Gold at (1:30 am est) $1200.90 DOWN $10.40
silver at $16.97: down 26 CENTS
Access market prices:
Tomorrow is inauguration day. Let us see if the manipulators no longer have the Fed’s blessing in their decades old continuing raid on gold and silver as they will need Trump’s blessing , something that he will probably not give..
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:
Shanghai FIRST morning fix Jan 19/17 (10:15 pm est last night): $ 1218.54
NY ACCESS PRICE: $1201.80 (AT THE EXACT SAME TIME)/premium $16.74
Shanghai SECOND afternoon fix: 2: 15 am est (second fix/early morning):$ 1217.14
NY ACCESS PRICE: $1201.85 (AT THE EXACT SAME TIME/2:15 am)
HUGE SPREAD 2ND FIX TODAY!!: $15.29
China rejects NY pricing of gold as a fraud/arbitrage will now commence fully
London Fix: Jan 19/2017: 5:30 am est: $1203.35 (NY: same time: $1204.25 (5:30AM)
London Second fix Jan 19.2017: 10 am est: $1196.05 (NY same time: $1196.90 (10 AM)
It seems that Shanghai pricing is higher than the other two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.
Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.
For comex gold:
NOTICES FILINGS FOR JANUARY CONTRACT MONTH: 41 NOTICE(S) FOR 4100 OZ. TOTAL NOTICES SO FAR: 1175 FOR 117,500 OZ (3.6547 TONNES)
NOTICES FOR JANUARY CONTRACT MONTH FOR SILVER: 122 NOTICE(s) FOR 610,000 OZ. TOTAL NUMBER OF NOTICES FILED SO FAR; 557 FOR 2,785,000 OZ
Let us have a look at the data for today
In silver, the total open interest ROSE by 2,161 contracts UP to 174,217 with respect to YESTERDAY’S TRADING. In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .871 BILLION TO BE EXACT or 124% of annual global silver production (ex Russia & ex China).
FOR THE JANUARY FRONT MONTH IN SILVER: 122 NOTICES FILED FOR 610,000 OZ.
In gold, the total comex gold FELL BY 2,313 contracts WITH THE FALL IN THE PRICE GOLD ($0.70 with YESTERDAY’S trading ).The total gold OI stands at 465,624 contracts.
we had 41 notice(s) filed upon for 4100 oz of gold.
With respect to our two criminal funds, the GLD and the SLV:
We had no changes in tonnes of gold at the GLD
Inventory rests tonight: 807.96 tonnes
we had no changes in silver into the SLV:
THE SLV Inventory rests at: 338.356 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 2,161 contracts UP to 174,217 AS SILVER ROSE 13 CENTS with YESTERDAY’S trading. The gold open interest FELL by 2313 contracts DOWN to 465,624 AS THE PRICE OF GOLD FELL BY $0.70 WITH YESTERDAY’S TRADING
2.a) The Shanghai and London gold fix report
2 b) Gold/silver trading overnight Europe, Goldcore
and in NY: Bloomberg
3. ASIAN AFFAIRS
REPORT ON JAPAN SOUTH KOREA NORTH KOREA AND CHINA
b) REPORT ON JAPAN
c) REPORT ON CHINA
i)China injects a record 1.034 trillion yuan (151 billion usa) into bank liquidity ahead of their new year. Inflation is something that we must be cognizant of:
( zero hedge)
ii)My goodness! China orders the local weather bureaus to stop issuing smog alerts as if citizens are not aware of its danger!
( zero hedge)
4 EUROPEAN AFFAIRS
i)No real change from the ECB: they leave QE at 60 billion euros per month but may revise higher or lower:
( zero hedge)
ii)As we have warned you on the huge risks to the European economy, Draghi’s comments were extremely dovish. He suggests that inflation is something that he is not worried about. In other words: expect him to untaper!!! Down goes the Euro
( zero hedge)
iii)More problems for Deutsche bank:
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
Russia continues to act statesmanlike: they invite the new President elect to the Syrian peace talks and again snubbing Obama:
(courtesy zero hedge)
7. OIL ISSUES
DOE reports a huge crude inventory buildup and thus oil goes down again
( zero hedge)
8. EMERGING MARKETS
My goodness! The Supreme Court Justice presiding over Brazil’s political scandal dies in a plane crash
( zero hedge
9. PHYSICAL MARKETS
i)Craig Hemke questions the wisdom of how the financial markets are operating”
( Craig Hemke/TFMetals)
ii)Your humour story of the day
iii)We brought this important story to you yesterday and today London’s Financial times comments on what it means:
( Rennison/London’s Financial Times/GATA)
iv)Mike Kosares is claiming (and correctly) that Trump will abandon the longstanding strong dollar policy initiated by Robert Rubin. This would be great for gold
( Mike Kosares/USAGold)
v)Now with this release of former classified CIA documents, you now know why gold is the enemy of the state:
( Smaul gld)
vi)Dave Kranzler comments on why gold and silver were whacked yesterday. For the past 10 years, every time a fed Chairman spoke, down went the precious metals. Our manipulators would not want gold and silver to rise while they were speaking. Yesterday was no different
( Dave Kranzler /IRD)
i)I do not like the looks of this; The FBI and 5 other USA agencies are now officially probing on whether the Kremlin covertly funded the Trump election:
( zero hedge)
ii)The key figure here is that over 700,000 more poor souls are claiming continual benefits than before the election two months ago. The crazy seasonal adjustments cause the initial claims to crash to 44 yr lows. Do not believe the latter data point..utter trash.
