Dec 20/Italy close to a banking failure/Huge spread in gold between Shanghai gold fix and NY pricing/Looks like another Chinese bond failure/

Gold at (1:30 am est) $1131.50 down $9.00

silver  at $16.06:  up 3 cents

Access market prices:

Gold: $1132.40

Silver: $16.08

THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON

.

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

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

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

And now the fix recordings:

TUESDAY gold fix Shanghai

Shanghai morning fix Dec 20 (10:15 pm est last night): $  1170.51

NY ACCESS PRICE: $1138.80 (AT THE EXACT SAME TIME)/premium $31.71

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Shanghai afternoon fix:  2: 15 am est (second fix/early  morning):$   1170.51

NY ACCESS PRICE: $1134.50 (AT THE EXACT SAME TIME/2:15 am)

HUGE SPREAD 2ND FIX TODAY!!:  $36.01

China rejects NY pricing of gold  as a fraud/arbitrage will now commence fully

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

London Fix: Dec 20: 5:30 am est:  $1132.75   (NY: same time:  $1132.90    5:30AM)

London Second fix Dec 20: 10 am est:  $1125.70 (NY same time: $1126.50    10 AM)

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

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

end

For comex gold: 

NOTICES FILINGS FOR DECEMBER CONTRACT MONTH:  2 NOTICE(S) FOR 200 OZ.  TOTAL NOTICES SO FAR: 9126 FOR 912600 OZ    (28.385 TONNES)

For silver:

 NOTICES FOR DECEMBER CONTRACT MONTH FOR SILVER: 0 NOTICE(s) FOR nil  OZ. TOTAL NUMBER OF NOTICES FILED SO FAR; 3532 FOR 17,6600,000 OZ

Let us have a look at the data for today

.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest FELL by 114 contracts DOWN to 160,299 with respect to YESTERDAY’S TRADING.    In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .801 BILLION TO BE EXACT or 114% of annual global silver production (ex Russia & ex China).

FOR THE DECEMBER FRONT MONTH:  0 NOTICES FILED FOR nil  OZ.

In gold, the total comex gold FELL BY  1,050 contracts DESPITE THE FACT THAT WE HAD A RISE IN  THE PRICE GOLD ($5.20 with YESTERDAY’S trading ).The total gold OI stands at 400,742 contracts. We are very close to the bottom with respect to OI. Generally 390,000 should do it.

 

we had 2 notice(s) filed upon for 200 oz of gold.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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

GLD:

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

Inventory rests tonight: 828.10 tonnes

.

SLV

we had a small  change in silver, BUT THIS TIME A WITHDRAWAL  OF 758,000  OZ FROM THE SLV/

THE SLV Inventory rests at: 339.262 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 114 contracts DOWN to 160,229 AS THE the price of silver FELL by  $0.12 with YESTERDAY’S trading.  The gold open interest FELL by  1050 contracts DOWN to 400,742 despite the fact that the price of gold ROSE BY $5.20 WITH YESTERDAY’S TRADING.

(report Harvey).

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late MONDAY night/TUESDAY morning: Shanghai closed DOWN 15.20 POINTS OR 0.48%/ /Hang Sang closed DOWN 103.62 OR 0.85%. The Nikkei closed UP 102.93 OR 0.53%/Australia’s all ordinaires CLOSED UP 0.49% /Chinese yuan (ONSHORE) closed DOWN at 6.9535/Oil ROSE to 52.44 dollars per barrel for WTI and 55.56 for Brent. Stocks in Europe: MOSTLY IN THE GREEN EXCEPT INDIA. Offshore yuan trades 6.94950 yuan to the dollar vs 6.9532 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS COMPLETELY AS MORE USA DOLLARS ARE BLOCKED FROM LEAVING CHINA’S SHORES /

REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

3a)THAILAND/SOUTH KOREA

none today

b) REPORT ON JAPAN

 The Bank of Japan leaves policy unchanged as they target the 10 yr Japanese bond to zero interest rate.  So far it has not been working

( zero hedge)

c) REPORT ON CHINA

i)China blinks and hands over the underwater drone. However they state that they are not happy that USA spends military ships etc in the South China seas.  The next move will no doubt be with Mr Trump

( zero hedge)

ii)China cuts offering size of 3 to 7 yr notes by 40% signally concerns again of a failed auction.  Overnight rates continue to rise.  China is stuck with its peg to the dollar. It must devalue to st0p the huge exodus of dollars from leaving her shores:

( zero hedge

4 EUROPEAN AFFAIRS

i)Germany awakes with this news:  they arrested the wrong man.  The real truck attacker is still armed and at large.  During the Christmas season, that ought to give a warm fuzzy feeling all over that everything is “fine”

( zero hedge)

ii)Monte de Paschi is again at the epicenter and now the private bailout is on the edge of collapse.  Qatar and other anchor investors have balked at the rescue. Not only that but the debt for equity swap only raised 200 million out of the 5 billion necessary.  Looks to me that Paschi will fail and that is when the fun begins.  Germany wants the bond holders and depositors to pay.  Mostly Italian moms and pops own the Italian bonds and a bail in could wipe out a huge number of these poor souls.

stay tuned…

(zero hedge)

iii)Why Italy will fail and enter bankruptcy:

(courtesy John Mauldin/Charles Gave)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

none today

6.GLOBAL ISSUES

Caterpillar

Caterpillar is a great Bellwether company to highlight growth in the global economy. As you can see, retail sales have been declining for 48 consecutive months.  They cannot push the string anymore

( zero hedge)

7. OIL ISSUES

none today

8. EMERGING MARKETS

none today

9.   PHYSICAL MARKETS

i)The key question is not the Dow but what will happen to the dollar in 2017
A great discussion with James Turk
( Kingworldnews/James Turk/GATA)

ii)Interesting:  the Keynesian Paul Krugman laments that the Trump economic team is a gathering of goldbugs!!( zero hedge)

iii) the great Jim Sinclair: Please everyone, read his commentary carefully and slowly and go over it a few times.  Jim is 100% correct

( Jim Sinclair)

iv The yuan collapse, the Chinese bond failure, the bubble in the housing sector bubble bursting, the huge outflow of USA dollars, all of the above seem to have caused a huge premium in the price of gold which is 36.00 dollars today.

( zero hedge)

 

10.USA STORIES

i)Early trading today:

( zerohedge)

ii)THIS OUGHT TO BE GOOD FOR BUSINESS:  GM AND CHRYSLER ARE IDLING 7 PLANTS AND OVER 10,000 WORKERS WILL BE AFFECTED DUE TO SLOW SALES:

( zero hedge)

iii)This is very scary!!  Morgan Stanley is fined 7.5 million dollars for commingling customer cash.  This is the very famous rehypothecation scheme invented by Jon Corzine. The problem here is that they are all doing it and this will lead to trouble when they go bust.

( zero hedge)

iv)Normally I discount heavily what Goldman Sachs states, but this time, I think they have it right

( the Fly/Goldman Sachs/)

Let us head over to the comex:

The total gold comex open interest FELL BY 1,050 CONTRACTS DOWN to an OI level of 400,742 AS THE  PRICE OF GOLD  ROSE $5.20 with YESTERDAY’S trading. We are now in the contract month of December and it is the biggest of the year. Here the front month of December showed a DECREASE of 147 contracts DOWN to 732.We had 40 notice(s) served upon yesterday so we LOST 107 contracts 10,700 oz will not stand for delivery and no doubt for bought out for cash plus a fiat bonus.

For the next delivery month of January we had a loss of 231 contracts down to 2420. For the next big active delivery month of February we had a LOSS of 63 contracts DOWN to 277,398.

We had 2 notice(s) filed upon today for  200 oz

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

And now for the wild silver comex results.  Total silver OI FELL by 114 contracts FROM 160,343 DOWN TO 160,229 as the price of silver FELL BY $0.12 with YESTERDAY’S trading. We are moving  further from the all time record high for silver open interest set on Wednesday August 3/2016:  (224,540). We are now in the next major delivery month of December and here it FELL BY 56 contracts DOWN to 270 CONTRACTS . We had 56 notices served upon yesterday so we NEITHER  LOST NOR GAINED ANY SILVER CONTRACTS THAT WILL  stand for delivery.

The next non active delivery month is January and here the OI fell by 117 contracts down to 1083.

The next big active delivery month is March and here the OI FELL by 61 contracts DOWN to 131,640 contracts.

We had 0 notices filed for NIL 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 143,008  contracts which is fair.

Yesterday’s confirmed volume was 127,037 contracts  which is awful

Initial standings for DECEMBER
 Dec 20.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
 70,492.492 oz
Scotia
HSBC
incl. 500 kilobars Scotia
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
  24,605.08 oz
Scotia
No of oz served (contracts) today
 
2 notice(s)
200 oz
No of oz to be served (notices)
730 contracts
73,000 oz
Total monthly oz gold served (contracts) so far this month
9126 notices
912,600 oz
28.385 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     4,254,192.8 oz
Today we HAD 2 kilobar transactions/and again massive amounts of gold leaves the comex vaults. (net 49,887.4 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 Scotia:  24,605.08 oz
total customer deposits; 24,605.08 oz
We had 2 customer withdrawal(s)
 i) out of Scotia; 16,075.000 (500 kilobars)
ii) out of HSBC: 54,399.492 oz
total customer withdrawal: 70,492.492 oz
We had 1  adjustment(s)
i) Out of Brinks:  1157.400 oz (36 kilobars) leaves the dealer and enters the customer side of Brinks
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

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 2 contract(s)  of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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 (9126) x 100 oz or 912,600 oz, to which we add the difference between the open interest for the front month of DEC (732 contracts) minus the number of notices served upon today (2) x 100 oz per contract equals 985,600 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 (9126) x 100 oz  or ounces + {OI for the front month (732) minus the number of  notices served upon today (2) x 100 oz which equals 985,600 oz standing in this non active delivery month of DEC  (30.656 tonnes)
WE LOST 107  CONTRACTS OR AN ADDITIONAL 10,700 OZ OF GOLD WILL NOT STAND FOR DELIVERY.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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.   30.656 tonnes
total for the 12 months;  223.211 tonnes
average 18.600 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: 198.968 tonnes per the 8 months or 24.871 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:  30.656 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.
Total dealer inventor 1,662,872.779 or 51.722 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 9,182,589.093 or 286.63 tonnes 
 
Several months ago the comex had 303 tonnes of total gold. Today the total inventory rests at 284.19 tonnes for a  loss of 19  tonnes over that period.  Since August 8/2016 we have lost 70 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!

