Gold at (1:30 am est) $1128.80 DOWN $2.30
silver at $15.82: DOWN 10 cents
Access market prices:
Gold: $1129.00
Silver: $15.80
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:
THURSDAY gold fix Shanghai
Shanghai morning fix Dec 22 (10:15 pm est last night): $ 1166.22
NY ACCESS PRICE: $1131.30 (AT THE EXACT SAME TIME)/premium $34.92
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
Shanghai afternoon fix: 2: 15 am est (second fix/early morning):$ 1162.04
NY ACCESS PRICE: $1132.40 (AT THE EXACT SAME TIME/2:15 am)
HUGE SPREAD 2ND FIX TODAY!!: $29.64
China rejects NY pricing of gold as a fraud/arbitrage will now commence fully
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
London Fix: Dec 22: 5:30 am est: $1132.40 (NY: same time: $1131.30 5:30AM)
London Second fix Dec 22: 10 am est: $1131.35 (NY same time: $1132.10 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: 0 NOTICE(S) FOR nil OZ. TOTAL NOTICES SO FAR: 9126 FOR 912600 OZ (28.385 TONNES)
For silver:
NOTICES FOR DECEMBER CONTRACT MONTH FOR SILVER: 233 NOTICE(s) FOR 1,165,000 OZ. TOTAL NUMBER OF NOTICES FILED SO FAR; 3767 FOR 18,835,000 OZ
Let us have a look at the data for today
.
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In silver, the total open interest ROSE by 352 contracts UP to 160,049 with respect to YESTERDAY’S TRADING. In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .800 BILLION TO BE EXACT or 115% of annual global silver production (ex Russia & ex China).
FOR THE DECEMBER FRONT MONTH: 233 NOTICES FILED FOR 1,165,000 OZ.
In gold, the total comex gold ROSE BY 2360 contracts AS WE HAD A FALL IN THE PRICE GOLD ($0.40 with YESTERDAY’S trading ).The total gold OI stands at 401,021 contracts. We are very close to the bottom with respect to OI. Generally 390,000 should do it.
we had 0 notice(s) filed upon for NIL 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: 824.54 tonnes
.
SLV
we had a small change in silver, BUT THIS TIME A DEPOSIT OF 948,000 OZ FROM THE SLV/
THE SLV Inventory rests at: 340.210 million oz
.
First, here is an outline of what will be discussed tonight: Preliminary data
1. Today, we had the open interest in silver ROSE by 352 contracts UP to 160,049 DESPITE THE FACT THAT the price of silver FELL by $0.13 with YESTERDAY’S trading. The gold open interest ROSE by 2360 contracts UP to 401,021 as the price of gold FELL BY $0.40 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 WEDNESDAY night/THURSDAY morning: Shanghai closed up 2.13 POINTS OR 0.07%/ /Hang Sang closed DOWN 173.60 OR 0.80%. The Nikkei closed DOWN 16.82 OR 0.09%/Australia’s all ordinaires CLOSED UP 0.53% /Chinese yuan (ONSHORE) closed DOWN at 6.9475/Oil FELL to 52.12 dollars per barrel for WTI and 54.12 for Brent. Stocks in Europe: ALL IN THE RED. Offshore yuan trades 6.94050 yuan to the dollar vs 6.9475 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS A BIT AS MORE USA DOLLARS ARE ATTMEPTING TO LEAVE CHINA’S SHORES /
REPORT ON JAPAN SOUTH KOREA NORTH KOREA AND CHINA
3a)THAILAND/SOUTH KOREA
none today
b) REPORT ON JAPAN
NONE TODAY
c) REPORT ON CHINA
i)This does not look good: a Chinese multibillionaire defaults on retail bonds that his company issued. His reason: “severe cash crunch”. His company is the huge CoSun group. Where there is smoke, there is fire…
( zero hedge)
ii)Accelerating USA cash outflows, expectations of higher USA interest rates, and concerns with their domestic markets (as well as liquidity concerns) is causing China to be a huge risk. The 12 month forward on the Chinese offshore yuan is over 7.22 which signals more devaluations are coming. This will not be good for the global economy as China exports its deflation to all of us..this will be very problematic for global manufacturing of goods like steel and aluminum etc.
( zero hedge)
4 EUROPEAN AFFAIRS
Monte dei Paschi
i)More background on the Monte de Paschi problems:
( London’s Financial Times)
ii)The fun begins tonight after their 7:30 pm CET meeting. Monte de Paschi is expected to be nationalized and a bail in is scheduled to begin. This will cause huge damage to bond holders many of whom are moms and pops who put their entire life savings into the bank because the government told them Monte Paschi was safe. Depositors are fleeing the ship
( zero hedge)
iii)Italy and its banks
A good history lesson on banks. Italy proves that these entities are not risk free as everybody will begin to find out tonight
( Simon Black/Sovereign Man)
What!! Barclay’s have committed mortgage securities fraud and they do not settle??? They wish that their case goes to trial!!. Remember that they must provide now discoveries and that is something they loathe.
this should be interesting…
( zero hedge)
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
i)Saudi Arabia
the Saudis expect oil to trade in the 51 dollar area in 2017 rising to 65 dollars by 2019. It expects its budgetary deficit to lower to 8% of GDP which is still extremely high. However it will spend 20% on its budget on military. It expects global growth to come in at 3.4% which is way too high.
( zero hedge)
ii)Syria/Aleppo
6.GLOBAL ISSUES
none today
7. OIL ISSUES
none today
8. EMERGING MARKETS
none today
9. PHYSICAL MARKETS
i)Blockchain gains another customer as Goldmoney network makes a deal with the Canadian Mint:
(courtesy Chris Powell/Allison/International Business Times)
ii)Will the Trump victory ignite hope for Northern Dynasty’s copper and gold mine in Alaska. No doubt it will happen:
( Reuters/GATA)
iii)One of the first guys to write about the gold manipulation comments on what will happen next:
( Dmitri Speck/Acting Man.com
iv)Modi is a complete moron:
India is now rushing to lower the gold import tax from 10% to 6% because of massive smuggling. I am afraid that nothing will help. Modi killed the goose that laid the gold egg. Now nobody has any faith in paper currency in India
( Srivastava/India Express)
v)Dave Kranzler on the manipulation in gold and why he believes that gold has now received it’s strongest buy signal
( Dave Kranzler /IRD)
10.USA STORIES
i)Is the auto industry slowdown signalling trouble ahead for the USA economy?
( zero hedge)
ii)Durable goods tumble the most in over two years:
( zero hedge)
iii)Q3 GDP (final) comes in at 3.5% with higher consumer spending, government spending. Financial profits surged. However most of gain came from exports namely soybeans which was almost half of the gain. With the higher dollar it will be extremely difficult to main that kind of growth
( zero hedge)
iv)Strange jobless claims again. After a huge plunge into the November election it suddenly spiked higher in this latest release;
( zero hedge)
v)The Fed’s own National Activity Index and a favourite of Janet tumbles to 3 month lows post Trump victory:
( zero hedge)
vi)Mortgage rates rise and now home affordability drops to 8 yr lows:
( zero hedge)
Let us head over to the comex:
The total gold comex open interest ROSE BY 2,360 CONTRACTS UP to an OI level of 401,021 AS THE PRICE OF GOLD FELL $0.40 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 27 contracts DOWN to 685.We had 0 notice(s) served upon yesterday so we LOST 27 contracts 2700 oz will not stand for delivery and no doubt were bought out for cash plus a fiat bonus.
For the next delivery month of January we had a loss of 117 contracts down to 2131. For the next big active delivery month of February we had a GAIN of 636 contracts UP to 275,143.
We had 0 notice(s) filed upon today for NIL oz
And now for the wild silver comex results. Total silver OI ROSE by 352 contracts FROM 159,697 UP TO 160,049 as the price of silver FELL BY $0.13 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 rose BY 173 contracts up to 448 CONTRACTS . We had 2 notices served upon yesterday so we GAINED 175 SILVER CONTRACTS or 875,000 additional silver ounces that will stand for delivery.
The next non active delivery month is January and here the OI ROSE by 3 contracts UP to 1027.
The next big active delivery month is March and here the OI FELL by 82 contracts DOWN to 130,503 contracts.
We had 233 notices filed for 1,165,000 oz for the December contract.
Eventually at the end of December 2015: 6.4512 tonnes of gold stood for delivery
Eventually at the end of December 2015: 18.84 million oz of silver stood for delivery
VOLUMES: for the gold comex
Today the estimated volume was 113,400 contracts which is awful.
Yesterday’s confirmed volume was 125,656 contracts which is awful
| Gold | Ounces |
| Withdrawals from Dealers Inventory in oz | nil |
| Withdrawals from Customer Inventory in oz |
2,155.200 oz
HSBC
Brinks
|
| Deposits to the Dealer Inventory in oz | nil oz |
| Deposits to the Customer Inventory, in oz |
17,425.3 oz
International Services of Delaware
542 kilobars.
|
| No of oz served (contracts) today |
0 notice(s)
NIL oz
|
| No of oz to be served (notices) |
685 contracts
68,500 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 | 4,417,069.3 oz |
For December:
Today, 0 notice(s) were issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 0 contract(s) of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped/ Received) by jPMorgan customer account.
March 2015: 2.311 tonnes (March is a non delivery month)
| Silver | Ounces |
| Withdrawals from Dealers Inventory | nil |
| Withdrawals from Customer Inventory |
359,987.300 0z
Brinks
|
| Deposits to the Dealer Inventory |
nil OZ
|
| Deposits to the Customer Inventory |
nil oz
|
| No of oz served today (contracts) |
233 CONTRACT(S)
(1,165,000 OZ)
|
| No of oz to be served (notices) |
215 contracts
(1,075,000 oz)
|
| Total monthly oz silver served (contracts) | 3767 contracts (18,835,000 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 | 3,676,313.6 oz |
end
end
NPV for Sprott and Central Fund of Canada
end
Major gold/silver stories for THURSDAY
GOLDCORE/BLOG/MARK O’BYRNE
Royal Mint And CME Make A Mint On The Blockchain?
END-
One of the first guys to write about the gold manipulation comments on what will happen next:
(courtesy Dmitri Speck/Acting Man.com
Submitted by Dmitri Speck via Acting-Man.com,
Deutsche Bank Caves In
Deutsche Bank trader: “u just said u sold on fix.”
Answer UBS trader: “yeah, we smashed it good.”
Deutsche Bank is a defendant in more than 7,000 lawsuits worldwide. In two of them it has recently agreed to settlements and is prepared to pay tens of millions of US dollars in restitution and fines. This includes the settling of lawsuits over gold and silver price manipulation. Associated court proceedings against other financial institutions are still underway.
It has been said that precious metal bars make for good door stops due to their high specific gravity. Perhaps, but as DB has just found out, it also means that stubbing one’s toes on them can be painful [PT].
Apart from Deutsche Bank, several other banks have been sued in New York over manipulation of precious metals prices as well. Due to a lack of direct evidence, the plaintiffs initially presented statistical evidence. Charts that show average intraday price movements have played an important role in this. How did this come about?
Detecting Market Manipulation with Charts of Average Intraday Price Movements
In 2002 I had the idea to create a chart of average intraday price patterns in order to investigate potential gold price manipulation. For this purpose I used the one-minute intraday prices of gold over a time period of five years and calculated an average of these prices over the course of one trading day.