( zero hedge/BLS)
iii)This is a good sign: housing starts rise (rental units) as well as single family permits
iv)Another good sign: the Philly Fed index rises including almost all sub components. A worrying sign is the prices paid category as it indicates inflation is coming!
( zero hedge)
vi)With one day to go before he leaves the Presidency, Obama gives one last attempt to clean up the mess he started in Libya with the creation of ISIS:
( zero hedge)
vii)OH OH!! The USA government has been caught massively fabricating student loan defaults. The taxpayer is one the hook for billions of dollars!
( zero hedge)
viii)Michael Snyder comments on the end of the Obama administration and the huge problems he created but we are still in a mess:
( Michael Snyder)
Let us head over to the comex:
The total gold comex open interest FELL BY 2313 CONTRACTS UP to an OI level of 465,624 AS THE PRICE OF GOLD FELL $0.70 with YESTERDAY’S trading. We are now in the contract month of JANUARY and it is one of the poorest deliveries of the year.
With the front month of January we had a LOSS of 25 contract(s) DOWN to 107. We had 27 notices filed YESTERDAY so we GAINED 2 contract(s) or AN ADDITIONAL 200 oz WILL STAND for gold in this non active delivery month of January. For the next big active delivery month of February we had a LOSS of 14,614 contracts DOWN to 202,270.(feb 2016: 211,000 contracts). March had a GAIN of 308 contracts as it’s OI is now 1005. We are on a par with respect to OI when we compare data for open interest re the Feb 2016 contract.
We had 41 notice(s) filed upon today for 4100 oz
And now for the wild silver comex results. Total silver OI ROSE by 2,161 contracts FROM 172,056 UP TO 174,217 AS the price of silver ROSE 13 CENTS 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 non active delivery month of January and here the OI ROSE by 1 contract(s) RISING TO 230. We had 0 notice(s) filed on yesterday so we gained 1 silver contracts or an additional 5,000 oz will stand in this delivery month of January. The next non active month of February saw the OI rise by 35 contract(s) RISING TO 254.
The next big active delivery month is March and here the OI ROSE by 1706 contracts UP to 135,636 contracts.
We had 122 notice(s) filed for 610,000 oz for the January contract.
VOLUMES: for the gold comex
Today the estimated volume was 259,820 contracts which is good.
Yesterday’s confirmed volume was 238,607 contracts which is good
volumes on gold are getting higher!
|Withdrawals from Dealers Inventory in oz||nil|
|Withdrawals from Customer Inventory in oz||
|Deposits to the Dealer Inventory in oz||3000.000 oz
|Deposits to the Customer Inventory, in oz||
|No of oz served (contracts) today||
|No of oz to be served (notices)||
|Total monthly oz gold served (contracts) so far this month||
|Total accumulative withdrawals of gold from the Dealers inventory this month||3000.000 oz|
|Total accumulative withdrawal of gold from the Customer inventory this month||4,806,084.1 oz|
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 41 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)
|Withdrawals from Dealers Inventory||nil|
|Withdrawals from Customer Inventory||
|Deposits to the Dealer Inventory||
|Deposits to the Customer Inventory||
|No of oz served today (contracts)||
|No of oz to be served (notices)||
|Total monthly oz silver served (contracts)||557 contracts (2,785,000 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||18,343,304.6 oz|
And now the Gold inventory at the GLD
Jan 19/no changes in gold inventory at the GLD/Inventory rests at 807.96 tonnes
Jan 18/no changes in gold inventory at the GLD/Inventory rests at 807.96 tonnes
Jan 17/17/a deposit of 2.96 tonnes of gold/inventory at the GLD rests at 807.96 tonnes. I guess there is no more gold inventory to sent to C+Shanghai
Jan 13/17/there were no changes in gold inventory at the GLD/Inventory rests at 805.00 tonnes
Jan 12/2017/no change in gold inventory at the GLD/Inventory rests at 805.00 tonnes
Jan 11/no change in gold inventory at the GLD/Inventory rests at 805.00 tonnes
JAN 10/no changes in gold inventory at the GLD/Inventory rests at 805.00 tonnes
JAN 9/A WITHDRAWAL OF 8.87 TONNES OF GOLD FROM THE GLD/INVENTORY RESTS AT 805.00 TONNES
NPV for Sprott and Central Fund of Canada
Major gold/silver trading/commentaries for THURSDAY
Turkey, ‘Axis of Gold’ and the End of US Dollar Hegemony
Buy Gold and Lira, Sell Dollars To End “Economic Sabotage” – PM of Turkey
Gold Imports to Turkey Surge 688% In December
‘Tough Turkey’ today
Affinity for gold to save the day?
Central bank gold demand
Country’s gold reserves
Turkey Iran gold conduit
Axis of Evil to Axis of Gold
Conclusion: Gold as an insurance policy
With a ‘Hard Brexit’ looking more likely and Trump’s inauguration this week, 2017 is well and truly under way.
What we expect the year to hold is probably not even half of what it really will. But from what we know, the upcoming French and German elections, referendums, geopolitical crises, steps towards reverse globalisation and a third of global government debt yielding negative interest rates, governments are already prompting central banks and investors to turn to the one asset that has survived millennia of financial and monetary crises.