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.
 
IN THE LAST 4 1/2 MONTHS  70 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE DECEMBER DELIVERY MONTH
DECEMBER INITIAL standings
 Dec 20. 2016
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
 nil 0z
Deposits to the Dealer Inventory
  nil OZ
Deposits to the Customer Inventory 
538,454.890 oz
Brinks
No of oz served today (contracts)
0 CONTRACT(S)
(NIL OZ)
No of oz to be served (notices)
270 contracts
(1,350,000  oz)
Total monthly oz silver served (contracts) 3532 contracts (17,660,000 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  3,246,304.3 oz
 END
today, we had 0 deposit(s) into the dealer account:
total dealer deposit: nil oz
we had nil dealer withdrawals:
total dealer withdrawals: nil oz
we had 0 customer withdrawal(s):
TOTAL CUSTOMER WITHDRAWALS: nil oz
 we had 1 customer deposit(s):
i) into Brinks:  538,343.890 OZ
total customer deposits;  538,343.890  oz
 
 
 we had 0 adjustment(s)
The total number of notices filed today for the DEC. contract month is represented by 0 contracts for NIL 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  3532 x 5,000 oz  = 17,660,000 oz to which we add the difference between the open interest for the front month of DEC (270) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the DEC contract month:  3532(notices served so far)x 5000 oz +(270) OI for front month of DEC. ) -number of notices served upon today (0)x 5000 oz  equals  19,010,000 oz  of silver standing for the DEC contract month.
we neither gained nor lost any silver contracts (oz) standing.
Volumes: for silver comex
Today the estimated volume was 57,517 which is excellent
YESTERDAY’S  confirmed volume was 39,136 contracts  which is good.
 
Total dealer silver:  37.55 million (close to record low inventory  
Total number of dealer and customer silver:   182.926 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.

end

 

And now the Gold inventory at the GLD
Dec 20/no changes in gold inventory at the GLD/Inventory rests at 828.10 tonnes
Dec 19/A MASSIVE WITHDRAWAL OF 14.23 TONNES OF GOLD FROM THE GLD (WITH GOLD UP THESE PAST TWO TRADING SESSIONS)/INVENTORY RESTS TONIGHT AT 828.10 TONNES
Dec 16/no changes at the GLD/Inventory rests at 842.33 tonnes
Dec 15/ANOTHER HUGE WITHDRAWAL OF 7.11 TONNES OF GOLD/INVENTORY RESTS AT 842.33 TONNES
DEC 14/another huge withdrawal of 6.82 tonnes from the GLD/Inventory rests at 849.44 tonnes/
DEC 13/no changes in gold inventory at the GLD/Inventory rests at 856.26 tonnes
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 8/ANOTHER HUGE WITHDRAWAL OF 2.96 TONNES OF GOLD FROM THE GLD/INVENTORY RESTS AT 860.71 TONNES (THIS GOLD IS HEADING TO SHANGHAI)
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 30/A SMALL WITHDRAWAL OF 1.18 TONNES FROM THE GLD/INVENTORY RESTS AT 883.86 TONNES/MAYBE THEY ARE AT THE BOTTOM OF THE BARREL FOR PHYSICAL GOLD TO TRANSFER TO THE BANKERS.
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 21/A MASSIVE 11.87 TONNES OF PAPER GOLD WERE SUPPLIED BY THE CROOKS TO SUPPRESS THE PRICE OF GOLD/INVENTORY RESTS AT 908.76 TONNES/ AND GOLD RISES???
Nov 18/no changes at the GLD/Inventory rests at 920.63 tonnes
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Dec 20/ Inventory rests tonight at 828.10 tonnes
*IN LAST 54 TRADING DAYS: 121.71 TONNES REMOVED FROM THE GLD

end

Now the SLV Inventory
Dec 20/a small withdrawal of 758,000 oz/inventory rests at 339.262 tonnes
Dec 19A HUGE DEPOSIT OF 1.327 MILLION OZ INTO THE SLV/INVENTORY RESTS AT 340.020 MILLION OZ
Dec 16/A HUGE WITHDRAWAL OF 2.37 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 338.693 MILLION OZ/
Dec 15/NO CHANGES IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 341.063 MILLION OZ/
Dec 14.no change in inventory at the SLV/Inventory rests at 341.063 million oz/
DEC 13/ a huge withdrawal of 1.802 million oz from the SLV/Inventory rests at 341.063 million oz
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 30/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 23/A HUGE WITHDRAWAL OF 3.083 MILLION OZ FROM THE SLV/INVENTORY RESTS AT 347.099 MILLION OZ
NOV 22/NO CHANGE IN SILVER INVENTORY AT THE SLV/INVENTORY RESTS AT 350.182 MILLION OZ
Nov 21/a MASSIVE 6.071 MILLION OZ OF SILVER WITHDRAWN FROM THE SLV VAULTS/INVENTORY RESTS AT 350.182 MILLION OZ/AND SILVER HOLDS IN PRICE???
Nov 18/no changes in silver inventory at the SLV/Inventory rests at 356/253 million oz
.
Dec 20.2016: Inventory 339.262  million oz
 end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 7.1 percent to NAV usa funds and Negative 7.3% to NAV for Cdn funds!!!! 
Percentage of fund in gold 61.0%
Percentage of fund in silver:38.7%
cash .+0.3%( Dec 20/2016)
.
2. Sprott silver fund (PSLV): Premium FALLS to -.33%!!!! NAV (Dec 20/2016) 
3. Sprott gold fund (PHYS): premium to NAV FALLS TO – 0.75% to NAV  ( Dec 20/2016)
Note: Sprott silver trust back  into NEGATIVE territory at -0.33% /Sprott physical gold trust is back into NEGATIVE territory at -0.75%/Central fund of Canada’s is still in jail.
 

end

Major gold/silver stories for TUESDAY

GOLDCORE/BLOG/MARK O’BYRNE

Trumpenstein ! Who Created Him and Why?

http://www.goldcore.com/us/gold-blog/trumpenstein-who-created-him-and-why/

end
The key question is not the Dow but what will happen to the dollar in 2017
A great discussion with James Turk
(courtesy Kingworldnews/James Turk/GATA)

Dollar, not Dow, is key measure, Turk tells King World News

Submitted by cpowell on Mon, 2016-12-19 16:36. Section: Daily Dispatches11:37a ET Monday, December 19, 2016

Dear Friend of GATA and Gold:

GoldMoney founder and GATA consultant James Turk tells King World News today that the big market question in the United States is not about the Dow Jones Industrial Average but about the dollar, since stock market gains do not reflect increased purchasing power if the currency in which those gains are measured declines. An excerpt from Turk’s interview is posted at KWN here:

http://kingworldnews.com/james-turk-this-will-be-one-of-the-big-keys-for…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 

 

END

 

Interesting:  the Keynesian Paul Krugman laments that the Trump economic team is a gathering of goldbugs!!

 

(courtesy zero hedge)

Mike Maloney and David Morgan talk about the recent evidence of Deutsche Bank, UBS, and Barclays colluding to rig the silver markets.

Krugman: “Trump’s Economic Team Is A Gathering Of Gold Bugs”

Paul Krugman wants you to know that, in his view, the markets are misinterpreting “Trumponomics” and because he is far smarter than you, the markets, and pretty much anyone else, it’s important to pay attention.

Of course, this shouldn’t be terribly surprising as Trump could literally announce that he found a cure for cancer and Krugman would immediately take to the New York Times to pen an op-ed defending malignancies, and how its eradication would mark the end of “hope” for mankind.

In any event, Krugman posted a short article to his twitter account this afternoon warning that the markets’ interpretation of “Trumponomics” is all wrong.  While the confused Keynsian would ordinarily praise aggressive infrastructure plans, like the one proposed by Trump, in this case he’s willing to make an exception and notes that the plan looks more like a “privatization scheme” than an “actual plan to boost public investment.”  And while Krugman has never before seen a budget deficit that he didn’t criticize for being too small, Trump’s “privatization scheme” combined with “tax cuts for the rich” suddenly has him extremely worried about federal debt balances.

Financial markets seem to have decided that the Siberian candidate will pursue strongly expansionary macroeconomic policy. Long-term interest rates have risen sharply; expected inflation is also up, although not as much.

 

But are the markets getting this right? I suspect not: fiscal policy probably won’t be expansionary as expected (or maybe at all), and Trump’s economic team is looking like a gathering of goldbugs, who will if anything push for deflation.

 

On the fiscal side, I’m still seeing people talking about a huge infrastructure push. But there’s no indication that Republicans in Congress are at all eager to get moving on this push; their priorities seem to be repealing Obamacare and tax cuts for the rich, perhaps especially the estate tax. And in any case what we know about that supposed infrastructure push is that it looks much more like a privatization scheme than an actual plan to boost public investment.

 

So what we’re really looking at is a combination of tax cuts and spending cuts. Overall, this will surely increase budget deficits. But the tax cuts will go to the wealthy, who won’t spend much of their windfall, while the spending cuts will fall on the poor and struggling workers, who will be forced into sharp cutbacks in spending. The overall effect on demand is therefore likely to be negative, not positive.

For proof of his view on “Trumponomics,” Krugman provided the following tweet storm, for your reading pleasure, highlighting the “gathering of gold bugs” known as Trump’s cabinet.  Apparently Mnuchin “hangs out” with John Paulson so he’s guilty by association.  Meanwhile, Mulvaney had the audacity to imply that the Fed’s 0% interest rate policy might result in a weak USD.  And Larry Kudlow, well everyone knows that he is under the perpetual illusion that we’re still living in the 1970’s.

Are people noticing that the Trump economic team is shaping up as a gathering of gold bugs? 1/

Treasury goes to a guy with little public profile, but hangs out with John Paulson (who is also close to Trump) http://nyti.ms/2i3aZu6  2/

Steven T. Mnuchin, Donald Trump’s choice for Treasury secretary, at Trump Tower on Nov. 30.