The chart created at the time is depicted below. It shows the average intraday movements in the gold price from August 1998 to May 2002. The horizontal scale shows the time of the day, the vertical scale the average price level.
The chart therefore shows the typical intraday pattern in the gold price over a time period of more than one thousand trading days, based on millions of individual prices. Thus the chart has a high degree of statistical significance.
Gold, average intraday movements, 8/1998 – 5/2002. The gold price typically declined at the time of the PM fixing in London (10:00 am EST).
As can be seen, the gold price typically fell during the first two hours of trading in New York, particularly at the time of the London PM fixing at 10:00 am EST. Such a regularly recurring anomaly at a point in time at which reference prices are determined represents strong circumstantial evidence of price manipulation.
It furnishes almost conclusive proof if other causes such as statistical outliers can be firmly excluded. Apparently a number of market participants deliberately suppressed prices at the time of the fixing, possibly in order to profit from subsequent transactions tied to the reference price.
The chart shown above illustrated for the first time that the gold price was manipulated at the time of the fixing. It was inter alia published on the internet, where it can still be found today, e.g. here: www.gold-eagle.com/article/gold-manipulation-intraday-charts.
Later I conducted similar studies of silver and platinum prices. These also led to the finding that prices were manipulated at the time of the fixing. In 2010 I documented the exciting history of manipulation in precious metals markets in my bestselling book Geheime Goldpolitik (Finanzbuchverlag), which was published in 2013 in English as The Gold Cartel (Palgrave Macmillan).
These studies gained wide recognition in expert circles, but no noteworthy legal or policy consequences ensued. The supervisory authorities were unable to prove that manipulation had taken place.
“Libor-Hunter” Rosa Abrantes-Metz Gets Involved
The situation changed abruptly in December 2013, when Ms. Rosa Abrantes-Metz took up the topic of gold price manipulation in a Bloomberg editorial, with reference to my average intraday price charts.
Ms. Abrantes-Metz had previously contributed decisively to exposing manipulation of Libor. The Libor scandal raised the public’s awareness of the fact that systematic manipulation existed even in very large markets.
Since then events have unfolded rapidly. The fixings were replaced with more modern processes – and numerous lawsuits were filed, in which the method for determining average intraday price movements I have developed is used to provide evidence for price manipulation.
With success, as the settlement agreed to by Deutsche Bank demonstrates. As part of the settlement the bank undertook that internal business communications relevant to the case would be made available to the plaintiffs. So far it has provided 350,000 pages in total, which are going to be introduced as evidence in lawsuits against other banks.
The statistical evidence that has been available to date has now been complemented by direct evidence from these internal records. The first excerpts that have been published confirm beyond doubt that manipulation has indeed taken place.
Gold: Suspicion of Manipulation Continues to Linger
What is the situation these days though? Thanks to the Seasonax app that is nowadays available at Bloomberg and Thomson Reuters, I am able to replicate work that has taken me weeks to complete in 2002 within seconds: namely the creation of precise charts of average intraday price movements.
The next chart illustrates the average intraday pattern in the gold price over the past six months until mid December 2016.
Gold, average intraday price movements from 6/2016 – 12/2016. Gold prices are regularly sliding in early New York trading
As can be seen above, there are no longer any conspicuous price moves at the time of the by now revised fixing at 10:00 am EST. It seems that manipulation of the fixing is over and done with!
Nevertheless, a noticeable price slide still occurs regularly in early New York trading – price behavior that is reminiscent of the time after August 5 1993, when manipulation of the gold price could first be detected.
Conclusion
Systematic manipulation of gold prices has been in evidence for more than 23 years. This is probably a record for a market that is supposed to be free of interventions. The idea was initially mooted by the Fed, which at the time wanted to push down inflation expectations and raise confidence in the US dollar. This was first hinted at in Forbes magazine in 1995, in 1998 GATA was founded with the goal of getting to the bottom of the allegations and statistical evidence for the manipulation of prices has been available since the turn of the millennium – inter alia my contribution concerning the fixing.
The lawsuits filed to date are focused on manipulation of precious metals prices at the time of the fixing as well. As a result of the settlement entered into by Deutsche Bank and the release of the bank’s internal documents a more far-reaching probe has now become possible. Hopefully all parties concerned – including government agencies – will admit to their involvement in gold price manipulation in coming years.
end
Blockchain gains another customer as Goldmoney network makes a deal with the Canadian Mint:
(courtesy Chris Powell/Allison/International Business Times)
Goldmoney joins blockchain gold rush with Royal Canadian Mint
Submitted by cpowell on Wed, 2016-12-21 15:54. Section: Daily Dispatches
Gold is not only still money but it’s getting better all the time.
* * *
By Ian Allison
International Business Times, New York
Wednesday, December 21, 2016
Blockchain builders are filling their boots in the race to tokenize gold on distributed ledgers. Goldmoney Network is the latest platform to do a deal with a vaulted bullion holder — the Royal Canadian Mint — following the recent Royal Mint/CME blockchain announcement.
Despite the activities of other players in this market, such as Paxos’ Bankchain or Singapore’s Digix Global, Goldmoney says it will be the the first to put mint-vaulted gold bullion on a private blockchain globally.
The collaboration allows Goldmoney users to instantly purchase any amount of 100-percent reserved physical gold in the Mint’s Ottawa vault using Goldmoney’s proprietary, closed-loop blockchain technology, for a 0.50-percent fee and receive free storage for up to 1,000 grams, a release said. …
… For the remainder of the report:
http://www.ibtimes.co.uk/goldmoney-joins-blockchain-gold-rush-royal-cana…
END
Will the Trump victory ignite hope for Northern Dynasty’s copper and gold mine in Alaska. No doubt it will happen:
(courtesy Reuters/GATA)
Trump win ignites hope for stalled Alaska copper and gold mine
Submitted by cpowell on Thu, 2016-12-22 01:25. Section: Daily Dispatches
By Nicole Mordant
Reuters
Wednesday, December 21, 2016
VANCOUVER, British Columbia, Canada — A small Canadian miner is confident that Donald Trump’s U.S. presidential win will let it proceed with an application for a copper and gold mine in Alaska that has been stalled almost three years by environmental regulators aiming to protect the world’s biggest sockeye salmon fishery.
Ronald Thiessen, chief executive officer and president of Northern Dynasty Minerals Ltd, said he expected the U.S. Environmental Protection Agency to announce in the first quarter of 2017 that it will let the application process proceed for the controversial project. He said the company has held discussions with Trump’s transition team, including Myron Ebell, who heads the EPA transition.
Shares in Northern Dynasty, which owns the massive Pebble deposit in southwest Alaska’s Bristol Bay region, have more than doubled since the U.S. election on Nov. 8. The shares surged 23 percent on Nov. 9 alone.
In February 2014, the EPA took the unusual action of blocking a mine before the project owner applied for a development permit. The company has estimated that removing that pre-emptive veto could happen three to four months after an EPA announcement. This would allow Northern Dynasty to seek a deep-pocketed partner and resume permitting the project, one of the world’s biggest undeveloped copper and gold deposits. …
… For the remainder of the report:
http://www.reuters.com/article/us-mining-alaska-trump-idUSKBN14A287
END
Modi is a complete moron:
India is now rushing to lower the gold import tax from 10% to 6% because of massive smuggling. I am afraid that nothing will help. Modi killed the goose that laid the gold egg. Now nobody has any faith in paper currency in India
(courtesy Srivastava/India Express)
India Said to Consider Lowering Gold Import Tax to 6% From 10%
by Shruti Srivastava
December 21, 2016, 5:39 AM CST
Tax raised three times in 2013 to curb higher imports
Demand seen shrinking in 2016 to the least in 7 years
India, the world’s second-biggest consumer of gold, is said to be considering cutting the import tax on the precious metal in order to curb its smuggling, according to people familiar with the matter.
The government is planning to reduce the duty to 6 percent from 10 percent now, said the people, who asked not to be named as they are not authorized to speak to the media.
Gold shipments to India, which accounted for a quarter of global demand in 2015, have fallen due to higher prices in the first half of this year, a crackdown on undisclosed income and the government’s decision to withdraw old high- value bank notes. The government had raised the import tax three times in 2013 to curb inbound shipments, narrow a record current-account deficit and stop a slump in the rupee.
“Smuggled gold is cheaper while those who import have to pay high cost.” said Praveen Shankar Pandya, chairman of Gem & Jewellery Export Promotion Council. “Duty structure should be such that it doesn’t encourage smuggling and brings in transparency.”
Commerce ministry spokeswoman Mattu J.P. Singh did not immediately respond to an e-mail seeking comment.
Smuggled gold imports were estimated to be in the range of 140 tons to 160 tons in 2016, higher than the 120 tons in the previous year, according to the World Gold Council. It estimated in November that consumption would be 650 tons to 750 tons this year, the lowest in seven years.
-END-
Dave Kranzler on the manipulation in gold and why he believes that gold has now received it’s strongest buy signal
(courtesy Dave Kranzler /IRD)
Strongest Gold “Buy” Signal In 16 Years
When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one-so long as there are no restraints on trade or on the movement of capital. – Alan Greenspan, “Gold And Economic Freedom,” 1966
Anyone who was involved in the financial markets during Greenspan’s tenure as Chairman of the Federal Reserve would be shocked to see that comment above coming from Greenspan. He was, after all, the king of the printing press until his successor, Ben Bernanke took over the role of chief money and credit creator.
While it might not show up in the Fed’s “M” accounts, which are various measures of the “money supply,” Greenspan’s Fed shepherded in an era of unprecedented growth in systemic debt – private and Government – and unprecedented decline in credit standards. By the end of Greenspan’s reign of monetary terror, anyone with no more than two nickels to rub together could qualify for a credit card or mortgage.
The graph above shows total debt outstanding system-wide in the U.S. during Greenspan’s Fed. The level debt increased 400%. GDP? Not so much. Real GDP is said to have grown about 85%, but this metric is overstated by the amount that the Government underestimates the true inflation rate and by gimmicked changes to the GDP calculation for purposes of political expediency.
Debt issued behaves like printed money until that debt is payed back. That’s the dirty little secret that bona fide economists don’t discuss, at least in public. See the problem in the graph above? The level of debt NEVER declines. The small blip down in 2010 was a result of $100’s of billions in bank write-offs for defaulted mortgages, credit cards and auto loans. In order to measure the true money supply, it’s necessary to add to together the Fed’s “M” accounts plus the incremental increase in the level of debt each year.
But all of this is unnecessary in a system backed by gold. “Under a gold standard, the amount of credit that an economy can support is determined by the economy’s tangible assets, since every credit instrument is ultimately a claim on some tangible asset” (Greenspan, ibid).
In other words, the massive credit-induced bubbles that occurred during the Greenspan/Bernanke era, each progressively worse with worse consequences when they burst, could never have occurred if a gold standard were in place. AND THEREIN LIES THE REASON GOLD IS REVILED BY WALL STREET AND SUBJECTED TO GOVERNMENT/CENTRAL BANK PRICE CONTROLS: “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation…This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard” (Greenspan, ibid).
