Dec 12/More emails showing collusion and fraud from our bankers in gold and silver/Trump ignites spat with China on the ONE CHINA POLICY/China sends a nuclear bomber over the South China seas/Monte de Paschi scrambles to raise funds in order to avoid a bail in!/65% of all ATM’s non operational as Goldman Sachs states that they may go to a barter system/Saudi Arabia pledges more production cuts/a deal on the non OPEC players to cut 600,000 barrels per day/Clinton campagin calling for intel briefing prior to electoral college vote sending alarm bells ringing!/

Gold at (1:30 am est) $1163.50 UP $4.10

silver  at $17.12:  UP 22 cents

Access market prices:

Gold: 1162.30

Silver: 17.07



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:

MONDAY gold fix Shanghai

Shanghai morning fix Dec 12 (10:15 pm est last night): $  1188.15

NY ACCESS PRICE: $1159.85 (AT THE EXACT SAME TIME)/premium $28.30


Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1187.22



China rejects NY pricing of gold  as a fraud  


London Fix: Dec 12: 5:30 am est:  $1154.40   (NY: same time:  $1155.30    5:30AM)

London Second fix Dec 12: 10 am est:  $1156.10 (NY same time: $1159.80    10 AM)??

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

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


For comex gold: 


For silver:


Let us have a look at the data for today



In silver, the total open interest FELL by 684 contracts DOWN to 161,383 with respect to FRIDAY’S trading.    In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .807 BILLION TO BE EXACT or 115% of annual global silver production (ex Russia & ex China).



In gold, the total comex gold ROSE by 22 contracts DESPITE THE FALL IN  THE PRICE GOLD ($10.40 with FRIDAY’S trading ).The total gold OI stands at 394,722 contracts. We are very close to the bottom with respect to OI.  Generally 390,000 should do it.

we had a 0 notices filed upon for NIL oz of gold.


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


We had another small change in tonnes of gold at the GLD, a small withdrawal of 1.19 tonnes of gold and this gold is heading toward Shanghai

Inventory rests tonight: 856.26 tonnes



we no changes  in silver,

THE SLV Inventory rests at: 342.865 million oz


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

1. Today, we had the open interest in silver FELL by 684 contracts DOWN to 161,383 as the price of silver FELL by $0.12 with FRIDAY’S trading.  The gold open interest ROSE by 22 contracts UP to 394,722 despite the fact that the price of gold FELL BY  $10.40 WITH FRIDAY’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  SUNDAY night/MONDAY morning: Shanghai closed DOWN 79.91 POINTS OR 2.47%/ /Hang Sang closed DOWN 327.96  OR 1.44%. The Nikkei closed UP 158.66 OR 0.84%/Australia’s all ordinaires  CLOSED UP 0.06% /Chinese yuan (ONSHORE) closed DOWN at 6.9152/Oil ROSE to 53.79 dollars per barrel for WTI and 56.52 for Brent. Stocks in Europe: ALL MIXED.  Offshore yuan trades  6.9370 yuan to the dollar vs 6.91520  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS AGAIN AS  MORE USA DOLLARS  LEAVING CHINA’S SHORES / CHINA SENDS A CLEAR MESSAGE TO THE USA AND JANET  TO NOT RAISE RATES IN DECEMBER.




Japan is caught in a catch 22:  they are happy that the yen is falling  as it will help exporters.  However the yield on the 10 yr Japanese bond is not rising as fast as the USA and other global players.  This causes hot money to leave and this again will put pressure on the falling yen.  This forces up food prices and other imports. Also the long end of the Japanese yield curve contracts and this will be very damaging to its banks:

( zero hedge)


i)Trump ignites the USA/China spat by saying he is not bound by the “one China” policy:

( zero hedge)

ii)China hits back and warns:

  1. Nothing to discuss
  2. “the official Xinhua News Agency warned that world peace hinges on close and friendly ties between the U.S. and China.”

( zero hedge)

iii)Then to rattle everybody’s nerves, China flies a nuclear bomber above he South China Sea in response to what they call: the “ignorant child, Trump”

a great reason to hit on gold early this morning

( zero hedge)



Not so sure how this is going to help Monte de Paschi: Paolo Gentiloni picked as Italy’s new Prime Minister:

( zero hedge)


ii)Monte de Paschi scrambles to raise capital by the end of the year to avoid a bailin:

( zero hedge)

iii)Secular Investor gives a detailed account of the problems with Monte de Paschi. They certainly have a liquidity problem with over 5 billion euros of cash have been withdrawn by depositors. They have 30 billion euros of bad debt and need 10 billion euros to cover the hole if these loans leave to a bad bank:

( Secular Investor)

iv)A super commentary by Shedlock describing the real showdown coming between Italy and Germany due to Italy’s huge debts.  Either Germany funds Italy or Italy walks:

( Mish Shedlock/Mishtalk)

v)Now who could have foreseen this happening? 100 yr Belgian bonds collapse in price by over 30%

( zero hedge)





wow! 65% of India’s ATMs are non operational and Goldman Sachs is warning that India will return to a barter system:

( zero hedge)


Modi’s move to cut off the two largest denomination bills certainly has caused damage to it’s economy:  now the big Foxconn fires 25% of its Indian workers.  The company claims that sales of its products have been destroyed by Modi’s actions:

( zero hedge)


i)Another shock and awe from Saudi Arabia has they plan to cut a little more from production: this sends oil skyrocketing in price

( zero hedge)

( zero hedge)



i)Venezuela seizes 4 million toys stating “price gouging” from an importer and plays Santa Claus to the poor:

( zero hedge)

ii)In a move similar to India, Maduro removes half its paper money from circulation sending the distressed economy further down the rabbit hole:

( zero hedge)


i)I am absolutely speechless with respect to the emails submitted by Deutsche bank

Here are some lines which indicate breach of trust/collusion and fraud

we have 350,000 pages of emails along with 75 audio tapes:

(courtesy Allan Flynn/Bullionstar)

ii)There is going to be other:  this is just the beginning:

350,000 pages of emails/75 audio tapes

( Reuters)

iii)Michael Kosares  describes that Trump will take office polar opposite to what happened to Reagan.  Reagan came to power during a huge inflation bubble. Trump : deflation with huge excess capacity throughout the world

( Mike Kosares/)

iv)Seeking Alpha’s Avery Goodman describes how Modi’s attacks on gold will have little effect on gold demand


( Avery Goodman/seekingalpha)


i)Trump picks Exxon CEO Rex Tillerson, a close friend of Putin as Secretary of State:

( zero hedge)

ii)As expected Trump picks Marine General John Kelly as Homeland Security Secretary:

( zero hedge)

iii)First Boeing, now Lockheed Martin tumbles after Trump tweets that it’s F 35 costs are spiraling out of control:

( zero hedge)

iv)These guys ought to know:  the FBI disputes the CIA’s claims of influence by Russian in the Presidential election

( zero hedge)

v) As promised, the Clinton campaign is calling for an intel briefing ahead of the Electoral College vote in what looks like an attempt to steal the election:

(courtesy zero hedge)

vi) the US budgetary deficit for Nov 2016 came in at 136 billion dollars. For the first two months of the fiscal 2017 year:  181 billion and well on its way for deficit of 1 trillion dollars for the year.

( zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE BY 22 CONTRACTS UP to an OI level of 394,722 DESPITE THE PRICE OF GOLD FALLING $10.40 with FRIDAY’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 82 contracts DOWN to 1,325.We had 70 notices served upon yesterday so we LOST 12 contracts or 1200 oz will NOT stand for delivery.

For the next delivery month of January we had a LOSS of 44 contracts DOWN to 2443. For the next big active delivery month of February we had a LOSS of 548 contracts DOWN to 270,195.


We had 0 notices filed upon today for NIL oz


And now for the wild silver comex results.  Total silver OI FELL by 684 contracts FROM 162,067 UP TO 161,383 as the price of silver FELL BY $0.12 with FRIDAY’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 159 contracts DOWN to 667 CONTRACTS . We had 121 notices served upon yesterday so we LOST 38 contracts or an additional 190,000 oz will NOT stand for delivery and these guys were paper settled.

The next non active delivery month is January and here the OI fell by 151 contracts down to 1892. 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 326 contracts DOWN to 132,890 contracts.

We had 118 notices filed for 590,000 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 161,437  contracts which is fair.

Yesterday’s confirmed volume was 172,159 contracts  which is fair

Initial standings for DECEMBER
 Dec 12.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 159,524.103 oz
Deposits to the Dealer Inventory in oz nil oz


Deposits to the Customer Inventory, in oz 
45,408.343 oz
No of oz served (contracts) today
0 notices
NIL oz
No of oz to be served (notices)
1325 contracts
132,500 oz
Total monthly oz gold served (contracts) so far this month
8477 notices
847,700 oz
26.367 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     3,856,846.5 oz
Today we HAD 0 kilobar transactions/ and we had a huge 159,524.103 oz of real physical gold leave the comex!! OR A NET: 114,115.8 OZ 
Today we had 0 deposit(s) into the dealer:
total dealer deposits:  nil  oz
We had nil dealer withdrawals:
total dealer withdrawals:  nil oz
we had 1 customer deposit(s):
i) into HSBC: 45,408.343 oz
total customer deposits; 45,408.343 oz
We had 2 customer withdrawal(s)
 i) out of Scotia; 33,005.583 oz
ii) out of Brinks: 126,518.520 oz
total customer withdrawal: 159,524.103 oz
We had 0  adjustment(s)
Total dealer inventor 1,919,716.117 or 59.71 tonnes
Total gold inventory (dealer and customer) = 9,427,754.481 or 293.24 tonnes 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 293.24 tonnes for a  loss of 10  tonnes over that period.  Since August 8/2016 we have lost 61 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 notice(s) 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 0 contract(s)  of which 32 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

To calculate the initial total number of gold ounces standing for the DECEMBER. contract month, we take the total number of notices filed so far for the month (8477) x 100 oz or 847,700 oz, to which we add the difference between the open interest for the front month of DEC (1325 contracts) minus the number of notices served upon today (0) x 100 oz per contract equals 980,200 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 (8477) x 100 oz  or ounces + {OI for the front month (1325) minus the number of  notices served upon today (0) x 100 oz which equals 981,500 oz standing in this non active delivery month of DEC  (30.488 tonnes)
I have now gone over all of the final deliveries for this year and it is startling.
First of all:  in 2015 for the 12 months: 51 tonnes delivered upon for an average of 4.25 tonnes per month.
Here are the final deliveries for 2016:
Jan 2016:  .5349 tonnes  (Jan is a non delivery month)
Feb 2015:  7.9876 tonnes (Feb is a delivery month/deliveries this month very low)
March 2015: 2.311 tonnes (March is a non delivery month)
April:  12.3917 tonnes (April is a delivery month/levels on the low side
And then something happens and from May forward deliveries boom!
May; 6.889 tonnes (May is a non delivery month)
June; 48.552 tonnes ( June is a very big delivery month and in the end deliveries were huge)
July: 21.452 tonnes (July is a non delivery month and generally a poor one/not this time!)
August: 44.358 tonnes (August is a good delivery month and it came to fruition)
Sept:  8.4167 tonnes (Sept is a non delivery month)
Oct; 30.407 tonnes complete.
Nov.    8.3950 tonnes.
DEC.   30.488 tonnes
total for the 12 months;  222.028 tonnes
average 18.502 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: 198.790 tonnes per the 8 months or 24.849 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:  30.488 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 12. 2016
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
337,306.88  oz
Deposits to the Dealer Inventory
nil  OZ
Deposits to the Customer Inventory 
607,292.710 oz
No of oz served today (contracts)
(590,000 OZ)
No of oz to be served (notices)
546 contracts
(2,730,000  oz)
Total monthly oz silver served (contracts) 2,790 contracts (13,950,000 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  2,934,513.9 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 CNT:  337,306.880  OZ
Total customer withdrawals: 337,306.88  oz
 we had 1 customer deposit(s):
i) into CNT: 607,292.710 oz
,total customer deposits; 607,292.710  oz
 we had 0 adjustment(s)
Volumes: for silver comex
Today the estimated volume was 54,725 which is VERY GOOD
YESTERDAY’S  confirmed volume was 51,580 contracts  which IS VERY GOOD.
The total number of notices filed today for the DEC. contract month is represented by 118 contracts for 590,000 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  2790 x 5,000 oz  = 13,950,000 oz to which we add the difference between the open interest for the front month of DEC (667) and the number of notices served upon today (118) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the DEC contract month:  2790(notices served so far)x 5000 oz +(667) OI for front month of DEC. ) -number of notices served upon today (118)x 5000 oz  equals  16,680,000 oz  of silver standing for the DEC contract month.
we LOST 38 contracts or an additional 190,000 oz will NOT  stand for delivery in this active month of December..
Total dealer silver:  37.922 million (close to record low inventory  
Total number of dealer and customer silver:   179.727 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 12/a withdrawal of 1.19 tonnes of gold from the GLD/Inventory rests at 856.26 tonnes
Dec 9/another huge withdrawal of 3.26 tonnes of gold leaves the GLD vaults on its way to Shanghai/Inventory rests this weekend at 857.45 tonnes
DEC 7/ a huge change in gold inventory/a withdrawal of 6.23 tonnesas this gold is heading towards Shanghai/inventory rests at 863.67 tonnes
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 12/ Inventory rests tonight at 856.26 tonnes


Now the SLV Inventory
Dec 12/no change in silver inventory/inventory rests at 342.865 million oz/
Dec 9/no change in silver inventory/inventory rests at 342.865 million oz/
Dec 8/a huge withdrawal of 3.09 million oz from the SLV/Inventory rests at 342.865 million oz
DEC7/no changes in silver inventory at the SLV/Inventory rests at 345.995 million oz/
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 12.2016: Inventory 342.865 million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 6.8 percent to NAV usa funds and Negative 6.9% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.1%
Percentage of fund in silver:39.6%
cash .+0.3%( Dec 12/2016)
2. Sprott silver fund (PSLV): Premium RISES to +.26%!!!! NAV (Dec 12/2016) 
3. Sprott gold fund (PHYS): premium to NAV RISES TO – 0.49% to NAV  ( Dec 12/2016)
Note: Sprott silver trust back  into POSITIVE territory at +0.26% /Sprott physical gold trust is back into NEGATIVE territory at -0.49%/Central fund of Canada’s is still in jail.


Major gold/silver stories for MONDAY


Euro Crisis and Contagion Coming In 2017

A euro crisis and contagion is almost certain in 2017, Irish economist and writer David McWilliams has warned:

“It is almost certain that there will be another euro crisis in 2017. The last time we had a euro crisis, the focus of attention was Greece; today the vortex is Italy.

Italy is not Greece. Italy is the third-largest economy in the Eurozone. Italy is the second-largest manufacturing nation in the EU after Germany. Italy is the largest debtor in Europe.

The third-largest Italian bank is irredeemably bankrupt. Italy has no government and the people who are likely to win the next election want to take Italy out of the euro and replace the euro with their own currency, the lira.

Gold in EUR (YTD 2016)

These are the facts.

Our Finance Minister has said there is no problem in the Eurozone. I really don’t know what planet he is living on.

Unfortunately for the EU, if Greece was a tricky issue to deal with, Italy is — in economic terms — a massive Greece …”  See article here

Despite the recent sell off in gold prices, gold remains 12% higher in euro terms in 2016 – from €974/oz to €1,092/oz.

Gold is 10% higher in U.S. dollars and 30% higher in pounds.

The bout of euro strength we have seen in recent months is unsustainable and will in time give way to the euro weakening against gold. Gold will again hedge and protect investors and savers in the EU from euro weakness as it did during the financial crisis.

The dollar has had a massive rally and looks overvalued versus most currencies and indeed gold. U.S. assets have increasingly poor fundamentals and both U.S. stocks and bonds look vulnerable to sharp corrections and new bear markets.

The panacea of massive bailouts, bail-ins and massive currency printing by the ECB as announced last Thursday, may or may not prove effective at containing the crisis in 2017. However, investors with a more long term horizon are diversifying and looking to the inflation protecting and systemic hedging  qualities of gold.

The most effective hedging instrument and safe haven asset remains gold bullion. This is only the case if investors own allocated and segregated gold and silver coins and bars in the safest vaults, in the safest jurisdictions in the world.