Trump’s Treasury Pick Moves in Secretive Hedge Fund Circles

Steven T. Mnuchin’s time in the limelight came mainly as the head of OneWest, a bank bought out of bankruptcy that was criticized over foreclosures.

nytimes.com

Budget director appears to be John Bircher and conspiracy theorist (but aren’t they all? But note economic views 4/ http://m.motherjones.com/politics/2016/12/trump-mulvaney-john-birch-society 

Birchers want return to gold and silver, Mulvaney seems to agree 5/ pic.twitter.com/hTyHc3JbB6

In this crew, Kudlow — who thinks it’s always the 1970s, but doesn’t seem to see hyperinflation under his bed — is the most reasonable 6/

In this crew, Kudlow — who thinks it’s always the 1970s, but doesn’t seem to see hyperinflation under his bed — is the most reasonable 6/

Whoops — forgot Mulvaney’s Bitcoin derp: “He praised bitcoin as a currency that is “not manipulatable by any government.”” 7/

 

While Krugman blasts the Trump tax plan as a blatant gift to rich people he ignores that people of all tax brackets would get breaks under Trump’s plan.  Trump Tax Plan:

Trump Taxes

Current 2016 Tax Brackets:

2016 Taxes

He also ignores the reduction in corporate taxes that will impact 1000’s of small businesses around the country and the expectation that the new administration will slash regulations which is nothing more than a massive, conservative form of fiscal stimulus. But lets not allow facts to get in the way of a good narrative.

Finally, Neeraj Agrawal wins the award for “most outstanding response” to Krugman’s latest rant:

Whoops — forgot Mulvaney’s Bitcoin derp: “He praised bitcoin as a currency that is “not manipulatable by any government.”” 7/

And finally, not satisfied with his almost-insane allegations, Krugman played the race-card…

To join Trump admin, you have to be white nationalist conspiracy theorist, but must also be always wrong re your supposed area of expertise https://twitter.com/timkmak/status/811282539520397312 

end

Mike Maloney
DEC 20, 2016

 

Mike Maloney and David Morgan talk about the rigging of the silver markets with the recent evidence provided by Deutsche bank

(courtesy Mike Maloney/David Morgan)

end

 

the great Jim Sinclair: Please everyone, read the following carefully and slowly and go over it a few times.  Jim is 100% correct

(courtesy Jim Sinclair)

 

GOLD/SILVER

What Is Left To Go Before The Great Reset?

Posted December 19th, 2016 at 2:13 PM (CST) by Jim Sinclair & filed under General Editorial.

Dear Comrades in Golden Arms,

What is left to go before the Great Reset?

The Great Reset is the milestone economic event that is the final step in the restructuring of the monetary system that functions as real money is intended to.

This system in word and fact is the mechanism the sum of its parts truly functions as:

1.A Store House of value.

2.A Measure of value.

3.A Standard of value

4.A Medium of Exchange.

Money as generally interpreted in your modern business school and by a general public is anything of value that serves as a (1) generally accepted medium of financial exchange, (2) legal tender for repayment of debt, (3) standard of value, (4) unit of accounting measure, and (5) means to save or store purchasing power.

Read more: http://www.businessdictionary.com/definition/money.html

Before we get into the subject let’s agree to certain facts.

Common types of currency issued by official order are valued based on the issuing authority’s guarantee to pay the stated (face) amount on demand, and not on any intrinsic worth or extrinsic backing. All national currencies in circulation, issued and managed by the respective central banks, are fiat currencies.

Read more: http://www.businessdictionary.com/definition/fiat- currency.html

There simply is not enough fiat currency in circulation to pay off all national and business debts even if we exclude government guarantees.

Most what is called money is an accounting entry now in cyberspace.

Computer currencies are a bridge over mental gap between the common belief in money and the requirements of what money truly does.

All of this is based on confidence in a system whose foundation of convincing on a continuing basis a public that the fiat currency can pretend and extend an illusion of real money whose definition is other than that universally held now and whose foundation is set in the cement of a pure illusion without backing in kind, uninsured and failing badly in many respects.

Please keep in mind that President Elect Trump is a proven master at the use of bankruptcy in business to set a foundation upon which a going concern can replace the previous failed entity or system of operation of the entity.

Not only is the monetary system insolvent if called upon to perform in even a modesty percentage. The entire system would fail miserably. However, there is no lack of resources and productivity if incentivized to make the global system again functional and durable by making real, not pretend money the basis.

What is Mr. Trump’s real business background?

He is a builder of brick and mortar.

He is a negotiator.

He has zero lack of self worth or abilities.

He is a master of using the economic tool of bankruptcy to restructure and retreat and from the conditions of financial bankruptcy.

Today’s world is without any doubt a rolling bankruptcy whose foundation is pretend and extend. Inherently pretend and extend has shown no permanency anytime, anywhere. The “Great Flush” which must proceed the “Great Reset” has been, most disturbingly, war won or lost.

Therefore, the United States, one of the most powerful countries in the global system, is insolvent, that is true just on the factors of OTC derivatives and unfunded obligations. You need not be a genius to understand this.

As a result of all this nothing has been economically supplied to cure the basic problem. Pretend and extend has been the basis of the illusion that the system functions.

Why is gold hated, the dollar and the equity market always protected by the creation of more illusion that all is steady and the government and quasi government the underwriter of this.

Economic Potemkin City of money with stability. Why did gold move up and the general markets decline near $900 when the unexpected victory of President Elect Donald Trump occur? The answer is that a correct definition of the world’s new leader in known by some. It was the Hillary Clinton Plunge Protection Machine that rescued the market and pressured gold lower which was prepared in anticipation of a Clinton victory for the unexpected Trump victory.

There is an axiom that “before a massive public will accept a new system as a way out, they must suffer severely.” This is proven by history in every national bankruptcy of a nations currency. An example of note is the Weimar Republic that gave rise to the socialist leader, Hitler. In this example the war had to be lost for a Reset to happen. The reason I anticipate the “Great Reset,” is that the experiment of Globalism has failed miserably with the world now imitating the recklessness of massive Western Debt creation.

This is not the end of the world but rather the means of change to a new world that in the end might be quite abundant and peaceful. Just like a great fall caused no injury if you have prepared a large foam mattress for your family.

The injury comes via the means by which the fall stops. It is this that we work so hard to prepare you for in order for the transition by painless to you. It is not a game of gambling but of structuring in many ways to make your landing soft, not hard.

The means to the Great reset is in place and moving forward. It started with the nine exchanges opened for trading in PHYSICAL gold and silver. Premiums have been running in the $40-$45 basis on gold and $2 on silver.

The profit by arbitrage, which is the purchase and sale of the same item.

So here is your scenario:

1. Physical gold continues to rise under Mid Eastern and Russian demand plus the demand of sleeping giants in the US typically called One Percenters.

2. The physical gold arbitrage is not cheap requiring precise logistics, insurance, and relationships.

Trust which are hard to come by. Cooperation of a major gold refiner with in place logistics and payment systems plus trust is an absolute requirement.

All of this can be purchased except trust which is a product of long and fruitful relationships.

3. As the premium for gold, that is the price on the physical markets in China and Asia rises to over $50 and remains firm regardless of the ups and downs in the paper market the arbitrage will be profitable enough.

5. This Arbitrage has one place to come from and that is out of the paper gold warehouses to the refineries delivered directly to the account of the buyer or directly to the account of the physical exchange at the refinery.

6. Normal assays require 3 days and delivery according to logistics is prompt as one/two days or is made at the refineries.

7. Therefore the mechanics of the Great Reset has little to do with anything whatsoever except the size of the premium of physical over paper gold and silver plus the above criteria.

8. As this process continues the warehouse supply of all paper exchanges will continue to dwindle until the paper contract can longer function.

9. No longer function means even pretending to be able to make delivery when called upon right now for every one ounce of gold five hundred at twenty for are promised as deliverable. That is almost as crazy as the fraudulent OTC derivatives with no mark to market that we pretend has value.

10. When delivery from the paper exchange fails which it will, what is the value of a novated contract that cannot perform at the Comex? That is right. It is zero.

11. Since in the Hunt situation the first thing the board of directors at the Comex did was unilaterally changed (one side refuses to perform) the contract to “Sellers Only.” You can be sure the same people will do the same thing.

12. What do you think a contract that does not perform is worth? Again the correct answer is nothing.

13. As this occurs, which it has to, the paper gold contract loses all value. It is also useless if you are short because it will not perform for short the paper gold cover either. You cannot buy back a novated contract and meet the requirements for a short cover.

The reason is simple as a non novated contract for paper gold is entirely different than a regularly function paper gold contract since one is an apple and the other is a banana. You may have an 1100 plus fake profit you cannot collect one cent on.

As such all the normal causes of high gold and silver prices will play but a MINOR part in the unfolding drama. No group of wizards at any institution will figure this out, make it happen or stop it from happening as long as the price differential between paper gold and the price of the physical remain at or above the price of physical market for both.

In conclusion regardless of the drama unfolding or the opinion of so many new gurus no one word they say is correct in determination of the final price of gold.

All that matters is what is written above in points in 14 points.

Comex paper gold will be offered at a nominal price, say $5 offered and no bid. Physical gold will be between $3000 and $5000 bid and non offered by China, Russia and others.

I am regularly chastised for my dedicated bullishness in both my opinion on the gold price and on gold shares even though I am correct.

Now if per chance you could mine gold at let’s say $600 or so please inform me why you would sell it other than to meet immediate needs.

Bulyanhulu in Tanzania for instance has always been assumed to hold 20,000,000 ounces or more from inception. How much of that gold has been sold at present and lower absurd prices if you have a clear understanding of the shift in the mechanism for price discover in gold from paper exchanges to physical exchanges being the sole reason the Russians and Chinese are correct in buying all the physical offered.

Therefore, gold is going to $5000 or better wherein the profit will be made by Physical gold investors and enlightened gold company management that strives to produce and store all their gold not needed for sale to keep the lights on. The location for storage is at an international non – bank Swiss refinery, not at the location of the mine or at the location of the companies.

Try to explain that to anyone if you want to see glass forming over their eyes when it is so simple it screams at you.

The currency of greatest attraction will be that of the nation holding the most gold. The currency of the nation holding the least gold will be the weakest. Thus the market, not central banks accomplish the RESET.

Two ladies go to the inauguration balls. One quite beautiful lady wears a 10 carat diamond and the other lady wearing the hope diamond. Who gets looked at the most.

The value of gold is the jewelry.

Worn by the nation.

This is how currencies will ultimately be sought after.

Currencies will be valued by the value of gold each national treasury has.

It would be quite nice if the ISA has the gold they claim but this can only be known when a real third party audit occurs. Regardless either what I have told you what will happen. This is not in the far distant future.

Remember this is triggered at any price of gold should the difference in physical versus paper gold trigger the arbitrage transaction.