One that is highly liquid and convertible into other currencies – gold.
Whilst mining output remains relatively flat and we are at peak gold, Western central banks have stopped gold sales, large emerging market economies continue to increase their gold reserves. China, Russia (both top gold purchasers in 2016) and now Turkey, are the notable players.
Turkey’s President Recep Tayyip Erdogan reminded us of this when he called on his citizens to buy gold:
“Those who keep dollar or Euro currency under their mattresses should come and turn them into Liras or gold.”
This has been met by such support that, not only did Turkish gold imports surge 688% in December, to reach their highest monthly level in two years but, according to Reuters, “fervent supporters have offered free haircuts, fish and even tombstones to those who can prove they have done so.”
As a result, in December 2016 imports reached 36.7 tonnes, significantly more than the 4.65 tonnes seen in the same month in 2015. This accounted for more than one-third of the country’s annual imports of 106.2 tonnes, more than double 48.7 tonnes in 2015.
Before 1993, the Turkish gold market was not fully liberalised, since then the World Gold Council reports that they have seen ‘rapid growth of the sector’ and this is across all areas relevant to the physical gold market.
Encouragement to buy gold from the likes of Prime Minister Erdogan, who is very popular with huge swathes of the electorate, is not just a selfless act to protect citizens’ wealth during uncertain times in Turkey, the Middle East and across the globe. There are several factors at play here.
These factors should be considered with Turkey’s unique role in the global gold market, in mind. There is no country positioned in such a way (both geographically and politically) that plays all three major roles of producer, buyer and conduit, in the world of gold.
‘Tough Turkey’ today
Since 1950 the country has experienced at least one economic crisis per decade and today it is no secret that Turkey is struggling under both economic and political pressures. Along with heightened security concerns that have damaged the much relied-upon tourism sector, economic growth is sluggish, inflation is rising and a strong US dollar is not helping matters.
Despite this, Erdogan has recently tried to prevent the central bank from increasing interest rates.
All measures since taken by the central bank in order to boost liquidity in the system have lead to short-lived spikes in the Turkish lira. The Fitch-rating review on the 27th January is expected to downgrade the country’s credit rating to +BBB, something not even the failed coup made happen.
The push for support for gold is two-fold, first it is an attempt to boost trust in the central banking system which is in increasingly dire straights, the second is to support the underlying currency which is central to the ‘axis of gold’ (h/t Jim Rickards) that is Russia, China, Turkey and Iran. Both of these things push back against US dollar hegemony.
Gold to save the day?
Turkey’s citizens have long had an affinity to hold physical gold. It is rarely seen as an investment, few look at it as something that they will receive a return on. Instead it is a necessity and something that families hold for wealth preservation and as insurance.
In 2015 the World Gold Council published a report entitled ‘Turkey: Gold In Action’. Much of the report focused on the imports of the country:
“At an average of 181 tonnes per annum over the past 10 years, Turkey is the world’s fourth largest consumer of gold accounting for around 6% of global consumer demand, and we estimate that Turkish households have accumulated at least 3,500t of ‘under-the-pillow’ gold.”
Therefore, it was not unusual for citizens to act on the PM’s exhortation to buy gold when Erdogan made his statement in December. Gold is bought for insurance, rather than investment, and Erdogan has recognised this.
The fall in the lira has meant a slump in demand in recent years, but this has changed recently. Whilst Trump’s victory saw the Turkish lira plummet further, it also drove up gold demand. A move which has been termed the ‘Fear Trade’ by Frank Holmes.
Then Erdogan’s calls for citizens to buy gold not only boosted imports but also helped to give some respite to the currency’s fall. As a result, the Turkish lira has found some support. This may seem a little contradictory given the idea that gold will save the Turkish lira when citizens buy gold. If the gold has to be imported this puts further pressure on the currency and widens the trade deficit.
However, it may be that the majority of recycled gold is bought domestically, which accounts for a large proportion of gold purchases.
Central bank gold demand
The title of this section is misleading. Usually when we talk about central bank gold demand we are referring to how much the central bank has purchased for its own reserves. However, when it comes to Turkish central bank demand they don’t so much need to purchase gold, they just amend policy in order to accumulate others’ holdings and therefore demand more of the yellow metal.
According to WGC data, Turkey has the 14th largest amount of central bank gold reserves with 396.5 tonnes. However, this means little given a proportion of this includes gold holdings by commercial banks. At the bottom of the World Gold Council’s official central bank holding’s list they place a foot note on Turkey, that reads “Gold has been added to Turkey’s balance sheet as a result of a policy accepting gold in its reserve requirements from commercial banks.”
This is because in 2012 the Turkish central bank increased the amount of gold commercial banks could hold as reserves to meet their reserve liability requirements, to 20%. Any form of gold was accepted as collateral. The government were looking to mobilise ‘under the pillow gold’. Banks were also told that gold reserves could not count towards foreign currency liabilities.
The World Gold Council wrote in 2015, “By the end of 2013, commercial banks held around 250t, equivalent to US$10.4bn, some of which had been put to work supporting Turkey’s economy. Most of this was from investors switching Turkish lira and foreign currency into gold accounts. But it also includes 40t – about US$1.7bn – of Turkey’s “under- the-pillow” stock, which has been mobilised since mid-2012.”
