in-the-sky hope.

Bankruptcy the Only Solution

Unions would be wise to come up with a plan that preserves the most benefits for the most people. But they won’t.

A fair restructuring would cut the most at the top. Million dollar payouts are beyond affordable.

The city of Central Falls, Rhode Island shows what can happen if things end up inside bankruptcy court: “The city’s 133 retirees had their pensions cut by up to 55 percent, with pensioners now getting an average of $16,626 a year. The state allocated $2.6 million to soften the blow for the next five years.”

Having a pension cut from $200,000 to $100,000 is quite different than a cut from $25,000 to $12,500.

However, steep across-the-board cuts are where things are headed because unions never negotiate cuts.

Related Articles

Dallas is headed for bankruptcy court. The sooner it gets there the better off the city will be.





This is not good:  USA productivity from its workers suffers its first two quarter annual decline

(courtesy zero hedge)

US Productivity Suffers First Two-Quarter Annual Decline Since 1993

US Productivity rose a disappointing 3.1% in Q3 (missing expectations of a 3.3% rise). However, on a year-over-year basis, Q3 saw a second consecutive decline – the first two-quarter decline in US productivity since 1993. Unit labor cost growth slowed in Q3 to 3.00% (with QoQ growth tumbling from 6.2% in Q2 to just 0.7% in Q3).

Actually if one looks at the official table US productivity has notr risen YoY since Q4 2015 – (Q1 0.0%, Q2 -0.3%, Q3 -0.05%)

But, as Fed-induced investment in buybacks crowds out capex, real-worker productivity is collapsing (but buy back productivity is soaring!!).

*  *  *

How can this be?? The mainstream media ‘economists’ are stunned. As we explained previously, there are a few reasons… Even Alan Greenspan has warned that America is “in trouble basically because productivity is dead in the water…” There are numerous reasons for this plunge in worker-productivity, from perverted inventives not to work to unintended consequences of monetary policy enabling zombies, but perhaps the most critical driver is exposed in the following dismal chart…

51% of total time spent on the Internet is on mobile devices – in 2015, first time ever mobile is #1 – to make a total of 5.6 hours per day snapchatting, face-booking, and selfying…

Source: @kpcb

So, while every effort can be made by Ivory Tower academics to solve the problem of American worker productivity, perhaps it can be summed up simply as “Put The Smart-Phone Down!”

As we detailed previously, adjusting for the WWII anomaly (which tells us that GDP is not a good measure of a country’s prosperity) US productivity growth peaked in 1972 – incidentally the year after Nixon took the US off gold.

The productivity decline witnessed ever since is unprecedented. Despite the short lived boom of the 1990s US productivity growth only average 1.2 per cent from 1975 up to today. If we isolate the last 15 years US productivity growth is on par with what an agrarian slave economy was able to achieve 200 years ago.

In addition, the last 15 years also saw an outsized contribution to GDP from finance. If we look at the US GDP by contribution from value added by industry we clearly see how finance stands out in what would otherwise have been an impressively diversified economy.

With hindsight we know that finance did more harm than good so we can conservatively deduct finance from the GDP calculations and by doing so we essentially end up with no growth per capita at all over a timespan of more than 15 years! US real GDP per capita less contribution from finance increased by an annual average of 0.3 per cent from 2000 to 2015. From 2008 the annual average has been negative 0.5 per cent!

In other words, we have seen a progressive (pun intended) weakening of the US economy from the 1970s and the reason is simple enough when we know that monetary policy broken down to its most basic is a transaction of nothing (fiat money) for something (real production of goods and services). Modern monetary policy thereby violates the most sacred principle in a market based economy; namely that production creates its own demand. Only through previous production, either your own or borrowed, can one express true purchasing power on the market place.

The central bank does not need to worry about such trivial things. They can manufacture the medium of exchange at zero cost and express purchasing power on the same level as the producer. However, consumption of real goods and services paid for with zero cost money must by definition be pure capital consumption.

Do this on a grand scale, over a long period of time, even a capital rich economy as the US will eventually be depleted.Capital per worker falls relative to competitors abroad, cost goes up and competitiveness falls (think rust-belt). Productive structures cannot be properly funded and the economy must regress to align funding with its level of specialization.

In its final stage, investment give way for speculation, and suddenly finance is the most important industry, pulling the best and brightest away from every corner of the globe, just to find more ingenious ways to maximise capital consumption.

As the slave economy got perverted by incentives not to work, so does the speculative fiat based economy, which consequently create debt serfs on a grand scale.