Gold and Silver Bullion – News and Commentary

Gold falls to 10-mth lows on Fed rate hike bets (

Saudis Signal Deeper Cuts After Deal With Non-OPEC Countries (

Trump offers Goldman Sachs President NEC Director Position (

Donald Trump says CIA charge Russia influenced election is ‘ridiculous’ (

House prices in prime central London fall by nearly 5%, says Knight Frank (

Chinese Buyers Find Bargains in Gold (

Gold Turnaround King Follows Biggest Deal Yet With Plan for More (

What’s The Catch With This Turkish Gold Plan? (

Inflation-hit Venezuela to pull largest bill from circulation (

Gold “primed for a $150-$200 rally” (


Gold Prices (LBMA AM)

12 Dec: USD 1,154.40, GBP 916.82 & EUR 1,089.41 per ounce
09 Dec: USD 1,168.90, GBP 927.64 & EUR 1,100.75 per ounce
08 Dec: USD 1,174.75, GBP 925.47 & EUR 1,088.64 per ounce
07 Dec: USD 1,171.25, GBP 929.62 & EUR 1,092.19 per ounce
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

Silver Prices (LBMA)

12 Dec: USD 16.86, GBP 13.34 & EUR 15.90 per ounce
09 Dec: USD 16.95, GBP 13.45 & EUR 16.03 per ounce
08 Dec: USD 17.13, GBP 13.50 & EUR 15.88 per ounce
07 Dec: USD 16.77, GBP 13.32 & EUR 15.64 per ounce
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

Recent Market Updates

– ECB ‘Bazooka’ Reloaded Until At Least December 2017 – Euro Gold Rises 1%; 13% YTD
– UK £6 Billion Worse Off After Multi Billion Pound Gold “Accounting Error”
– Buy Silver – May Replace Gold As Money In India
– Shariah Gold Standard Approved for $2 Trillion Islamic Finance Market
– 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

Mark O’Byrne
Executive Director





I am absolutely speechless with respect to the emails submitted by Deutsche bank

Here are some lines which indicate breach of trust/collusion and fraud

we have 350,000 pages of emails along with 75 audio tapes:


1.UBS Trader A: “we smashed it good.”

 2.“UBS boring the market again”

3.the famous  11 o’clock rule:

“11 oclock rule” where both UBS and Deutsche Bank would short silver at 11A.M.”

4.As examples of the comparative ease by which UBS moved the silver market the memo reveals Deutsche Bank Trader B added UBS Trader A to a chat with HSBC Trader B, which UBS Trader A deemed “the mother of all chats,” and leading to the trader’s own analysis:

5.UBS Trader A to Deutsche Bank Trader B: “if we are correct and do it together, we screw other people harder”


6.UBS Trader A: “an avalanche can be triggered by a pebble if you get the timing right” and “silver still here, u can easily manipulate silver”and in reference to UBS supposed manipulative influence by an unnamed party: “u guys WERE THE SILVER MKT.”

7.UBS intended to reap financial rewards by manipulation of the price of physical silver and associated financial instruments, the memo says as UBS Trader A suggested:go make your millions now jedi master…” “pls write me a check when u aer a billionare,” and “i teach u a fun trick with silver” to which Deutsche Bank Trader B replied: “show me the money.

8.UBS Trader A: gona blade silver now.
intent as to they knew it was wrong:
9.Of course all the secrecy in the world about the operations was required of the chat groups by UBS Trader A stating: pls keep all these trick to yourself,” “btw keep it to yourself…,” and “ok rule of thumb EVERYTHING here stays here.
10.Your breach of trust:
Deutsche Bank Silver Fix Trade-Submitter A: im getting ntg but stops
Merrill Lynch Trader A: we had similar” “I sweep them…Fuk these guys.
Showing disregard to global regulators even after noting their activities the two continued to “sweep” the silver market, allegedly observing at one stage: “Someone got stopped messily.
(courtesy Allan Flynn/Bullionstar)

How to Trigger a Silver Avalanche with a Pebble: : “Smash(ed) it Good”

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By Allan FlynnGuest Post at

“An avalanche can be triggered by a pebble if you get the timing right” 

Earlier this year at April’s hearings for London Silver and Gold Fix lawsuits, the judge and defendant’s attorney quipped about trader chats named “the mafia” and “the bandits” published in prosecutors findings of Forex investigations but conspicuously absent from precious metals investigation findings, and the silver and gold antitrust lawsuits under consideration.

THE COURT: “Those were bad facts for the defendants.”

LACOVARA: “I think, your Honor, that if we had chat rooms that said “The Cartel”, we might be having a different focus to oral argument today.”

THE COURT: “I think that is correct.”

Given the judges skepticism of the allegations described in an earlier article, it came as a surprise early October when the banks listed were ordered by magistrate Valerie E. Caproni to face charges. More surprising perhaps was the exemption granted Swiss bank UBS, which despite having been found guilty and fined for “precious metals misconduct” by the Swiss Financial Market Supervisory Authority FINMA in November 2014, was granted motion to dismiss from both silver and gold lawsuits.

All that may be about to change according to documents filed in a New York district court December 7th, where plaintiffs claim that transcripts showing conspiracy to manipulate silver, provided by Deutsche Bank as part of an April settlement agreement, includes extensive smoking gun evidence involving UBS and other banks. Plaintiffs describe a “multi-year, well-coordinated and wide-ranging conspiracy to rig the prices of silver and silver financial instruments that far surpasses” that of the previous complaint, including potentially incriminating evidence of UBS precious metals traders allegedly conspiring with other banks.

Five additional banks to the remaining defendants HSBC and Bank of Nova Scotia are mentioned including Barclays Bank, BNP Paribas, Standard Chartered Bank, Bank of America and Merrill Lynch. The Memorandum of Law signed by Vincent Briganti on behalf of Lowey Dannenberg Cohen & Hart for plaintiffs on Wednesday 7th December seeks leave to amend the existing complaint filed with the United States District Court Southern District of New York.

Included in the memo are numerous astounding transcripts indicating coordination between UBS and other banks of “pushing,” ”smashing,” ”bending,” ”hammering,” ”blading,” ”muscling,” and “ramping” the prices of silver and silver financial instruments.

In support of claims of conspiracy to manipulate the price of silver downward the following gem is attributed to UBS Trader A: “so we both went short” “f*cking hell it just kept going higher” “63,65, then my guy falls asleep, it goes to 69 paid!” “then finally another reinforcement came in.

Discussions supposedly of coordination between UBS and their competitors about fixing the price of physical silver by offering only wide spreads between the bid and ask (where a “lac” is reference to an Indian measure equaling 100,000 units) go like this:

UBS Trader B: “what did u quote let me check”

Deutsche Bank Silver Fix Trader-Submitter A: “44/49”

UBS Trader A: “just quote wider if they call me in 1 lac I will quote 7-8 cents”

Deutsche Bank Trader B: “how wide u making 1 lac today 5 cents?”

UBS Trader A: “silver actually steadier than gold i would make 5-6 cents wide in silver”

UBS Trader A: how wide would you quote 5 lacs silver?”

Deutsche Bank Trader B: “10cu>?”

Deutsche Bank Trader B:”how wide u quote for 3 lacs?”

UBS Trader A: 10 cents”).

Manipulation of the Silver Fix price to benefit their silver trading positions in derivatives by UBS is claimed in the following exchanges:

Deutsche Bank Trader B: “u guys short some funky options” “well you told me to no one u just said you sold on fix”

UBS Trader A: “we smashed it good.”

Deutsche Bank Silver Fix Trader-Submitter A: “UBS boring the market again”…”just like them to bid it up before the fix then go in as a seller…they sell to try and push it back.”

It’s further alleged by plaintiffs that UBS implemented an “11 oclock rule” where both UBS and Deutsche Bank would short silver at 11A.M.

As examples of the comparative ease by which UBS moved the silver market the memo reveals Deutsche Bank Trader B added UBS Trader A to a chat with HSBC Trader B, which UBS Trader A deemed “the mother of all chats,” and leading to the trader’s own analysis:

UBS Trader A to Deutsche Bank Trader B: “if we are correct and do it together, we screw other people harder”


UBS Trader A: “an avalanche can be triggered by a pebble if you get the timing right” and “silver still here, u can easily manipulate silver”and in reference to UBS supposed manipulative influence by an unnamed party: “u guys WERE THE SILVER MKT.”

UBS intended to reap financial rewards by manipulation of the price of physical silver and associated financial instruments, the memo says as UBS Trader A suggested:go make your millions now jedi master…” “pls write me a check when u aer a billionare,” and “i teach u a fun trick with silver” to which Deutsche Bank Trader B replied: “show me the money.

Confident of their ability to manipulate UBS made bold predictions according to the following alleged extracts:

UBS Trader A: gonna bend this silver lower; “i will bend it lower told u”; ”hah cool its gonna get ugly”; “use the blade on silver rg tnow it’ll hold it up,

Deutsche Bank Trader B: “yeah,

UBS Trader A: gona blade silver now.

Of course all the secrecy in the world about the operations was required of the chat groups by UBS Trader A stating: pls keep all these trick to yourself,” “btw keep it to yourself…,” and “ok rule of thumb EVERYTHING here stays here.

Examples of other banks alleged transcripts are included in the following:


Deutsche Bank Trader B instructing Barclays trader A: today u smash,

Barclays Trader A: yeah” and “10k silver” “im short.

It’s alleged that Barclays and Deutsche Bank shared information so often that Barclays Trader A remarked “we are one team one dream.”

Materials in the memo even include the Deutsche Bank and Barclays precious metals traders agreeing at one stage to “stay away” from silver for a week.

The traders of course knew it was terribly wrong with Barclays Trader A responding to Deutsche Bank’s Trader B instruction to “push silver”: “HAHAHA lol i don’t think this is politically correct leh on chat.

Merrill Lynch

Allegedly fixing the bid-ask spread they offered clients on silver:

Merrill Lynch Trader A: How wide r u on spot? Id assume 10 cents for a few lacs?

Deutsche Bank Silver Fix Trade-Submitter A: im getting ntg but stops

…Merrill Lynch Trader A: we had similar” “I sweep them…Fuk these guys.

Showing disregard to global regulators even after noting their activities the two continued to “sweep” the silver market, allegedly observing at one stage: “Someone got stopped messily.

BNP Paribas Fortis

Fortis Bank Trader B allegedly conspired with Deutsche Bank to manipulate silver prices, using what he termed a “bulldozer” on the silver market.

Standard Chartered

Conversations between Deutsche Bank Silver Fix Trade-Submitter A and Standard Chartered Trader A as follows:

Yeh” “small long out of the fix…” “ok where to sell sivler then?

23.40 thru that use it as a stop profit and let it runnnnnnnnnnnnn

were on the same wavelength

im long silver”…”ilke both [silver and gold] to get the absolute sht squeezed out of them” “im longer silver than i am gold


Assuming the transcripts submitted are accepted and plaintiffs are permitted to file their Third Amended Complaint, the possible pending “avalanche” of settlements in silver lawsuits will speak volumes for the investigative prowess of the CFTC and the DOJ, both of which were commissioned to investigate long running allegations of silver and precious metals market manipulation over recent years, and came up completely empty.

It appears Judge Caproni, former FBI General Counsel, was on the money when considering the potential of ineptitude in government investigations of precious metals markets at April’s gold hearing: “I don’t put a lot of stock in the fact that there are investigations because I was a government lawyer for a long time and I know what you need to open an investigation. By the same token, the fact that they closed it without charging anybody doesn’t mean that everybody is innocent. So I don’t put a lot of stock in it one way or the other.”

The CFTC proudly announced in September 2013 they had spent five years and seven thousand enforcement hours investigating complaints of manipulation in the silver market, including with assistance by the Commission’s Division of Market Oversight, the Commission’s Office of Chief Economist, and outside experts, but yet found nothing.

The Department of Justice Antitrust Division which were so confident of their investigation of collusion in precious metals they went to the extraordinary lengths in January of this year of providing a letter to silver and gold lawsuit defendants advising they had closed their investigation without findings of wrongdoing.

The Swiss Financial Services watchdog FINMA investigated, published and prosecuted UBS for forex and precious metals trading misconduct but yet said so little about precious metals findings in their November 2014 investigation report, it was impossible for the court to withstand UBS motion to dismiss in both metals.

And finally of the ability of authorities to reign in rogue banks in the precious metals or any other markets, the memorandum flags a fact that should draw the attention of those trying to figure out if they can indeed trust that their bullion bank has their best interests at heart simply by banning participation in trader chat rooms.

“The chats contained in the DB material are just the tip of the iceberg, as evidence suggests that Defendants intentionally communicated in undocumented ways to keep their manipulation hidden.”

For example the memo includes the salient reminder that banks willalways find a way “to evade detection,” in this case where two traders are described as also communicating “via email and personal cell phone.”

The above article was first published at Allan Flynn’s website here.

Allan Flynn is a specialist researcher in aspects of gold and silver. He is currently investigating for future publication on the same topic and works in property and commercial architecture when he needs to eat. He holds shares in precious metals producers and banks.





There is going to be other:  this is just the beginning:

350,000 pages of emails/75 audio tapes

(courtesy Reuters)

Deutsche Bank’s ‘smoking gun’ evidence cited in bid to expand U.S. silver rigging case


By Nate Raymond
Thursday, December 8, 2016

Lawyers for investors accusing several major banks of conspiring to rig silver prices are seeking to add five new defendants to the case, based what they call “smoking gun” evidence they obtained from Deutsche Bank following a settlement.

In papers filed in Manhattan federal court on Wednesday, the lawyers sought to revive previously-dismissed claims against UBS and add Barclays, BNP Paribas, Standard Chartered, and Bank of America as defendants.

The newly cited evidence was produced by Deutsche Bank after it reached a $38 million settlement in the case earlier this year. The plaintiffs said the evidence showed the new defendants engaged in collusive price manipulation.

UBS said in a statement that it believed the plaintiffs’ claims had “no merit.” Representatives for the other banks either declined to comment or did not respond to requests for comment.

In their proposed revised complaint, the investors claim Deutsche Bank, HSBC Holdings, Bank of Nova Scotia, and others rigged prices of silver and silver financial instruments through a secret daily meeting called the Silver Fix.

The plaintiffs, who are seeking court permission to file the revised complaint, said more than 350,000 pages of documents and 75 audio tapes that Deutsche Bank produced, including electronic chats involving silver traders, backed up their claims. …

… For the remainder of the report:





Now mainstream is carrying the story on the silver fixing scandal

Bloomberg is not aware that they have the details of the early April 2011 drive by shooting of gold and silver.


Of note:

  1. 11 o’clock rule
  2. exact timing  3, 2 1  boom
  3. breach of trust/annihilating their own clients bulldozing through on stop losses
  4. intent and need for secrecy/ they know it is criminal activity

(courtesy Bloomberg)


‘3, 2, 1, Boom’ — Silver-Fixing Allegations in a Dozen Chats

December 12, 2016 — 12:00 AM EST
  • Court documents detail private chats between bank traders
  • Lawsuit alleges widespread rigging of precious metal market

Deutsche Bank Records Said to Show Silver Rigging Scheme


A cache of documents from Deutsche Bank AG include what a group of silver investors claim is a “smoking gun”: private electronic chats showing traders from numerous banks conspiring to rig prices from 2007 to 2013, according to a court filing in New York last week.

The bank provided the documents to the investors after settling a lawsuit accusing it of rigging markets in precious-metals. As part of the accord in April, the bank paid $38 million and turned over more than 350,000 pages of documents and 75 audio tapes. The investors now want to use the chats to win permission from a judge to file a new complaint against other banks.

The traders aren’t named in the chats now in court filings; instead, they are identified by their bank, such as UBS Trader A. The chats have not been edited for spelling or grammar:

In Chats, Silver ‘Mafia’ Traders Flexed Muscle, Drew Blades

UBS and Deutsche Bank silver traders agreed to follow the “11 o’clock” rule where they would short silver at 11 a.m., timing their trades with a countdown sequence, according to court papers. From a Feb. 8, 2011 chat:

“Here we go here we go,” wrote a Deutsche Bank trader.

A UBS trader: “gogogogogoggog.”

“Dude…near the high,” the Deutsche trader responded. “Im gonna ramp it…that my plan…u?”

“If 53 breaks imam go guns blazing,” the UBS trader wrote.