Respectfully,
Jim
http://www.jsmineset.com/2016/12/19/what-is-left-to-go- before-the-great-reset/

 

 

end

 

The yuan collapse, the Chinese bond failure, the bubble in the housing sector bubble bursting, the huge outflow of USA dollars, all of the above seem to have caused a huge premium in the price of gold which is 36.00 dollars today.

(courtesy zero hedge)

Yuan Collapse Sends China Physical Gold Premium Soaring To 3-Year Highs

Worse than Lehman…”

The premium that mainland Chinese investors are willing to pay for physical gold has surged to over $40 as the Chinese government seeks to curb illegal capital outflows. Following slowing in Tier 1 home price growth, and a collapse in the China bond market, it appears gold panic-buying is accelerating

 

This premium is higher than during the Lehman crisis and as bad as the peak of the Chinese banking system liquidity crisis in 2013 as onshore investors appear to prefer the precious metal to hedge against ongoing Yuan devaluation…

 

But it’s not just precious metals that are bid as alternatives to their paper money, Bitcoin is bid to its highest since Jan 2014…

end

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

 
 

1 Chinese yuan vs USA dollar/yuan DOWN to 6.9535(SMALL DEVALUATION SOUTHBOUND  /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN NARROWS  TO 6.94950 / Shanghai bourse CLOSED DOWN 15.20 POINTS OR 0.49%   / HANG SANG CLOSED DOWN 103.62 OR 0.47%

2. Nikkei closed UP 102.93 POINTS OR 0.53% /USA: YEN RISES TO 118.19

3. Europe stocks opened MOSTLY IN THE GREEN     ( /USA dollar index RISES TO  103.58/Euro DOWN to 1.0362

3b Japan 10 year bond yield: FALLS    +.071%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 118.19/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  52/44  and Brent: 55.56

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 FALLS TO +256.%/Italian 10 yr bond yield RISES 4 full basis points to 1.856%    

3j Greek 10 year bond yield FALLS to  : 7.24%   

3k Gold at $1130.00/silver $15.72(7:45 am est)   SILVER BELOW RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP  27/100 in  roubles/dollar) 61.63-

3m oil into the 52 dollar handle for WTI and 55 handle for Brent/

3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation  (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT a SMALL   DEVALUATION DOWNWARD from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 118.19 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  1.0311 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0683 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT

3r the 10 Year German bund now POSITIVE territory with the 10 year FALLS to  +.256%

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

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

4. USA 10 year treasury bond at 2.568% early this morning. Thirty year rate  at 3.140% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

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

S&P Futures Rise Propelled By Stronger Dollar; Europe At 1 Year High As Yen, Bonds Drop

It appears nothing can stop the upward moment of equities heading into the year end, and as has been the case for the past few weeks, US traders walk in with futures higher, propelled by European stocks which climbed to their highest in almost a year, while the dollar rose and bonds and gold fell, failing again to respond to a series of geopolitical shocks following terrorist attacks in Ankara, Berlin and Zurich. The yen tumbled after the Bank of Japan maintained its stimulus plan even as the central bank touted improving economic prospects for the Japanese economy.

“There was no particular surprise from the policy meeting, but investors are happy that the economy’s fundamentals are finally rising after the BOJ expressed an upbeat view,” said Takuya Takahashi, a strategist at Daiwa Securities.

In an amusing interlude during today’s Kuroda press conference, in which the BOJ head said the BOJ is far from its target, Kuroda said that the BOJ continues to target 10 Year yield at “about 0%” and then added that it is meaningless to try to discuss “what about 0%” is, hinting to markets that as long as US yields keep rising, the Yen will keep falling.

European shares were steady with unease over the attacks balanced by gains by bank shares and the Milan market after Italy’s government said it wanted approval for up to €20 billion to rescue troubled lenders. The Stoxx Europe 600 Index rose 0.1% to 360, pushed higher by deal activity in media and credit card services. Treasuries and gold reversed gains from Monday following a probable terror attack in Berlin, while Turkey’s lira pared losses sustained after the killing of Russia’s envoy to the country. The yen approached the weakest since February, rising above 118 versus the dollar after the central bank closed a tumultuous year for monetary policy by keeping its yield-curve and asset-purchase programs unchanged.

The dollar and rising bond yields again dominated, after Janet Yellen flagged the strength of the U.S. jobs market in a speech to students on Monday. That sent the greenback bouncing towards last week’s 14-year high and it was at 103.40 on the index that measures it against other leading currencies, just short of its recent peak of 103.56.

“The biggest impact you see from the attacks in Berlin and Istanbul is the Swiss franc/euro,” said Societe Generale FX strategist Alvin Tan. “But apart from that the dollar continues to be strong after we had some rather positive comments from Janet Yellen,”

China’s CSI 300 index slid 0.6 percent, on Beijing’s move to tighten supervision of shadow banking activities and on liquidity concerns, while Japan’s Nikkei .N225 closed up 0.5 percent after the BOJ meeting.

U.S. stock-index futures were also fractionally higher following a rally that sent equities to record levels. S&P 500 futures expiring in March up 0.1 percent to 2,263 at 6:03 a.m. in New York, while those on the Dow rise 24 points to 19,861. VIX dropped for fourth day, set for lowest close since August.

Energy markets were trading at session highs, with Brent rising above $55/bbl before U.S. stockpiles data due Tuesday, Wednesday. DOE inventories data to be published on Wednesday are forecast to show 5th week of reductions. January WTI near $52/bbl before expiry.  “We’re moving sideways as a whole, liquidity is lower at the moment,” said Giovanni Staunovo, commodity analyst at UBS in Zurich. “It’s range-trading still.”

The yield on U.S. 10-year Treasuries climbed four basis points to 2.58 percent, while gold slid 0.5 percent.

The most notable feature of overnight trading, according to Bloomberg, is the remarkable immunity demonstrated by markets to terror incidents this year, with initial knee-jerk reactions to buy haven assets after attacks fading quickly.

“The market response to each new terror event is less and less pronounced,” said Mike van Dulken, head of research at Accendo Markets. The move in European stocks “confirms ever-thickening investor skin.”

That said, with trading volumes decreasing before December holidays and year-end, investors may be loath to veer too far from the underlying market trends that have prevailed since the election of Donald Trump in November, namely favoring stocks and shunning bonds.

Bulletin headline summary from RanSquawk

In a similar fashion to yesterday, European equities trade with little in the way of firm direction as newsflow remains light after the BoJ kept policy on hold
Very quiet in the FX markets today, but the USD has received yet another push as North American players responded to comments from Fed chair Yellen
Looking ahead, highlights include Turkish Rate Decision, Fonterra GDT auction as well as earnings from Nike and General Mills
Markets Snapshot

S&P 500 futures up 0.1% to 2263
Stoxx Europe 600 up 0.1% to 360.0
MSCI Asia Pacific down 0.5% to 135.27
Nikkei 225 up 0.5% to 19,494.53
US 10Yr yield up 4 bps to 2.58%
Dollar index up 0.2% to 103.38
WTI oil futures up 0.1% to $52.17/bbl
Brent crude up 0.1% to $54.99/bbl
Gold spot down 0.4% to $1133.69/oz
German 10yr yield up 3bps to 0.28%
Portuguese 10yr yield up 5bps to 3.81%
Italian 10yr yield up 6bps to 1.88%
iTraxx Main down 0.3bps to 70.88
iTraxx Crossover up 0.5bps to 290.36
Euro spot down 0.17% to 1.0384
Yen spot -0.7% to 117.90
Copper down 0.06% to $5492/MT
Looking at Asian stocks, markets traded mixed despite a positive lead from Wall St where telecoms outperformed and sentiment was supported by hopes a Santa rally would push the Dow above 20,000. ASX 200 (+0.5%) took the impetus from US and was underpinned higher by miners after gold recouped some of the 2% declines it suffered last week. Nikkei 225 (+0.5%) shrugged-off early cautiousness as a weaker JPY post-BoJ kept the index afloat, while Hang Seng (-0.5%) and Shanghai Comp. (-0.5%) traded subdued as a firm CNY 250b1n liquidity injection by the PBoC was overshadowed by reports that China may tighten licensing procedures for insurance firms and could also increase financial and asset requirements for shareholders. 10yr JGBs traded higher with support seen following the BoJ policy decision to maintain the 10yr JGB yield target at around 0% as this raises speculation the BoJ could continue restricting rapid advances in yields as seen last week. However, prices then pulled back, while the yield curve also steepened amid underperformance in the super-long end.

The BOJ kept its bank rate unchanged at -0.1% as expected and maintained its target for the 10yr JGB yield at around 0%. The decision to maintain policy was conducted by 7-2 vote with Sato and Kiuchi as the dissenters, while the BoJ also raised its economic assessment for the 1st time in 18 months as it stated that the economy is likely to turn to a moderate expansion. RBA minutes from December 6th meeting stated that reducing rates further could carry risks for debt that outweighed any economic benefit but also added that domestic data has not been that encouraging.

In Europe, equities continue to trade flat on the session with muted price action across the board. On a sector specific basis, defensive sectors outperform in the form of Healthcare names while materials are the notable laggards. Mediaset (17%) continue their recent ramp, with Vivendi continuing to grow their stake in the Co. and stating they are looking to increase to 30%. Fixed income markets have seen similarly muted trade, with bunds marginally lower on the day, however remaining above the 163.00 level. Periphery spreads are marginally wider against the German benchmark for the most part amid the thin liquidity, with Italy continuing to remain in focus after the government took the first step for a bailout of their banking system.

In currencies, FX markets are very quiet but the USD has received yet another push as North American players responded to comments from Fed chair Yellen on the strength of the US labour market. USD/JPY has recovered back onto a 118.00 handle, but along with EUR/USD under 1.0400, we are seeing a severe lack of momentum in the market. This is not deterring USD bulls, who remain vulnerable to a short squeeze, but against GBP, we are seeing another push on the mid 1.2300’s as EUR/GBP gets a fresh bid through .8400. Into year end, we have to expect some Euro based buying here. The commodity currencies are also under pressure against the greenback, with AUD looking to .7200, NZD sub .6900 and USD/CAD shaping up for a retest on the resilient 1.3500-1.3600 area. Only one trade in town at the moment and that is to buy USD dips, but proving strained at the present time despite the offered tone in USTs.