In this last episode of the Shadow of Truth, we discuss the manipulation of gold, directly and via targeted fake news reports about the gold market, and explain why gold is signalling one of its strongest “buy” signals in the last 16 years:
end
Your early THURSDAY morning currency, Asian stock market results, important USA/Asian currency crosses, gold/silver pricing overnight along with the price of oil Major stories overnight
1 Chinese yuan vs USA dollar/yuan UP to 6.9475(SMALL DEVALUATION SOUTHBOUND /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN WIDENS A BIT TO 6.94050 / Shanghai bourse CLOSED UP 2.13 POINTS OR 0.07% / HANG SANG CLOSED DOWN 173.60 OR 0.80%
2. Nikkei closed DOWN 16.82 POINTS OR 0.09% /USA: YEN RISES TO 117.64
3. Europe stocks opened ALL IN TH RED ( /USA dollar index FALLS TO 102.92/Euro UP to 1.0448
3b Japan 10 year bond yield: FALLS +.056%/ !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 117.64/ 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:: 52.12 and Brent: 54.12
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 DOWN for WTI and DOWN for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10 yr bund RISES TO +260.%/Italian 10 yr bond yield RISES 3 full basis points to 1.857%
3j Greek 10 year bond yield FALLS to : 7.19%
3k Gold at $1129.90/silver $15.85(7:45 am est) SILVER BELOW RESISTANCE AT $18.50
3l USA vs Russian rouble; (Russian rouble UP 17/100 in roubles/dollar) 61.05-
3m oil into the 52 dollar handle for WTI and 54 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT a SMALL 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 117.64 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 1.0245 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0706 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.
3p BRITAIN VOTES AFFIRMATIVE BREXIT
3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to +.260%
3s The Greece ELA NOW at 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 2.551% early this morning. Thirty year rate at 3.122% /POLICY ERROR)GETTING DANGEROUSLY HIGH
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Global Stocks Decline As Trading Volumes Collapse Ahead Of Monte Paschi Nationalization
European, Asian stocks and S&P futures all declined amid collapsing volumes, after the Wednesday drop in the S&P500, and after oil prices held losses amid an unexpected increase in supplies, as traders close out trades ahead of the holidays. Top overnight news include the imminent nationalization of Monte Paschi, the ongoing manhunt for the German Christmas market terrorist, Uber halting its self-driving car test in San Francisco, and the anti-China, anti-regulation moves in the Trump administration.
European stocks edged lower, led by miners, and U.S. stock futures stagnated after the Dow Jones Industrial Average failed to make progress toward 20,000 Wednesday. The MSCI Asia-Pacific Index headed for a one-month low and oil traded below $53 a barrel after data showed U.S. stockpiles expanded for the first time in five weeks. The Bloomberg Dollar Spot Index recovered from Wednesday’s decline. Global stocks are “resting” after the tremendous Trumflation rally, with trading volumes ebbing as year-end holidays approach. The Treasuries market has steadied following a selloff that took the 10-year yield to the highest since 2014, with the rate holding in a 7 basis point range this week.
“Moderate losses on Wall Street, underpinned by the fall in oil prices, are providing little inspiration for Asian markets today,” said Jingyi Pan, a strategist at IG Asia in Singapore. “Thin volumes are also providing little momentum for trade into the end of the year.”
Overnight, MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.5 percent with the Nikkei finishing 0.1 percent lower having hit one-year highs this week. Japan’s cabinet approved a record $830 billion spending budget for fiscal 2017 that counts on low interest rates and a weak yen to limit borrowing, underscoring the challenge Tokyo faces in curbing the industrial world’s heaviest debt burden. Hong Kong’s Hang Seng index was down 0.7 percent after touching its lowest levels since July, though Australian shares finished up 0.5 percent, extending their gains into a fourth straight session.
A quick snapshot of the major markets shows the Stoxx Europe 600 Index down -0.2% percent at 6:00am in New York, retreating from the year’s highest intraday level on Wednesday. Japan’s Topix and Nikkei indexes also slid 0.1 percent at the close in Tokyo, with both down for a second day. S&P 500 Index futures were likewise down -0.1%. The underlying gauge dropped 0.3% on Wednesday in New York, while the Dow was off 0.2 percent and closed at 19,941.96, unable to hit Dow 20,000 for over a week.
In rates, 10Y Treasuries were little changed at 2.54 percent. Japan’s 10-year rate was 1 basis point lower at 0.05 percent. German bunds of the same maturity were at 0.25 percent Wednesday. Benchmark 10-year Italian and Spanish yields rose 1-2 basis points (bps) to 1.84 percent and 1.34 percent respectively and broadly in line with the wider bond market. Greek 2-year yields saw the biggest jump meanwhile with familiar concerns about its debts now returning.
In keeping with the nearly decade-old upside down market, shares in Milan climbed 0.3% on “hopes” for the insolvent Monte Paschi would be bailed out by the government imminently. “This situation has dragged on for years without a clear solution. Now a solution is in sight,” LC Macro Advisors head, Lorenzo Codogno, said. “My perception is that the government backstop will be welcomed by financial markets and it will be a plus for the (Italian) economy as well.”
The Monte dei Paschi saga is one of the reasons why Rome’s government bonds have been the worst performing in the euro zone this year, losing roughly 4 percent
The dollar, which has been on a tear since Donald Trump’s election win stoked hopes of a fiscal boost for the U.S. economy, was flat as traders booked profits before a batch of U.S. data including revised GDP figures. “You could see the dollar continue higher next year, maybe mid-single digit for the DXY index, but we would be surprised if it was another 10 percent,” JP Morgan Asset Management global market strategist, Mike Bell, said.
Crude oil prices made modest gains, recovering from pressure from a report showing a surprise build in U.S. crude inventories last week, as well as news that Libya expects to boost production over the next few months. U.S. crude was steady at $52.44 per barrel, Brent crude ticked up to $54.49, spot gold edged down to $1,130.44 an ounce while industrial metals copper, zinc and tin continued their recent decline.
Major market moves are thin and far between though with many investors already departing ahead of this weekend’s Christmas and New Year holiday. Markets in Tokyo will be closed on Friday for the Japanese Emperor’s birthday. On Thursday, the United States will release a third revision of U.S. third quarter gross domestic product. Durable goods orders for November and weekly initial jobless claims were also scheduled to be released.
“There’s a lot of year-end book-closing and position-squaring, and less in terms of data and events to go on,” Barclays Singapore’s head of FX strategy, Mitul Kotecha, said.
Market Snapshot
- S&P 500 futures down less than 0.1% to 2259
- Stoxx 600 down 0.2% to 359.7
- FTSE 100 down less than 0.1% to 7040
- DAX down less than 0.1% to 11475
- German 10Yr yield up less than 1bp to 0.26%
- Italian 10Yr yield up 1bp to 1.84%
- Spanish 10Yr yield up less than 1bp to 1.37%
- S&P GSCI Index down 0.1% to 390.1
- MSCI Asia Pacific down 0.4% to 135
- Nikkei 225 down less than 0.1% to 19428
- Hang Seng down 0.8% to 21636
- Shanghai Composite up less than 0.1% to 3140
- S&P/ASX 200 up 0.5% to 5644
- US 10-yr yield up less than 1bp to 2.54%
- Dollar Index down 0.08% to 102.94
- WTI Crude futures up less than 0.1% to $52.53
- Brent Futures up 0.1% to $54.54
- Gold spot up less than 0.1% to $1,131
- Silver spot down 0.2% to $15.91
Top Global News
- Actelion, J&J Are Back in Exclusive Talks a Week After Breakup; this exclusive discussions are about a possible transaction that Actelion called “strategic”
- Trump Summons Contractors to Mar-a- Lago Over Spending; two largest U.S. defense contractors said they would seek to control their costs
- Exxon Foe Says Bigger InterOil Offer Still Isn’t Good Enough; says Exxon still not offering shareholders full value for hydrocarbon reserves in Papua New Guinea
- Icahn Named Special Trump Adviser to Roll Back Regulations; Icahn has attacked the EPA repeatedly over costs his refinery investments face complying with renewable-fuel mandates
- Trump Forms Trade Council Led by China Critic Peter Navarro; one of the leading economists on the Trump campaign
- Alibaba Again Named ‘Notorious Market’ in Blow to Overseas Push; U.S. Office of the Trade Representative puts Alibaba’s Taobao back on list
- Amazon Eyes Western Europe’s $42 Billion Online Fashion Market; Zalando ruled fashion e-tailing, then you-know-who came along.
- Honda in Talks With Google’s Waymo on Self-Drive Tech; at this point talks are about research, rather than full production vehicles
- Nippon Paint Buys Dunn- Edwards of U.S. Amid Japanese M&A Spree; sale to be completed by end March
- Micron Rises on Quarterly Sales Forecast, Restored Growth; CEO Durcan sees supply-demand balance persisting in 2017
* * *
Looking at Asian markets, stocks traded mostly lower following the lacklustre lead from Wall Street, where all 3 US majors closed marginally negative amid a lack of demand and drivers heading into Christmas. ASX 200 (+0.5%) outperformed with the index led by strength in financials, although weakness in the energy sector following yesterday’s unexpected DoE inventory build capped upside in the index. Nikkei 225 (-0.1%) mirrored the losses in its US counterparts, while both Shanghai Comp. (+0.1%) and Hang Seng (-0.8%) were also pressured as tight liquidity and default concerns dampened sentiment, despite efforts by the PBoC to inject funds and support lending. 10yr JGBs traded higher amid the risk averse tone in Japan, while the curve continued to steepen alongside outperformance in the short-end. Japan’s Cabinet approved FY17/18 budget spending plan which is at a record amount of JPY 97.5trl. PBoC injected CNY100bIn in 7-day, CNY 70bIn in 14-day and CNY 50bIn in 28-day reverse repos. (Newswires) PBoC set mid-point at 6.9435 (Prey. 6.9489).
Top Asian News
- Taiwan Holds Discount Rate at Six-Year Low as Anniversary iPhone, Rising Oil Buoy Outlook; rate kept at 1.375 percent for second straight quarter
- China Stocks’ Worst Year Since 2011 Seen Becoming 21% Rally; analysts say 2017 will be brighter
- Hong Kong Stocks Enter Correction as Energy Firms, Insurers Fall; Hang Seng slumped more than 10 percent since its Sept. 9 high
- Abe Government 2017 Budget Rewards Companies That Play Ball; offers incentives for companies that help meet policy objectives such as raising wages
- Top Picks for 2017 in EM Asia Are India, Indonesia; Avoid Korea; according to most popular picks for investors and strategists next year
- Singapore Court Metes Out Toughest Sentence in 1MDB-Related Case; ex-BSI banker Yeo gets 30 months for obstruction of justice
In Europe, it has been one of the quietest sessions of the year so far in terms of newsflow, and stocks are modestly down on the day (Euro Stoxx 600: -0.2%); 4 of 19 Stoxx 600 sectors rise, 51% of Stoxx 600 members decline, 46% gain. Outperformers include healthcare, while Sanofi and Actelion are both among the notable movers after the latter decided to enter discussions with J&J as oppose to Sanofi. Elsewhere, bunds have done little this morning to trade modestly lower with no notable price action in the periphery.