The 20% was soon increased to 30% and as of September 2016, an additional 5% was permitted, in order to “…bring out residents’ gold into the economy and to increase foreign exchange reserves.”
It took until just 2014 for the central bank’s reserves to climb by 350% from 2011’s figures and saw gold become the top investment option amongst Turkish citizens’, ahead of real estate.
A central bank paper written in 2014 stated, “the new policy framework… has been successful in achieving a soft landing in the economy and lessening the financial stability risks”.
Since the liberalisation of the Turkish gold market, local banks have offered gold accounts for its citizens, however as of 2012 much of the privately held gold was outside of the banking system. Estimates vary as to how much is privately held, ranging from 3,500t to 5,000t.
The government has, since 2011 tried a number of routes and incentives to encourage citizens to get their gold into the banking system, this is part of the drive to reduce the risk of a liquidity crisis.
As Tim Ash, told the FT, “It’s essentially to further encourage banks to mop up the considerable gold savings of the population (under the mattress – might be uncomfortable), deposit these as part of reserve requirements, and then frees up FX, and potentially I guess lira liquidity when the need arises.”
The move to mobilise deposits did bring some positives (as mentioned above) the currency rose, interest rates fell along with the significant current account deficit, and government bonds were once again made ‘investment grade status.’
The move was seen as such a success that Central Bank governor Erdem Basci was awarded the Banker’s 2012 ‘Central Banker of the Year award’.
However, overall the ‘scheme’ has had varying results, so reports Metals Focus, “Although at its peak in June 2013 some 260 tonnes was held in gold deposit accounts, the bulk of this was made through cash payments, rather than from gold collected from the public…Furthermore,” “gold held in these deposits has since fallen sharply, to now stand at around 70 tonnes.”
Interestingly, we should note that despite Erdogan’s calls to support the lira and gold (and subsequent increases in gold imports) US dollar deposits by Turkish residents and non-bank companies rose for a third week, last week.
Gold is harder for citizens to move out of the financial system, the view is likely to be that when the time comes citizens will struggle to get deposits out of the system and instead they can be used to support the currency and the banking system.
The move to bring gold into the banking system is likely a move to prevent a situation whereby banks are unable to meet creditors’ demand for repayment – a liquidity crisis. This is something the country has been working to avoid since the 2000/2001 liquidity crisis in Turkey. However, it became something that looked like happening again in 2011.
The increase in gold reserves is also likely to be designed to counteract any leaps in domestic gold demand by providing a liquidity pool, so as to try and reduce the need to import gold and weaken the lira. However, this would leave banks wide open to a run, should depositors demand their gold back, en masse. Not impossible to imagine that their gold might not be so easy to get at in such a situation and a reason that Turkish people should keep some of their gold in secure storage in vaults internationally.
Country’s gold reserves
Arguably the country doesn’t need to go on a huge gold grab from its citizens. Turkey is Europe’s largest gold producer. Every year since 2001 gold production has climbed, from 2t in 2001 to 33.5t in 2013.
According to the World Gold Council, the Turkey’s Ministry of Energy & Natural Resources estimate gold reserves to be 840t, and resources to be as high as 6,500t. The government continues to encourage growth in the gold mining sector with well-considered incentive schemes to get mining companies up and running.
Gold recycling is also well-established in the country and there is strong supply-chain. With this and it’s growing mining sector it isn’t surprising that is one of a handful of countries that has more than one LBMA accredited refinery, an excellent position to be in as the gateway between Europe, Asia and the Middle East.
Whilst mined amounts may seem small compared to the likes of China, it is not be sniffed at given the potential resource and established recycling trade. Considering it’s geographical position and refineries, Turkey’s homegrown gold may well be very valuable to the country and its allies.
Conduit to Iran
It is not only Turkey’s rumoured plans for the gold it is bringing into the banking system and refining, that has grabbed the attention of the gold world but also its relationships and role as a conduit to other countries building up their gold reserves.
In May 2012 the Turkish Statistical Institute reported that gold sales to Iran, from Turkey, had increased by over 30 times in the first quarter of the year, gold exports between the two countries had increased by nine metric tonnes; in 2011 the amount exported was just 286kg.
Prior to 2012 the country had been a gold importer for 28 of the previous 31 years. It became an exporter when Iran began selling the country gas and accepted gold bullion as payment. This was, of course, done in order to circumvent international sanctions.
In 2012, I wrote, “In January it was reported that Turkey were preparing to bypass UN sanctions by trading with Iran for oil in exchange for gold…The Turkish government has assured the US that they will reduce oil imports from the Islamic Republic this year, however total trade increased by 47% in the first quarter of 2012 between the two countries. It is not surprising Iran has become one of Turkey’s biggest trading partners; the country benefited heavily from the Iran-Iraq war in 1980-1988, becoming a trading partner to both parties…
‘…It is this recent surge in trade with Iran which analysts believe accounts for the tripling in demand by Iran for Turkey’s precious metals, mainly gold. The longer the Islamic Republic remains isolated, the greater the trade in Turkish gold, and the longer high prices in the local market are maintained. Reuters report that the fall in the rial’s value against the dollar has caused an increase gold investment for savings purposes.”
This trade apparently continues today, explains Jim Rickards:
“Reliable data is not available for Iran, however, exports from Turkey and Dubai to Iran are significant, and there is good reason to conclude that Iran is also a rising gold power relative to the size of its economy.”