“Yeah…exactly…as in on the break of’s the 3 2 1 boom.”

UBS Group AG said last week it will “vigorously” fight the new allegations in court papers.

Bend Silver

On Oct. 15, 2010, a UBS trader wrote, “Gonna bend this silver lower.”

A Deutsche Bank trader responded, “Oh dear. my boss just said he bought some.”

The UBS trader said, “I have to be sneaky then.”

Then later, “Had to really work that one. told u I’d bend it lower for u.”

Recruit Others

On June 8, 2011, a UBS trader wrote about the need to recruit others to their network of silver riggers, according to the new court documents.

“Im gonna sell a lil more we need to grow our mafia a lil get a third position involved,” the UBS trader wrote.

A Deutsche Bank trader responded, “OK calling barx” (Barclays; a bank representative declined to comment).

‘One Team’

“You are short right…haha…we are one team one dream,” a Barclays trader wrote on April 6, 2011.

A Deutsche Bank trader responded, “Of course short. Short 1 lac.”

“Nice,” the Barclays trader said.


Traders at UBS conspired with Deutsche Bank so often to trigger stop-loss orders that they referred to themselves as “Stop Busters,” according to the court filing.

“And if you have stops…oh boy,” the UBS trader wrote on June 8, 2011.

The Deutsche Bank trader responded, “HAHA…who ya gonna call!…STOP BUSTERS…deh deh deh deh dehdehdeh deh deh deh deh dehdehdeh.”

‘We’ll Sell’

On Aug. 22, 2007, a Deutsche Bank trader-submitter wrote to an unnamed acquaintance at Fortis Bank, “Seems some buying pre sil fix in the systems.”

The Fortis banker responded, “We’ll sell 70’s together.”

“At this rate mate we can sell 11.80’s both mkts are as thin as Ive ever seen them in my 5 years,” the Deutsche Bank trader-submitter said. “Ill be a light seller on the fix so watch your screen.”

Fortis was purchased in 2009 by BNP Paribas SA, which declined to comment.

Influence Market

A UBS trader admitted his bank’s ability to influence the silver market in a Aug. 11, 2011, chat with a Deutsche Bank trader.

“If you want to accelerate it…go short 20k silver,” the UBS trader wrote. “Stay on the offer in 1s…doesn’t require much ammo.”

“Ack,” the Deutsche Bank trader responded.

“Avalanche can be triggered by a pebble if u get the timing right,” the UBS trader wrote.

‘Do It Together’

On April 1, 2011, a UBS trader commented on plans to manipulate silver transactions with Deutsche Bank, according to the court filing. “If we are correct and do it together, we screw other people hard,” the trader wrote.

‘Slight Adjustment’

In an Aug. 5, 2011, chat, a UBS trader wrote, “Bro lets make a slight adjustment to our plan today.”

A Deutsche Bank trader responded, “K.”

The UBS trader then wrote, “Depending on where the mark is we go short around 11-11:30 am I makesure to let u know if I do something.”

“Ok Im definitely going short lol,” the Deutsche Bank trader said.

“Lol revenge huh? That’s what’s driving u,” the UBS trader responded.

“It is but I dun care.”

Join Chat

In a Feb. 9, 2011 chat, traders from UBS and Deutsche Bank decide to invite traders from HSBC and Barclays to join the chat, in addition to others, according to the filing. After those individuals were added, the UBS trader wrote, “Wow this is going to be the mother of all chats.”

Remain Patient

On May 11, 2011, a UBS trader urged a trader at Deutsche Bank to remain patient.
“Cooooooooooooome on!!!!!! I got faith I got two hours for this to push up faith bro this is like a trading church me and u have,” the UBS trader wrote.

“Hahah dude,” the Deutsche Bank trader responded.

“Hallelujah,” the UBS trader said.

The Deutsche Bank trader then said, “I wanna ramp it up like really just buy at mmkt and fk everyone so bad.”

“Stick to game plan 2 lots @ 20/25 30 patience,” the UBS trader said.

‘Stays Here’

Several chats express the need for secrecy, according to the filing. On June 8, 2011, for instance, a UBS trader wrote, “Okay rule of thumb. EVERYTHING here stays here.”
A Deutsche Bank trader responded, “Yeah.”

“So no need to repeat in the future,” the UBS trader wrote.

“Saves us typing lol,” the Deutsche Bank trader responded.

“Cause we just so paranoid” the UBS trader said



Michael Kosares  describes that Trump will take office polar opposite to what happened to Reagan.  Reagan came to power during a huge inflation bubble. Trump : deflation with huge excess capacity throughout the world

(courtesy Mike Kosares/)

Mike Kosares: Trump, Reagan economies at polar opposites


3:20p ET Saturday, December 10, 2016

Dear Friend of GATA and Gold:

President-elect Donald Trump’s economic philosophy may resemble that of President Ronald Reagan, USAGold’s Mike Kosares writes today, but the economic circumstances awaiting Trump are the opposite of those that awaited Reagan. Kosares writes that Reagan took office just after an explosion of inflation, while Trump is taking office amid a deflationary scare. Kosares’ analysis is headlined “Trump, Reagan Economies at Polar Opposites” and it’s posted at USAGold here:

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



Seeking Alpha’s Avery Goodman describes how Modi’s attacks on gold will have little effect on gold demand


(courtesy Avery Goodman/seekingalpha)

Avery Goodmdan: India’s attacks on gold are just posturing and will have little effect


9:47a ET Sunday, December 11, 2016

Dear Friend ofGATA and Gold:

Market analyst and securities lawyer Avery B. Goodman writes today that the Indian government’s recent attacks on gold purchasing and ownership are mere posturing and will have little effect. He adds that even if India’s demand for gold declines, Chinese demand will offset it. Goodman’s analysis is headlined “Will India Really Have Much Impact on Gold Prices in 2017?” and it’s posted at his internet site here:…

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






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



2. Nikkei closed DOWN 158.66 POINTS OR 0.84% /USA: YEN RISES TO 115.83

3. Europe stocks opened ALL MIXED     ( /USA dollar index RISES TO  101.34/Euro UP to 1.0593


3c Nikkei now JUST BELOW 17,000

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

3e WTI::  53.79  and Brent: 56.52

3f Gold DOWN/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 UP for WTI and UP 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 +404.%/Italian 10 yr bond yield RISES 1/2 full basis points to 2.03%    

3j Greek 10 year bond yield RISES to  : 6.73%   

3k Gold at $1155.20/silver $16.85(7:45 am est)   SILVER BELOW RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP 1 AND 23/100 in  roubles/dollar) 61.22-

3m oil into the 53 dollar handle for WTI and 56 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 BIG   DEVALUATION DOWNWARD from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  1.0166 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0771 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  +.404%


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 2.515% early this morning. Thirty year rate  at 3.204% /POLICY ERROR) GETTING DANGEROUSLY HIGH

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

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


Global Stocks, Bonds Slide; China Tumbles As Oil Surges To 17 Month High

 In a quiet start to the week, European, and Asian stocks fell with S&P futures fractionally in the red, as Chinese markets tumbled the most since June and crude oil surged, even as the Nikkei erased all losses for 2016 on continued weakness in the Yen.

The big story continues to be crude oil which surged 5% to the highest in 17 months, with WTI and Brent trading near $54 and $57 respectively, following Saturday’s agreement by NOPEC (mostly Russia and Oman) nations to cut as much as 600kbpd in production as described  in Saudi “Shock And Awe” Sparks Buying Panic In Crude – WTI At 17-Month Highs.

Oil jumped after after Saudi Arabia, whose output just hit a new all time high when it told OPEC it pumped 10.72 million barrels per day last month, up from 10.625 million bpd in October, signaled it will cut output by more than previously agreed amid a weekend deal to tackle oversupply with competitors such as Russia. Longer-dated securities led declines as government bonds around the world tumbled, while climbing energy shares bucked a drop in Europe’s wider benchmark stock gauge.

The jump in oil continues to push up the outlook for global inflation, sending 10-year Treasury yields above 2.5% for the first time since October 2014, as longer-dated government bonds around the world tumbled. The prospect of increased price pressures is filtering through into the market’s outlook for central-bank policy, with traders seeing 100 percent odds of a rate hike at this week’s Federal Reserve meeting, and a two-in-three chance of additional tightening by June, according to Bloomberg calculations based on fed fund futures.

“The spike in oil is behind the further cheapening in global bonds,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. “It’s a foregone conclusion that we’re going to have a 25 basis-point rate hike.”

China stocks suffered their biggest fall in six months as blue chips were knocked by fresh regulatory curbs to rein in insurers’ aggressive stock investments and rising bond yields prompted profit-taking in equities.  China’s insurance regulator, which recently warned it would curb “barbaric” acquisitions by insurers, said late on Friday it had suspended the insurance arm of China’s Evergrande Group from conducting stock market investment.

The Shanghai Composite Index sank the most since June as a gauge of smaller companies in Shenzhen plunged more than 5%, and the ChiNext index slumped 5.5% amid concerns about the outlook for the property market, while intermarket liquidity tightened, with various funding indicators once again showing funding stress and rising tightness as regulators continued their crack down on insurers’s stock investments and Donald Trump raises concern about a possible trade war, said Ken Peng, Asia investment strategist at Citigroup Global Markets Asia. Hong Kong’s Hang Seng Index slipped 1.5%.

“The decline in stocks was the result of amplified impact on market sentiment after the cumulative events of higher government bond yields, a weaker yuan against the dollar and regulatory curbs on insurance funds,” said Chen Li, a strategist at Credit Suisse in Hong Kong.

The Yuan tumbled above 6.90 for the dollar, and will likely continue to face pressure, as Trump tying Taiwan policy to trade deals with China raises the risk of trade conflict. According to Bloomberg. domestic liquidity would stay tight to support yuan, which is negative for stock market. The recent crackdown on insurers’ acquisitions in listed companies has raised concern that insurance fund inflows to equities may slow until authorities clarify rules. As a result, investors are taking profits as good news is largely priced in and regular position adjustments start before year- end. However, analysts note that as interest rates are more likely to rise in China, and property prices decline, investors will still favor stocks in 2017.

Japanese shares rose, with the Nikkei 225 Stock Average recouping losses for this year as the yen slid to a 10-month low against the dollar before the Federal Reserve sets interest rates this week. The equity gauge advanced for a fifth day, its longest rally in two weeks. The Topix index fluctuated between a gain of 1.2 percent and a decline of 0.3 Japanese stocks have staged a dramatic rebound in the second half, riding on a global recovery in risk appetite, with investors betting that U.S. President-elect Donald Trump will boost economic stimulus.

The Nikkei and Topix have climbed more than 10% over the past two months, entering a bull market in November after rising by more than 20 percent from their respective 2016 lows set in June. “Markets are moving ahead quite a bit based on expectations, which may be the case until January,” Masahiro Ichikawa, a senior strategist at Sumitomo Mitsui told Bloomberg “Policy expectations for the Trump administration are basically a tailwind for cyclical shares, and export-reliant businesses will continue see positive momentum.”

In Europe, the Stoxx Europe 600 Index fell 0.4 percent in early trading, following its biggest weekly rally in almost two years. Still, commodity producers and miners gained, with the Stoxx 600 Oil & Gas Index up 2.1 percent. Amundi SA rose 6.7 percent after the firm agreed to buy Pioneer Global Asset Management from Italy’s UniCredit SpA. Banca Monte dei Paschi di Siena SpA shares advanced as much as 10.3 percent after the lender’s board met on Sunday and agreed to stick with its original deadline for its capital plan.

“Weakness out of China and Hong Kong has somewhat dampened the prevailing bullish sentiment,” Markus Huber, a trader at City of London Markets, wrote in emailed comments.

Banks and technology shares drove the S&P 500 to a 3.1 percent climb last week, with the U.S. benchmark reaching successive all-time highs as the Dow Jones Industrial Average also rose to records. S&P futures fell 0.2 percent on Monday.

Ten-year Treasury yields rose as much as six basis points to 2.53 percent. The U.S. Treasury auctions 10-year notes later Monday, and 30-year bonds Tuesday. Hedge funds and other large speculators raised bearish bets on 10-year Treasuries to the highest in almost two years last week, more than doubling them to a net 228,604 contracts, according to the latest Commodity Futures Trading Commission data. Germany’s yield curve, as measured by the spread between two- and 30-year bonds reached the steepest since 2014, based on closing prices, while a similar gauge for Japan widened for a fifth day U.K. 10-year yields climbed three basis points to 1.48 percent, while those on similar-maturity bunds also added three basis points, to 0.39%.

The main event this week is of course the likely 2nd US rate hike (Wednesday) in this cycle 10 and a half years on from the last hike in the previous cycle. On rough calculations we’ve seen over 670 rate cuts globally since the GFC but not much more than a handful of hikes. So this is a pretty monumental event. Yellen’s words will be the most closely watched part of the day but it would be a surprise if she deviated too far from her remarks to Congress back on November 17th with perhaps the key message being that it was too early for her to judge the impact of President-elect Trump’s potential fiscal plans. With little additional info to add on this since the testimony she’s unlikely to rock the boat. Whether other members feel the same will be unveiled in the dots. So keep an eye out for that.

* * *

Market Snapshot

  • S&P 500 futures down 0.1% to 2252
  • Stoxx 600 down 0.3% to 354
  • FTSE 100 down 0.1% to 6946
  • DAX down 0.4% to 11157
  • German 10Yr yield up 4bps to 0.4%
  • Italian 10Yr yield up 5bps to 2.09%
  • Spanish 10Yr yield up 2bps to 1.53%
  • S&P GSCI Index up 2.6% to 400.9
  • MSCI Asia Pacific down 0.4% to 138
  • Nikkei 225 up 0.8% to 19155
  • Hang Seng down 1.4% to 22433
  • Shanghai Composite down 2.5% to 3153
  • S&P/ASX 200 up less than 0.1% to 5563
  • US 10-yr yield up 3bps to 2.5%
  • Dollar Index down 0.18% to 101.41
  • WTI Crude futures up 5.1% to $54.13
  • Brent Futures up 5% to $57.03
  • Gold spot down 0.5% to $1,155
  • Silver spot down 0.4% to $16.80

Top Headlines

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  • Fox-Sky $14 Billion Deal Talks Said to Hinge on Structure: Fox said weighing outright bid versus ‘scheme of arrangement’
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  • Tencent Hunts for Hollywood Deals to Feed China’s Film Boom: Film unit “very open” to acquisitions as ambitions grow: CEO
  • Teledyne Tech to Acquire E2V for 275p/Share in Recommended Deal

Looking at regional markets, Asian stocks traded mixed after the region failed to sustain the momentum from last Friday’s US gains where indices printed fresh record highs and posted the largest weekly gain since the US election. Nikkei 225 (+0.8%) outperformed and briefly rose above 19,200 as exporters benefited from JPY weakness after USD/JPY rose above 115.00, while ASX 200 (flat) closed relatively flat as gains in the energy sector was counterbalanced by weakness in gold miners. Hang Seng (-1.6%) and Shanghai Comp. (-2.5%) declined amid losses in the property sector after several downbeat industry-related reports, while insurers were pressured after Evergrande Life were banned from Chinese stock investments last week amid a crackdown on insurers’ riskier investments. Shenzhen Comp. (-4.5%) underperformed on weak foreign investor inflows via the Stock Connect and surges in Chinese money market rates. 10yr JGBs traded lower amid the heightened risk appetite in Japan, with the yield curve steepening as the super long-end underperformed. This also coincided with continued downside in T-notes and the US 10yr yield rising to its highest in 18-months of 2.4950% ahead of this week’s FOMC. PBoC injected CNY 80bIn in 7-day reverse repos, CNY 30bIn in 14-day reverse repos, CNY 20bIn in 28-day reverse repos.

Top Asian News

  • China Warns Trump Against Using Taiwan for Leverage on Trade: Trump says other nations shouldn’t dictate who U.S. speaks to
  • In Global First, India Offers Discounts for Payments Made Online
  • Hong Kong’s Finance Chief Resigns, Signaling Run at Top Job *Bill English’s Daunting Task: Replacing a Popular Prime Minister

In Europe, with a particularly light economic calendar kicking off the week, this morning has seen relatively subdued price action in European equities, with most of the major indices trading flat on the session. The notable exception comes in the form of the FTSE MIB, with the Italian banks lifting the index after Banca Monte dei Paschi (+9%) benefitted from reports the Co. are to go ahead with recapitalisation plans and possible support from Italian government if needed, while UniCredit (+3.7%) rose after confirmation of USD 4.1 bin Pioneer sale to Amundi. Fixed income markets saw a continuation of the overnight downside, with yields yet again on the rise as the US 10yr broke above 2.5% for the first time since 2014, while global bonds see some further bear curve steepening. Plenty of supply is seen throughout the week, with today seeing US 3 and 10Y note auctions, while corporates may also choose to front load ahead of the FOMC’s expected hike on Wednesday.