European Top News
• Monte Paschi Said Headed for Nationalization After Sale Failure; that would be the country’s biggest bank nationalization in decades
• Brexit and Politics Cast Shadow Over U.K. After Tumultuous 2016; long-predicted Brexit slump may finally arrive
• U.K. Consumers Are Feeling Gloomy About the Economic Outlook; excluding sharp drop after Brexit referendum, its at lowest reading in almost four years
• Wilbur Ross Seen Cutting Bank of Cyprus Ties to Work for Trump; private equity firm that bears his name is under no obligation to sell its stake
• Trash-to- Treasure Train Keeps Austrians Warm at Rome’s Expense; Roman garbage will help generate more than 550,000 megawatt-hours power
• Rally in U.K. Inflation-Linked Bonds Seen Losing Steam in 2017; U.K. linkers have returned about 21 percent this year, set for the biggest gain since 2011
In currencies, the Bloomberg Dollar Spot Index was little changed after falling 0.1% Wednesday, but is still on course for a gain of more than 3 percent this year. The yen was unchanged percent at 117.52 per dollar after appreciating 0.3 percent Wednesday. The euro climbed 0.3 percent to $1.0450. The New Zealand dollar was up 0.1 percent after the country’s gross domestic product report, while the Swedish krona added another 0.3 percent after gaining in Wednesday after the Riksbank extended its quantitative easing program into next year.
In commodities, West Texas Intermediate crude oil stabilized at $52.50 a barrel Thursday after dropping Wednesday by 1.5 percent, its first slide in a week. Ever tightening trade seen in all markets, but we see Gold prices softening slightly in line with the USD bid. Base metals are doing very little as anticipated, while Oil prices have stabilised after yesterday’s post DOE hit. Modest losses seen here, with a little more downside seen in am London, but front month WTI is still only a touch over 1 USD off better levels seen at the start of the week.
US Event Calendar
- 8:30am: GDP Annualized QoQ, 3Q T, est. 3.30% (prior 3.20%)
- 8:30am: Durable Goods Orders, Nov P, est. -4.80% (prior 4.60%); Cap Goods Orders Nondef Ex Air, Nov P, est. 0.40% (prior 0.20%)
- 8:30am: Initial Jobless Claims, 17-Dec, est. 257k (prior 254k)
- 9am: FHFA House Price Index MoM, Oct., est. 0.50% (prior 0.60%)
- 9:45am: Bloomberg Consumer Comfort, 18-Dec., (prior 45.5)
- 10am: Personal Income, Nov., est. 0.30% (prior 0.60%)
- 10am: Leading Index, Nov., est. 0.10% (prior 0.10%)
- 10am: Freddie Mac mortgage rates
- 10:30am: EIA natural-gas storage change
- 11am: Kansas City Fed Manf. Activity, Dec., est. 4 (prior 1)
3a)THAILAND/SOUTH KOREA/:
none today
b) REPORT ON JAPAN
c) REPORT ON CHINA
i)Late WEDNESDAY night/THURSDAY morning: Shanghai closed up 2.13 POINTS OR 0.07%/ /Hang Sang closed DOWN 173.60 OR 0.80%. The Nikkei closed DOWN 16.82 OR 0.09%/Australia’s all ordinaires CLOSED UP 0.53% /Chinese yuan (ONSHORE) closed DOWN at 6.9475/Oil FELL to 52.12 dollars per barrel for WTI and 54.12 for Brent. Stocks in Europe: ALL IN THE RED. Offshore yuan trades 6.94050 yuan to the dollar vs 6.9475 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS A BIT AS MORE USA DOLLARS ARE ATTMEPTING TO LEAVE CHINA’S SHORES /
end
This does not look good: a Chinese multibillionaire defaults on retail bonds that his company issued. His reason: “severe cash crunch”. His company is the huge CoSun group. Where there is smoke, there is fire…
(courtesy zero hedge)
Chinese Multibillionaire Defaults On Retail Bonds Due To “Severe Cash Crunch”
Italy’s Monte Paschi isn’t the only institutions that is about to soak retail investors who thought that two bailouts for Italy’s third biggest bank in two years wouldn’t be followed by a third nationalization in year #3. According to the South China Morning Post, a Chinese multi-billionaire businessman has defaulted on bonds worth a paltry 100 million yuan ($14.4 million) that he raised from retail investors, citing “tight cash flow”, according to reports.
Wu Ruilin, chairman of the Guangdong based telecom company Cosun Group, has a personal fortune of 98.2 billion yuan, or just over $14 billion, China Business News (CBN) reported citing an audit by a third party. That makes Wu wealthier than Baidu’s founder Robin Li, who has 98 billion yuan and is ranked 8th on the Hurun Rich List 2016.
And yet, despite the founder’s personal fortune, according to a notice put up by the Guangdong Equity Exchange on Tuesday, two subsidiaries of Cosun Group are each defaulting on seven batches of privately raised bonds they issued in 2014. According to the notice, “the issuer had sent over a notice on December 15, claiming not to be able to make the payments on the bonds on time, due to short-term capital crunch.”
The good news, is that Wu is allegedly making unlimited guarantees for the principal and interest on the bonds with, what SCMP calls, “all of his legitimate wealth.” Meanwhile, Zheshang Property and Casualty Insurance Company is responsible for the bonding insurance that guarantees scheduled payments of interest and principal on the bond, the notice said.
The bad news is that neither Wu nor the insurer had put the payments into the relevant account by 5 pm on Tuesday, according to the exchange notice. Although the bourse did not specify the value of the bonds, CBN said they were together worth around 100 million yuan.
SCMP adds that calls to Cosun went unanswered on Wednesday.
Philip Sun, an analyst with central China based JZ Securities, said it made no sense for Wu to “purposely defaults on the bonds” as it would “severely affect his credit and make institutional investors panic”, which would create bigger problems for him.
“Either he was building his business on high leverage, or he is determined to count on the insurer, but it is for sure he really has a severe cash crunch,” said Sun. CBN reported, somewhat redundantly, that some investors said they would sue Cosun and Wu Ruilin himself.
Still, one wonders if the (formerly) prosperous company of a Chinese billionaire is on the verge of bankruptcy due to a “severe cash crunch”, just how bad is the cash crunch behind the scenes in China, and how much longer can the PBOC keep keep the charade that all is well going?
Goldman Warns “China Remains A Key Risk”, Sees Yuan Downside Accelerating
With Bitcoin at 3 year highs, China’s renewed efforts to curb declines in its currency are doing little to stop yuan bears who have sent forward devaluation expectations to record highs and options positioning to six-month lows. And judging by Goldman Sachs’ outlook – a potential resurgence in Chinese growth fears early next year, but more broadly, a continued bumpy deceleration – things are not getting better anytime soon.
As Bloomberg notes, traders have turned increasingly negative amid tighter liquidity, sending bets for further losses soaring. The gap between forward contracts wagering on the offshore yuan a year from now versus its current level is heading for a record monthly jump…
Just as the extra cost for options to sell the currency against the dollar hit a six-month high relative to prices for contracts to buy.
The currency is facing a triple whammy of accelerating capital outflows, faster U.S. interest-rate increases and concerns over domestic financial markets as liquidity tightens. Strategists say its weakening, set to be the biggest this year in more than two decades, may accelerate as the government restores the annual quota for citizens to convert yuan holdings into foreign exchange. And Goldman Sachs warns, China remains a key risk to watch…
Where we stand now:
Broader concerns about China risk derailing global growth and markets proved somewhat short-lived. After the S&P 500 hit its low for the year on February 11, two days after we published, better economic data and a sense that the Fed would react to global concerns—confirmed by the dovish March FOMC meeting—helped improve market sentiment. Political events in the western hemisphere have since broadly taken center stage in global markets, leaving China concerns in the background. But the reality is that growth—on some level—did take a hit; for example, US GDP growth came in at an anemic 1.1% annualized in 1H2016, owing in part to weakness in the industrial sector and energy-related activity but largely due to tighter financial conditions primarily in the wake of China concerns. China growth itself also remained relatively weak in 1H as measured by the GS China Current Activity Indicator, which declined towards 4% in 1Q and began to climb slowly thereafter.
Stabilizing growth in China has helped push China to the background of investor concerns. In order to stabilize growth and meet official GDP targets, China’s policymakers continued to pursue an ambitious stimulus plan begun in early 2015 that entailed pausing fiscal reforms, sharply cutting interest rates, loosening housing policies, and increasing credit growth. The result: GDP growth looks set to meet the target of 6.5%-7% for 2016, and producer prices are rising after years of deflation.
But policies that re-ignited growth in the short-term just increase concern about the future, especially in terms of credit. We estimate that total credit growth adjusted for muni bond issuance accelerated from 13% yoy in 1Q15 to 17% yoy as of 2Q16, and to 20% yoy when including shadow lending not captured in official statistics. In short, the potential credit problems in China have not receded, and indeed have likely grown given the very fast pace of credit expansion.
Policymakers have taken note of these potentially destabilizing dynamics and have refocused on risk management; indeed, China’s recent Central Economic Work Conference to plan for next year’s economic policy included strong statements on controlling financial risks. Risk management measures employed in recent months include increasing short-term repo rates, reining in off-balance sheet exposures such as wealth management products, and rolling out measures to try to curb home price appreciation. Fiscal policy also seems likely to tighten at least slightly in coming months. But any tightening will likely prove short-lived given that meeting growth targets will remain critical in 2017—a year of leadership transition.
Our RMB view has also become more negative, presenting risk to the US dollar and S&P 500. When we published at the height of market anxiety around China, we were relatively constructive on the RMB, arguing that a large, one-off devaluation was unlikely and envisioning only a “mild” trade-weighted depreciation (against the CFETS basket, the CNY has depreciated 4.5% since then). But capital outflow pressures have remained, particularly in the context of US dollar strength. Despite the government’s official focus on a trade-weighted currency basket, higher $/CNY fixings are still a powerful signal that can easily re-ignite capital flight, as households and firms anticipate a faster pace of depreciation.
Indeed, the PBOC’s FX reserves fell US$69bn to US$3,052bn in November, the largest decline since January. The US election has reinforced these dynamics given the strengthening dollar and potential for trade frictions, motivating tighter restrictions on capital flows. Global markets have so far taken these developments in stride, but the risk of a repeat of related equity market volatility remains, which could impact the pace of Fed tightening and dollar strength.
What to look for in 2017 (and beyond):
A potential resurgence in Chinese growth fears early next year, but more broadly, a continued bumpy deceleration. We expect sequential GDP growth to decelerate into 1Q17 to c.5.5% annualized on recent tightening measures. But we expect a rapid pivot back to stimulus should the growth target look at risk, especially given next year’s leadership transition.
Continued concerns about China credit growth. Although policymakers have introduced tightening measures to reduce the risk of asset price bubbles, China’s reliance on credit growth, which undermines financial stability, remains a key risk.
RMB downside, posing potential risk to the stronger US dollar and global stock markets. We forecast a $/CNY fix of 7.00, 7.15 and 7.30 in 3, 6 and 12 months, respectively, and long $/CNY is one of our 2016 Top Trades. The pace of capital outflows and the evolution of the fix warrant monitoring; in our view, as long as the fix simply offsets dollar strength and capital outflows are contained, global risk appetite should hold up.
China remains a key risk to watch.