The trade deficit came in much larger than expected rising to 42 billion from 36 billion. This was due to the strong dollar which causes exports to decline and imports to rise. This will cause 4th quarter GDP to fall.

(courtesy zero hedge)

Trade Deficit Grows More Than Expected As Stronger Dollar Pressures Exports

The U.S. monthly international trade deficit increased in October 2016 according to the U.S. Census Bureau, rising from $36.2 billion in September (revised lower from $36.4 billion) to $42.6 billion in October, higher than the $41.8BN consensus estimate, as exports decreased and imports increased which was to be expected following the recent surge in the US Dollar. The goods deficit increased $6.3 billion in October to $63.4 billion. The services surplus decreased $0.1 billion in October to $20.8 billion.

Breaking down the main trade categories, exports of goods and services decreased $3.4 billion, or 1.8 percent, in October to $186.4 billion. Exports of goods decreased $3.5 billion and exports of services increased $0.1 billion.

  • The decrease in exports of goods reflected decreases in foods, feeds, and beverages ($1.4 billion), in industrial supplies and materials ($1.0 billion), and in consumer goods ($0.9 billion).
  • The increase in exports of services mostly reflected an increase in transport ($0.1 billion), which includes freight and port services and passenger fares.

At the same time, imports of goods and services increased $3.0 billion, or 1.3 percent, in October to $229.0 billion. Imports of goods increased $2.8 billion and imports of services increased $0.2 billion.

  • The increase in imports of goods mostly reflected increases in consumer goods ($2.4 billion) and in capital goods ($1.1 billion). A decrease in automotive vehicles, parts, and engines ($0.7 billion) partly offset the increases.
  • The increase in imports of services reflected an increase in transport ($0.2 billion).

Broken down by country, the October figures show surpluses, in billions of dollars, with Hong Kong ($2.6), South and Central America ($1.8), Singapore ($1.3), and Brazil ($0.1). Deficits were recorded, in billions of dollars, with China ($28.9), European Union ($12.9), Mexico ($5.8), Japan ($5.8), Germany ($4.7), India ($2.4), Italy ($2.2), OPEC ($2.1), Canada ($1.7), France ($1.6), South Korea ($1.4), Taiwan ($1.0), United Kingdom ($0.7), and Saudi Arabia ($0.2).

  • The deficit with China increased $2.0 billion to $28.9 billion in October. Exports increased $0.5 billion to $10.6 billion and imports increased $2.4 billion to $39.5 billion.
  • The balance with Canada shifted from a surplus of $0.2 billion in September to a deficit of $1.7 billion in October. Exports decreased $0.9 billion to $22.0 billion and imports increased $1.0 billion to $23.6 billion.
  • The balance with the United Kingdom shifted from a surplus of $0.9 billion in September to a deficit of $0.7 billion in October. Exports decreased $1.0 billion to $4.3 billion and imports increased $0.6 billion to $5.0 billion.

While not a big surprise, we expect that Q4 GDP estimates will see some modest downward revisions as a result of the weaker trade report. The biggest question is how it will translate at the micro level, and how soon before the ongoing dollar strength forces companies, especially those with global sales exposure, to begin trimming their 2017 earnings and revenue forecasts.






Factory orders surge prior to the USA election as government spending increased dramatically.  This happens all the time before an election so do not extrapolate the data thinking that it will continue:

(courtesy zero hedge)

Factory Orders Surged Most In 16 Months (Before The Election)

Despite all the uncertainty, all the chaos, all the headlines, and all the media angst, Factory Orders in America surged by the most in 16 months in October ahead of the election.

Factory Orders rose 2.7% MoM (ahead of the 2.6% rise expected) led by am 11.9% spike in Capital Goods orders…

In case this seems odd to anyone, we remind them of what we wrote previously about the election cycle surge in government spending

Some pretty good economic reports have energized various parts of the financial markets lately. Consumer spending is up, GDP is exceeding expectations and even factory orders, that perennial downer, popped this morning.

In response the dollar is soaring and interest rates are at breaking
out of their multi-decade down-channel. The economy is clearly
recovering, implying a return to normality. Right?

Nah, it’s just the usual election year illusion.

When the presidency is at stake the party in power always
pumps up spending in an attempt to put people back to work and create
the impression of a well-run country whose leaders deserve more time in
the spotlight.
After the election, spending returns to trend and the resulting bad news gets buried in “political honeymoon” media coverage.