Top European News

  • EU Takes on Trump in Final Push for Free-Trade Pact With Japan: Brussels sends envoy to Tokyo in bid for a year-end agreement
  • May Faces New Legal Case Over Post-Brexit Single Market Plan: Campaigners seek to separate EU divorce, market access action
  • Monte Paschi Pursues Its Capital Plan to Avoid State Rescue:

In currencies, oil-exporting currencies lead gains against the dollar, with the Russian ruble gaining 2.2 percent and the Norwegian krone and Mexican peso advancing 0.6 percent. The Turkish lira tumbled for a third day, slumping 1.4 percent after twin bombings in Istanbul on Saturday killed 38 and wounded more than 150 people. The Korean won retreated for a second session, losing 0.2 percent amid concern the political instability sparked by President Park Geun-hye’s impeachment could hurt the economy.

In commodities, West Texas Intermediate crude gained 4.9 percent as of 9:52 a.m. London time, climbing to $54 a barrel as Brent added 4.8 percent to $56.92. Both are headed for their highest settlement prices since July last year. The deal between OPEC members and outside nations, including Russia, was agreed at a meeting in Vienna at the weekend. It should usher in the first global petroleum cuts in 15 years and covers about 60 percent of the world’s output. Copper futures rallied as much as 1.4 percent in New York before erasing gains and retreating 1.1 percent. Gold fluctuated, trading down 0.4 percent in the spot market at $1,155.01 an ounce.

Looking at the day ahead, it’s a quiet start to the week today. There’s no notable data to highlight in Europe while the sole release in the US is the November monthly budget statement

US Event Calendar

  • 2pm: Monthly Budget Statement y/y, Nov., est. -$130b (prior – $44.2b)

DB’s Jim Reid concludes the overnight wrap

It seems rather apt that in 2016, those of us in the UK last night voted a Finnish lady and resident as the runner-up in the X-Factor TV singing competition. Perhaps globalisation and even the UK’s relationship with Europe is not dead after all! Is it too much though to think this could herald the odd vote for the UK in next year’s Eurovision Song Contest to return the favour?

Moving swiftly on so as to gloss over the fact that I watch the X-Factor, outside of Bronte’s second birthday today (what an impact my first dog has had on me), the main event this week is of course the likely 2nd US rate hike (Wednesday) in this cycle 10 and a half years on from the last hike in the previous cycle. On our rough calculations we’ve seen over 670 rate cuts globally since the GFC but not much more than a handful of hikes. So this is a pretty monumental event. Yellen’s words will be the most closely watched part of the day but it would be a surprise if she deviated too far from her remarks to Congress back on November 17th with perhaps the key message being that it was too early for her to judge the impact of President-elect Trump’s potential fiscal plans. With little additional info to add on this since the testimony she’s unlikely to rock the boat. Whether other members feel the same will be unveiled in the dots. So keep an eye out for that. We’ll preview in full on Wednesday.

There’s a fair amount of US data alongside the FOMC this week. Given the ECB meeting last week and the recent run up in oil we’ll be particularly interested in CPI on Thursday. The reason we mention the ECB and oil is that the discussion within DB research last week was how crucial oil has been to the ECB’s policy in recent years (the hike in 2011 and negative rates and QE more recently) and how we may have to watch it in 2017 for any signs that the taper announced last week looks set to go much further in 2018. Obviously the opposite could also happen but the news over the weekend that non-OPEC countries have joined in with production cuts makes things interesting. Indeed the latest update is that Russia along with 10 other non-OPEC members have agreed to a production cut of 558k barrels per day. That’s in conjunction with the 1.2m barrels per day reduction agreed upon by OPEC members at the Vienna meeting on November 30th. That’s not all as Bloomberg is also reporting that Saudi Arabia is supposedly signalling that it might be ready to cut output more than it had initially suggested at that meeting. Saudi’s Oil Minister was reported as saying that ‘effective January 1st we’re going to cut and cut substantially to be below the level that we have committed to on November 30th’.

Unsurprisingly the news of a now coordinated agreement has seen Oil rally again this morning. WTI is currently +4.76% as we type and around $54/bbl (and the highest since July 2015) while Brent is up a similar amount and trading above $56/bbl. While energy stocks are generally outperforming in Asia this morning its still been a much more mixed start to the week. The Nikkei (+0.52%) is leading the way and in the process has bounced back into positive territory for the year, although it has pared back much stronger gains at the open. The ASX (+0.14%) is also slightly higher while the Kospi is flat. The Hang Seng (-1.12%) and Shanghai Comp (-2.03%) have weakened however with property names in particular under pressure after the president of one of the largest Chinese property companies painted a bleak view about the prospects for real estate sales in the year ahead. Some weakness in the insurance sector is also weighing.

The other big story for markets at the moment is Italy. More specifically, its Italy’s banking system that’s in the spotlight after being under pressure again on Friday following the news that the ECB had rejected a timeline extension for a proposed recap in the sector. Reports this morning suggest that a planned capital raising is to still go ahead in the next couple of days following a meeting yesterday. The FTSE Italia Banks index was down -2.25% on Friday (versus the FTSE MIB at -0.73%) while sub spreads on 3 of the nation’s banks were 9bps to 18bps wider. Still, Italian Banks closed over +12% higher last week while the simple average of the 4 Italian banks in the sub financial index rallied 36bps (versus a 12bp rally for the wider index). We’ve also since had the news that Foreign Minister Paolo Gentiloni has been appointed as the new PM and given a mandate to form a new government. According to newswires, this will allow current Finance Minister, Carlos Padoan, to stay in his current role and manage the banking sector troubles.

So this should be another big focus for markets this week. For more on the subject, on Friday, DB’s Marco Stringa (Economics), Paola Sabbione (Bank Equity) and Michal Jezek (Credit) published a joint piece “Italy: Options to address the bank problem”. They focus on two key short-term priorities for Italy: 1) a new electoral law and 2) a solution to the bank problem. On 1), they argue that while it may be controversial (higher risk of 5SM in power in the short term), it may be more beneficial in the medium term for Italy to have a strong majoritarian electoral system in both Houses. That would give rise to stable governments capable of reforms which are necessary for Italy to grow out of its debt. 2) They discuss the size of the NPL overhang in the Italian banking sector and argue that the most efficient solution, if purely private efforts fail, would be a public backstop greater than the size of the problem. They also discuss the option of a possible ESM involvement, as reported by some media last week, explaining that it is very unlikely at this point. For more details, see the following link.

Another report worth drawing readers’ attention to is an update from DB’s Chief China Economist, Zhiwei Zhang, over the weekend. Zhiwei noted that the Politburo of the Communist Party held a meeting on December 9th discussing the economic policies in 2017. The press release showed that the policy stance will remain broadly unchanged, with a focus on the stability of growth. At the same time progress on reforms will likely be slow. All of this was in line with Zhiwei’s expectations and he maintains his 6.5% China growth forecast in 2017.

Before we look at the week ahead, a quick recap of how we closed out Friday. Despite that leg lower for Italian banks that we highlighted at the top post the ECB story, it was on the whole another positive session which capped a strong week for risk assets. The Stoxx 600 closed up +0.97% to finish the week +4.72% which is the strongest weekly performance for the index since January 2015. In the US the S&P 500 (+0.59%) rallied for a sixth session in a row to turn in a +3.08% return for the week. All four major bourses struck new record highs in the process too with the Santa Claus rally in full flight. Credit indices were much the same. CDX IG finished 2bps tighter on Friday and 6bps tighter over the week while the iTraxx Main index was 1bp tighter on Friday and 5bps tighter over the 5 days. Despite financials having a weaker day (Senior and Sub +1bps and +5bps respectively) on Friday with the Italy news they still ended 6bps and 12bps tighter respectively during the week.

Meanwhile it was a much more mixed performance across rates. 10y Treasury yields finished 6bps higher on Friday at 2.468% which is the highest closing yield now since June last year. 10y Bund yields on the other hand finished a couple of basis points lower at 0.360% while 2y yields dived another 2.1bps lower to -0.771% and the lowest yield recorded.

As far as the data was concerned, in the US the first estimate of the University of Michigan consumer sentiment print rose 4.2pts in December to 98.0 (vs. 94.5 expected). That is the highest reading since January 2015 and was supported by a boost from both the current conditions (+4.8pts to 112.1) and expectations (+3.7pts to 88.9) components. Clearly President-elect Trump’s proposed policies having a clear positive impact on sentiment and it’ll be interesting to see if this is a one off honeymoon impact or we get some moderation in the next revision. Meanwhile, inflation expectations did soften with both 1y and 5-10y expectations easing one-tenth to 2.3% and 2.5% respectively. Elsewhere, there was no change to the final wholesale inventories reading of -0.4% mom in October.

In Europe we received the latest trade data in Germany where the surplus shrunk slightly in October owing to a +1.3% mom uptick in imports which more than offset the more modest +0.5% mom rise in exports. In France industrial production was unexpectedly weak in October (-0.2% mom vs. +0.6% expected) and which had the effect of lowering the YoY rate to -1.8% from -1.1%. Finally in the UK the trade deficit was reported as shrinking thanks to a sharp bounce back in exports.

Over to the week ahead now. It’s a quiet start to the week today. There’s no notable data to highlight in Europe while the sole release in the US is the November monthly budget statement. Tuesday morning kicks off in China where we’ll get the November industrial production, retail sales and fixed asset investment data. In Europe we’ll get final November CPI revisions in Germany, last month’s inflation report for the UK, Euro area employment data for Q3 and the ZEW survey in Germany. In the US the import price index reading for last month will be out. Japan gets things going on Wednesday where all eyes will be on the Q4 Tankan survey. There are a few notable reports in Europe including the final November CPI report in France, the latest employment report in the UK and also retail sales data for the Euro area. It’s busy in the US on Wednesday. We’ll get November retail sales data, PPI, industrial and manufacturing production, business inventories and then of course later in the evening concluding with the FOMC rate decision and also the updated Fed dot plots. Thursday is PMI day where we’ll get the flash December manufacturing, services and composite readings in Europe. Thereafter, UK retail sales data for last month will be released before we turn over to the BoE policy meeting outcome just after midday. In the US it’s another important day for data with the November CPI report being the focus. Also due out is empire manufacturing, initial jobless claims, Philly Fed survey, flash manufacturing PMI and NAHB housing market index. We close the week out in Europe on Friday with the final revisions to the November CPI report for the Euro area, along with various confidence indicators in France and CBI trends orders data for the UK. In the US we’ll get housing starts and buildings permits data.

Away from the data the Fedspeak this week comes on Friday when Lacker is due to speak in the evening. Fed Chair Yellen will of course also be hosting a press conference following the FOMC outcome on Wednesday. Other potentially interesting events include a meeting of EU leaders on Thursday to discuss migration issues and the Brexit process and a meeting between Japan PM Abe and Russia President Putin the same day.



i)Late  SUNDAY night/MONDAY morning: Shanghai closed DOWN 79.91 POINTS OR 2.47%/ /Hang Sang closed DOWN 327.96  OR 1.44%. The Nikkei closed UP 158.66 OR 0.84%/Australia’s all ordinaires  CLOSED UP 0.06% /Chinese yuan (ONSHORE) closed DOWN at 6.9152/Oil ROSE to 53.79 dollars per barrel for WTI and 56.52 for Brent. Stocks in Europe: ALL MIXED.  Offshore yuan trades  6.9370 yuan to the dollar vs 6.91520  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS AGAIN AS  MORE USA DOLLARS  LEAVING CHINA’S SHORES / CHINA SENDS A CLEAR MESSAGE TO THE USA AND JANET  TO NOT RAISE RATES IN DECEMBER.



Japan is caught in a catch 22:  they are happy that the yen is falling  as it will help exporters.  However the yield on the 10 yr Japanese bond is not rising as fast as the USA and other global players.  This causes hot money to leave and this again will put pressure on the falling yen.  This forces up food prices and other imports. Also the long end of the Japanese yield curve contracts and this will be very damaging to its banks:

(courtesy zero hedge)

Speculation Grows Japan Will Tighten Next

First it was the Fed, then the ECB (which last week tapered when it reduced the monthly amount of bond purchases under its QE program). Now attention shifts to the Bank of Japan, because as the WSJ writes, one of central banking’s most aggressive easers – Kuroda’s Bank of Japan – may soon have to think about tightening for the first time since 2007.

While it has yet to permeate the markets (confirmation would send the Yen soaring), the latest buzz in Japanese monetary-policy circles is that the BOJ may have to lift the 10-year government-bond target from a recently set zero, in the process tightening financial conditions even more. Indeed, as the WSJ notes, such a changed view on BOJ policy is quite a turnaround.

Just a few months back investors and economists world-wide were discussing what would be the next easing steps in the bank’s 15-year fight to boost the economy and produce inflation. More certainly seems needed: Japan’s economy grew more slowly than expected in the latest quarter and prices are falling.

So why switch gears now? Blame Donald Trump, stupid, whose miraculously adverse impact on the Yen has been more profound than either of Japan’s recent QEs…. and that is before Trump is even inaugurated, or reveals any of the details behind his fiscal stimulus plans.

The U.S. dollar and Treasury yields have been climbing since soon after Trump was elected president on Nov. 8, triggered by expectations that his policies would boost U.S. growth, inflation and interest rates. So far, that has been good for Japan, where the weaker yen is brightening exporters’ prospects, helping send Tokyo stocks to 11-month highs. A weaker yen bolsters their bottom lines by making their products cheaper overseas and inflating the value of repatriated income. As of Friday, one dollar buys ¥114.50, 9.6% more than the day before the U.S. election.

While that may be fine as far as it goes, according to various central-bank watchers who spoke to the WSJ, the BOJ’s latest easing policy raises the risk of far greater, and potentially damaging, depreciation. That is because as a result of the curve “anchoring”, the wider the yield spread between JGBs and foreign bonds, the greater the outflows, the more aggressive the selling of the Yen. For example, since U.S. Election Day, U.S. 10-year Treasury yields have risen to 2.426% from 1.862%, far outstripping the Japanese benchmark bond’s rise to 0.056% from minus 0.064%.

As yields rise around the world—led by the U.S., whose Federal Reserve is expected to raise rates on Dec. 14—the gap between Japan and other markets widens. That draws money out of Japan as investors search for better returns, which puts further pressure on the yen.

So what happens if US TSY yields spike even higher (the 10Y was at 2.493% moments ago, the highest since June 2015)? Should 10Y yields climb to 3% or higher next year, as some economists think it could, “the BOJ may be forced to raise its yield target in response, even if it hasn’t achieved its policy goal of 2% inflation.

The pressure to raise the target could be especially intense if the yen weakens to levels like ¥130 to the dollar.

While for those who believe an imploding yen is what the doctor ordered, referencing Abe’s plan to goose the economy with easy money, there are notable downsides.

Sure, a weaker yen could boost optimism and inflation expectations among Japanese companies, argues Abe adviser Etsuro Honda, making them more willing to invest and raise wages. If the result was increased upward pressure on bond yields, the “natural course of action” would be for the BOJ to raise the 10-year yield target a touch from zero, he said. Two months ago Mr. Honda was calling on the BOJ to lower its targets as an added jolt of easing.

However for Abenomics skeptics, the yen’s deteriorating prospects ring alarm bells. BNP Paribas chief Japan economist Ryutaro Kono said in a recent note for clients that a fall to ¥115 to the dollar could upset consumers by raising the cost of living.

The Yen is already below that level.

When BOJ easing weakened the yen to ¥125 to the dollar from ¥110 between autumn 2014 and summer of 2015, it cast a chill over the economy as rising costs for imported food and necessities battered consumers while companies held back from raising wages.

Then there is the yield curve argument: Japanese economists say the BOJ may have to raise its bond-yield target just to give more breathing room to the country’s banks, whose profits are dwindling as their longer-term lending rates fall dangerously close to what they’re paying on deposits.