Axis of Gold
And where does all this lead to? The ‘Axis of Gold’, as entitled by Rickards. Once again, it is very important to consider Turkey’s geographical position and allies when it comes to gold demand.
“A major blind spot in U.S. strategic economic doctrine is the increasing use of physical gold by China, Russia, Iran, Turkey and others both to avoid the impact of U.S. sanctions and create an offensive counterweight to U.S. dominance of dollar payment systems…Russia, China, Turkey, and Iran constitute a new “Axis of Gold” prepared to undermine confidence in the U.S. dollar.”
This has been confirmed by Erdogan himself, as reported by Hurriyet, in early December last year. As the Turkish President Erodgan opened a new mall he took the opportunity to say a few words about the country’s foreign exchange ideas ‘“I proposed Putin the following: Let’s do our trade in local currencies. Whatever I buy [from you] I shall pay you in Russian ruble, and whatever you buy from me make the payment in Turkish Liras,” said Erdogan on December 3…
The move to accumulate gold in Russia is no secret, and as Putin advisor, Sergey Glazyev told Russian Insider, in April 2016, ‘The ruble is the most gold-backed currency in the world’.
The Hurriyet report continues:
He added that he had made the same offer to China and Iran and his offer was found reasonable. “We have given the necessary instructions to our central banks and we will try to conduct such [trade] relationships between us through this way,” Erdogan said.
Erdogan again reiterated his call to Turkish citizens to convert their foreign exchange into gold or the Turkish Lira. “Those who keep foreign currency under their mattress should come and turn them into lira or gold,” he said.’
Conclusion: Gold as an insurance policy
Turkey may well have major issues in many areas of its economy, but it is positioning itself for the changing of the monetary guard that we are slowly witnessing around the world, and it is using gold as its insurance and safe haven in the ongoing and soon to escalate currency wars.
Russia and China are poised for a weakening of the dollar and of the influence of the last superpower and indeed the potential political and financial contagion in the EU.
Turkey feels aggreived and sees itself as a victim of “economic sabotage” and of dollar “hegemony” and largely ignored by the EU when it comes to the refugee crisis and growing threat of terrorism.
All three countries have shown a strong affinity through gold across all levels – government, banking system and citizens.
Whether you think of the Turkey in Europe or not, there is no country on the continent that is able to play all three roles of producer, conduit and accumulator of gold in the same way that Turkey can.
The US dollar system currently rules the international payments sphere, but moves to step away from it are already in play by those in the ‘Axis of gold’. As Jim Rickards has pointed out
“…adversaries do not issue currencies that are potential alternatives to the dollar because of inadequate rule-of-law, immature bond markets, primitive capital markets infrastructure, or all three. The only feasible alternatives to dollar dominance are special drawing rights (SDRs) issued by the IMF, and gold.”
In an increasingly multi polar world where the heavily indebted, near bankrupt U.S. economy and by extension the U.S. dollar look very vulnerable, gold is the ideal currency for those seeking to protect themselves from the coming decline of the dollar.
This applies for all – for apolitical investors, for U.S. allies and especially as we have seen for the U.S.’ competitors and adversaries who are looking to operate beyond the realms of the US-dollar denominated SWIFT payments and dollar based monetary system.
Gold is highly liquid, cannot fall victim to cyber warfare and is very difficult to steal or confiscate if owned in the safest ways – allocated and segregated gold coins and bars in the safest jurisdictions in the world. It has throughout history and in recent months shown its safe haven attributes and value as a hedge against dollar and other fiat currencies weakness and devaluation.
Mike Kosares is claiming (and correctly) that Trump will abandon the longstanding strong dollar policy initiated by Robert Rubin. This would be great for gold
(courtesy Mike Kosares/USAGold)
|Trump is waving adios to the longstanding ‘strong dollar policy’|
| — Published: Thursday, 19 January 2017 | Print | Comment – New!
By Michael J. Kosares
IMPORTANT POST FOR LONG-TERM PORTFOLIO PLANNING
“Douglas Borthwick, managing director of Chapdelaine Foreign Exchange, argued in a note earlier this month that an incoming Trump administration, by throwing out the strong dollar policy, could use the currency as a linchpin in implementing its economic agenda: ‘With a removal of the Strong USD Policy, the US Dollar will weaken against its global counterparts. This will give the FED the ability to normalize US interest rates, as they can use the weaker USD and the resulting inflation as an excuse for raising rates. . .’”
MK note: We have come to an interesting crossroads for the gold market. Yesterday, vice-president elect Pence told Fox News that we now have a president who understands business and that a strong dollar hurts our exports. He made the inference that Trump would likely comment on the dollar regularly as president, something past presidents traditionally have shied away from doing.
Markets, as most of us know, move on sentiment as much as they do hard realities. Thus someone the stature of the U.S. president talking down the dollar is very important to market psychology – not just for gold but all markets. The Trump administration’s position has already had an effect on the gold market. Though gold has reacted rather modestly to Janet Yellen’s announcement two days ago of more interest rate hikes this year, it is nothing when compared to the waterfall drops following past announcements on the subject of higher rates.
Things have changed. . . . . .
MK note 2: As for the Fed using weak dollar sentiment as cover to boost rates, such increases are likely to stay behind the inflation curve. The quickest way to undermine, and in fact eliminate, a weak dollar policy would be to put rates high enough to create a positive real rate of return on dollar-based financial instruments. Real interest rates is what real money managers watch in terms of positioning their clients’ portfolios. I think the Fed understands that such a policy would undermine the Trump administration’s economic program. The fact of the matter is that it would also undermine the Fed’s attempt to “normalize” interest rates.