Looking at the day ahead, this morning in Europe we kicked off with German November PPI data came in at 0.1%, hotter than the -0.2% expected, and well above the -0.4% print in October. There’s no data due out in the US although later today though we are due to get China’s Conference Board leading economic index for November. It’s fairly quiet away from the data too although it’ll be worth keeping an eye on events in the UK where PM Theresa May is due to be questioned by the House of Commons Liaison Committee about her plans for leaving the EU, amongst other things

* *  *

DB concludes the overnight wrap

Sadly our final recap of the year is tainted by the sombre events in Germany, Turkey and Switzerland yesterday. The news of the assassination of Russia’s ambassador in Ankara came as Turkey and Russia were striving to rebuild their relationship over the conflict in Syria however the incident will now have the potential to reignite tensions again in the region. Meanwhile in Germany investigations are underway after a truck drove into a number of innocent bystanders at a Christmas market in Berlin. In Zurich three men have also been seriously injured following a shooting in an Islamic centre near the city’s main station. These events come after geopolitical concerns were already coming back into the spotlight following the seizure of a US drone in the South China Sea last week.

The biggest impact in markets from the events was in FX where the Turkish Lira (-0.75%) in particular underperformed, along with a number of other EM currencies. The MSCI EM equity index also closed -0.62% and so declining for the fourth consecutive session. In developed markets the feeling was generally cautious but resilient. The Stoxx 600 (-0.12%) closed a touch lower while the S&P 500 (+0.20%) edged slightly higher although unsurprisingly on seasonally thin trading volumes. The most interesting price action continues to be in sovereign bond markets. 10y Bund yields closed 6.9bps lower yesterday at 0.241% and have now moved up or down by at least 3.3bps for each of the last six sessions. 10y Treasury yields also dipped 5.3bps lower to close at 2.539%. While there was some suggestion that the moves reflected safe haven flows it appears that the blame was more last minute position clearing into year-end than anything else.

Before we go any further, this morning in Asia the focus has turned over to the BoJ meeting outcome. As expected there were no last minute holiday season surprises with the various policy measures all kept as is. Significantly, that also means that the BoJ will continue with its yield curve control policy which means targeting 10y JGB yields around zero percent. Where the BoJ was a bit more upbeat however was on its assessment of the economy. The BoJ now expects Japan’s economy to “turn to a moderate expansion” following a pickup in exports, improved domestic demand and business sentiment. Inflation forecasts are however expected to continue to be benign while the BoJ also pointed towards the risks to the outlook as including developments in EM and commodity exporting economics, developments in the US economy, Brexit and geopolitical risks. Governor Kuroda is scheduled to speak just after we go to print.

The Yen has weakened -0.40% following that while Japanese equity markets have rebounded following early modest losses. The Nikkei and Topix are currently +0.46% and +0.14% respectively. 10y JGB yields are also 0.6bps lower at 0.061% after touching a high of 0.090% last week. As we’ve highlighted a few times, it’ll be interesting to see how much the yield cap gets tested by the market next year. Elsewhere in Asia it’s a bit more mixed. The Hang Seng (-0.32%) and Shanghai Comp (-0.52%) are both in the red although the Kospi (+0.23%) and ASX (+0.43%) have both edged higher. US equity index futures are little changed meanwhile along with Gold and most of the commodity complex.

Moving on. The Italian banking sector was also back in the spotlight again yesterday following the news that the Italian government has asked Parliament to authorise up to €20bn through increasing public debt to rescue the nation’s ailing banks. Expect this story to rumble on today.

Elsewhere, Fed Chair Yellen also spoke yesterday at the University of Baltimore. However, as we were expecting there wasn’t a huge amount of new information. Speaking primarily on the labour market, Yellen said that “after years of a slow economic recovery, you are entering the strongest job market in nearly a decade” and that “there are also indicators that wage growth is picking up, and weekly earnings for younger workers have made strong gains over the past couple of years”.

There was also a bit of data to highlight yesterday. In the US we got the flash services PMI for December which came in weaker than expected at 53.4 (vs. 55.2 expected and 54.6 in the month prior). Combined with the manufacturing print from last week, that leaves the flash composite reading at 53.7 which is down 1.2pts from November. Elsewhere, in Germany the December IFO business climate index printed at 111.0 (vs. 110.6 expected) which is up 0.6pts from last month. The current assessment reading was reported as rising 1pt to 116.6 while the expectations component was little changed around 105.6.

Looking at the day ahead, this morning in Europe we’re kicking off in Germany where the November PPI data will be released followed thereafter by the UK’s CBI distributive trends survey for this month. There’s no data due out in the US although later this afternoon we are due to get China’s Conference Board leading economic index for November. It’s fairly quiet away from the data too although it’ll be worth keeping an eye on events in the UK where PM Theresa May is due to be questioned by the House of Commons Liaison Committee about her plans for leaving the EU, amongst other things.

3.REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

i)Late  MONDAY night/TUESDAY morning: Shanghai closed DOWN 15.20 POINTS OR 0.48%/ /Hang Sang closed DOWN 103.62  OR 0.85%. The Nikkei closed UP 102.93 OR 0.53%/Australia’s all ordinaires  CLOSED UP 0.49% /Chinese yuan (ONSHORE) closed DOWN at 6.9535/Oil ROSE to 52.44 dollars per barrel for WTI and 55.56 for Brent. Stocks in Europe: MOSTLY IN THE GREEN EXCEPT INDIA.  Offshore yuan trades  6.94950 yuan to the dollar vs 6.9532  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS COMPLETELY AS  MORE USA DOLLARS ARE BLOCKED FROM LEAVING CHINA’S SHORES /

3a)THAILAND/SOUTH KOREA/:

none today

b) REPORT ON JAPAN

The Bank of Japan leaves policy unchanged as they target the 10 yr Japanese bond to zero interest rate.  So far it has not been working
(courtesy zero hedge)

Bank Of Japan Leaves Policy Unchanged, Upgrades Economic Outlook

With a vote of 7 to 2, The Bank of Japan decide to change nothing about its monetary policy. While expected, some had suggested Kuroda might shift the 10Y target away from 0bps, but no – no change to asset purchases, no change to 10Y target level, and no change to policy rate. However, in what some say is a tilt towards future tightening, The BoJ upgraded its view of the Japanese economy.

  • BOJ keeps monetary policy unchanged, as predicted by all 39 economists surveyed by Bloomberg.
  • BOJ: Japan’s Economy Has Continued Moderate Recovery Trend
  • Bank of Japan Keeps 10-Year JGB Yield Target at About 0%
  • BOJ Maintains Policy Balance Rate at -0.100%
  • BOJ statement lists all the usual risks – China, Brexit, uncertainty in the U.S. And, interestingly, it flags worries about euro zone debt and European banks, the crisis that everyone seems to have forgotten (except the BOJ it seems).

There is a small (negative) reaction in yen…

Unusuallym there are no wild-cards in this statement, but as Bloomberg’s Brian Fowler notes, the one key takeaway is that BOJ upgrades view of Economy. One more piece of evidence suggesting next move will be toward tightening rather than loosening.

c) REPORT ON CHINA

China blinks and hands over the underwater drone. However they state that they are not happy that USA spends military ships etc in the South China seas.  The next move will no doubt be with Mr Trump

(courtesy zero hedge)

China Blinks: Beijing Returns Seized Underwater Drone

China has blinked.

On Tuesday, Beijing has returned a U.S. underwater drone taken by one of its naval vessels in the disputed South China Sea last week after what it said were friendly talks with the United States, which reiterated its criticism of the “unlawful” seizure. The move could diffuse tensions after protests from the White House and critical tweets from President-elect Donald Trump.

China’s defense ministry said in a brief statement the drone had been given back to the United States on Tuesday. “After friendly consultations between the Chinese and U.S. sides, the handover work for the U.S. underwater drone was smoothly completed in relevant waters in the South China Sea at midday,” the ministry said. When prompted by Reuters, the defense ministry declined to give more details about the handover.

Chinese foreign ministry spokeswoman Hua Chunying referred questions about the handover and other details of the case to the defense ministry. “The handling of this incident shows that the Chinese and U.S. militaries have quite smooth communication channels. We think that this communication channel is beneficial to timely communication and the handling of sudden incidents and prevention of miscalculations and misunderstandings,” she said.

“As to what the U.S. defense department said, I have to verify it with the military. But I think what they said is unreasonable as we have always said that for a long time the U.S. military has regularly sent ships and aircraft to carry out close up surveillance and military surveys in waters facing China, which threatens China’s sovereignty and security,” Hua told reporters.

“China is resolutely opposed to this and has always demanded the U.S. end these kinds of activities. I think this is the cause of this or similar incidents.”

A Pentagon spokesman later said the transfer took place near where the vehicle was “unlawfully seized,” about 50 nautical miles northwest of the Philippines’s Subic Bay. The unmanned glider had completed a pre-programmed military oceanographic survey route when it was snatched, Pentagon Press Secretary Peter Cook said. “This incident was inconsistent with both international law and standards of professionalism for conduct between navies at sea,” Cook said. The U.S. “will continue to fly, sail, and operate in the South China Sea wherever international law allows, in the same way that we operate everywhere else around the world.”

The confiscation of the unmanned underwater vehicle in international waters near the Philippines triggered a diplomatic protest and speculation about whether it would strengthen U.S. President-elect Donald Trump’s hand as he seeks a tougher line with China. A Chinese naval ship took the drone, which the Pentagon says uses unclassified, commercially available technology to collect oceanographic data, on Thursday about 50 nautical miles northwest of Subic Bay in the Philippines.

As Reuters observed, the seizure has added to U.S. concern about China’s growing military presence and aggressive posture in the disputed South China Sea, including its militarization of maritime outposts. China is deeply suspicious of any U.S. military activity in the resource-rich South China Sea, with state media and experts saying the use of the drone was likely part of U.S. surveillance efforts in the disputed waterway.

The U.S. Navy has about 130 such underwater drones, made by Teledyne Webb, each weighing about 60 kg (130 lb) and able to stay underwater for up to five months. They are used around the world to collect unclassified data about oceans, including temperature and depth.

It is not clear how many are used in the South China Sea; it is also not clear if Beijing managed to reverse engineer any of the “secret” technology contained in the drone as some US politicians had claimed.

 

end

 

China cuts offering size of 3 to 7 yr notes by 40% signally concerns again of a failed auction.  Overnight rates continue to rise.  China is stuck with its peg to the dollar. It must devalue to st0p the huge exodus of dollars from leaving her shores:

(courtesy zero hedge

China Cuts Offering Size Of 3, 7 Year Bonds By 40% Over Concerns Of More Failed Auctions

The danger signs are building up for the Chinese bond market.