“It’s like they’re submerged under water and holding their breath,” said Kazuo Momma, a former BOJ executive director who is now executive economist at Mizuho Research Institute. “If this situation becomes protracted, they could drown.”

Naturally, the BOJ – just like the ECB – which are both agreeable to steepening the yield curve even more (seemingly unaware that will also crash the housing market), is allergic to any discussions of tightening. After all, if there is one thing that could crash this market, it is further hints of tightening and the yanking of billions in reserves. Then again, just like in the case of the ECB, perhaps all Kuroda needs to do is come up with a fancy-sounding economic name for its imminent tightening, one which doesn’t wake up the algos. Perhaps “inverse massive QE” should do the trick…


Trump ignites the USA/China spat by saying he is not bound by the “one China” policy:

(courtesy zero hedge)

Trump Reignites China Diplomatic Spat, Says Not Bound By “One China” Policy

While the domestic US audience was focused on what Trump would say about the latest scandal of alleged Russian intervention in the US presidential elections, which as a reminder, he called “ridiculous” and suggested that democrats are behind the report, China was more curious by Trump’s foreign policy thoughts, which may have sparked yet another diplomatic spat, because one week after Trump snubbed America’s long-running “One China” policy, today the President-elect questioned whether the United States had to be bound by its long-standing position that Taiwan is part of “one China” and brushed aside Beijing’s concerns about his decision to accept a phone call from Taiwan’s president.

“I fully understand the ‘one China’ policy, but I don’t know why we have to be bound by a ‘one China’ policy unless we make a deal with China having to do with other things, including trade,” Trump said. Trump’s decision to accept a congratulatory telephone call from Taiwan President Tsai Ing-wen on Dec. 2 prompted a diplomatic protest from Beijing, which considers Taiwan a renegade province.

Following Trump’s decision to nominate Iowa Governor Terry Branstad as the next U.S. ambassador to China, choosing a long-standing friend of Beijing after rattling the world’s second largest economy with tough talk on trade and the call with the leader of Taiwan, pundits thought that Trump would moderate his diplomatic outbursts vis-a-vis China. However, in the Fox interview, Trump brought up a litany of complaints about China which he had emphasized during his presidential campaign, and which may provoke an fresh bout of harsh criticism from China.

We’re being hurt very badly by China with devaluation, with taxing us heavy at the borders when we don’t tax them, with building a massive fortress in the middle of the South China Sea, which they shouldn’t be doing, and frankly with not helping us at all with North Korea,” Trump said. “You have North Korea. You have nuclear weapons and China could solve that problem and they’re not helping us at all.”

Here, contrary to Trump’s allegations, over the past two years China has been doing everything in its power to prop up its rapidly devaluing currency, which recently hit record lows against the dollar as a result of ongoing capital flight by domestic depositors who are scrambling to park their savings offshore realizing just how insolvent local financial institutions are.

The President-elect further criticized China over its currency policies, its activities in the South China Sea and its stance toward North Korea and said it was not up to Beijing to decide whether he should take a call from Taiwan’s leader.

“I don’t want China dictating to me and this was a call put in to me,”Trump said. “It was a very nice call. Short. And why should some other nation be able to say I can’t take a call?”

“I think it actually would’ve been very disrespectful, to be honest with you, not taking it,” Trump added.

Trump  questioning of long-standing U.S. policy risks antagonizing Beijing further and analysts have said it could provoke military confrontation with China if pressed too far. As of early noon Eastern time – and thus late at night in China’s capital – Beijing had no comment on Trump’s remarks.

The call with Trump was the first such contact with Taiwan by a U.S. president-elect or president since President Jimmy Carter switched diplomatic recognition from Taiwan to China in 1979, acknowledging Taiwan as part of “one China.” Taiwan is one of China’s most sensitive policy issues, and China generally lambastes any form of official contact by foreign governments with Taiwan’s leaders.

After Trump’s phone conversation, the Obama administration said senior White House aides had spoken with Chinese officials to insist that Washington’s “one China” policy remained intact. The administration also warned that progress made in the U.S. relationship with China could be undermined by a “flaring up” of the Taiwan issue. Following Trump’s latest comments, a White House aide said the Obama administration had no reaction beyond its previously stated policy positions.

* * *

Meanwhile, as Trump postures in an attempt to jockey the greatest possible diplomatic leverage in his negotiations with China, and drums on about ending free-trade agreements, China is widening its economic footprint in the U.S. backyard: Latin America.

As Bloomberg notes in its daily Macro piece, the region has long been thought of by the U.S. as under its umbrella of influence. President Teddy Roosevelt famously used the phrase “speak softly, and carry a big stick” emphasize region hegemony in the Americas.

But the world is shifting. With U.S. influence waning, China is carrying a big carrot: trade. President Xi paraded through Latin America in November, boosting trade ties, and a few days ago the state-owned oil behemoth CNOOC purchased a deep-water oil block in Mexico. As the Middle Kingdom’s economy shifts to a larger middle class and more consumption, demand for agriculture produce is expected to increase on top of an already strong desire for metals and oil, which have been the staple exports from South America over the last decade.

The benefits will spread unevenly across the region with countries such as Brazil, Chile and Peru will likely continue to profit more from China trade (Sorry Mexico, China probably won’t bail you out from Trump shocks). Brazil and Chile already run sizable trade surpluses with China. Their top exports are, unsurprisingly, raw materials and agricultural products.

In 2009, China overtook the U.S. to become Brazil’s biggest trade partner. Now, Brazil runs a $24 billion trade surplus with China, bigger than its total surplus last year.

Half of Chile’s exports are copper and related products, mostly bought by China. During Xi’s fall visit, the two countries agreed to begin talks to upgrade their free-trade agreement signed a decade ago.

While others benefit, Mexico will likely be left mostly on the sidelines, given its limited agriculture exports and falling oil output, at a time when it faces possible trade restrictions from the U.S., which buys more than three- fourths of its exports. Mexico has pumped out less and less crude oil during the last few years amid turmoil at state-owned Pemex. Scant Chinese interest in Mexican exports and a strong appetite for “Made in China” goods have contributed to a $22 billion trade deficit.

Although it opened up its energy sector to foreign investors last year, Mexico needs more funding and better technology to boost output and exports over time. Also, its industrial prowess and access to the U.S. may attract Chinese exporters looking to cut costs, but only when the fate of NAFTA becomes more certain.

* * *

There was a time when China felt hedged in by the economic might of the U.S., but with America’s influence in Asia also starting to slip, the tables could be set to turn.

Trump should be careful how far he pushes Beijing, even if it is only with rhetoric.





China hits back and warns:

  1. Nothing to discuss
  2. “the official Xinhua News Agency warned that world peace hinges on close and friendly ties between the U.S. and China.”

(courtesy zero hedge)



Not so sure how this is going to help Monte de Paschi: Paolo Gentiloni picked as Italy’s new Prime Minister:

(courtesy zero hedge)

Paolo Gentiloni Picked As Italy’s New Prime Minister

With the ECB snubbing Italy on Friday, and refusing to grant insolvent bank Monte Paschi more time to find a financial rescue, it was of paramount urgency for Italy to announce a replacement government that of outgoing prime minister Matteo Renzi, in order to mitigate concerns about the ongoing political chaos.  As a result, on Sunday, Italy’s President Sergio Mattarella asked departing Foreign Minister Paolo Gentiloni – a loyalist from Renzi’s Democratic Party – to form a new government, in the process hopefully bringing to a close a political crisis triggered by a ‘no vote’ in a referendum on constitutional reform last weekend.

As the WSJ first reported, Mattarella gave Gentiloni the mandate to try to form a new caretaker cabinet. Gentiloni, 62, accepted and will begin consultations with political parties to put together his team of ministers. That list could emerge as soon as Sunday evening, setting the stage for the new government to seek votes of confidence in parliament by Tuesday. Correspondents say that if he is successful in rallying support a government could be formed in days.

A quick biographical snapshot of the new prime minister:

  • Born to an aristocratic family, has the title Nobile
  • Worked as a journalist on an environmental magazine
  • Organised Francesco Rutelli’s successful 1993 campaign for Rome mayor
  • Elected to parliament in 2001
  • Communications minister from 2006-08
  • Appointed foreign minister in 2014
  • Dealt with difficult issues such as killing of Giulio Regeni in Egypt

Gentiloni said in a brief speech that he has accepted the mandate “with great honor and responsibility”. He added he’s aware of the urgent need to address the economic and social problems Italian citizens are facing and the country’s upcoming international commitments.  “I’ll be back to Mr. Mattarella [with a list of ministers] as soon as possible,” the premier-designate told reporters.

The political development signals a rapid resolution to a government crisis sparked by the resignation this week of Prime Minister Matteo Renzi, who stepped down after a stinging defeat in last Sunday’s referendum on constitutional reform he had staked this political future on.  As noted above, the urgency stems in part from the need to deal with a growing crisis at Banca Monte dei Paschi di Siena SpA, Italy’s No. 3 lender and one of Europe’s weakest banks. The Tuscan bank urgently needs a capital injection, but with little appetite from private investors, the new government will likely orchestrate a state rescue plan. The problem became even more pressing Friday after the European Central Bank refused the bank’s request for a 20-day extension on the end-of-year deadline the central bank set for the lender to raise new capital.

Given the need to act quickly on Monte dei Paschi, Mr. Gentiloni is likely to reconfirm Economy Minister Pier Carlo Padoan, a well-regarded economist who has led Italy’s efforts to solve the country’s banking problems; Padoan had also been rumored to be the frontrunning candidate for the PM position.

As the WSJ notes, in choosing Gentiloni, Mattarella is reaching for a seasoned politician who enjoys cross-party esteem in Italy, something that can help him navigate the political tensions that have exploded since the resignation of Mr. Renzi. Italian parties are now pushing hard for elections to be brought forward from their current timetable of spring 2018.

However, the country needs a new electoral law before Mr. Mattaralla can dissolve parliament because of a court challenge to the current law. Moreover, there are two different electoral rules for each of Italy’s parliamentary houses, a situation that would likely produce a hung legislature.

Mr. Gentiloni enjoys wide support within the center-left Democratic Party, the largest party in parliament. He also has a good relationship with former Premier Silvio Berlusconi as a result of Mr. Gentiloni’s stint as communications minister in the mid-2000s. Those relationships could help him with the complicated task of rewriting voting rules just as an election looms.

Mr. Gentiloni is also highly regarded on the international front. Having joined the Renzi government as foreign minister in October 2014 after Federica Mogherini stepped down to become Europe’s foreign policy chief, he has spearheaded Italy’s efforts to gather international support for a solution to the Libyan crisis.

Mr. Gentiloni has also had to strike a delicate balance regarding Italy’s Russia policy. While the U.S. has pressed European leaders to take a hard line on Russia, Rome has struck a more conciliatory tone with Moscow, arguing that the West should work more closely with Russian President Vladimir Putin to resolve the crisis in Syria and elsewhere.

A new government will be sworn in after Gentiloni holds consultations with the other parties, and chooses choose his ministers. The premier and his new cabinet will then be required to win confidence votes in each of Italy’s two parliamentary chambers to fully take power. That will likely happen before this Thursday, thus allowing Mr. Gentiloni to represent Italy at a European Union summit that day.

It remains to be sen if the rapid change in Italy’s government will provoke more confidence among potential Monte Paschi investors, or if the third rescue plan of the bank will conclude with nationalization, a step many had expected could take place as soon as today.





Monte de Paschi scrambles to raise capital by the end of the year to avoid a bailin:

(courtesy zero hedge)

Monte Paschi “Scrambles” With Last Minute Capital Increase To Avoid Nationalization

Having picked a new prime minister to replace Matteo Renzi, when as reported this morning Italian president Sergio Mattarella asked Foreign Minister Paolo Gentiloni, a loyalist from Renzi’s Democratic Party, to form a new government, the chaos surrounding Italy’s political future appears to be subsiding, which as we said this morning, is welcome news for the future of Monte Paschi, as Italy’s third largest bank may once again avoid a state bailout should enough private investors turn up and inject funds into the failing financial institution, the world’s oldest.

So it comes as no surprise that, facing a third nationalization in just a few years, Bloomberg reports that Banca Monte dei Paschi di Siena plans to step up efforts to win investors for a debt-for-equity swap in the coming days, and will once again press ahead with a €5 billion capital raise to avoid a state rescue that would impose losses on bondholders and shareholders, an outcome the ECB suggested on Friday would be unavoidable absent a private sector rescue.

Bloomberg adds that the bank’s board is meeting Sunday to review a fresh offer for note holders that would allow more retail investors to participate after money managers already swapped €1.02b, although it remains unclear why more investors would take on the bank’s offer.

Following the swap, a stock sale to an anchor investor and a public share placement would follow, to complete the full capital raise.

Meanwhile, Reuters writes that Monte Paschi was “scrambling on Sunday to thrash out a last-ditch plan to raise €5 billion on the market by year-end after the European Central Bank refused to give it more time to recapitalize.” Rome is ready to intervene with an emergency decree to rescue the bank if needed, a government source said on Friday. Such an intervention would impose losses on bondholders as per European bail-in regulations.

As Bloomberg has now confirmed, the eleventh-hour private solution being drawn up by the bank, advised by JPMorgan and Mediobanca, involves reopening a debt-to-equity swap offer to 40,000 retail investors holding 2.1 billion euros of the bank’s subordinated bonds, but this needs the approval of market watchdog Consob. The initial offer, which raised 1 billion euros from institutional investors, had been deemed too risky for the vast majority of ordinary investors.

A major wildcard is whether Qatar, long seen as an anchor investor would provide as much as €1 billion in fresh capital. Under the plan, Qatar’s sovereign wealth fund could put in another 1 billion euros, while a consortium of banks would try sell shares for the remainder in the market but without underwriting the issue, a senior banking source said.

As Monte dei Paschi’s board met on Sunday, a source close to the board said the fact that Gentiloni had been asked to form a government gave the bank confidence it could still pull off the privately funded capital raise. “There’s still time. Qatar is in the game and available to put in the amount that is being talked about,” the source said.

The Reuters source added the bank had been in contact with Consob since Friday to discuss the reopening of the debt swap, a politically sensitive move that could expose the lender and the market watchdog to accusations of bending the rules.

Some more details:

Another source said no decision would be taken before the ECB formally communicates its rejection of the bank’s request for an extension, which should happen early this week. According to the senior banker, the lender would argue that under European rules, retail investors risked losing all their money if the state had to intervene, so they would be better off converting their bonds.

The bank’s fate is a political hot potato in Italy.

The Monte Paschi rescue has become a political hot potato topic: Luigi Di Maio, a leader of the anti-establishment 5-Star Movement that is ahead in opinion polls, said on Sunday the bank should be nationalized while accusing Renzi’s Democratic Party (PD) of using the crisis to rebuff calls for snap polls and justify the need for a quick, unelected government.

PD Chairman Matteo Orfini said: “The market solution is the best. Should it not succeed, the bank must be stabilized while respecting EU rules.”

That said, if indeed the flux surrounding the fate of the Italian government has been resolved, Monte Paschi may just have avoided yet another nationalization if only for the time being. As for Qatar making any return on its €1 billion investment, funds which will promptly be soaked up by even more bad debt losses, we wouldn’t hold our breath.





Secular Investor gives a detailed account of the problems with Monte de Paschi.They certainly have a liquidity problem with over 5 billion euros of cash have been withdrawn by depositors. They have 30 billion euros of bad debt and need 10 billion euros to cover the hole if these loans leave to a bad bank:

(courtesy Secular Investor)

Is Another European Bail-In Right Around The Corner?

Secular Investor's picture

(courtesy Mish Shedlock/Mishtalk)

Now who could have foreseen this happening?

100 yr Belgian bonds collapse in price by over 30%

(courtesy zero hedge)

‘Century’ Bond Collapse Continues As Belgian 2116s Crash 30% From Highs

While all the headlines have been about 10Y Treasury yields breaking above 2.50% briefly for the first time since September 2014, the bigger news for the world of bond traders is the utter bloodbath in ultra-long duration European bonds.