*  *  *

So don’t hold your breath; don’t extrapolate this… we suspect Trump is being set up for a big fall as the impulse from this surge in government debt/spending fades ahead of his inauguration.






However for the 22nd straight month, USA durable goods orders declined on a year over year basis

(courtesy zero hedge)

Donald does like the huge costs to AirForce ONE Boeing 747s. He states costs are out of control and ordered them cancelled.
(courtesy zero hedge)

Boeing Slides After Trump Tweets Airplane “Costs Are Out Of Control”

As Politico reports, The Pentagon is looking to replace its aging fleet of Boeing 747-200 aircraft, which will reach the planned 30-year service life in 2017. Officials have said the next Air Force One jets are estimated to begin operations in fiscal 2023. The Air Force expects the planes to have the range to fly between continents and comparable interiors to the current 747, whose features include work and sleeping quarters for the president and first family.

But it seems President-Elect Trump has other ideas, and it now seems that “aerospace is the new pharma” when it comes to Twitter-based risk factors.

Boeing is building a brand new 747 Air Force One for future presidents, but costs are out of control, more than $4 billion. Cancel order!

Indicatively, according to Politico, the Air Force said previously that it had earmarked $1.65 billion for two new presidential aircraft, which will be four-engine Boeing 747-8s.

In any case, algos reacted immediately as follows:

As a reminder, Boeing is 5.5% of The Dow, and with Ex-Im bank on the wires (defending its existence), we note that Boeing’s employee base is near the lowest since 1993:

And then, moments later, “negotiating” Boeing’s pricing strategy, Trump said that “we want Trump to make a lot of money, but not that much money”

Trump on Boeing/Air Force One tweet: “The plane is totally out of control…we want Boeing to make a lot of money, but not that much money”

What happens next? This sums things up nicely:

“everyone had a plan until the President Tweeted out that the stock market was in a big fat ugly bubble”


Is this guy nuts???

The First Defection: Republican Elector Writes In NYT Op-Ed Why He Won’t Be Voting For Trump





A great commentary by David Stockman on Sears and how Steve Mnuchin et al helped destroy the company.  David Stockman warns us on how Mnuchin will fair in the Trump cabinet:

(courtesy David Stockman)

Eddie, Steve (Mnuchin) And Bruce’s Swell Adventure Destroying Sears—A Cautionary Tale For Trumponomics

There is something very important to understand about Trumponomics. To wit, all of the tax cuts and deregulation in the world are not going revitalize the American economy unless the Fed’s Bubble Finance regime and the resulting casinos on Wall Street are decisively shutdown.

That’s because the C-suites of corporate America have become rogue financial engineering operations. In order to feed the casino’s incessant demand for dividends, stock buybacks and M&A deals, they are virtually strip-mining company balance sheets and cash flows to the point that there is nothing left for investment in productive assets or improving worker training and productivity.

During the 12 months (LTM) ending in September 2016, for example, reported profits of the S&P 500 came in at about $800 billion. But as shown in the chart below, estimated stock-buybacks and dividends this year will hit a record $1 trillion. So the 500 largest US based companies will end up disgorging about 125% of their net income to the gamblers and momo traders of Wall Street.

And this has nothing to do with the so-called free market at work or corporate assessments of the “highest and best uses” for their cash. To the contrary, companies all over America are eating their seed corn because Fed policy is rewarding their top executives for doing so via vastly inflated stock prices which fatten their stock option winnings in an irresistible manner.

Image result for images of stock buybacks plus dividends as % of net income for s&P 500

And the above is just the half of it. Based on the first 11 months this year, it’s now estimated that US based M&A deals will total a record $2.5 trillion during 2016. Again, this isn’t a product of efficient allocation of capital on an honest free market.

Instead, it reflects the fact that companies can raise virtually unlimited amounts of cheap debt to “grow” via vastly over-priced acquisitions that rarely make economic sense or produce the ballyhooed synergies.

In fact, what they generate is post-deal “restructurings” that result in massive layoffs and plant and other facility closures that cause deadweight losses to the US economy. Yet in the Fed’s world of Bubble Finance, the signaling mechanisms of the free market have been totally disabled.

To wit, in a market that is never permitted to fail, the casino gamblers have decreed that these hundreds of billions in asset impairments and cash restructuring costs should be ignored because they are purportedly “nonrecurring” expenses. Yet these blunderbuss cost take-outs essentially embody cookie-cutter “synergy savings” formulas designed to satisfy Wall Street traders, not generate real operational efficiencies.