First, last Thursday, Chinese bond futures crashed by the most on record forcing China’s regulator to briefly halt trading in the security until the panic fades.

Then, on Friday, a Chinese bill auction technically “failed” when it was unable to find enough buyers for the total amount offered for sale.

At the same time, interbank lending among Chinese banks effectively froze when, as a result of the spike in overnight lending rates, the PBOC was forced to intervene by providing a “massive” amount of liquidity . The PBOC tapped an emergency lending facility it created in 2014 to extend 394 billion yuan ($56.7 billion) in six-month and one-year loans to 19 banks. That pushed the net amount extended through the facility to 721.5 billion yuan so far in December, a monthly record, according to Beijing-based research firm NSBO.  The central bank also injected a net 45 billion yuan into the money market on Friday, following a net 145 billion yuan cash infusion on Thursday. The PBOC also ordered a few large banks to extend longer-term loans to nonbank financial institutions, while China’s securities regulator asked brokers tasked with making a market in bonds to continue trading and not shut any companies out of the market, according to Mr. Zheng of Dongxing Securities.

Fast forward to today, when overnight China’s Ministry of Finance announced it would offer a steeply downsized CNY16 billion of bonds at each of its 3- and 7-year debt sales on Wednesday, according to statements on China Central Depository & Clearing Co.’s website. The amount were reduced by 40% from 28 billion yuan announced earlier, suggesting the MOF was concerned about another failed auction following last week’s Bill failure.

And while we have covered the troubling developments in China’s fixed income market extensively over the past month, which are exacerbated by China’s accelerating FX outflows, summarizing our take most recently as follows: “the PBOC will soon have to make an unpleasant choice: deflate the housing bubble, and avoid an acceleration in capital outflows, or preserve the viability of China’s creaking banking sector and continue with massive “emergency” liquidity injections”, for those new to the topic, here is a good summary from the website of The Macrotourist blog, which overnight has penned a good summary on why euphoric investors should…

Pay Attention to Chinese Money Markets

Contrary to most market participants’ belief of Yellen as some sort of uber dove, she once again proved her tone deafness with yesterday’s speech.

First, after years of a slow economic recovery, you are entering the strongest job market in nearly a decade. The unemployment rate, at 4.6 percent, is near what it was before the recession. This is a level that has been associated with good job opportunities. Job creation is continuing at a steady pace; the layoff rate is low; and job openings are up over the past couple years, which is another sign of a healthy job market. There are also indications that wage growth is picking up, and weekly earnings for younger workers have made strong gains over the past couple of years. That is probably one reason why younger workers reported feeling significantly more optimistic about the job market compared with 2013, according to a survey published just today by the Federal Reserve.

Yeah, I know Janet was giving a commencement address, so a certain degree of optimism was required out of basic politeness, but the markets took her remarks as an upgrade of her assessment of the employment environment. When you combine this change of outlook with her staunch denial the other day that she would allow the economy to run hotter for longer, the market has correctly interpreted her latest remarks as further guidance short rates will continue rising.

The yield curve, which had been trying to bounce from her earlier FOMC Q&A about-face, quickly gave up the recent hard fought gains.

You might think that given the delicate situation in Italy where the world’s oldest bank is desperately trying to raise capital for a massive restructuring, Yellen might throw Europe a bone and ease off on the hawkish rhetoric, but no such luck.

I am aware the Federal Reserve sets policy for the United States and is not responsible for the global financial system, but unfortunately with the privilege of being the world’s reserve currency comes some responsibilities. Yet Yellen and her colleagues seem oblivious to the damage her policy is reaping on the rest of the world.

And nowhere is this more evident than China. The Federal Reserve tightening cycle has been brutal on China.

China kept their loose peg to the US dollar for too long, and although they have now re-calibrated it against a basket of currencies, the damage has already been done. China needs a lower exchange rate, and the Fed raising rates only exacerbates the problem.

As Yellen keeps her foot on the throat of the global economy with higher rates and more hawkish rhetoric, the pressure intensifies for China to devalue their currency.

 

In the mean time, Chinese money markets are being starved of liquidity as the PBOC valiantly tries to stop the Yuan from plummeting.

The signs of the stress are everywhere.

Last week Chinese bond futures were halted as selling became too intense.

I might be willing to overlook the Chinese long end declining as many bond markets are struggling for oxygen in the current global bond bear market.But it’s the short end of the Chinese yield curve that is most worrying.

The two year spread between swaps and Chinese government bonds has blown out. This crude “TED” spread measures the stress in bank funding.

Two year swap spreads are exploding higher. When you step back and look at the longer term picture, it becomes evident this is no regular widening. The spread has hit all time wides.

It’s not getting much press, but late last week the People’s Bank of China made some emergency liquidity injections to quieten the disarray in money markets. From the WSJ:

China’s central bank extended hundreds of billions of yuan in emergency loans to financial firms on Friday and ordered some of the country’s biggest lenders to extend credit as well, as it moved to ease a liquidity crunch and continuing debt selloff.

 

The moves marked a second day in which the People’s Bank of China pumped money into the financial system and markets, after the U.S. Federal Reserve signaled it might quicken the pace of its rate increases. That in turn spooked Chinese investors who were already worried about government attempts to let the air out of a highly leveraged and overheated bond market by tightening credit.

 

On Friday, the PBOC tapped an emergency lending facility it created in 2014 to extend 394 billion yuan ($56.7 billion) in six-month and one-year loans to 19 banks. That pushes the net amount extended through the facility to 721.5 billion yuan so far in December, a monthly record, according to Beijing-based research firm NSBO.

 

The PBOC also ordered a few large banks to extend longer-term loans to nonbank financial institutions, while China’s securities regulator asked brokers tasked with making a market in bonds to continue trading and not shut any companies out of the market, according to Mr. Zheng of Dongxing Securities.

 

The central bank also injected a net 45 billion yuan into the money market on Friday, following a net 145 billion yuan cash infusion on Thursday.

 

“The whole market is scrambling for liquidity and the PBOC is ready to do more to calm the market,” said Arthur Lau, head of Asia ex-Japan fixed income at PineBridge Investments in Hong Kong.

Right now everyone is all bulled up with Trumphoria, but these developments in China deserve some caution. As the Federal Reserve tightens, something will break. Maybe it won’t be in the US. Maybe it will be the world’s second biggest economy. Either way, keep your eye on Chinese money markets. They are way more important than the market realizes.

4 EUROPEAN AFFAIRS

Germany

Germany awakes with this news:  they arrested the wrong man.  The real truck attacker is still armed and at large.  During the Christmas season, that ought to give a warm fuzzy feeling all over that everything is “fine”

(courtesy zero hedge)

Berlin Police Says It Arrested “The Wrong Man”: Truck Attacker Is “Armed, Still At Large”

In the latest gaffe for German authorities, one which could further impact Merkel adversely if confirmed – something the Euro confirmed when it just tumbled to fresh 13 years lows –  moments ago Die Welt reported that according to German police, the man from Pakistan who was arrested as a suspect in the attack on a Berlin Christmas market that killed 12 people on Monday was not the actual perpetrator.

Police in the German capital questioned a suspect arrested near the scene who they believed was the driver of the truck that rammed into crowds on a square in the heart of west Berlin. The individual denied any involvement and the investigation by Germany’s federal prosecutor, who steps in on terror cases or other major crimes targeting state security, is ongoing, according to Interior Minister Thomas de Maiziere

“We have the wrong man,” said a senior police chief. “And therefore a new situation. The true perpetrator is still armed, at large and can cause fresh damage,” the paper quoted the source as saying.

The source said that all police and special forces units in Berlin have been informed and put on high alert.

Police urged Berlin residents “not to follow dangerous developments on your own,” asking them to report any suspicious activity to law enforcement officers.

Shortly after, Berlin police chief Klaus Kandt admitted the mistake, saying the suspect apprehended in truck attack on Berlin Christmas market may not have been the driver.

“It’s not yet certain whether this is really the driver,” Kandt tells reporters in Berlin Kandt says if suspect isn’t implicated, police will pursue an assailant “who might still be at large.”
Follow
PolizeiBerlinEinsatz
✔@PolizeiBerlin_E
The temporary arrested suspect denies the offense.
Therefore we are particulary alert.
Please be also alert.#Breitscheidplatz

7:28 AM – 20 Dec 2016

Bloomberg adds that the prospect of a terrorist suspect still at large puts further pressure on Chancellor Angela Merkel to do more to guarantee the German public’s security. As reported earlier, in a nationally televised statement in Berlin earlier Tuesday, Merkel said that people across Germany were mourning after the “horrific and unimaginable” deaths and injuries sustained, and pledged to use the full force of German law to bring the perpetrators to justice.

END

Monte de Paschi is again at the epicenter and now the private bailout is on the edge of collapse.  Qatar and other anchor investors have balked at the rescue. Not only that but the debt for equity swap only raised 200 million out of the 5 billion necessary.  Looks to me that Paschi will fail and that is when the fun begins.  Germany wants the bond holders and depositors to pay.  Mostly Italian moms and pops own the Italian bonds and a bail in could wipe out a huge number of these poor souls.

stay tuned…

end

 

Italy: Monte de Paschi

Monte Paschi Private Bailout On Edge Of Collapse As “Potential Anchor Investors Balk”

On Sunday, when we previewed the latest last-ditch effort to rescue Italy’s third largest bank when Monte Paschi launched a 4-day attempt to sell €5 billion in equity to anchor and retail investors, we said that “in the otherwise quiet pre-Christmas week, all eyes will be on Monte Paschi, and specifically the intentions of the alleged anchor investor, Qatar (and perhaps a handful of Chinese banks), to determine if Italy’s banking crisis is “fixed” if only for the near future, or if the new year is set to begin with another “risk flaring” episode out of the Italian banking sector as Monte Paschi’s bailout once again morphs into a political scandal and the biggest headache for Italy’s brand new government.”

This was followed on Monday by a surprising report out of Reuters that the Italian cabinet was seeking parliamentary approval to raise public debt by €20 billion, in a “precautionary” move, which however set off alarms that the Monte Paschi private sector bailout was not going as expected, and the government would have to step in, in the process triggering Germany’s ire.

That was confirmed this morning when Bloomberg reported that Monte Paschi will “probably fail in its effort to raise €5b of funds from money managers and individuals as potential anchor investors balk and few bondholders agree to swap their notes into stock, said people with knowledge of the matter.”