10Y Treasury yields broke above 2.50% this morning…


But while US 10Y Bonds have lost around 7% of their value fromn the August highs, it is the ultra-long duration bonds issued by various European nations over the summer that are collapsing…


Now back below its issuance price. The question is – who holds these and are they mark-to-market insensitive?



none today



wow! 65% of India’s ATMs are non operational and Goldman Sachs is warning that India will return to a barter system:

(courtesy zero hedge)

With 65% of ATMs Nonoperational, Goldman Warns India Is “Returning To Barter System”

India continues to stagger from bad to worse following Modi’s demonetization. With just 35% of ATMs nationwide operational, Goldman warns the shortage of cash continues to incentivize the use of alternate payments, including extension of informal credit and a return to barter systems. Addtionally, the slowdown in activity is dramatically reflected in lower tax collections and discounts offered by luxury car companies.

Goldman Sachs  recently introduced their India ‘De-monetization dashboard’ in which they track the progress of the Indian government’s recent currency reform announced on November 8 via a variety of high-frequency data, including money supply, credit/deposit, interest rates, physical asset premia, real economic activity, price indicators and capital flows.

This week’s update shows that cash availability at ATMs is still low.On real economic activity, there were no major data releases this week. However, PMIs and auto sales data released last week suggested a significant slowdown in activity. Separately, anecdotal evidence suggested continued weakness in activity as shown in the lower indirect tax collections and various discounts given by luxury car companies.

Monetary infrastructure

According to Livemint, 95% of ATMs (out of 200,000 in the country) have been re-calibrated to accept new notes but only 35% of the re-calibrated ATMs are operational. Banks are preferring to make cash available in their own branches instead of making cash available at ATMs. Daily data from ATMs in the four key metro cities – namely Bengaluru, Delhi, Kolkata and Mumbai – show that people are still facing a ‘cash crunch’ in about half of the ATMs. The shortage of cash continues to incentivize the use of alternate payments including electronic payment systems, extension of informal credit and a return to barter systems. The government has further announced various measures to promote digital and non-cash transactions including discounts on digital purchase of fuel, suburban train tickets, and service tax exemptions on transaction charges up to INR 2000 on December 8.

Exhibit 1: Shortage of cash in ATMs continues

Source: CashNoCash, Goldman Sachs Global Investment Research

Exhibit 2: Still very elevated search interest for retailers accepting electronic payment

Trends in Google searches for key financial terms in India

Source: Google, Goldman Sachs Global Investment Research

Real activity indicators

On real activity, no major data was released this week. However, last week, India’s Nikkei Markit manufacturing PMI moderated in November after rising to a 22-month high in October (Exhibit 3). The weakness was across the board, suggesting softening in manufacturing activity post the de-monetization announcement on November 8. The Nikkei Markit services PMI also dropped sharply in November driven by a significant decline in new business, also indicating the potential impact of the cash shortage.

Separately, industry-wide November auto sales (Exhibit 4) showed commercial vehicle sales declined by over 18% mom s.a., car sales declined by 4% mom s.a. and two-wheeler sales dropped by 15% mom s.a. Furthermore, registrations of motor vehicle have fallen since November 2016.

Exhibit 3: India’s composite PMI declined sharply in November led by weak services PMI

Source: Haver Analytics, Nikkei Markit

Exhibit 4: Auto sales contracted sharply in November

Source: CEIC, Company data, Goldman Sachs Global Investment Research

Exhibit 5: Motor vehicle registrations have fallen

(December data only partial month)

Source: Road Transport Office, Goldman Sachs Global Investment Research

The latest anecdotal evidence (Exhibit 6) suggests continued weakness in activity during the fourth week post announcement of de-monetization. The slowdown in activity is reflected in lower tax collections and discounts offered by luxury car companies.

Exhibit 6: Real activity anecdotal evidence

Source: Live Mint, The Economic Times, Times of India, Business Standard, Goldman Sachs Global Investment Research

Monetary and financial indicators

Money supply

Reserve money expanded by 0.5% yoy as of the week ending December 2, 2016 after a decline of 16.8% yoy the previous week.This was mainly driven by a INR4.7 trillion increase in bankers’ deposits with the RBI (+128.4%yoy) post the temporary increase in Cash Reserve Ratio (CRR) to absorb excess liquidity in the system on November 26 (Exhibit 7). This increase in CRR will be withdrawn from December 10 as announced by the RBI. The central bank also mentioned that they have distributed INR 4 trillion of new high denomination notes so far.

Trends in hard assets premia

Domestic gold and silver premia, as measured by the difference between USD-equivalent domestic prices and global prices, appear to have normalized after an initial spike. Bitcoin premia (we calculate this as the difference between the price of Bitcoin on India exchanges and those abroad) also moderated somewhat this week (Exhibit 15).

Exhibit 15: Hard assets premia somewhat normalised four weeks post announcement

Source: CEIC, Haver Analytics, Bloomberg, Unocoin, Goldman Sachs Global Investment Research

Exhibit 16: Google Trends on gold prices have normalised while Bitcoin stayed elevated

Trends in Google searches for key physical asset words

Source: Google, Goldman Sachs Global Investment Research





Modi’s move to cut off the two largest denomination bills certainly has caused damage to it’s economy:  now the big Foxconn fires 25% of its Indian workers.  The company claims that sales of its products have been destroyed by Modi’s actions:

(courtesy zero hedge)

Foxconn Fires 25% Of India Workers As Demonetization Destroys Sales

While piecemeal anecdotes and surveys have already exposed the devastation that PM Modi’s demonetization plan has had on the Indian economy, tonight we see the first hard evidence as Foxconn has asked 25% of its workforce to leave after the cash ban caused sales to collapse by 50% forcing the company to slash production by half.

Amid social unrest and loss of faith in the nation’s currency, India’s economy has ground to a halt with its Composite PMI crashing by a record in the last month as demonetization strikes.

And now, as The Economic Times reports, the government’s move to ban Rs 500 and Rs 1,000 notes from November 9 has had a domino effect on the mobile phone industry, where a large majority of mobile phones are bought for less than Rs 5,000 and most of the transactions happen through cash.

Consumer purchase power has been reduced dramatically – mobile phone monthly sales halved to Rs 175-200 crore post demonetisation – and sales revival is not looking up, as was perceived earlier, industry insiders said.

Leading local players including Intex, Lava and Karbonn are planning to lay off or bench 10-40% of their workforce, as they cut production to control inventory pile-ups in retail channels with consumers delaying cash purchases after Nov 8 demonetisation sucked out cash from the market.

Lava is shutting down its plant – which employs around 5000 people -for a week starting December 12, while others could soon follow, industry insiders said.

Foxconn – which makes devices for China’s Xiaomi, Oppo and Gionee, besides Infocus and Nokia – along with Lava, Intex, Karbonn and Micromax account for around 50% of the handsets assembled in India, say experts.

“The four plants in Sri City (Andhra Pradesh) are operating at 1.2 million capacity a month, down from 2.5 million that it has,” a senior industry executive aware of Foxconn’s manufacturing details said, asking not to be named. The company has put about 1,700 of its workforce on the bench, or on forced leave for two weeks during which they will get paid but the number of days would be cut from their earned leaves. Benching may continue if production – directly related to consumer demand – does not come to the 2 million a month levels by January, the person added.

Will the workers come back? Will production come back? Well as we noted previously, Modi’s move has shaken faith in the foundations

A final philosophical point. Our entire monetary system depends on trust. A banknote is a piece of paper that says the RBI will give the bearer another similar piece of paper, or make an entry in an electronic ledger for that amount. The system works because everybody believes that those pieces of paper will be accepted by everybody else and therefore, money serves as an useful medium of exchange. This move has shaken that trust.



Another shock and awe from Saudi Arabia has they plan to cut a little more from production: this sends oil skyrocketing in price

(courtesy zero hedge)

Saudi “Shock And Awe” Sparks Buying Panic In Crude – WTI At 17-Month Highs

Despite Saudi Arabia pumping record amounts of crude, the energy complex has spiked 6% higher tonight after two major headlines. First, Russia and other non-OPEC nations agreed to join the OPEC pledge to reduce production; and then, in what some are calling their “whatever it takes” moment, Saudi Arabia surprised the market by saying it will cut more than previously agreed.

Saudi Arabia will “cut substantially” below the target agreed last month with OPEC members, Energy Minister Khalid Al-Falih says.

Al-Falih’s comments follow a deal by non-OPEC countries to join forces with the group and trim output by 558k b/d next year, the first pact between the rivals in 15 years.

“This is a very powerful message that producers want to balance the market higher,” says Chris Weston, chief market strategist in Melbourne at IG Ltd. “As a statement of intent, this is about as bullish as it gets”

Oil spiked up to its highest since July 2015…

and perhaps most worrying for those inflation-watchers, is up 55% YoY…

“This is shock and awe by Saudi Arabia,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd. in London. “It shows the commitment of Riyadh to rebalance the market and should end concerns about OPEC delivering the deal.”

The question is – what happens next? How long can the Saudis keep jaw-boning the market higher in true central bank-inspired ‘forward guidance’ before ‘investors’ get wise to them not actually cutting production?





This is a non brainer: of course the USA shale boys will increase production with the higher oil price;

(courtesy zero hedge)


(courtesy zero hedge)

Oil Fades From OPEC Exuberance On Fund Flows, Storage, & Contango Concerns

The overnight exuberance in crude oil futures markets has fadednotably as the day has worn on. While news of supply cuts are unquestionably bullish (should one choose to believe it or not, remember the Saudis admission “we tend to cheat”), but the last few days have also seen a plethora of bearish-biased news that for now is being ignored.

The excitement is fading…


As large specs have never been more bullish crude… Investors are betting the rally will continue as we head into 2017. Money managers boosted wagers on higher Brent crude prices to a record before non-OPEC producers agreed Dec. 10 to join OPEC nations in cutting output. Their net-long position in the global benchmark surged by 46 percent in the week ended Dec. 6 to 452,585, the highest in data from ICE Futures Europe going back to 2011. Long positions also surged to a record.


But at the same time, US oil fund USO suffers the biggest 2-week outflows since 2009… U.S. Oil Fund had $197.1m outflow last week following $367.9m outflow the week before, biggest consecutive 2-week outflow since March 2009, according to data compiled by Bloomberg.


And while the front-end of the crude curve remains steeply contango,the belly has notably inverted into backwardation…


The biggest backwardation since Oct 2014 suggesting producers are hedging aggressively as opposed to believing the higher-for-longer hype.

Part of the steepness of the backwardated curve likely derives from the increasing belief that continued growth of crude supply in North America will have a tendency to drive cash prices in the future towards the marginal cost of production (i.e. lower)… and this is happening as Cushing crude inventories are soaring…

And up more this week according to Genscape: up 1.12mm barrels to 68.4mm

And remember, OPEC and Saudi production is at record highs and the biggest rig count increase in over 2 years in the US means more of the same is coming from US Shale.


Venezuela seizes 4 million toys stating “price gouging” from an importer and plays Santa Claus to the poor:

(courtesy zero hedge)

Happy Socialist Christmas: Venezuala Seizes 4 Million Toys From “Price-Gouging” Importer, Gives To Nation’s Poor

‘Toys for Socialist Tots’ appears to be the latest scheme dreamed up by Venezuela’s President Maduro to keep the people from the verge of outright revolution. As Bloomberg reports, Venezuela price regulators on Friday seized almost 4 million toys from warehouses around greater Caracas and said they’d distribute them to low income children ahead of the Christmas holiday.

William Contreras, the country’s price czar, accused toy importer Distribuidora Kreisel of hoarding and price gouging and asked that the company’s directors be detained and prohibited from leaving the country.

Flanked by national guardsmen, he said the company had received preferential exchange rates for goods it imported as early as 2009 and then raised prices by as much as 50,000 percent.

“These products will be put to use by the Clap,” he said, referring to the government’s community-based network that distributes food to low income residents. “Venezuela’s boys and girls will have their baby Jesus guaranteed, and these companies will learn that they can’t play with the rights of the Venezuelans.”

Triple-digit inflation and a collapsing currency have made many non-essential items out of reach for most Venezuelans, where a monthly minimum wage buys only around $20 on the black market. Government authorities have in the past several years ordered price cuts ahead of the Christmas holiday, and price regulators ordered clothing stores in downtown Caracas to cut prices by 30 percent earlier this week.

In 2013, President Nicolas Maduro accused retailers across the South American nation of price gouging and deployed the military to slash prices at electronics and home appliance stores. The event became coined the “Dakazo,” after the socialist leader ordered an electronics chain called Daka to slash its merchandise prices to “fair” levels and liquidate their inventory on live television.

Since then, Venezuela’s government has cracked down on prices across the entire economy — everything from eggs to children shoes — levying sanctions or confiscating the merchandise of business owners who don’t comply.

With the nation’s currency hyperinflating faster than a CNN Russian hacking story, this confiscation of ‘unfairly-priced’ toys is likely the only way to keep the Grinch from the door of this socialist nirvana.



In a move similar to India, Maduro removes half its paper money from circulation sending the distressed economy further down the rabbit hole:

(courtesy zero hedge)

Maduro Stunner: Venezuela Eliminates Half Its Paper Money After Pulling Largest Bill From Circulation

Having observed the economic chaos to emerge as a result of India’s shocking Nov. 8 demonetization announcement, and perhaps confident it can do better, today president Nicolas Maduro of Venezuela, Latin America’s most distressed economy, mired in an economic crisis and facing hyperinflation, likewise shocked the nation when he announced on state TV that just like India, Venezuela would pull its highest denominated, 100-bolivar bill (which is worth about two U.S. cents on the black market), from circulation over the next 72 hours, ahead of the introduction of new, higher-value notes, as large as 20,000.

“I have decided to take out of circulation bills of 100 bolivars in the next 72 hours,” Maduro said. “We must keep beating the mafias.”

To this we would add “and cue economic chaos”, but since this is Venezuela, that’s a given.

The surprise move, announced by Maduro during an hours-long speech, is likely to worsen a cash crunch in Venezuela, and lead the largely-cash based economy to a state of paralysis. Maduro said the 100-bolivar bill will be taken out of circulation on Wednesday and Venezuelans will have 10 days after that to exchange those notes at the central bank.

Critics immediately slammed the move, which Maduro said was needed to combat contraband of the bills at the volatile Colombia-Venezuela border, as economically nonsensical, adding there would be no way to swap all the 100-bolivar bills in circulation in the time the president has allotted. Indeed, if India is any example, Venezuela – whose economy is far worse than that of India, the world’s fastest growing emerging market – may have just signed its own economic death warrant.

According to central bank data, in November there were more than six billion 100-bolivar bills in circulation, 48 percent of all bills and coins. In other words, Venezuela just eliminated half the paper cash in circulation.

Authorities on Thursday are due to start releasing six new notes and three new coins, the largest of which will be worth 20,000 bolivars, less than $5 on the streets. No official inflation data is available for 2016 though many economists see it in triple digits. Economic consultancy Ecoanalitica estimates annual inflation this year at more than 500%, close to the IMF’s estimate.

Meanwhile, assuring hyperinflation next year will be a doozy, the oil-producing nation’s bolivar currency has fallen 55% against the U.S. dollar on the black market in the last month.

Money supply, the sum of cash and checking deposits as well as savings and other “near money” deposits, was up a staggering 19% in the three weeks to Dec. 2 and the curve has been exponential since Maduro’s predecessor Hugo Chavez came to power in 1999.

Maduro previously has said that organized crime networks at the Colombia-Venezuela border buy up Venezuelan notes to in turn buy subsidized Venezuelan goods and sell them for vast profits in Colombia.

While smuggling of this sort is an issue at the border, it cannot account for nationwide shortages of the most basic goods from food to medicine, which have left millions hungry and doctors crying out for help. As we reported previously paying a restaurant or supermarket bill without a debit or credit card can often require a backpack full of cash. However, getting cash in recent months has proven difficult, and the country’s credit-card machines have recently suffered problems, leaving many businesses asking customers to pay by bank transfer.

As Reuters adds, strict currency controls introduced in 2003 that pegged the bolivar to the dollar, coupled with heavy reliance on oil, are seen as the root of the crisis by most economists. Maduro has blamed an “economic war” being waged against his government by the opposition and the United States.

With Venezuela’s move, we can now add the insolvent Latin American country to an increasingly large group of countries including India, Sweden, and Australia, which in recent months have been on a quiet crusade to eliminate all forms of paper money. Certainly, Venezuela will not be the last as only full control over a nation’s currency will allow governments to enact global negative rates, something which is inevitable once the current “Trumpflation” euphoria finally ends.