In fact, much of the present manic M&A activity generates diseconomies of scale—-globe spanning business agglomerations that are unmanageable and often internally disruptive, such as vertical mergers that result in loss of customers owing to downstream or upstream competitive conflicts. Accordingly, the huge disconnect between the destructive main street economic impacts of rampant M&A and soaring stock and bond price valuations goes uncorrected.

That’s right. During 2015 the S&P 500 companies charged upwards of $250 billionto such non-recurring costs, and for the nine years of 2007-2015 these so called “ex-items” charges cumulated to more than $1 trillion.

We often use the term “falsified” to explain the perverse deformations caused by the Fed’s attempt to peg money market rates, manipulate the yield curve and prop up the stock market and other risk assets.  Yet how else can you describe a process in which $1 trillion or wasted corporate assets were perversely cheered on by the casino as indicative of higher profits ahead.

Image result for images of total US M&A transactions since 1995

Presumably, Donald Trump’s economic advisors—especially his Secretary of the Treasury designate—-would alert him to this profound barrier to rejuvenating the US economy. But during his very first interview on bubble vision it became evident that Steve Mnuchin is clueless, as this interchange with host Joe Kernen underscores:

Kernen: Are you a fan of Janet Yellen, Steven?

Mnuchin: You know, look. I think she’s done a good job at the Fed. 

Kernen: She should continue to serve out her term?

Mnuchin: I’m not going to comment on whether she should or shouldn’t.

If the man is confused about the urgent need to get Janet Yellen out of the top Fed chair on January 20th, then you might wonder if he has an inkling about the multi-trillion financial engineering spree in the C-suites that is sucking the lifeblood out of corporate America.

Then again, that very same day another announcement regarding Mnuchin made everything crystal clear. It seems that Mnuchin will be resigning his seat on the board of Sears, where he has served since 2005—more than 11 years.

Yet Sears is the poster boy for what rampant financial engineering ultimately brings about. That is, the complete destruction of an enterprise in order to feed Wall Street speculators and insiders with dividends and stock buybacks foolishly extracted from company resources that should have instead been invested in capital improvements, customer service enhancement, advertising and marketing and other avenues of competitive advantage.

Worse still, Mnuchin’s partners in crime in this instance where none other than hedge fund impresarios  Eddie Lambert and Bruce Berkowitz. The former was Mnunchin’s compatriot at Yale and Goldman Sachs, while the latter is one of the hedge fund raiders trying to extract billions from the Fannie Mae/Freddie Mac caper we slammed last week, and which Mnuchin also endorsed during his first CNBC interview.

Indeed, it is difficult to identify any trio of corporate leaders who have done more to destroy a company through financial engineering than this group. Sears was systematically stripped of working capital, employees and in-store capital investment in order to fund share buybacks during 2005-2011; and when the cash ran-out, it subsequently engaged in massive store closings and financial engineer schemes, such as selling it’s prime mall stores to a REIT, in order to generate enough cash to stay in business—even though the massive operating leases it took on spelled its eventual death sentence.

Thus, during the last 11-years it spent $7 billion on stock buybacks or nearly double the amounts it reinvested in a maintaining and renewing its store base, which at one time numbered more than 4,000 Sears, K-Mart and other specialty store units.

Yet in a fiercely competitive environment challenged by the likes of Wal-Mart, Target and Kohl’s in the brick and mortar venues and Amazon in on-line retail, the chart below was the company’s death warrant. During the last decade, for example, SHLD spent  just $4 billion on CapEx or 0.9% of sales compared to Wal-Mart’s investment of $130 billion or 3% of sales.
SHLD Net Common Equity Issued (Purchased) (TTM) Chart

SHLD Net Common Equity Issued (Purchased) (TTM) data by YCharts

This gutting of its balance sheet and cash flow, of course, was undertaken in order to levitate its stock price, and to periodically attract retail homegamers into the stock on the promise that SHLD had vast hidden value in its brands and real estate. Jim Cramer peddled that line for years, while insiders yo-yo’ed the share price.

With each run-up of the stock price, more sheep were attracted to the slaughter until even Cramer gave up. What was once a $200 per share stock price has sunk close to single digits.

SHLD Chart

SHLD data by YCharts

In a honest free market, SHLD would have been in chapter 11 long ago. But it’s trio of financial engineers have repeatedly tapped the capital markets for debt and real estate financings that have postponed the day of reckoning. and which have also enabled them to hide the cheese.