Below are charts covering the historical real rate of return on gold and the dollar. With respect to the real of return, gold has done spectacularly well over the past decade and a half and probably a key reason why gold investment demand has continued to grow over the past several years despite the lower price.
Now the question becomes: Has the Trump administration inadvertently conferred its blessing on the gold market?
Chart note: The extensions in the financial instruments’ bars above the CPI represent a positive real rate of return. When the CPI extends above the financial instrument, it represents a negative real rate of return. As you can see, at times gold’s real rate of return has been spectacular, as mentioned in the text above.
Now with this release of former classified CIA documents, you now know why gold is the enemy of the state:
(courtesy Smaul gld)
Declassified CIA Memos Reveal Probes Into Gold Market Manipulation
By Smaul gld
The CIA recently released a series of declassified 1970s memos relating to the gold market and the newly created SDR. These memos give new insight how the CIA viewed the gold market, the perceived manipulation of gold and the potential for the SDR to become a gold substitute in the international monetary system.
The classification of the documents is significant because “secret” is the CIA’s second-highest classification. The CIA notes unauthorized disclosure of secret information would cause “serious damage” to national security.
Each of the declassified gold and SDR documents was marked “SECRET” with a warning: “The document contains information affecting the national defense of the United States within the meaning of Title 18 sections 793 and 794 of the US Code.”
CIA Concerns of Gold Market Manipulation (link) – Document: Intelligence Memorandum – The World Gold Market- Semi Annual Review January – June 1970.
The 1970 CIA memorandum reviewed in the video below shows a CIA concerned about gold market manipulation by the Swiss whom they characterize as “in an excellent position to influence the London free market fixing.” The memorandum points to “strong circumstantial evidence that Zurich bullion dealers, under the leadership of the Union Bank of Switzerland are again manipulating the gold markets”
This manipulation in turn was interfering with an IMF agreement with South Africa to sell its gold to the IMF under certain conditions when it could not sell its newly mined out put on the free market:.
“While the [IMF] agreement essentially provides a floor of $35 an ounce for South African gold, it guarantees a free market supply large enough to keep the free market price at or near the floor at least through 1970.”
The CIA memorandum bemoans Swiss manipulation of the gold market: “There is strong circumstantial evidence that Zurich bullion dealers, under the leadership of the Union Bank of Switzerland are again manipulating the gold markets” “London bullion dealers had hoped that the 1969 agreement between the IMF and South Africa would restore London as the focal point of the world gold market. It has not.”
Ironically, as page 5 of the memorandum notes, much of the recent gold fix rigging exposed in recent year, was correctly anticipated by the CIA some 47 years ago:
“Manipulation of the free market price is suggested by the extremely narrow price range that prevailed for eleven consecutive weeks — from later January through mid-March. During this period, more than 85% of all morning and afternoon fixings fell within the $34.97 to $35.01 range, with nearly 40% of all quotations set at exactly $35.00.
Moreover, Swiss bullion dealers are in an excellent position to influence the London free market fixing. At each of some 255 morning fixing a year, the manager of Rothschild’s bullion and foreign exchange department suggests an opening price based on a previous half hour of intensive telephone conversations with people at the Bank of England and a host of others, mainly dealers in Switzerland. Representatives of the four other houses are in constant telephone contact with their trading rooms and these in turn are in direct communication with as many as a dozen key clients scattered across Europe. The result is that supply and demand conditions in Zurich are strongly reflected at the London fixings.”
* * *
CIA Talks up the IMF’s Strategic Drawing Rights (link) – Document: Intelligence Memorandum – Special Drawing Rights: Paper Gold In Action – September 1970
The gold standard under Bretton Woods Agreement was showing cracks in 1970. The CIA memorandum notes: “the only available means of increasing reserves abroad was through continued deficits in the US balance of payments, But the US no longer had excess gold reserves and other countries had become reluctant to accept large additions to their dollar holdings.”
The CIA memorandum reflects the tenuous position of the gold market and the inclusion of gold in the international monetary system just prior to the break up of the Bretton Woods Agreement in 1971. The CIA viewed the newly created SDR as a potential replacement for gold calling it: “a new type of liquidity as permanent as gold it self – to insure increases in liquidity”… “The SDR is a form of money and credit”
“SDRs can not be extinguished by being exchanged by gold -they can only be traded among central banks. And unlike gold, there are no private uses for SDRs that compete with their use as an international currency.”
CIA however concludes that “Nevertheless, SDRs are not soon likely to supplant the dollar in the international monetary system. Foreign central banks need working balances which are presently denominated largely in dollars.”
* * *
CIA Worries of Substantially Higher Gold Prices (link) – Document: Intelligence Memorandum Recent Trends in the Gold Market – October 1970
This memorandum grapples with the question; Why has there been a sharp rise in the price of gold? “in the absence of any monetary crisis there seems to be no obvious explanation for the recent substantial price in gold.”
“There is however strong circumstantial evidence that Zurich bullion dealers, under the leadership of the Union Bank of Switzerland are again manipulating the gold markets”
“London bullion dealers had hoped that the 1969 agreement between the IMF and South Africa would restore London as the focal point of the world gold market. It has not.”