The much discussed Qatar sovereign-wealth fund, which had considered an investment, hasn’t yet committed to buying Paschi shares Bloomberg notes, and no major investors have stepped in in its place.

Just as bad, a concurrent second debt-for-equity swap has raised less than €200m through Monday, far less than the expected target in the billions, and confirming that the state’s bailout contribution could be substantial.

The above means that, absent some dramatic change in the opinion in private sector investors over the next 48 hours, Monte Paschi’s market-based rescue is doomed, and the state will inevitably have to intervene. As a reminder, under European banking rules, any losses must be imposed on bondholders if taxpayer money is used. The state is discussing a so-called precautionary recapitalization that would potentially limit bondholder losses.

As a further reminder, on Sunday Germany once again voiced its reservations against a state bailout in a “worst case” scenario when Merkel aide Christoph Schmidt warned again against a taxpayer rescue of Monte Paschi. “The restructuring of the bank should be achieved under the agreed rules, meaning the creditors must contribute to its rescue, not the taxpayers,” Schmidt, head of German Chancellor’s council of independent economic advisers, said in abstract of interview to be published Monday by Westdeutsche Allgemeine Zeitung.

Schmidt said that Italy’s effort to solve its banking crisis is key test for European banking union, and added that Italy must push for necessary reforms, warning that a lack of reforms in Italy could pose threat to euro area.

And so, with just days to go until the New Year, the epicenter of Europe’s festing banking crisis – Italy – is about to test the resolve of Europe’s political class, with the first truly substantial bank bailout in years, which in turn will answer the persistent question: will Europe finally engage in bail-ins, or will the poliical will be too low, and revert to the old, familiar taxpayer, and public-debt, funded bailouts.

END

Bloomberg reports at the end of the day, Paschi failed to lure investors into the company.  It now seems that sovereign Italy is ready for a rescue attempt.  The problem :  will it be a bail in or a bail out?

(courtesy Bloomberg/Sirletti)

Paschi Said Failing to Lure Investors as State Readies Aid

  • Qatar hasn’t yet committed to investing in Paschi, people say
  • Debt-for-equity swap raised 200 million euros through Monday

Banca Monte dei Paschi di Siena SpA will probably fail in its effort to raise 5 billion euros ($5.2 billion) of funds from money managers and individuals as potential anchor investors balk and few bondholders agree to swap their notes into stock, said people with knowledge of the matter.

Qatar’s sovereign-wealth fund, which had considered an investment, hasn’t yet committed to buying shares, while a second debt-for-equity swap has raised less than 200 million euros through Monday, said the people, who asked not to be identified because the matter is private. Other institutions that were considering buying shares have indicated that they would put funds in the troubled bank only if it’s able to raise 2 billion euros from the swap and 1 billion euros from cornerstone investors, one person said.

Monte Paschi will probably make a final decision on the share sale once the offer period ends on Thursday, said the person. A spokesman for the bank declined to comment.

The Italian government late Monday moved closer to a potential rescue of lenders including Monte Paschi by seeking permission from parliament to increase the nation’s public debt by as much as 20 billion euros. The plan is aimed at providing a backstop to the banking system “through public guarantees in order to restore their short- and medium-term lending ability,” Finance Minister Pier Carlo Padoan said following a cabinet meeting Monday night.

Monte Paschi stock fell as much as 2.6 percent in Milan trading and was down 1.4 percent at 18.3 euros at 4:56 p.m., extending the year-to-date decline to about 85 percent. The lender’s subordinated bond risk rose to a record. Its 369 million euros of junior notes due in April 2020 fell 2 cents to an all-time low of 49 cents on the euro, according to data compiled by Bloomberg. Credit swaps insuring the bank’s junior bonds for five years rose to imply a 67 percent chance of default, data compiled by CMA show.

Complex Plan

Monte Paschi’s plan to raise 5 billion euros has three interlocking pieces: a debt-for-equity swap, a stock offering and the disposal of the soured loans. The capital being raised would be used to cover the bank for losses it would book in selling the bad debt. If the sale fails, the conversions of debt to equity would be nullified.

Monte Paschi expanded and extended its debt-for-equity swap last week. In the previous offer, bondholders had already agreed to exchange about 1.02 billion euros for shares.

If government funds are used in the bank’s recapitalization, its bondholders will probably have to take losses under European burden-sharing rules. The cabinet is considering a so-called precautionary recapitalization that may reduce the potential losses. A meeting is scheduled Friday to determine the details, a government official said.

“The government action seems to reflect the perspective of a non-positive outcome of Monte Paschi’s recapitalization plan,” Marco Sallustio, an analyst at ICBPI wrote in a report Tuesday.

Trouble Ahead

Here is a summary of other Italian lenders facing pressure to shore up their finances and get rid of soured debt on their books.

Banca Carige SpA: The ECB instructed the Genoa-based lender to step up efforts to reduce sour debt on its balance sheet, giving it until Feb. 28 to present a more aggressive proposal. The existing plan calls for cutting the total to 19.9 percent by 2020 from 27.8 percent in 2015. The bank, which is struggling to restore investor confidence after revising its 2012 and first-half 2013 accounts, posted a loss in the third quarter on falling revenue and higher provisions for bad loans.

Banca Popolare di Vicenza SpA/Veneto Banca SpA: The rescued Italian lenders in merger talks may need as much as 2.5 billion euros of fresh capital to fulfill requests from the ECB, people with knowledge of the matter have said. The ECB said the pair should reduce bad loans by as much as 4 billion euros, increase liquidity buffers and make additional provisions for ongoing litigation, the people said. Vicenza and Veneto are owned by the state-orchestrated Atlante following a 2.5 billion-euro emergency cash call in June, after investors balked their initial public offerings.

Four “Good Banks” : The four small domestic lenders rescued from collapse last year must be sold to comply with European regulators’ requests. Executives obtained an extension of June’s deadline as they struggle to reach a deal. Unione di Banche Italianeis in talks to buy three of the four regional banks. The Bank of Italy may seek additional contributions from lenders to bolster the country’s resolution fund if the sale doesn’t generate enough cash to repay creditors, people with knowledge of the matter have said.

end

 

 

Why Italy will fail and enter bankruptcy:

(courtesy John Mauldin/Charles Gave)

Brace Yourself For Italy’s Bankruptcy

Submitted by John Mauldin via MauldinEconomics.com,

When Charles Gave, paterfamilias of Gavekal, chooses to express displeasure over an economic trend, an asset class, or what have you, he does not exactly mince words. If you happen to be in the room when he does so, he can sound like the Voice of God Himself, declaring from on high. And with his longish flowing white hair, he actually looks like central casting setting over to play the part.

Today Charles is exercised about Italy. He first reminds us that when Italy adopted the euro in 1999, he had argued that Italy would change from being an economy with a high probability of many currency devaluations to one with the certain probability of eventual bankruptcy. Now, he says, the fateful moment is not far off.

He gives us a couple of before-and-after charts: before March 1999 and from March 1999 to the present, in which he compares Italian and German industrial production and the performance of their respective stock markets. He notes that from 1979 to 1998, Italian industrial production outpaced Germany’s by more than 10%, and Italian equities outperformed German equivalents by 16%. That’s after taking into account the devaluations. Northern Italy is actually a production powerhouse, or was…

Then came the euro. Since 1999 Italian stocks have underperformed German stock by 65%, and since 2003 Italian factory output has lagged Germany’s by 40%. Thus, summarizes Charles, in this short essay,

The diagnosis is simply that Italy has become woefully uncompetitive, and as a result, is not solvent. This much is clear from the perilous state of its banking system, which is always the outcome when banks lend to firms that have been rendered uncompetitive by some reckless central banker…,

This has to be the most well-telegraphed, and now inevitable, national bankruptcy that I have seen in my 45-year career.

Putting the Boot into Italy

By Charles Gave

Matteo Renzi has joined a long line of Italian prime ministers who failed to “reform” their country. This is another way of saying that he could not wave a magic wand and make Italy competitive with Germany. The grim reality is that no Italian leader stood a chance of changing their country once the fateful decision was made to peg its currency to Germany’s. At the time of the euro’s launch in 1999, I argued that the risk profile of Italy would change from being an economy where there was a high probability of many currency devaluations to the certain probability of eventual bankruptcy. Sadly, that moment is not so far away.

The chart below tells the story of Italy’s recent economic history in two parts, namely, (i) March 1979 to March 1999, and (ii) March 1999 to the present. Italy joined the Exchange Rate Mechanism in 1979 at 443 lira per deutschemark, yet by 1990 frequent devaluations meant that rate had slid to about 750 lira. By the early 1990s, the Bundesbank was overseeing a newly unified German monetary system and in order to fight inflation it had driven real interest rates to 7%. By September 1992 the stresses on the system caused the UK, Sweden and Italy to exit the ERM, which meant another huge currency devaluation, pushing the lira as low as 1250 against the deutschemark, but delivering a huge tourist boom to boot.

Italy's Bankruptcy

Still, from 1979 to 1998 Italian industrial production outpaced that of Germany by more than 10%, while Italian equities outperformed German equivalents by 16% (this indicates that Italian firms were earning a higher return on invested capital than those in Germany).

Then came the euro. By 2003 it was clear that Italy was uncompetitive and subsequently, Italian equities have underperformed German equities by -65%, reversing the previous half century’s pattern when Italian equities outperformed on a total return basis. Similarly, since 2003 Italian factory output has lagged Germany’s by 40%.

The diagnosis is simply that Italy has become woefully uncompetitive, and as a result, is not solvent. This much is clear from the perilous state of its banking system, which is always the outcome when banks lend to firms that have been rendered uncompetitive by some reckless central banker. Short of imposing Greek-style slavery on Italy, there is not much hope of solving the problem, but I rather doubt that the Italian electorate will be as patient as its neighbours across the Ionian sea.

As such, the relationship between Italy and Germany is radically different from that in the 1945-99 era when a natural return toward equilibrium was achieved through exchange rates adjustments. The only possibility on the current trajectory is that the Italian and German economies keep diverging, which is why a “normal” resolution cannot be achieved.

Hence, an Italian sovereign default of some variety is now a near certainty. While a central bank can address a liquidity problem, it cannot fix a solvency issue, especially one as large as Italy’s. The only remedial action that can now be taken is to throw good money after bad, which is exactly what I expect Mario Draghi to do, especially as he played such a key facilitators’ role in getting Italy into the euro system in the first place. Such actions – possibly to be announced on Thursday at the European Central Bank’s policy setting meeting – can of course merely postpone the day of reckoning, but will solve absolutely nothing.