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




GBP/USA 1.2626 UP .0068 (Brexit by March 201/UK government loses case/parliament must vote)


Early THIS MONDAY morning in Europe, the Euro ROSE by 43 basis points, trading now WELL BELOW the important 1.08 level RISING to 1.0593; 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 AND NOW THE ECB TAPERING OF ITS PURCHASES/ 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 79.91 0r 2.47%     / Hang Sang  CLOSED DOWN 327.96 POINTS OR 1.44%   /AUSTRALIA IS HIGHER BY 0.06% / EUROPEAN BOURSES ALL MIXED 

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 MONDAY morning CLOSED UP 158.66 POINTS OR 0.84%

Trading from Europe and Asia:
1. Europe stocks ALL MIXED 

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 327.96 OR 1.44%   Shanghai CLOSED DOWN 79.91 POINTS OR 2.47%   / Australia BOURSE IN THE GREEN /Nikkei (Japan)CLOSED UP 158.66 POINTS OR 0.84%/  INDIA’S SENSEX IN THE RED

Gold very early morning trading: $1155.50


Early MONDAY morning USA 10 year bond yield: 2.515% !!! UP 5 IN POINTS from FRIDAY 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  3.204, UP 5 IN BASIS POINTS  from FRIDAY night.

USA dollar index early MONDAY morning: 101.34 DOWN 30 CENT(S) from FRIDAY’s close.

This ends early morning numbers MONDAY MORNING


And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield: 3.83% DOWN 2  in basis point yield from FRIDAY  (does not buy the rally)

JAPANESE BOND YIELD: +.088% UP 2  in   basis point yield from  FRIDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD:1.499%  DOWN  1  IN basis point yield from  FRIDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.00  DOWN 3  in basis point yield from FRIDAY 

the Italian 10 yr bond yield is trading 50 points HIGHER than Spain.





Closing currency crosses for MONDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:30 PM

Euro/USA 1.06340 UP .0088 (Euro UP 88 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 114.93 DOWN: 0.213(Yen UP 21 basis points/ 

Great Britain/USA 1.2687 UP 0.0129( POUND UP 129 basis points)

USA/Canada 1.3128 DOWN 0.0040(Canadian dollar UP 40 basis points AS OIL ROSE TO $53.24


This afternoon, the Euro was UP by 88 basis points to trade at 1.0634


The POUND ROSE 129 basis points, trading at 1.2687/

The Canadian dollar ROSE by 40 basis points to 1.3128, AS WTI OIL ROSE TO :  $53.24

The USA/Yuan closed at 6.9044
the 10 yr Japanese bond yield closed at +.088% UP 2 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 1   IN basis points from FRIDAY at 2.471% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.1561 UP 1  in basis points on the day /

Your closing USA dollar index, 100.81 DOWN 73 CENTS  ON THE DAY/1.30 PM 

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for MONDAY: 1:30 PM EST

London:  CLOSED DOWN 63.79 POINTS OR 0.92%
German Dax :CLOSED DOWN 13.42 POINTS OR 0.12%
Paris Cac  CLOSED DOWN 3.30 OR 0.07%
Spain IBEX CLOSED UP 16.80 POINTS OR 0.18%
Italian MIB: CLOSED DOWN 77.67 POINTS OR 0.42%

The Dow was UP 39.58 points or 0.20%  4 PM EST

NASDAQ DOWN  31.96  points or 0.59%  4.00 PM EST
WTI Oil price;  52.34 at 3:30 pm; 

Brent Oil: 55.27   3:30 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: $55.33

USA 10 YR BOND YIELD: 2.475% 

USA DOLLAR INDEX: 100.96 down 68  cents(huge resistance at 101.80)

The British pound at 5 pm: Great Britain Pound/USA: 1.2673./ up 113  BASIS POINTS.

German 10 yr bond yield at 5 pm: +.399%


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


“Extremely Greedy” Traders ‘Shocked’ As Stocks Stumble Most Since Election, Dollar Dumps

Afte exhibiting “Extreme Greed”


A down day!!!


Sentiment for the day started off strong thanks to OPEC/NOPEC and Saudi comments sparking a buying panic in crude to 17-month highs…


But it didn’t help China… (worst stock drop in 6 months) after Trump’s questioning “One China Policy” and a crackdown on insurers and liquidity…


The bond market was never really buying the opening spike in equity futures overnight…


And as oil faded back so energy stocks gave up their gains and Financials had their first losing day in 7 days…


Goldman stock actually dropped!


But Trannies and Small Caps dropped the most on the day with The Dow clinging to new record high gains… (for small caps this is the biggest loss since 11/3)


As Breadth fell drastically…


VIX ended the day higher…


Treasury yields ended the day unchanged – ralying back from overnight weakness…


The USD Index fell for the first time in a week led lower by Sterling and Euro strength…


With the biggest USD Index drop since September…


Copper followed China stocks lower (worst day in 2 weeks) but gold and silver managed small gains (as crude gave back a lot of its initial gains)



Early morning trading throughout the globe:

the USA two yr yield rises above 2.53%:

Global Bond Rout Returns With A Vengeance, Sending 10Y Yields To Highest In Over Two Years

The global bond rout returned with a bang, sending 10Y US Treasury yields as much as six basis points higher to 2.53%, the highest level in over two years. The selloff happened as oil prices surged by more than 5% following Saturday’s agreement by NOPEC nations agreed to slash production, leading to rising inflation pressures. At last check, the 10Y was trading at 2.505%, up from 2.462% at Friday and on track for its highest close since September 2014, according to Tradeweb.

“There’s been some pretty decent cheapening across global bond markets,” said Craig Collins, managing director of rates trading at Bank of Montreal in London. The spike in oil prices since OPEC announced a cut in output has led to further cheapening, while in Europe “you had the ECB last week, all contributing to the steepening that we’ve seen.”

Japanese bond yields jumped, while Eurozone bonds were weaker across the board, too, with the yield on 10-year German debt up 0.05 percentage point at 0.392%. Germany’s yield curve, as measured by the spread between two- and 30-year bonds reached the steepest since 2014, based on closing prices, while a similar gauge for Japan widened for a fifth day. U.K. 10-year yields climbed three basis points to 1.48 percent, while those on similar-maturity bunds also added four basis points, to 0.40 percent

Even that bastion of negative rates, Switzerland, saw yields spike, fast approaching the psychological 0% barrier.

“It does seem to be oil-driven, but clearly the bearish sentiment around fixed income prevails,” Mitul Patel, head of interest rates at Henderson Global Investors, told Reuters.

Another fundamental catalyst behind the bond weakness remains uncertainty over Trump’s policies: the rise in oil process adds to a general selloff in government bonds that gathered pace following the election of Donald Trump in November. Investors expect Mr. Trump’s policies of cutting taxes and increasing infrastructure spending to lead to higher growth and inflation. Those policies may also encourage the U.S. Federal Reserve to raise interest rates at a faster clip than previously expected, which would likely hit bonds. The Fed is expected to raise interest rates at its meeting this week for the first time in a year.

Treasurys registered their largest five-week gain in yields for six years on Friday after investors sold. The Treasury bond market will face a further test this week with a series of debt auctions. Sales of three-year notes and 10-year notes are scheduled for later Monday, followed by an auction of bonds with 30-year maturities on Tuesday. That will increase the supply of bonds at the end of the year, a period when some investors are reluctant to put money to work and many have grown wary of rising yields.

Adding to the pressure, hedge funds and other large speculators raised bearish bets on 10-year Treasuries to the highest in almost two years last week, more than doubling them to a net 228,604 contracts, according to the latest Commodity Futures Trading Commission data.

Technical analysts believe that a sustained break in Treasury yields above 2.5% would open up an attempt at 3% according to Imre Speizer from Westpac Banking Corp. Forecasters in a Bloomberg survey see German bund yields climbing to 0.6 percent by end-2017. That said, both JPM and Goldman have warned that 10Y yields approaching or rising above 2.75% is where the equity rally will fizzle as tighter financial conditions from rising rates will overcome the favorable equity momentum. That level is now just 25 bps away and may be hit in the coming days.





the US budgetary deficit for Nov 2016 came in at 136 billion dollars. For the first two months of the fiscal 2017 year:  181 billion and well on its way for deficit of 1 trillion dollars for the year.

(courtesy zero hedge)


US Budget Deficit Doubles As November Spending Hits All Time Monthly High

While it is unclear if the recent increase in government spending and the resulting increase in the budget deficit, has been a factor in the recent string of better than expected US economic data, at 2pm on Monday the US Treasury announced that in November, the government’s budget deficit rose to $136.7 billion, nearly double the $64.5 bilion deficit reported in the same month of 2015, which however was largely a function of a calendar quirk.

Not only was November total more than double the amount reported a year ago, but the $136.7 billion deficit, was also the highest going back all the way to February of 2016, when it jumped by $192.6 billion. February is traditionally the most spending-intensive month for the US government.

Why the spike? Two reasons: in November, total receipts were down about 2% from the same month a year earlier. Meanwhile, total federal outlays rose roughly 25% compared with November 2015, when some scheduled benefit payments had been recorded instead in October 2015 because Nov. 1 fell on a Sunday. However, even when adjusting for the “quirk”, the trend was concerning: the Treasury said that adjusting for that timing shift, spending rose about 6% last month from a year earlier and the monthly deficit widened by roughly 21% on the year.

This was the highest monthly outlay reported for the month of November in US Treasury history.

The calendar quirks continued: for the first two months of the 2017 fiscal year, the budget deficit totaled $180.84 billion, down about 10% from the $201.11 billion deficit in the same period a year earlier. However, because Oct. 1 fell on a Saturday this year, some federal payments for October were instead recorded in September, substantially reducing outlays in the current fiscal year; normalizing for the data would have shown a substantial increase in the US deficit in Fiscal 2017 compared to last year.

As noted one month ago, the federal budget deficit has once again started to rise after years of marked decline. The deficit totaled $587.33 billion in the 2016 fiscal year that ended Sept. 30, or roughly 3.2% of gross domestic product. That was up from 2.5% of GDP in the prior year.

The Congressional Budget Office in August estimated that the deficit would be 3.1% of GDP in the 2017 fiscal year and rise over the next decade as spending growth outpaces revenues, reaching 4.6% of GDP in 2026. Alas, that number will be woefully low: the CBO’s baseline projection assumes no major changes to current law and continued modest economic growth. President-elect Donald Trump and congressional Republicans have signaled that overhauling the tax system will be a priority in the coming year, though the details and potential effects on the deficit and economic growth remain uncertain.

Ironically, the budget is blowing out before Trump even is inaugurated. Should the increase in deficits persist, Trump may not even have to unleash a major spending program, as Obama may have quietly done it for him.


Trump picks Exxon CEO Rex Tillerson, a close friend of Putin as Secretary of State:

(courtesy zero hedge)

Trump Picks Exxon CEO Rex Tillerson As Secretary Of State

In a move that is certain to infuriate those who see Trump as nothing more than a puppet of the Kremlin, moments ago NBC reported that Rex Tillerson, CEO of Exxon Mobil and late entrant into the SecState race after his first meeting with the president elect this past Tuesday at the Trump Tower, has been picked by Trump to serve as his next Secretary of State.

JUST IN: Trump to name Exxon Mobil CEO Rex Tillerson as secretary of state, sources say 

As NBC adds, Tillerson met Saturday with Trump at Trump Tower in New York, the president-elect’s spokesperson confirmed.  The selection of Tillerson comes after Trump and his transition team spent weeks searching for someone to fill the post of the top U.S. diplomat. Former Republican presidential candidate Mitt Romney and former New York City Mayor Rudy Giuliani were reportedly in the running. Giuliani said Friday he had taken his name out of consideration.

The 64-year-old Texas oilman, whose friends describe as a staunch conservative, emerged as a Secretary of State contender only last week following a meeting with Trump, when it was speculated that he would consider the offer “due to his sense of patriotic duty and because he is set to retire from the company next year.” Tillerson’s appointment would introduce the potential for sticky conflicts of interest because of his financial stake in Exxon: he owns Exxon shares worth $151 million, according to recent securities filings.

A quick biographical sketch of Tillerson courtesy of the WSJ:

The son of a local Boy Scouts administrator, Tillerson was born in Wichita Falls, Texas. He attended the University of Texas, where he studied civil engineering, was a drummer in the Longhorn band and participated in a community service-oriented fraternity.

He joined Exxon in 1975 and has spent his entire career at the company.

For most of his adult life, he has also been closely involved with the Boy Scouts of America, even occasionally incorporating the Scout Law and Scout Oath into his speeches.  Mr. Tillerson played an instrumental role in leading the organization to change its policy to allow gay youth to participate in 2013, Mr. Hamre said. Former Defense Secretary Robert Gates subsequently moved to lift the organization’s ban on gay adult leaders as Boy Scouts president in 2015.  “Most of the reason that organizations fail at change is pretty simple: People don’t understand why,” Mr. Tillerson said in a speech after the 2013 decision, urging leaders to communicate about the policy to help make it successful. “We’re going to serve kids and make the leaders of tomorrow.”

* * *

However it is not his Boy Scout exploits that will be the key talking point for pundits in the coming days, but rather his close relationship with Russian president Vladimir Putin.

According to the WSJ, few U.S. citizens are closer to Mr. Putin than Mr. Tillerson,  a recipient of Russia’s Order of Friendship, bestowed by the president…

… who has known Putin since he represented Exxon’s interests in Russia during the regime of Boris Yeltsin.

“He has had more interactive time with Vladimir Putin than probably any other American with the exception of Henry Kissinger,” said John Hamre, a former deputy defense secretary during the Clinton administration and president of the Center for Strategic and International Studies, a Washington think tank where Mr. Tillerson is a board member.

Exxon CEO Rex Tillerson with Vladimir Putin, then Russia’s prime minister, at
a signing ceremony in the Black Sea resort of Sochi in August 2011.

In 2011, Mr. Tillerson struck a deal giving Exxon access to prized Arctic resources in Russia as well as allowing Russia’s state oil company, OAO Rosneft, to invest in Exxon concessions all over the world. The following year, the Kremlin bestowed the country’s Order of Friendship decoration on Mr. Tillerson.

The deal would have been transformative for Exxon. Mr. Putin at the time called it one of the most important involving Russia and the U.S., forecasting that the partnership could eventually spend $500 billion. But it was subsequently blocked by sanctions on Russia that the U.S. and its allies imposed two years ago after the country’s invasion of Crimea and conflicts with Ukraine.

Tillerson spoke against the sanctions at the company’s annual meeting in 2014. “We always encourage the people who are making those decisions to consider the very broad collateral damage of who are they really harming with sanctions,” he said.

As such, many have speculated that under his regime, the State Department may quietly drop any existing sactions against Russia.

* * *

Then there is the thorny issue of potential conflicts of interest, and his massive holdings of Exxon stock.

One of the first issues Tillerson would have to resolve as secretary of state would be his holdings of Exxon shares, many of which aren’t scheduled to vest for almost a decade. The value of those shares could go up if the sanctions on Russia were lifted.

The shares would likely have to be sold under State Department ethics rules, Chase Untermeyer, a former U.S. Ambassador to Qatar, said in an interview. “He could not erase his strong relationship with a particular country,” Mr. Untermeyer said. “The best protection from a conflict of interest is transparency.”

Tillerson will sell his $150+ million in XOM shares tax free, courtesy of the same tax break that was introduced in 1989 under the administration of President George H.W. Bush, which allowed Hank Paulson, Colin Powell and plenty of other public servants to dispose of their equity holdings without paying taxes: to get the tax relief, it must be deemed “reasonably necessary” for a public official to divest his shares, or a congressional committee must require the asset sale, according to section 1043 of the tax code, something which is virtually assured in the case of Tillerson.

* * *

Finally, the environmentalists will certainly be displeased with Trump’s choice, even thought Tillerson helped shift Exxon’s response to climate change when he took over as CEO in 2006. He embraced a carbon tax as the best potential policy solution and has said climate change is a global problem that warrants action. That was a break from his predecessor, Lee Raymond.

Still, Mr. Tillerson is a polarizing figure among Democrats and environmental activists. They have accused Exxon of sowing doubt about the impacts of climate change during Mr. Raymond’s tenure and say Mr. Tillerson hasn’t done enough to disclose the future impact of climate-change regulations on the company’s ability to get oil out of the ground.