END
China tries to assure investors that the holding of USA treasuries is in their long term investment category. It sure does not look so as China continues to cash in their treasuries:
(courtesy zero hedge)
China Says Will Make “Tactical Adjustments” On US Debt
Following the latest TIC report, which showed China dumping over $40 billion in Treasuries in October, bringing its total to the lowest since 2010, and at $1.116 trillion sending China below Japan only for the second time in the list of top US creditors, questions emerged about China’s strategy on US debt holdings.
Today, this specific question that was addressed by an official at China’s State Administration of Foreign Exchange (SAFE), who calmed nerves and told US reporters at a briefing that while China will make “tactical adjustments” on its US debt holdings, Beijing’s long-term investment view on US debt has not changed, adding that U.S. Treasuries are China’s long-term strategic investment targets as MarketNews reported.
When asked if China is strategically cutting its US treasury, he replied “absolutely not” adding that it is difficult to forecast value of U.S. dollar and U.S. Treasuries according to Bloomberg.
He also said that there is no barrier for foreign companies to transfer investment returns out of China as long as they comply with relevant rules.
Of course, whould Trump push aggressively for trade concessions, especially following the appointment of Peter Navarro, and demand a decline in Chinese exports to the US, ostensibly by imposing tarriffs, it is likely that China’s tactical adjustments will acceleration the recent one-way liquidation trendline.
Shifting from bonds to the other topic du jour, namely China’s reserve outflows, the official said China would step up enforcement of existing policies to ensure forex market stability, and that forex reserve fluctuating around a certain level will be the norm.
However, in a rather surprising admission he said that it is uncertain if China’s forex reserves will increase or drop, and said guidance is needed on China’s outbound M&A deals.
Finally, he said that SAFE would cooperate with customs, tax authorities and police to crack down underground banks and fake trade, stating that it’s good timing to push ahead reforms on inflows, such as allowing foreign investors to access bond market.
END
The Chinese are using Bitcoin as a means for getting USA dollars out of the country.
Bitcoin has now risen to 875.00 USA per coin
(courtesy zero hedge)
Bitcoin Is Soaring
Just yesterday we noted the resurgence in Bitcoin as China turmoil accelerates, but overnight (as Yuan weakened further), demand for the cryptocurrency has soared once again, sending the price (in USD) to $875 – the highest since Dec 2013. Bitcoin is up over 10% this week alone.
Bitcoin is soaring…We first warned of this ‘outlet’ for Chinese capital in September 2015 when Bitcoin was trading around $200…now it is trading at $875
And the massive volume coming from Chinese exchanges suggests where the flow is…
The last 48 hours have seen Chinese Bitcoin prices spike over 12% on heavy volume…
As a reminder, back in 2013, the government classified bitcoin as a commodity and not currency, placing it outside the purview of the foreign-exchange regulator, the people said. That does not mean, however, that China is powerless at limiting bitcoin’s upside.
Several Chinese government bodies including the People’s Bank of China and the financial regulators said in a joint notice that year that bitcoin functioned like a digital commodity without the legal status of a currency. The central bank said in January it is studying the prospects of issuing its own digital currency and aims to roll out a product as soon as possible.
While China dominates bitcoin mining and trading, the government has shown caution over its spread in the nation. In 2013, the PBOC barred financial institutions from handling bitcoin transactions.
end
4 EUROPEAN AFFAIRS
Monte dei Paschi
More background on the Monte de Paschi problems:
(courtesy London’s Financial Times/and special thanks to Robert H for sending this to us)
https://www.ft.com/content/90299b9e-c789-11e6-9043-7e34c07b46ef
Italy to bail out Monte dei Paschi di Siena bank
6 hours ago by: Rachel Sanderson in Milan, James Politi in Rome and Martin Arnold in LondonMonte dei Paschi di Siena is to be rescued by the Italian state using a new €20bn bailout package, as a last-gasp private sector rescue plan for the world’s oldest bank looked set to fail, forcing losses on bondholders.
The government rescue, which had long been resisted in Rome, is designed to draw a line under the slow-burn crisis in Italian banking that has alarmed investors and become the main source of concern for European financial regulators.
The woes of Italy’s banking sector have also spilled over into the political sphere, contributing to the government’s defeat in this month’s constitutional referendum.
A private €5bn recapitalisation plan led by JPMorgan collapsed on Wednesday after MPS failed to find an anchor investor, a crucial plank of the deal, said four people close to the dossier.
With MPS also failing to raise sufficient money from a debt-for-equity offer — another part of the private sector rescue — by a deadline of Wednesday, the government is expected to inject capital, taking its stake in the bank much above the current 4 per cent. Rome could even take a majority stake, according to people close to the bank.
Bankers said the debt-for-equity swap was on track to raise €1.7bn, far short of the overall amount needed.
The state funds to rescue the bank would come from a €20bn package approved by both houses of parliament on Wednesdaythat could be used to bail out several of Italy’s most fragile banks. Goldman Sachs estimates they need €38bn to be adequately capitalised
Shares in MPS were suspended on Wednesday morning after the bank, Italy’s third-largest lender by assets, warned that its liquidity levels were deteriorating rapidly. People close to the bank said small and midsized companies had been pulling deposits.
Speaking in parliament on Wednesday, Pier Carlo Padoan, Italy’s finance minister, said government-backed recapitalisation would be conditional on the willingness of banks to put forth restructuring plans allowing them “to travel on their own legs, be profitable, and finance the economy”.
Mr Padoan insisted that apart from a few “critical” situations, Italy’s banking system was “solid and healthy”. He vowed to “minimise, if not erase” any impact of the public intervention on the savings of ordinary citizens.
MPS shares have fallen 86 per cent in the past year, while Italian banks on average have halved in value. Italy is readying to pump more funds into other midsized banks in Veneto and Genoa in need of capital amid expectations they will also fail to find private support.
The state rescue caps a dramatic decade-old collapse in the fortunes of MPS, a lender founded in 1472 to support Tuscan farmers which became a crucial seat of power in Italy with ties to the country’s political left.
But its fortunes have declined since the ill-timed €9bn cash acquisition of its local rival Banca Antonveneta on the cusp of the financial crisis.
Rome and Brussels have been in talks on ways to structure the bailout of the bank in a way that compensation could be offered to an estimated 40,000 retail holders of junior debt that may suffer losses based on new EU rules.
A sale of €28bn in bad loans demanded by regulators is also in doubt and may need to be renegotiated, said two people involved.
MPS, which has already burnt through €8bn in new capital since the financial crisis, is expected to receive the state funds under a “precautionary recapitalisation” agreed with EU regulators under its new banking rules.
Support for the bank bailout bill was led by Italy’s ruling centre-left Democratic party, but members of the centre-right opposition also agreed to vote in favour after Silvio Berlusconi, the leader of Forza Italia, announced his backing.
The Five Star Movement, the main anti-establishment opposition party led by comedian Beppe Grillo, opposed the measure, calling for a full nationalisation of struggling banks.
A backlash against a taxpayer-funded bailout of Italy’s weakest lenders has already begun. Codacons, a consumer lobby group, estimated €20bn ploughed into Italy’s failing lenders would cost each Italian family €833.
END
The fun begins tonight after their 7:30 pm CET meeting. Monte de Paschi is expected to be nationalized and a bail in is scheduled to begin. This will cause huge damage to bond holders many of whom are moms and pops who put their entire life savings into the bank because the government told them Monte Paschi was safe. Depositors are fleeing the ship
(courtesy zero hedge)
Italian Government To Meet At 7:30PM CET To Approve Monte Paschi Nationalization
Having failed to secure a private sector rescue after its anchor investor Qatar balked at sinking another $1 billion into the perpetually insolvent bank, Italy’s Monte Paschi is set to be nationalized as soon as 7:30pm CET today when the Italian cabinet is expected to meet and decide on a bank decree. The EU is said to have approved the Italian bank decree.
As Bloomberg notes, the Italian government set to intervene soon after expected failure of Monte Paschi recapitalization plan, says senior Italian official who asked not be named before cabinet discusses banks’ decree. The decree would set up a €20 billion fund which would intervene when recaps by banks are not supported by market.
Paschi and other troubled lenders will not be named in the decree, but it will apply to them. While shareholders will be hit, something which is obvious by the market cap of the company which is now below €500 million, the aim is to limit losses for stock and bondholders. The cabinet is also expected to announce a 6-month extension for popolari banks.
Some other details:
- DTA provision on taxes paid in advance for banks, can be turned into fiscal credits.
- Decree to include intervention on resolution for four banks rescued from collapse last year
Ahead of the announcement, the bank’s subordinated bond risk has risen to a record high. Monte Paschi’s 379 million euros of junior notes due in September 2020 fell 2 cents on the euro to an all-time low of 46 cents. Credit swaps insuring the bank’s junior bonds for five years imply a 70% chance of default, data compiled by CMA show; it remains to be seen whether ISDA would treat yet another nationalization by the government, which is expected to take at least a 50% equity stake in the bank, as a credit event.
State intervention and a hit to bondholders is the most likely scenario for Monte Paschi, Manuela Meroni, an analyst at Intesa Sanpaolo SpA wrote in a note to clients Thursday. “The solution to the Monte Paschi issue could reduce the systemic risk for the sector,” Meroni wrote.
Bloomberg notes that if government funds are used in the bank’s recapitalization, bondholders will probably have to take losses under European burden-sharing rules, however the specific terms of the “bail in” are still to be formalized. The cabinet is considering a so-called precautionary recapitalization that may reduce the potential losses.
The bigger problem for Monte Paschi, is the recent plunge in deposits, which as reported yesterday has suffered a €14bn rush of deposit outflows in the nine months from January to September this year – 11 per cent of its total deposits, as shown in the following FT chart.
Should the nationalization fail to stem the bank run, either at Monte Paschi, or other Italian banks, more bailouts are imminent.
END
Italy and its banks
A good history lesson on banks. Italy proves that these entities are not risk free as everybody will begin to find out tonight
(courtesy Simon Black/Sovereign Man)
Italy Proves That Banks Are Not The Risk-Free Fantasy We’re Told To Believe
Submitted by Simon Black via SovereignMan.com,
In the late 1400s, the city-states of Italy were among most dominant powers in the world.
Most of the city-states had abandoned the feudal system that persisted across Europe.
So Italy was one of the only places on the continent where anyone, including foreigners, could work hard, take risks, and become wealthy.
People could start businesses and own private property– revolutionary concepts in the 1400s.
Italy was truly the America of its day, and people from all over Europe flocked to the city-states in search of wealth and freedom.
Scientific, medical, and technological advancement flourished, as did commerce and banking.
The Medici Bank in Florence was by far the largest bank in Europe in the 1400s, and they helped popularize a double-entry system of accounting and the widespread use of credit, both of which still define modern banking.
Early Renaissance banks realized that hauling giant bags of gold coins across the countryside to settle payments with one another was expensive and risky.
Instead, every time they made or received a payment, the banks would adjust their accounting ledgers and then periodically get together to make sure everyone’s numbers matched up.
Italian banks perfected this technique and developed a comprehensive set of accounting rules that everyone followed.
When the bank Monte dei Paschi di Siena was founded in 1472, they adopted this system as well.
What’s interesting is that Monte dei Paschi di Siena still exists today (just barely).
And they’re basically still using the same system.
Despite all of our modern technology, commercial banking has changed very little over the past 5+ centuries.
Even today, whenever banks transact with one another, they’re merely making accounting entries in their ledgers.