The rational approach for investors is to shun Italian financial assets such as bank equities or government bonds until such time as exchange rates are once again market determined prices. This has to be the most well-telegraphed, and now inevitable, national bankruptcy that I have seen in my 45-year career. There is no reason to be dragged under the steam roller as there are many other markets and assets to play in.

*  *  *

Every week, celebrated economic commentator John Mauldin highlights a well-researched, controversial essay from a fellow economic expert. Whether you find them inspiring, upsetting, or outrageous… they’ll all make you think Outside the Box. Get the newsletter free in your inbox every Wednesday.

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

none today

6.GLOBAL ISSUES

Caterpillar

Caterpillar is a great Bellwether company to highlight growth in the global economy. As you can see, retail sales have been declining for 48 consecutive months.  They cannot push the string anymore

(courtesy zero hedge)

Caterpillar Posts Record 48 Consecutive Months Of Declining Retail Sales

While Caterpillar’s CEO may have resigned recently, admitting that he misjudged the business strategy, and even the company issued a press release cautioning the market may have gotten ahead of itself, CAT  stock does not appear to be bothered, soaring by 12% since the Trump presidential victory, and continues to trade near 2016 highs on hopes an infrastructure push would make excavators great again. For now, however, the woes at the heavy industrial manufacturer continue, with yet another month of declining global sales, the company’s 48th in a row.

To be sure, there was a glimmer of hope for CAT coming out of Asia, where retail sales continued the rebound after posting positive gains in the August, September, and October, rising 12% last month, the biggest annual gain since September 2012, however the November gains moderated fractionally to 11%. This however was offset by continuing – and sharper – declines in North America, the EAME and Latin Ameica regions, which declined by 19%, 25%, and 32%, worse than last month’s declines of 16%, 14% and 24%, respectively.

But it was on a global blended basis, that the ongoing problems facing CAT refuse to go away, and where we can see that the company has not reported a single monthly uptick in sales for record 48 consecutive months, or 4 straight years, a period which is now 2.5x longer than the far more acute 19 month drop observed during the post-financial crisis period.

Meanwhile, the stock continues to levitate higher, unanchored by any fundamental considerations.

Source

end

7. OIL ISSUES

none today

8. EMERGING MARKETS

Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings TUESDAY morning 10:00 am

Euro/USA   1.0462 DOWN .0039/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP WINS THE ELECTION/USA READY TO GO ON A SPENDING BINGE WITH THE TRUMP VICTORY/ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/USA RAISING RATES

USA/JAPAN YEN 118.19  UP 1.180(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA:  HELICOPTER MONEY  ON THE TABLE AND DECISION ON SEPT 21 DISAPPOINTS WITH STIMULUS/OPERATION REVERSE TWIST

GBP/USA 1.2343 DOWN .0042 (Brexit by March 201/UK government loses case/parliament must vote)

USA/CAN 1.3411 UP .0008 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT FROM EU)

Early THIS TUESDAY morning in Europe, the Euro FELL by 39 basis points, trading now WELL BELOW the important 1.08 level FALLING to 1.0432; 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 15.20 0r 0.48%     / Hang Sang  CLOSED DOWN 103.62 POINTS OR 0.47%   /AUSTRALIA IS HIGHER BY 0.49% / EUROPEAN BOURSES ALL IN THE GREEN

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

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

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

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

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

The NIKKEI: this TUESDAY morning CLOSED UP 102.93 POINTS OR 0.53%

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

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 103.62 OR 0.47%   Shanghai CLOSED DOWN 15.20 POINTS OR 0.48%   / Australia BOURSE IN THE GREEN /Nikkei (Japan)CLOSED UP 102.93 POINTS OR 0.53%/  INDIA’S SENSEX IN THE RED

Gold very early morning trading: $1129.20

silver:$15.73

Early TUESDAY morning USA 10 year bond yield: 2.568% !!! UP 2 IN POINTS from MONDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. THE RISE IN YIELD WITH THIS SPEED IS FRIGHTENING

 The 30 yr bond yield  3.140, UP 2 IN BASIS POINTS  from MONDAY night.

USA dollar index early TUESDAY morning: 103.58 UP 45 CENT(S) from MONDAY’s close.

This ends early morning numbers TUESDAY MORNING

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And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield: 3.744% DOWN 51  in basis point yield from MONDAY  (does not buy the rally)

JAPANESE BOND YIELD: +.081% DOWN  4/5  in   basis point yield from  MONDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD:1.337%  DOWN  4  IN basis point yield from  MONDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 1.839  UP 2  in basis point yield from MONDAY 

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

GERMAN 10 YR BOND YIELD: +.260% UP 1 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR TUESDAY

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

Euro/USA 1.0397 DOWN .0006 (Euro DOWN 6 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 117.77 UP: 0.751(Yen DOWN 75 basis points/ 

Great Britain/USA 1.2357 DOWN 0.0030( POUND DOWN 30 basis points)

USA/Canada 1.3367 DOWN 0.0037(Canadian dollar UP 37 basis points AS OIL ROSE TO $52.40

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This afternoon, the Euro was DOWN by 6 basis points to trade at 1.0397

The Yen FELL to 117.77 for a LOSS of 75 basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND FELL 30 basis points, trading at 1.2351/

The Canadian dollar ROSE by 37 basis points to 1.3367,  WITH WTI OIL RISING TO :  $52.40

The USA/Yuan closed at 6.9469
the 10 yr Japanese bond yield closed at +.081% DOWN 4/5 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP  3   IN basis points from MONDAY at 2.56% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.145 UP 2  in basis points on the day /

Your closing USA dollar index, 103.24 UP 11 CENT(S)  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 TUESDAY: 1:30 PM EST

London:  CLOSED UP 26.80 POINTS OR 0.38%
German Dax :CLOSED UP 38.04 POINTS OR 0.33%
Paris Cac  CLOSED UP 27.12 OR 0.56%
Spain IBEX CLOSED UP 71.20 POINTS OR 0.76%
Italian MIB: CLOSED UP 278.30 POINTS OR 1.47%

The Dow was UP 91.56 POINTS OR .46% 4 PM EST

NASDAQ WAS UP 26.50 POINTS OR .49%  4.00 PM EST
WTI Oil price;  52.40 at 1:30 pm; 

Brent Oil: 55.43  1:30 EST

USA /RUSSIAN ROUBLE CROSS:  61.42 (ROUBLE UP  49/100 roubles from YESTERDAY)

TODAY THE GERMAN YIELD RISES  TO +0.260%  FOR THE 10 YR BOND  2:30 EST

END

 

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

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

WTI CRUDE OIL PRICE 5 PM:$52.22

BRENT: $55.57

USA 10 YR BOND YIELD: 2.560%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 3.142%

EURO/USA DOLLAR CROSS:  1.0389 DOWN .0014

USA/JAPANESE YEN:117.82  up 0.819

USA DOLLAR INDEX: 103.27 up 14  cents(BREAKS HUGE resistance at 101.80)

The British pound at 5 pm: Great Britain Pound/USA: 1.23664 : down 19  BASIS POINTS.

German 10 yr bond yield at 5 pm: +.248%

END

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

TRADING IN GRAPH FORM

Dow (Almost) 20,000

They’re giving it all they’ve got!! Bob Pisani said that Dow 20,000 was “inevitable.. we’ll do it at tomorrow’s open”…

 

They did their best – breaking the market and slamming VIX three times – but just couldn’t make it… Record Highs though still (13 points shy of 20k)

 

 

Futures broke out of their range overnight and led the charge…

 

Once again the “Most Shorted” stocks were ramped in the first hour of the day…

 

But be careful what you wish for – Is Dow 20k the new Nikkei 40k?

 

Close but no cigar…

In case it’s not completely evident, here are a couple fun facts…

  1. The Dow has not had 2 down days in a row for 8 weeks
  2. The biggest ‘dip’ since Trump’s victory has been 1.09%
  3. The Dow is up 7 weeks in a row – the longest streak since Dec 2014

Dow 10 and 15k saw the market oscillate around that level for 6-12 months…

 

And who is responsible for this panic-buying… Simple – Goldman Sachs…

In fact just 6 stocks account for 50% of the gains – GS, UNH, JPM, BA, TRV, & HD.

Since Brexit, banks are the big winners…

 

We also note that Russell 2000 (dividend yield) is no longer cheap to its corporate bond market…

 

The correlation between the Dow and S&P has dropped near its lowest in 15 years…

 

Trannies and Small Caps are leading the week…

 

The S&P 500 managed to scramble back to unchanged post-Fed but bonds and bullion remain weak along with dollar strength…

 

Treasury yields rose on the day (though the short-end outperformed) but the entire curve remains lower since Friday close…

 

The Dollar Index managed to take out cycle highs (back to 14 year highs) before fading back…

 

Cable is the week’s biggest loser of the majors as Yuan strengthens…

 

Gold (and SIlver) was slammed overnight but silver managed to get back to unch…

 

Copper remains worst on the week (and crude managed to hold gains)

 

Finally, it seems all the hope has been puked into stocks and yet economic growth expectations remain near cycle lows…

end

Early trading today:

(courtesy zerohedge)

Buying Panic Resumes As Dollar Surges To Fresh 14 Year Highs, Gold Dumped

After a brief respite yesterday amid global terror attacks and weak data, The BoJ’s lack of action overnight appears to have spurred more panic-buying in stock futures (near record highs, Dow testing towards 20k), VIX-slamming, and a surge back into the dollar (back at Dec 2002 highs). Gold (and silver) and getting monkeyhammered once again and bonds are being sold.

The Dollar Index broke its post-Fed highs to 14 year highs…

As EURUSD hits fresh 13 year lows (amid chatter of European stabiity after Merkel’s political prospects look troubling following yesterday’s terror attacks)

Dollar strength – for now – means precious metal weakness…

But silver is worse…

And buyers are back in stocks (dumping protection)…Is today the day for Dow 20k?

and exiting bonds once again…

end

THIS OUGHT TO BE GOOD FOR BUSINESS:  GM AND CHRYSLER ARE IDLING 7 PLANTS AND OVER 10,000 WORKERS WILL BE AFFECTED DUE TO SLOW SALES:

(courtesy zero hedge)

Car-tastrophe – GM, Fiat Chrysler Idle 7 Plants; Over 10,000 Workers Affected

(courtesy the Fly/Goldman Sachs/)

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