“The present situation implies effective control of free market supplies by the Swiss commercial banks.”
The memo also cited a study that says “gold demand from industrial users and hoarders already exceed free world output…and several – less than interested individuals point to the inevitability of the free market gold price rising to as much as $100 per ounce by 1980.” That would represent a three-fold increase to the then prevalent price.
* * *
More in the video below
Dave Kranzler comments on why gold and silver were whacked yesterday. For the past 10 years, every time a fed Chairman spoke, down went the precious metals. Our manipulators would not want gold and silver to rise while they were speaking. Yesterday was no different
(courtesy Dave Kranzler /IRD)
JBGJ regards Indians buying less gold as cash crunch bites primarily as evidence that FOBs (Friends of Bloomberg) are not in gold. If India’s domestic gold market was as weak as presented there would be a significant discount to the world price…In reality the Government has struck a shattering blow at the trust Indians have in holding wealth in any form accessible to the Authorities. When things finally unglue, India’s propensity to hold gold will probably be found to have risen – John Brimelow’s Gold Jottings report – LINK.
Yesterday’s sell-off in gold occurred after the Comex floor had closed for the day. The period of time between when the Comex closes – 1:30 p.m. EST – and the CME’s Globex computer system trading closes for about an hour – 5 p.m. EST – is one of the least liquid trading periods of the 23 hour, 5-day trading week. It makes that period of time susceptible to manipulative price take-downs.
As it so happens, likely not coincidentally, Janet Yellen began speaking about monetary policy at 2 p.m. EST. She stated that the Fed expects a few interest rate hikes per year until 2019. Geez, that would take the Fed funds rate up to maybe 2%? Of course, helped along the by the bullion banks, the hedge fund trading algos grabbed the soundbytes spewing forth from Yellen and concomitantly sold paper gold and bought dollars. The dollar spiked up and gold was taken down to $1200. It traded below $1200 overnight on the “fumes” of yesterday.
Gold, silver and the mining stocks have had a nice move from late December to now. They will not go straight up. Technically the sector was set up to be susceptible to trading activity related to Fed soundbyte propaganda like yesterday. This is yet another buying opportunity. Buy a little every month when the price gets taken down in the paper market. According to the Indian data presented by Brimelow, India is a huge buyer of gold below $1200. China is a steady buyer regardless of the price.
The Trump presidency will usher in a period in which Orwell’s prophecies will shift into overdrive. Popular mistrust of anything and everything Government will accelerate and Big Government’s attempt to counter-act this movement will take place in the form of intensified propaganda and a further reduction in civil rights. Along with this influx of political and media chaos will be an increasing distrust of fiat paper “fake” currency, which means the public will likely buy even more gold and silver than it did in 2016. Note: the U.S. mint sold a record amount of gold eagles in 2016.
In today’s episode of the Shadow of Truth, we continue our discussion of the precious metals sector, including some analysis of the gold / silver ratio:
Craig Hemke questions the wisdom of how the financial markets are operating”
(courtesy Craig Hemke/TFMetals)
TF Metals Report: Questioning the generally accepted narrative
Submitted by cpowell on Wed, 2017-01-18 19:36. Section: Daily Dispatches
2:36p ET Wednesday, January 18, 2017
Dear Friend of GATA and Gold:
Taking inventory of the convention wisdom about the financial markets in 2017, the TF Metal Report’s Turd Ferguson notes today that it’s not doing so well. His commentary is headlined “Questioning the Generally Accepted Narrative” and it’s posted at the TF Metals Report here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
Your humour story of the day
Free candy bar more appealing to Californians than a free gold coin
Submitted by cpowell on Thu, 2017-01-19 02:14. Section: Daily Dispatches
9:17p ET Wednesday, January 18, 2017
Dear Friend of GATA and Gold:
Writer and provocateur Mark Dice this week once again took to the sunny streets of Encinitas, California, just north of San Diego, to reconfirm the ignorance of Americans — or Californians, anyway — about the monetary metals, as he offered passersby the choice of a free 10th-ounce gold coin or a free Snickers candy bar. If the three-minute video Dice has posted at You Tube about his experiment is representative, he couldn’t give away the gold coin and even sometimes had a hard time giving away the candy. At least one fellow accosted by Dice recognized that a social experiment of sorts was in progress, though he couldn’t quite figure it out.
Odds are that Dice will not attempt this experiment in Mumbai, Ho Chi Minh City, or Shanghai.
The video is posted at You Tube here:
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
We brought this important story to you yesterday and today London’s Financial times comments on what it means:
(courtesy Rennison/London’s Financial Times/GATA)
China cuts U.S. Treasury holdings to lowest level since 2010
Submitted by cpowell on Thu, 2017-01-19 02:22. Section: Daily Dispatches
By Joe Rennison and Eric Platt
Financial Times, London
Wednesday, January 18, 2017
China cut its holdings of U.S. Treasuries by $66 billion in November, reducing its position in the safe-haven debt to the lowest level since 2010 as the country battles to stabilise its currency.
The acceleration in sales — the largest monthly decline since December 2011 — threatens a rise in U.S. interest rates if it continues and follows an unwinding in October that saw China cede its position as the largest foreign holder of U.S. Treasuries to Japan.