It’s not like there’s actually any money that changes hands. Banks don’t FedEx cash or coin to one another to settle up. It’s all just digits on an electronic balance sheet.
The biggest “advance” in modern banking has been the involvement of government and central banks.
Back in the Renaissance, banks spent years building up a solid reputation as conservative, responsible custodians of other people’s money.
They had to earn their customer’s trust the old-fashioned way. It wasn’t handed to them by some government agency.
Today, few people give a single thought about their bank.
We’ve been programmed to sign over our life’s savings to a complete stranger simply because the government says it’s OK.
That same government has lied to us about everything else imaginable, ranging from the existence of Weapons of Mass Destruction to whether or not he had “sexual relations with that woman.”
Yet this government-sanctioned trust is routinely abused.
Hardly a month goes by these days without a major banking scandal.
Wells Fargo is in the spotlight right now for having fraudulently manufactured new accounts without customers’ consent (and then charging FEES on top of that).
And right this moment Wells Fargo is scrambling once again for submitting a questionable solvency plan to the Federal Reserve.
But that’s just the tip of the iceberg.
Banks have been caught red-handed colluding to manipulate interest rates, exchange rates, and commodities prices.
They force law-abiding customers to jump through bureaucratic hoops to prove that we aren’t criminal terrorists, but then giant banks like HSBC and Barclays literally do business with terrorist groups.
They maintain very loose controls, allowing “rogue traders” to lose billions of dollars on stupid bets.
And they maintain a strict culture of secrecy.
As depositors, we don’t have the foggiest idea what our banks are actually doing with our money.
Their financial statements provide cursory summary numbers for categories like “LOANS” or “INVESTMENTS”.
But there’s no detail for us to see whether those loans and investments are safe and conservative… or whether they’ve put our savings in danger once again.
Banks also notoriously abuse accounting tricks to massage their numbers and hide losses.
One common technique that banks have used over the last few years is reclassifying their bond investments.
Typically a bank has to report the gains and losses of its bond investments each quarter.
But banks have the option to reclassify their bond investments into a different category called “hold to maturity,” in which they no longer have to report the losses.
As you can imagine, when bond values decline, many banks conveniently reclassify their portfolios, thus hiding the losses.
Amazingly enough, this deceit is totally legal under modern accounting rules.
Look, I’m not suggesting that banks are about to collapse. Some of them are in great shape.
And others… yeah, they’re about to collapse. Like Monte dei Paschi di Siena, and most of the rest of the Italian banking system.
What’s important is to realize that banking is a black box with zero transparency, NOT the risk-free fantasy that we have been told.
We can see this right now in Italy.
If a bank goes under, shareholders will be wiped out first.
But as a depositor, you’re actually a creditor of the bank– an unsecured creditor who has nothing more than a claim on your account balance.
Most countries, including Canada, the United States, and most of Europe, have passed “bail-in” legislation to penalize a bank’s creditors in the event they collapse.
Europe’s Union Bank Recovery and Resolution Directive became effective on January 1st, and the Federal Reserve is issuing a new bail-in rule next week.
So, depositors can be on the hook for a bank’s losses as well, just as we saw in Cyprus back in 2013.
Depositors are supposedly protected by deposit insurance like the FDIC.
But a single bank failure can easily wipe out these insurance funds (which happened in 2008).
And most governments are now too broke to recapitalize them.
Bottom line: It matters where you put your money. They evidence is pretty obvious that banks are not risk-free.
Why take the chance?
You can quickly mitigate these risks at practically zero cost by holding a portion of your savings in a safer, better capitalized bank… or outside the banking system in physical cash or gold.
end
What!! Barclay’s have committed mortgage securities fraud and they do not settle??? They wish that their case goes to trial!!. Remember that they must provide now discoveries and that is something they loathe.
this should be interesting…
(courtesy zero hedge)
In Rare Move, US Sues Barclays For Mortgage Securities Fraud
The market was waiting for the DOJ to announce the long-awaited settlement with Deutsche Bank today. Instead, it got news of a surprise lawsuit filed by the DOJ which sued Barclays after failing to settle a long-running probe into the UK bank’s involvement in pre-crisis mortgage fraud. Deutsche Bank and Credit Suisse are in settlement negotiations with the DOJ over similar claims.
According to the 198-page lawsuit, the British bank deceived investors about the quality of loans underlying tens of billions of dollars of mortgage securities between 2005 and 2007 and “engaged in a fraudulent scheme to sell tens of billions of dollars of residential mortgage-backed securities (RMBS), in which it repeatedly deceived investors about the characteristics of the loans backing those trusts.’’ The suit also said that the bank “systematically and intentionally misrepresented key characteristics of the loans.”
The lawsuit is rare for the big banks, which tend to negotiate a settlement rather than risk a trial, suggesting that Barclays is confident the final lawsuit terms, including protracted legal fees, would be more beneficial to the bank than to settle. As Bloomberg notes, the breakdown in talks suggests that the bank is willing to take its chances with the incoming enforcement officials in the Trump administration.
As Bloomberg also added previously, Barclays executives tried to draw the line at $2 billion in settlement charges which made an opening offer it deemed too high. The Justice Department’s starting point for negotiations wasn’t disclosed. At the same time Deutsche Bank is negotiating to lower its own settlement in a similar cash, in which the German bank is hoping to significantly reduce the amount it has to pay from the original DOJ “ask” of $14 billion.
Barclays said in a statement that the claims in the lawsuit are “disconnected from the facts” and that it has an obligation to defend against “unreasonable allegations and demands.” In terms of demands, Barclays was apparently referring to negotiations with the Justice Department to settle the claims without a case being filed.
“Barclays rejects the claims made in the complaint,” the bank said in a statement, adding that it considers the allegations “disconnected from the facts.” The statement also said “we have an obligation to our shareholders, customers, clients, and employees to defend ourselves against unreasonable allegations and demands.”
As of this summer, the U.K. bank had set aside £2.5 billion ($3.1 billion) to cover fines and litigation more generally.
“Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity,” the statement said. Barclays has lined up a lawyer known for his aggressive defense of clients including Lt. Col. Oliver North.
As the WSJ adds, investors have feared that a sizable fine will eat into Barclays’s capital position. The litigation will prolong the uncertainty around the settlement and likely weigh on the bank’s share price. The British bank is currently selling down assets in Europe and Africa to try to bolster its capital position. It still faces a number of civil suits on mortgage-backed securities.
Major U.S. banks including JPMorgan and Bank of America have already paid tens of billions of dollars to settle with U.S. authorities over their pooling and sale of the securities.
According to the lawsuit against Barclays, more than half the underlying loans in $31 billion worth of mortgage loans pooled into 36 deals defaulted
The full DOJ complaint can be found here: “United States Sues Barclays Bank to Recover Civil Penalties for Fraud in the Sale of Residential Mortgage-Backed Securities”
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
the Saudis expect oil to trade in the 51 dollar area in 2017 rising to 65 dollars by 2019. It expects its budgetary deficit to lower to 8% of GDP which is still extremely high. However it will spend 20% on its budget on military. It expects global growth to come in at 3.4% which is way too high.
(courtesy zero hedge)
Saudis Forecast $51 Oil In 2017 Rising To $65 By 2019; Will Spend 20% Of Total Budget On Military
After suffering two record budgets shortfalls in 2015 and 2016 as a result of plunging oil prices, and which nearly brought both Saudi Arabia’s economy and banking sector to a standstill, not to mention billions in unpaid state worker wages at least until generous foreign investors funded the Kingdom’s imminent cash needs with its first, and massive, bond sale ever, today Saudi Arabia released it budget outlook for the next year.
And while the Saudis believe the country’s budget deficit will fall modestly next year even with an increase in spending, it is still set to be a painful 8% of GDP suggesting the Saudi cash burn will continue even with some generous oil price assumptions.
The budget deficit for 2017 is expected decline 33% to 198 billion riyals ($237 billion), or 7.7% of GDP, from 297 billion riyals or 11.5% of GDP in 2016 year and 362 billion riyals in 2015, the Finance Ministry said in a statement on its website on Thursday. In 2016, the finance ministry said its spending of 825 billion riyals ($220 billion) was under the budgeted 840 billion, and the 2016 budget deficit came to 297 billion, below the 362 billion in 2015.
The 2017 will be deficit is the result of 890 billion riyals in spending, 8% higher than in 2016, offset by 692 billion riyals in revenue, of which oil revenue is expected to contribute over two thirds, or 480 billion riyals, with non-oil revenue providing the remainder, or 212 billion. Of the biggest spending categories, the top one remains education, with 200 billion ryals budgeted, followed immediately in second place by military spending at 191 billion riyals.
As Bloomberg notes, “the world’s biggest oil exporter has faced a fiscal crunch since crude prices plunged, and this year implemented a series of unpopular austerity measures — including lowering energy and water subsidies, raising visa fees and cutting the take-home pay for civil servants. In April, Deputy Crown Prince Mohammed bin Salman rolled out the so-called Saudi Vision 2030 plan to end the kingdom’s “addiction” to oil.”
Which is why much attention will be focused on the revenue side, where the Saudis agreed to implement “selective taxes” on tobacco, soft and energy drinks during fiscal year 2017, according to the Saudi budget statement.
Amusingly, for those who get offended at Y-axis violations, here are the Saudis doing the same with the X-axis, which shows the collapse in oil revenue… from right to left.
When looking at its oil indsutry, the Kingdom expects its to grow 3.37% in 2016, with the refining industry set to grow 14.78%, Finance Ministry says in statement on its website. The government said it will review subsidies, including adjustments for petrol products, water and electricity, and re-pricing over next 5 years to achieve efficient use of energy, preserve natural resources, avoid irrational use, support middle or low income citizens, establish competitive business sector. The subsidy system for oil products, water and electricity was adjusted and re-priced in 2016.
The government is planning to have a “balanced” national budget by 2020. The 2016 budget deficit is 9 percent lower than the government’s initial estimate, while the International Monetary Fund predicted the 2017 deficit would be 9.5 percent of Saudi Arabia’s GDP. The government expects to spend 890 billion riyals next year — 8 percent higher than in 2016.
Finally, and most importantly, here are the assumptions the Saudis base their forecasts on. The Kingdom expects 3.4% global GDP growth in 2017, leading to a 1.1% increase in oil demand to 95.3mmbbl in 2017, resulting in an average oil price of $50.6.
Finally, while not revealed in the actual budget, according to Arabiya, here are the Saudi oil forecasts for oil, in both the base and conservative scenarios: the Kingdom sees oil trading between $49 in the conservative case, to $55 in the main, or “base case”, eventually rising to $65 in 2019.
Base Case scenario for oil prices:
- 2017: $55
- 2018: $61
- 2019: $65
Conservative Scenario for oil prices:
- 2017: $49
- 2018: $52
- 2019: $55
- 2020: $58
Of course, if Saudi Arabia is wrong, expect this chart, also when read from right to left, to continue surging, as Saudi debt explodes.
Syrian Army Says Aleppo Has Returned To Government Control
The battle for Aleppo is officially over.
Having concluded the evacuation of rebels from their last enclave in the eastern part of the city, the Syrian army said Aleppo has returned to government control, ending the 4-year rebel control over parts of the city that years ago was the largest metropolitan center in Syria and is now a landscape out of Call of Duty.