This is certainly a good way to make clear exactly who’ll be running the government in a Trump administration—just cut out the middleman and hand it directly to the fossil-fuel industry,” said Bill McKibben, the environmental activist and founder of

Exxon has disputed the criticism and accused activists and Democratic attorneys general of conspiring against the company.

The son of a local Boy Scouts administrator, Mr. Tillerson was born in Wichita Falls, Texas. He attended the University of Texas, where he studied civil engineering, was a drummer in the Longhorn band and participated in a community service-oriented fraternity.

As secretary of state, Tillerson would be fourth in line to the presidency.

No matter how US diplomacy plays out under Tillerson, however, one thing is certain: at least Mitt Romney will not be setting US foreign policy for the next four years. This particular ritual humiliation has now been duly completed…

REPORT: Mitt Romney May Be Forced to Publicly Apologize to Trump in Exchange For Sec of State Bid 

Finally, as NBC also adds, Tillerson’s deputy secretary of state for day-to-day management of the department will be former U.N. Ambassador John Bolton.

To summarize: a cabinet run by Wall Street and big oil (with a neocon backstop), and a handful of veteran generals thrown in. The writing should be on the wall as to what comes next.





As expected Trump picks Marine General John Kelly as Homeland Security Secretary:

(courtesy zero hedge)

Trump Officially Nominates Retired Marine General John Kelly As Homeland Security Secretary

This morning Trump has confirmed his intention to nominate retired Marine General John Kelly to head the Department of Homeland Security, a pick that had been rumored for days.  In a statement, Trump highlighted Kelly’s experience in defending the homeland from threats of terrorism and said that he was the right person to “spearhead the urgent mission of stopping illegal immigration and securing our borders.”

“Gen. John Kelly’s decades of military service and deep commitment to fighting the threat of terrorism inside our borders makes him the ideal choice to serve as our Secretary of the Department of Homeland Security.”

“He is the right person to spearhead the urgent mission of stopping illegal immigration and securing our borders, streamlining TSA and improving coordination between our intelligence and law enforcement agencies.With Gen. Kelly at the helm of DHS, the American people will have a leader committed to our safety as well as one who will work hand-in-hand with America’s rank-and-file TSA, ICE and Border Patrol officers.”

Per The Hill, Kelly vowed to “take back sovereignty at our borders and put a stop to political correctness.”

“The American people voted in this election to stop terrorism, take back sovereignty at our borders, and put a stop to political correctness that for too long has dictated our approach to national security,” Kelly said in a statement. “I will tackle those issues with a seriousness of purpose and a deep respect for our laws and Constitution.”

JOhn Kelly

Before retiring last winter, Kelly served as the head of U.S. Southern Command, where, among other things, he oversaw Guantánamo Bay.  According to The Hill, Kelly built a reputation as a blunt critic of the Obama administration and was often accused to taking actions intended to obstruct the administration’s efforts to close Guantánamo.  John Kelly’s son, Robert, was killed in combat in Afghanistan.

Immigration hard-liners had been routing for Trump to appoint Kansas Secretary of State Kris Kobach as head of the Department of Homeland Security.  Kobach was generally viewed as the candidate most likely to draw the hardest line on illegal immigration after helping to draft one of the toughest pieces of immigration law in the country, Arizona’s SB 1070, which requires law enforcement officers to demand to see the immigration papers of anyone they suspected of being in the country illegally.

By choosing Marine General John Kelly, immigration experts fear that the Trump administration will focus more on border security, as it relates to terrorist threats, but will not emphasize the deportation of the millions of illegal citizens already in the country.

Still others, including the ever skeptical New York Magazine, view Kelly simply as a “Trojan Horse” who has a better chance at Senate Confirmation for the top DHS position but will then use that role to appoint an immigration hard-liner, like Kobach, to the Deputy Secretary position.

Perhaps most important, Kelly is not Kris Kobach, the fiery crusader against immigration “amnesty,” alleged voter fraud, and nefarious Muslim plots to rob Americans of their priceless heritage of freedom. The name of the Kansas secretary of State, who is a big-time national celebrity among hard-core conservatives, had often been mentioned in connection with the DHS gig.

But before anyone starts celebrating over Kobach’s continued confinement in Topeka, it might be wise to pay attention to some intel the Washington Examiner provided earlier this week:

Kansas Secretary of State Kris Kobach and retired Marine Gen. John Kelly are likely to be tapped for secretary and deputy secretary of homeland security, according to a top transition official familiar with the president-elect’s current thinking, but the source would not reveal which of the two men is favored for the top post and which is likely to be deputy secretary.

If that is correct, it is entirely possible Team Trump decided to make the less controversial Kelly — who faces a much easier Senate confirmation — the figurehead at the top of DHS, while installing Kobach as his deputy with special responsibilities for immigration and anti-terrorism policy. And there is also the option of placing Kobach at the Justice Department with authority over enforcement of immigration and voting laws. Crediting the upcoming administration with a “moderate” cabinet appointment might be accurate but also misleading.

With one more pick officially on the record, all eyes turn to the Secretary of State position.




First Boeing, now Lockheed Martin tumbles after Trump tweets that it’s F 35 costs are spiraling out of control:

(courtesy zero hedge)


Lockheed Martin Tumbles After Trump Tweets On “Out Of Control” F-35 Costs

After running up dramatically post-Trump’s victory, Lockheed Martin shares are tumbling again this morning after the president-elect tweeted, questioning the costs of the company’s F-35…

The F-35 program and cost is out of control. Billions of dollars can and will be saved on military (and other) purchases after January 20th.

The reaction was a swift 3% plunge in the share price…

In Feb., Lockheed Martin said in a filing that “The F-35 program is our largest program, generating 20% of our total consolidated net sales, as well as 59% of Aeronautics’ net sales in 2015”

The tweet appears to have come in response to this story exposing “The Pentagon’s most expensive weapons program”… (via ABC)

U.S. Defense Secretary Ash Carter was visiting Israel Monday as it prepared to receive the first two next-generation F-35 fighter jets that will help preserve the country’s military edge in the volatile Mideast.


The F-35 is the Pentagon’s most expensive weapons program, with an estimated cost of nearly $400 billion. Israel is among a small number of allies to get the plane.


Israeli Defense Minister Avigdor Lieberman said the fighter jets “present another component in maintaining air superiority in our region” and expressed gratitude to Carter, who was welcomed with a military honor guard at a Tel Aviv army base.


The jets were supposed to touch down in Israel in the early afternoon, but the Israeli military said their arrival was delayed due to weather conditions in Italy. Neither U.S. nor Israeli officials provided further details.

First Boeing, now Lockheed Martin… Raytheon next? Maybe the swamp of wasting taxpayer money is being cleaned up after all?





These guys ought to know:  the FBI disputes the CIA’s claims of influence by Russian in the Presidential election

(courtesy zero hedge)

FBI Disputes CIA’s “Fuzzy And Ambiguous” Claims That Russia Sought To Influence Presidential Election

Since election day, Democrats have engaged in a panicked attempt to leverage their last couple of weeks in control of the executive branch to delegitimize the Trump presidency.  Obama has even gone so far as to order a “full report” on Russian tampering in the 2016 election cycle to be completed before he leaves office (see “A “Soft Coup” Attempt: Furious Trump Slams “Secret” CIA Report Russia Helped Him Win“).  Of course, we should simply ignore the fact that a true investigation of such allegations would take much longer than the one month that Obama has left in office because any delay could run the risk of a bipartisan/independent review and that’s just not how the Obama administration plays the game.

But at least one investigative agency, the FBI, isn’t buying the “fuzzy and ambiguous” assertions from the CIA that Russia “quite” clearly meddled in the U.S. elections on behalf of the Trump campaign.  Meanwhile, the FBI’s unwillingness to play along is infuriating Democrats.  Per the BizPac Review:

The FBI did not corroborate the CIA’s claim that Russia had a hand in the election of President-elect Donald Trump in a meeting with lawmakers last week.


A senior FBI counterintelligence official met with Republican and Democrat members of the House Permanent Select Committee on Intelligence in order to give the bureau’s view of a recent CIA report. The official did not concur with the CIA, frustrating Democrats.


The CIA believes Russia “quite” clearly intended to send Trump to the White House. The claim is a bold one and concerned Democrats and some Republicans who are worried about Trump’s desire to mend relations with an increasingly aggressive Russia. The CIA report was “direct, bold and unqualified,” one of the officials at the meeting told The Washington Post Saturday.


The FBI official was much less convinced of the claims, providing “fuzzy” and “ambiguous” remarks.

The Washington Post compiled the following comments from the weekend talk show circuit highlighting where various DC players stand on the Russia allegations.


Meanwhile, the Washington Post also points out that the whole disagreement likely comes down to “cultural” differences between the FBI and CIA.  Apparently the FBI “wants facts and tangible evidence to prove something” while the CIA is “more comfortable drawing inferences.” 

The competing messages, according to officials in attendance, also reflect cultural differences between the FBI and the CIA. The bureau, true to its law enforcement roots, wants facts and tangible evidence to prove something beyond all reasonable doubt. The CIA is more comfortable drawing inferences from behavior.


“The FBI briefers think in terms of criminal standards — can we prove this in court,” one of the officials said. “The CIA briefers weigh the preponderance of intelligence and then make judgment calls to help policymakers make informed decisions. High confidence for them means ‘we’re pretty damn sure.’ It doesn’t mean they can prove it in court.”


The FBI is not sold on the idea that Russia had a particular aim in its meddling. “There’s no question that [the Russians’] efforts went one way, but it’s not clear that they have a specific goal or mix of related goals,” said one U.S. official.

Well, that certainly seems reasonable…who needs “facts and tangible evidence” when the CIA can just “draw inferences“…they’re supposedly really smart so we should probably just believe them.





As promised, the Clinton campaign is calling for an intel briefing ahead of the Electoral College vote in what looks like an attempt to steal the election:

(courtesy zero hedge)

Clinton Campaign Calls For Intel Briefing Ahead Of Electoral College Vote

And there it is.

Just as we first laid out on Saturday following Friday night’s shock “report” that the CIA had concluded Russia had intervened in the presidential election on behalf of Trump, which we quickly assessed had all the marks of a “soft coup” attempt, and which culminated most recently with a report that up to 10 electors had requested a briefing on “Russian Interference” before the presidential vote, moments ago none other than the Clinton campaign, by way of its top political adviser John Podesta, said the campaign is supporting an effort by members of the Electoral College to request an intelligence briefing on foreign intervention in the presidential election, Politico reported.

In his statement released on Monday, Podesta said “The bipartisan electors’ letter raises very grave issues involving our national security,” and added that “electors have a solemn responsibility under the Constitution and we support their efforts to have their questions addressed.”

“Each day that month, our campaign decried the interference of Russia in our campaign and its evident goal of hurting our campaign to aid Donald Trump. Despite our protestations, this matter did not receive the attention it deserved by the media in the campaign. We now know that the CIA has determined Russia’s interference in our elections was for the purpose of electing Donald Trump. This should distress every American.”

Podesta’s statement is the first public statement from the Clinton campaign raising questions about the legitimacy of Donald Trump’s victory.

It follows the previously reported open letter from 10 presidential electors, including Democratic Leader Nancy Pelosi’s daughter Christine, requesting an intelligence briefing ahead of the Dec. 19 vote of the Electoral College.

Why this push is curious, is because during today’s briefing Press Secretary Josh Earnest explicitly stated that “US intel agencies didn’t detect any malicious cyberactivity “that interfered w the casting and counting of ballots” on Nov. 8″, a narrative at odds with that concocted by the WaPo, in its interpretation of what the CIA allegedly concluded in its “secret” assessment, which thenbegs the question: who is lying?

Shortly after Podesta’s statement, the Democratic National Committee disseminated a Politico story that revealed the electors’ call for a briefing. Two Democratic members of Congress have also suggested the Electoral College should take an active role in reassessing, or stopping, a Trump presidency.

It was unclear which particular agency would provide the briefing, if it was permitted, especially in light of reports that there has been a shcism between the CIA and FBI in their interpretation of whether Russia had indeed intervened directly to push for a Trump election.

While so far no proof has been provided by the CIA substantiating its claim, and we doubt one will be forthcoming, it is likely that should the Clinton Campaign’s request for a “breifing” be granted, that it would lead to a dramatic split among the already polarized US nation. As to whether the Electoral College would ultimately vote against Trump, we leave it up to readers to consider the possible, and very damaging for the US, consequences.




What a waste of money (3.5 million dollars): Trump gains an extra 162 votes in a recount:

(courtesy zero hedge)


Trump’s Wisconsin Victory Confirmed – Gained Net 162 Votes In Statewide Recount

It’s official… again! Donald Trump remains the winner of Wisconsin following the statewide recount demanded by Jill Stein and paid for by sad snowflakes. After counting over 3 million ballots (at a cost of $3.5 million), Trump gained a net 162 votes…

As AP reports,

Republican Donald Trump’s victory in Wisconsin has been reaffirmed following a presidential recount that showed him defeating Democrat Hillary Clinton by more than 22,000 votes.


Trump picked up a net 162 votes as a result of the recount that the Wisconsin Elections Commission certified Monday. Green Party candidate Jill Stein requested and paid for the recount that began Dec. 1.


But after recounting nearly 3 million ballots, little changed. The final results changed by fewer than 1,800 votes.


Stein has also tried to get statewide recounts in Michigan and Pennsylvania, but courts have stopped them. The federal deadline to certify the vote is Tuesday.


Wisconsin’s recount uncovered no widespread problems or hacking as Stein had suggested, without evidence, that there might be.

As The Wisconsin State Journal reports, WEC chairman Mark Thomsen said in a statement…

“Completing this recount was a challenge, but the real winners are the voters.”


“Based on the recount, they can have confidence that Wisconsin’s election results accurately reflect the will of the people, regardless of whether they are counted by hand or by machine.”


The commission originally advised county clerks to complete their recount process by 8 p.m. Monday so it could certify the results on Tuesday, the last day federal law guarantees a state’s electoral votes will reflect the popular vote when the Electoral College convenes on Dec. 19.


On Monday the Board of Canvassers in the final four counties — Dane, Milwaukee, Outagamie and Rock — certified their results.

So that was a total and utter waste of $3.5 million of Democrats’ money.
Now where have we heard this before?
Manipulation? illicit profits?
(courtesy zero hedge)

Two New Jersey Traders Arrested For Manipulating $10 Billion Worth Of Stocks, Making $26 Million In Profit

The SEC continued its crackdown against “market-manipulating masterminds” today, when it charged two New Jersey-based traders, 37-year-old Joseph Taub, of Clifton, and 21-year-old Elazar Shmalo of Passaic, with manipulating more than 2,000 NYSE and NASDAQ-traded stocks and reaping more than $26 million in profits from their successful trades.

The duo is accused by both the SEC and the NJ Attorney’s Office of manipulating more than 23,000 trades, buying and selling $10 billion worth of securities and making more than $26 million in illegal profits, usually through “two or more trading accounts that bought and sold the same lightly traded stock on the same day during the same period of time,” U.S. Attorney Paul Fishman said in a statement.

In the complaint, the DOJ charges the two traders of engaging in “a scheme to place numerous buy and sell orders for specifically targeted, lightly traded securities in a coordinated fashion that allowed them to manipulate the price to their advantage. Over a period of years, they manipulated $10 billion worth of securities in this way, pocketing $26 million in illicit profits at the expense of other investors. The charges we filed today are part of our continuing effort to hold accountable those who would try to illegally tilt the playing field in their own favor.”

“The trading manipulations usually lasted just a few minutes each, during which time the conspirators sometimes controlled at least 80 percent of the volume of a targeted stock and traded in several accounts simultaneously,” Fishman said.

The SEC alleged that Taub and Shmalo “schemed dozens of times per trading day to artificially move stock prices for their personal benefit,” Andrew Calamari, director of the agency’s New York regional office said in a statement.

Taub and Shmalo were charged with one criminal count of conspiracy to commit securities fraud which carries a maximum potential penalty of five years in prison and a fine the greater of $250,000 or twice the gain derived from the offense or twice the loss caused by the offense. The two men are scheduled to appear before U.S. Magistrate Judge Steven C. Mannion in Newark federal court.

Well that is all for today
I will see you tomorrow

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