To wit, in July 2015 the company spun-off 258 Sears and K-Mart stores into a real estate investment trust named Seritage Growth Properties (SRG). In return for $170 million in annual lease payments which will escalate at 2% per year, the company claims to have generated $2.7 billion in new investor cash.

This was peddled as a vote of confidence by Wall Street, but it was hardly that. For one thing, the cash is already all gone. During the five quarters since the deal, SHLD has generated $2.5 billion of negative free cash flow, and at its most recent quarterly SEC filing had just $238 of cash on its balance sheet versus nearly $3 billion in debt.

More importantly, the Seritage financing was just another pea-shuffling operation by the hedge fund trio that has turned SHLD into a slow-motion financial trainwreck. Only $458 million of the new investment consisted of outside equity. The rest of the $2.7 billion of proceeds from Seritage for the 258 stores was either borrowed in the junk debt market ($1.2 billion) or supplied by Lampert’s hedge fund ($745 million) or Bruce Berkowitz’ Fairholme capital ($297 million).

In other words, the whole deal was a backdoor financing to get assets out of SHLD prior to its impending bankruptcy. The hedge fund insiders will now have a secured senior claim through the newly created REIT, which they substantially own, rather than worthless SHLD common stock.

Nor is this the only maneuver of this sort. Sears’ hedge fund owners have been slicing and dicing the company’s assets through subsidiary spin-offs and other financial engineering maneuvers for years—-all designed to extract their investments from a sinking ship before it finally goes down.

The charts below summarizes why the end is near. Same store sales have been declining for years and revenues have literally collapsed. Sears’ sales have dropped from $41 billion in 2000 to $15 billion in 2015. Kmart, which merged with Sears in 2005, has seen its sales plunge from $37 billion to $10 billion during the same period. Overall consolidated sales are now running at about a $20 billion per annum compared to a peak of $54 billion in 2006.
SHLD Operating Revenue (TTM) Chart

SHLD Operating Revenue (TTM) data by YCharts

But it is on the free cash flow front that the Sears disaster is most vividly event. Since operating free cash flow turned negative in its October 2010 quarter, SHLD has consumed nearly $8 billion of cash.

And the true situation was actually worse because the hedge funds which control it have deliberately and literally starved it’s operating accounts of needed expenses for staffing, inventory, merchandising, advertising and minimum store maintenance in order to staunch the cash bleed. Much of the chain now consists of nearly empty stores—-bereft of shoppers, merchandise and employees.
SHLD Free Cash Flow (TTM) Chart

In fact, SHLD will surely file for Chapter 11 in the next 60 days. But that has not stopped it’s press office from pumping the preposterous story that its abysmal operating performance is compensated for by its trove of valuable assets:

“We are absolutely focused on restoring Sears Holdings to profitability,” Sears spokesman Howard Riefs told Business Insider in November. “We are an asset-rich enterprise with multiple resources at our disposal.”

In fact, SHLD has $1.35 billion of trade payables, and its suppliers are operating with one eye on the exit ramp. As Business Insider recently reported:

 “… least half a dozen suppliers have “significantly” reduced product shipments to Sears over fears of a bankruptcy, according to Marc Wagman, executive vice president of trade credit and political risk at the insurance brokerage firm Arthur J. Gallagher & Co., which represents the Sears suppliers to insurers.

The companies’ concern over Sears’ financial health has “really accelerated in the last 6 to 12 months,” Wagman told Business Insider…….Suppliers have grown concerned after warnings from Sears store employees and a number of banks.

Fitch Ratings in October identified Sears as one of seven major retailers at risk of going bankrupt in the next 12 to 24 months and eventually liquidating. In September, Moody’s analysts downgraded Sears’ liquidity rating, saying Sears and Kmart don’t have enough money — or access to money — to stay in business.

So it looks like Steve Mnuchin got of Dodge just in the nick of time. It also appears that Donald Trump has chosen a Treasury Secretary who is so deep in the Wall Street bubble that he has no clue about what is destroying capitalist prosperity in America.

After all, he spent a decade making tax-driven investments in Hollywood movies; five years harvesting billions from the FDIC-supported corpus of IndyMac that should been liquidated when it failed in 2008; and 11 years helping Eddie and Bruce drive the storied Sears and K-Mart retail chains into bankruptcy.

Now he’s going to help the Donald drain the swamp and kickstart the US economy back into 3-4% real growth.




well that about does for tonight

I will see you tomorrow night


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