A statement broadcast on Syrian TV said the army has re-established “security and safety” in the northern city which has been liberated from “terrorism and terrorists.”
Regaining Aleppo represents a momentous victory for President Bashar Assad and a crushing defeat for Syria’s opposition which will struggle to forge a way forward.
The ancient city has been divided into rebel and government parts since 2012.
A SANA reporter wrote previously on Thursday that the last stage of evacuating terrorists and their families from eastern Aleppo was underway.
end
6.GLOBAL ISSUES
NONE TODAY
7. OIL ISSUES
NONE TODAY
8. EMERGING MARKETS
none today
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings THURSDAY morning 10:00 am
Euro/USA 1.0448 UP .0023/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 117.64 UP 0.026(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 1.2344 DOWN .0007 (Brexit by March 201/UK government loses case/parliament must vote)
USA/CAN 1.3469 UP .0037 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT FROM EU)
Early THIS THURSDAY morning in Europe, the Euro ROSE by 23 basis points, trading now WELL BELOW the important 1.08 level RISING to 1.0448; 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 UP 2.13 0r 0.07% / Hang Sang CLOSED DOWN 173.60 POINTS OR 0.80% /AUSTRALIA IS HIGHER BY 0.53% / EUROPEAN BOURSES ALL IN THE RED
We are seeing that the 3 major global carry trades are being unwound. The BIGGY is the first one;
1. the total dollar global short is 9 trillion USA and as such we are now witnessing a sea of red blood on the streets as derivatives blow up with the massive rise in the rise in the dollar against all paper currencies and especially with the fall of the yuan carry trade. The emerging market which house close to 50% of the 9 trillion dollar short is feeling the massive pain as their debt is quite unmanageable.
2, the Nikkei average vs gold carry trade ( NIKKEI blowing up and the yen carry trade HAS BLOWN up/and now NIRP)
3. Short Swiss franc/long assets blew up ( Eastern European housing/Nikkei etc.
These massive carry trades are terribly offside as they are being unwound. It is causing global deflation ( we are at debt saturation already) as the world reacts to lack of demand and a scarcity of debt collateral. Bourses around the globe are reacting in kind to these events as well as the potential for a GREXIT>
The NIKKEI: this THURSDAY morning CLOSED DOWN 16.82 POINTS OR 0.09%
Trading from Europe and Asia:
1. Europe stocks ALL IN THE RED
2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 173.60 OR 0.80% Shanghai CLOSED UP 2.13 POINTS OR 0.07% / Australia BOURSE IN THE GREEN /Nikkei (Japan)CLOSED DOWN 16.82 POINTS OR 0.09%/ INDIA’S SENSEX IN THE RED
Gold very early morning trading: $1130.70
silver:$15.86
Early THURSDAY morning USA 10 year bond yield: 2.551% !!! UP 2 IN POINTS from WEDNESDAY 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 3.122, UP 0 IN BASIS POINTS from WEDNESDAY night.
USA dollar index early THURSDAY morning: 102.92 down 8 CENT(S) from WEDNESDAY’s close.
This ends early morning numbers THURSDAY MORNING
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And now your closing THURSDAY NUMBERS
Portuguese 10 year bond yield: 3.803% UP 3 in basis point yield from WEDNESDAY (does not buy the rally)
JAPANESE BOND YIELD: +.056% DOWN 1/2 in basis point yield from WEDNESDAY/JAPAN losing control of its yield curve
SPANISH 10 YR BOND YIELD:1.401% UP 4 IN basis point yield from WEDNESDAY (this is totally nuts!!/
ITALIAN 10 YR BOND YIELD: 1.852 UP 3 in basis point yield from WEDNESDAY
the Italian 10 yr bond yield is trading 45 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.261% UP 1 IN BASIS POINTS ON THE DAY
END
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IMPORTANT CURRENCY CLOSES FOR THURSDAY
Closing currency crosses for THURSDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM
Euro/USA 1.0441 UP .0016 (Euro UP 16 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 117.59 DOWN: 0.028(Yen UP 3 basis points/
Great Britain/USA 1.2300 DOWN 0.0051( POUND DOWN 51 basis points)
USA/Canada 1.3495 UP 0.0064(Canadian dollar DOWN 64 basis points AS OIL ROSE TO $53.01
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This afternoon, the Euro was UP by 16 basis points to trade at 1.0441
The Yen ROSE to 117.59 for a GAIN of 3 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 51 basis points, trading at 1.2300/
The Canadian dollar FELL by 64 basis points to 1.3495, WITH WTI OIL RISING TO : $53.01
Your closing 10 yr USA bond yield UP 1 IN basis points from WEDNESDAY at 2.548% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 3.129 UP 1 in basis points on the day /
Your closing USA dollar index, 102.98 DOWN 2 CENT(S) ON THE DAY/1.00 PM
Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY: 1:30 PM EST
London: CLOSED UP 22.26 POINTS OR 0.32%
German Dax :CLOSED DOWN 12.54 POINTS OR 0.11%
Paris Cac CLOSED UP 0.81 OR 0.02%
Spain IBEX CLOSED DOWN 38.10 POINTS OR 0.41%
Italian MIB: CLOSED DOWN 94.33 POINTS OR 0.49%
The Dow was DOWN 23.08 POINTS OR .12% 4 PM EST
NASDAQ WAS DOWN 24.01 POINTS OR .23% 4.00 PM EST
WTI Oil price; 53.01 at 1:00 pm;
Brent Oil: 55.03 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 60.97 (ROUBLE UP 25/100 roubles from YESTERDAY)
TODAY THE GERMAN YIELD RISES TO +0.261% 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:$52.71
BRENT: $54.78
USA 10 YR BOND YIELD: 2.553% (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)
USA 30 YR BOND YIELD: 3.128%
EURO/USA DOLLAR CROSS: 1.0436 up .0011
USA/JAPANESE YEN:117.54 down 0.069
USA DOLLAR INDEX: 103.07 up 7 cents (BREAKS HUGE resistance at 101.80)
The British pound at 5 pm: Great Britain Pound/USA: 1.2283 : down 68 BASIS POINTS.
German 10 yr bond yield at 5 pm: +.261%
END
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM
Investors ‘Shocked’ As Dow Suffers Longest Losing Streak Since Election
The Dow Jones Industrial Average shocked investors today as it suffered a second consecutive day of losses – the first time since before the election…
Despite best efforts at slamming VIX once again (for the 5th day in a row), Dow 20k eludes…
Another disappointed trader…
DOW almost 20000#GIDDYUP be patient #EmeraldCity is getting closer and closer
US Stock market breadth remains weak…
Small Caps and Trannies slipped into the red for the week, S&P (green) managed to bounce off unch for the week…
Retail stocks were monkey-hammered – worst day since May – on personal income weakness and reported holiday spending drop…
Off the pre-Election lows, Small Caps remain the biggest winner (and Nasdaq the laggard)…
As a reminder all of the market’s gains of the last two years are in this post-Trump period…
Financials slipped lower for a 2nd day (now red post-Fed)…
Monte Paschi Sub bonds bloodbath’d as the bailout/bailin looms (20c on the dollar?)
But post-Referendum, Unicredit has exploded…
Slightly off topic, we note that Indian stocks are now red year-to-date…
And Philippines stocks have plunged since Duterte slammed Obama…
The USD index limped higher on the day thanks to Sterling and Aussie weakness…
4th day in a row of overnight Treasury selling and US day session buying…
Silver took a tumble today after panic bids around the US open, crude fell back into the red for the week…
Bitcoin was aggressively bid to 3 years highs (China and India)…
END
Is the auto industry slowdown signalling trouble ahead for the USA economy?
(courtesy zero hedge)
Is The Auto Industry Slowdown Signaling Trouble Ahead For The Overall Economy
While it’s not as applicable today, there used to be a saying that “as goes GM, so goes the economy.” While the “Big 3” aren’t quite as big as they used to be, they still offer vital clues about the overall economic health of the United States. Unfortunately for anyone who has been paying attention, those “vital clues” are all flashing red warning signs as each passing day seems to bring more news of idled plants and/or shift reductions (see here and here). Of course, rising interest rates, tightening credit, softening used car prices and rising subprime auto delinquencies just as the North American auto SAAR seems to be peaking out well above normalized replacement volumes are probably not great signs either.
Perhaps that’s why Goldman’s David Tamberrino recently downgraded the U.S. auto industry on the thesis that sales would trend back toward normalized demand of 15mm units per year over the next two years. Of course, as we’ve pointed out numerous times in the past we tend to agree with his assessment of normalized demand based on a driving age population of 255mm and a 17.5 year vehicle useful life which implies normalized demand for annual sales of ~14.6mm units.
We lower our Autos and Auto Parts coverage view to Cautious from Neutral. As we progress through the later stages of the US auto cycle, we expect a sales plateau through 2017 held up by increasing OEM incentives. Beyond this, we see US light vehicle sales mean reverting back toward normalized SAAR of 15mn from 2018 through 2020 as pent-up demand clears through. In addition, as we dissect some of the drivers of the later stage growth, we expect the non-recurrence of several tailwinds (higher leasing penetration, higher non- and sub- prime FICO score penetration) in addition to macroeconomic factors (rising interest rates and crude oil prices) to be headwinds to further growth and the favorable pricing environment for both OEMs and suppliers.
Meanwhile, Deutsche Bank’s Tim Rokossa was slightly more constructive on U.S. autos in his “2017 Auto Industry Outlook” piece published this morning. Ironically, however, his “optimistic near term outlook” came in spite of his warnings on “further declines” of used car prices, rising rates, “credit tightening” and “lengthening ownership cycles”…apart from those minor issues everything it just fine.
Used vehicle prices have begun to moderate, and we’ve been anticipating further declines (lower trade-in values hurt new car affordability; more attractive used vs. new prices also cannibalize new car sales).
We expected rates to start rising.
Credit has been tightening (Note the Fed’s Sr. Loan Officer Survey, Ford pulling back on leases, several lenders pulling back on subprime).
We expected ownership cycles to lengthen (due to longer loan terms over the past few years, rising levels of negative equity in trade-ins).
Yes, we should probably ignore the fact that declining interest rates and lengthening terms allowed U.S. consumers to increase their average vehicle purchase price by 21% from 2008 to 2016 with only a modest 5% increase in monthly payment. Good-bye Ford Focus, hello BMW 3-Series.
Of course, we should probably also ignore this rise in 61+ day delinquencies among GM’s subprime borrowers.
As Barclays’ Chief U.S. Economist Michael Gapen recently wrote in an article for The Hill, “something’s gotta give and we think that time may be coming.”
Altogether, it is likely that the greater use of incentives, availability of credit, and willingness of automakers to hold additional inventory above historical norms reflect a preference for quantity of sales over quality. These trends have limits, as automakers cannot sacrifice margins and earnings forever.
As the saying goes, something’s gotta give. We think that time may be coming.
END
Durable goods tumble the most in over two years:
(courtesy zero hedge)
Despite Trump Hope, Durable Goods Tumbles Most Since Aug 2014 As Non-Defense Orders Crash
Despite exuberance in soft “survey” data post-Trump, as hope for change re-appears, “hard” data continues to disappoint with Industrial production weakness and now durable goods orders tumbling 4.6% MoM (slightly better than expected -4.8%) – the biggest drop since Aug 2014.
Aside from the reactive drop in 2014 after the big Boeing order, this is the biggest MoM drop since summer 2013…
Durable Goods New Orders decline YoY once again (-0.5%) as ex-defense orders crashed 6.6% MoM (-2% YoY).
END
Q3 GDP (final) comes in at 3.5% with higher consumer spending, government spending. Financial profits surged. However most of gain came from exports namely soybeans which was almost half of the gain. With the higher dollar it will be extremely difficult to main that kind of growth
(courtesy zero hedge)
Q3 GDP Revised To 3.5% On Higher Consumer, Government Spending; Financial Profits Surge
In the third and final estimate of Q3 GDP, the BEA reported that real gross domestic product increased 3.5% in the third quarter of 2016, above the 3.3% expected . The growth rate was 0.3% higher than the “second” estimate released in November, when it printed 3.2%, and well above the first estimate of 2.9% from two months ago.
However, a quick read beneath the lines shows that, as shown prior, the bulk of the growth was driven by a surge in soybean exports, which contributed 1% of total GDP growth. Add spending on utilities (i.e. air condition bills) and inventories, which contributed 0.5% of the bottom line growth print, and that covers more than half of the 3.5% GDP print the quarter.
The revised growth estimate, the fastest in two years, reflected updated figures on research and development expenses from companies, spending by nonprofit institutions and use of financial services. The upward revision to third-quarter GDP growth reflected upward revisions to business investment, to consumer spending, and to state and local government spending. In the second quarter, real GDP rose 1.4%. However, the economy is unlikely to sustain such a pace in the final three months of the year, when it is expected to slow down to 2.2% SAAR, according to the median estimate.
On a year over year basis, GDP grew 1.7%.
The increase in real GDP partly reflected an increase in consumer spending on services, notably on housing and utilities. Consumer spending on durable goods also increased, notably on motor vehicles and parts. However, spending on nondurable goods declined. Overall, Personal Consumption Expenditures contributed 2.03% of the bottom line annualized GDP print, up from 1.9% last quarter. As a result, spending, which account for almost 70 percent of the economy, grew at a 3% annualized rate, stronger than the 2.8% pace previously estimated, and was driven largely by increased spending on services..
While the spike in personal consumption will be a welcome sign, it begs the question how much was pulled forward from the Q4 GDP print, which is expected to slow down notably to around 2.0%
Exports of goods increased, notably in foods, feeds, and beverages and in consumer durable goods. Exports of services increased, mainly in travel. In addition, private inventory investment and federal government spending increased.
As a reminder, the biggest contributor to the Q3 jump was a surge in exports, mostly in the form of Soybeans, which contributed $50 billion of the annualized $144 billion Q3 increase.
Net trade contributed a total of 0.85% in the third quarter. Offsetting these contributions to growth, investment in equipment and in residential housing declined.
Fixed investment was revised just fractionally higher, printing at 0.02% thus ending the series of 3 consecutive quarters of negative prints. Corporate spending on equipment decreased at a 4.5% annualized pace in the third quarter, compared with the 4.8% drag previously estimated, and subtracted 0.3 percentage point from growth, the report showed.
Final sales to domestic purchasers increased at a 2.1% rate, compared with the prior estimate of a 1.7% pace.
Corporate profits increased 5.8% at a quarterly rate in the third quarter after decreasing 0.6% in the second quarter. Profits of domestic nonfinancial corporations increased 5.7 percent after decreasing 4.6
percent. The biggest contributor to the growh was profits of domestic financial corporations which soared 11.3 percent after rising 1.3 percent.
Profits from the rest of the world were nearly unchanged after increasing 10.3 percent. Over the last 4 quarters, corporate profits increased 2.1 percent.
end
Strange jobless claims again. After a huge plunge into the November election it suddenly spiked higher in this latest release;
(courtesy zero hedge)
Initial Jobless Claims Spike To 6-Month Highs – Biggest Annual Rise Since May
For the first time since May, initial jobless claims are now higher year-over-year (surging to 275k last week – the highest since June).
Notice the “odd” plunge in claims into the election… anything to maintain confidence…
While the trend is notably bad post election, we do note that this is the 94th consecutive week with claims below 300,000 – the longest streak since 1969…
Question is – what happens next? Recession?
end
The Fed’s own National Activity Index and a favourite of Janet tumbles to 3 month lows post Trump victory:
(courtesy zero hedge)
Fed’s National Activity Index Tumbles To 3-Month Lows Post-Trump
As confidence and sentiment measures soar to record highs post-Trump, the real economy is just not living up to expectations. The Fed’s own “National Activity Index” tumbled to -0.27 in November – the lowest in 3 months (and 4th consecutive economic contraction).
CFNAI dropped to -0.27 in November as two of the four broad categories of the 85 indicators in the index decreasing in November…
Production-related and consumption-and-housing-related indicators both decreased. Employment-related indicators and sales, orders, and inventory indicators increased.
41 indicators improved from October to November as 44 declined.
A weighted basket of 85 indicators measuring four broad categories of the economy, the index is meant to provide a snapshot of national economic activity and inflation pressures. Readings at zero suggest the U.S. economy is growing at its long-run trend level while negative prints indicate below-average growth.
end
USA spending for the 3rd month in a row outpaced income growth and thus savings plunged. A harbinger of things to come:
(courtesy zero hedge)
Disposable Income Per Capita Grows At Weakest Rate Since 2014
For the 3rd month in a row, annual US spending growth has outpaced annual income growth (+4.2% spending vs +3.5% income).
However, both spending and income growth MoM disappointed (with incomes unchanged MoM – the weakest since Feb 2016).
Combine these two and the savings rate in November plunged to its lowest since March 2015.
Finally we note that Disposable Real Personal Income per Capita dropped from 39,292 to 39,247, increasing just 1.5% YoY – the weakest growth since 2014.
end
Mortgage rates rise and now home affordability drops to 8 yr lows:
(courtesy zero hedge)
Home Affordability Drops To 8-Year Lows As Mortgage Rates Surge
One week after Freddie Mac chief economist Sean Becketti warned that “if rates continue their upward trend, expect mortgage activity to be significantly subdued in 2017“, mortgage rates continued their upward trend. According to the latest update from the mortgage giant, the 30-year fixed reached 31-month highs, touching level not seen since April 2014 in the week after the Fed hiked its interest rate for the second time in the past decade.
The average rate for a 30-year fixed mortgage was 4.3%, up from 4.16% last week, Freddie Mac said in a statement Thursday. The average 15-year rate climbed to 3.52%, the highest since January 2014, from 3.37%.
Mortgage rates have surged since October, when the 30 Year fixed was offered at 3.40%, tracking a jump in Treasury yields on expectations of rising inflation.
Freddie Mac’s chief economist Becketti was more sanguine after last week’s unexpected warning, saying that “a week after the only rate hike of 2016, the mortgage industry digested the Fed’s decision. Following Yellen’s speech last Wednesday, the 10-year Treasury yield rose approximately 10 basis points. The 30-year mortgage rate rose 14 basis points to 4.30 percent, reaching highs we have not seen since April 2014.”
So what does this surge in yields mean? According to a separate analysis released by RealtyTrac, home affordability in the fourth quarter tumbled to the lowest level since the financial crisis, Q4 2008. In a nutshell the report found that:
- 29% of Local Markets Less Affordable Than Historic Norms, Highest Since Q3 2009;
- Annual Home Price Appreciation Outpaced Wage Growth in 81 Percent of Markets;
- Affordability Index Improved From Year Ago in 18 Percent of Markets;
According to the quarterly RealtyTrac report, 29% of U.S. county housing markets were less affordable than their historic affordability averages in the fourth quarter, up from 24 percent of markets in the previous quarter and up from 13 percent of markets a year ago to the highest share since Q3 2009 — when 47 percent of markets were less affordable than their historic affordability averages.
Nationally the affordability index in the fourth quarter was 103, down from 108 in the previous quarter and down from 116 a year ago to the lowest level since Q4 2008, when the national home affordability index was 102.
The report analyzed median home prices derived from publicly recorded sales deed data collected by ATTOM Data Solutions and average wage data from the U.S. Bureau of Labor Statistics in 447 U.S. counties with a combined population of more than 184 million. The affordability index is based on the percentage of average wages needed to make monthly house payments on a median-priced home with a 30-year fixed rate and a 3 percent down payment — including property taxes and insurance. An index of 100 indicates market affordability on par with historical norms while above 100 indicates more affordable than historic norms and below 100 indicates less affordable than historic norms.
Counties in New York, Dallas, San Francisco less affordable than their historic norms
Out of the 447 counties analyzed in the report, 130 counties (29 percent) had an affordability index below 100, indicating they are less affordable than their historic norms.
Counties with the lowest affordability index in Q4 2016 were Cumberland County, Tennessee in the Crossville metro area (58); Genesee County, Michigan in the Flint metro area (77); Denver County, Colorado (79); Adams County, Colorado in the Denver metro area (81); and Wilson County, Tennessee in the Nashville metro area (83).
The most populated counties that were less affordable than their historic norms in Q4 2016 included Kings County (Brooklyn), New York (affordability index of 91); Dallas County, Texas (91); Queens County, New York (95); Tarrant County, Texas, also in the Dallas metro area (93); and Alameda County, California, in the San Francisco metro area (93).
The most populated counties that were less affordable than their historic norms in Q4 2016 included Kings County (Brooklyn), New York (affordability index of 91); Dallas County, Texas (91); Queens County, New York (95); Tarrant County, Texas, also in the Dallas metro area (93); and Alameda County, California, in the San Francisco metro area (93).
Home price growth outpaced wage growth in 81 percent of counties.
Annual home price growth outpaced annual wage growth in 363 of 447 counties (81 percent) analyzed in the report, up from 77 percent of counties in the previous quarter and up from 57 percent of counties a year ago.
Since bottoming out in Q1 2012, the national median home price has increased 60 percent while average weekly wages have increased just 1 percent during that same timeframe.
The most populated counties where home price growth outpaced wage growth were Los Angeles County, California; Harris County, Texas, in the Houston metro area; Maricopa County, Arizona in the Phoenix metro area; San Diego County, California; Orange County, California; Miami-Dade County, Florida; Kings County, New York; and Dallas County, Texas.
Counties with the strongest annual growth in average weekly wages were Woodbury County, Iowa in the Sioux City metro area (15 percent); Maury County, Tennessee in the Nashville metro area (14 percent); Iredell County, North Carolina in the Charlotte metro area (11 percent); Walton County, Georgia in the Atlanta metro area (9 percent); Elkhart County, Indiana in the Elkhart metro area (8 percent); and King County, Washington, in the Seattle metro area (8 percent).
In conclusion, “Rapid home price appreciation and tepid wage growth have combined to erode home affordability during this housing recovery, and the recent uptick in mortgage rates only accelerated that trend in the fourth quarter,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “The prospect of further interest rate hikes in 2017 will likely cause further deterioration of home affordability next year. Absent a strong resurgence in wage growth, that will put downward pressure on home price appreciation in many local markets.”
So all the US economy needs is a burst in wage growth. Good luck.
end
Well that about does it
I will bring to you a commentary tomorrow
I wish everyone a very Merry Christmas and also
to our Jewish friends , a very happy Chanukah
Harvey
harveyorganblog.com 
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