China has been selling its foreign exchange holdings in part to support the renminbi, which has fallen 4 percent against the U.S. dollar since the start of last year. The fall in Treasury holdings is part of a wider campaign by Beijing to stem capital outflows. …
… For the remainder of the report:
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 DOWN to 6.866(SMALL DEVALUATION SOUTHBOUND /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/MORE $ USA DOLLARS LEAVE CHINA/OFFSHORE YUAN NARROWS COMPLETELY TO 6.8439 / Shanghai bourse CLOSED DOWN 11.71 POINTS OR 0.38% / HANG SANG CLOSED DOWN 48.30 OR 0.21%
2. Nikkei closed UP 177.88 POINTS OR 0.94% /USA: YEN FALLS TO 114.62
3. Europe stocks opened ALL IN THE RED ( /USA dollar index FALLS TO 100.70/Euro UP to 1.0668
3b Japan 10 year bond yield: RISES TO +.077%/ !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 114.62/ 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:: 51.50 and Brent: 54.46
3f Gold DOWN/Yen UP
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS AND SELLING THE SHORT END
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil UP for WTI and UP for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO +.392%/Italian 10 yr bond yield UP to 1.991%
3j Greek 10 year bond yield FALLS to : 6.69%
3k Gold at $1203.90/silver $16.99(8:15 am est) SILVER BELOW RESISTANCE AT $18.50
3l USA vs Russian rouble; (Russian rouble DOWN 9/100 in roubles/dollar) 59.60-
3m oil into the 51 dollar handle for WTI and 54 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT a SMALL 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 114.62 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 1.0054 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0726 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 +.392%
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 2.437% early this morning. Thirty year rate at 3.015% /POLICY ERROR)GETTING DANGEROUSLY HIGH
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Global Stocks Dip; Bond Yields, Dollar Rise After Yellen’s Rate Guidance; All Eyes On Draghi
After yesterday’s speech by Janet Yellen which signaled a path of steady interest rate increases and was perceived as hawkish, the dollar rebounded, Asian shares slipped and government bond yields jumped to multi-week highs on Thursday.
European, Asian stocks and US equity futures all decline together with commodity metals while oil rises on the API reported drop in crude inventories. The euro rebounded as investors look to Mario Draghi to address quickening inflation that make his stimulative policies look increasingly out of sync, even if the market is confident the ECB won’t make any changes to its policy today. That said the ECB may struggle to downplay the recent spike in Eurozone inflation.
Top news stories include Netflix reporting its biggest quarter ever, Credit Suisse resolving U.S. mortgage probe, France’s Safran buying Zodiac in $10 billion aviation deal.
In markets, the main focus for the past 24 hours has been once again on the fairly large moves across rates and FX, albeit moves which largely ended up being a reversal of the previous day’s price action. 10y Treasury yields closed a shade over 10bps higher yesterday at 2.430% while the USD index rebounded +0.60% and finished higher for the first time in over a week. Those moves were given a late boost by comments from Fed Chair Yellen who said that “it is fair to say the economy is near maximum employment and inflation is moving toward our goal”. She also said that while “it makes sense to gradually reduce the level of monetary policy support” the actual timing of the next Fed rate hike “will depend on how the economy actually evolves over coming months”. So a fairly straight bat approach.
As a result, the dollar gained almost one percent from Thursday’s lows against a basket of currencies, yields climbed in Europe, catching up with Treasuries which sold off yesterday after Fed chair Janet Yellen said the American economy is strong enough to warrant higher interest rates, bringing the ECB’s quantitative easing into sharper relief as policymakers led by Draghi meet today. Stocks fell, led lower by real estate after an indicator of U.K. house prices fell for the first time in five months in December as values slumped in London.
Yellen’s hawkishness appeared to be wearing off on Thursday, though, as investors, looking for further details on Trump’s plans to boost growth, remained cautious before the President-elect’s inauguration on Friday. As a reminder, Yellen will speak again later on Thursday, after European markets close, about the economic outlook and monetary policy.
The ECB is set to meet as the euro recovered some of the ground it lost overnight, but with no policy changes expected. However, hints of disagreements among the region’s monetary guardians could ruffle markets.
European stocks opened a tad higher with some big moves in single stocks, as Zodiac Aerospace surged following a takeover offer, and Moneysupermarket.com jumped after it reported strong results.
Asian shares edged down 0.2 percent, knocked back by the dollar. Bucking the trend of weaker Asian shares, Japan’s Nikkei stock index ended up 0.9 percent, helped by weaker yen.
“Of all the speakers we’re getting, either from Davos or from less ostentatious spots, the one I’m going to listen to most for now will probably still be Janet Yellen,” Societe Generale’s currency strategist Kit Juckes said cited by Reuters. “As the U.S. economy approaches full employment, as wages rise but inflation rises nearly as quickly, how hawkish the Fed dares to be will determine how much the dollar rises.”
Euro zone government bonds were still moving in the slipstream of Yellen’s speech with benchmark German bond yields spiking to one-month highs after U.S. equivalents rose to their highest since Jan. 9. Yields on 10-year German bunds jumped 3 basis points to 0.38 percent by 9:40 a.m. in London. Treasury yields were steady at 2.43 percent.
As Reuters adds, and as we previewed overnight, earlier in Asia, short-term funding costs in China shot to their highest in nearly 10 years on fears that liquidity was tightening heading into the Lunar New Year holidays at the end of this month. “The market is typically short of liquidity ahead of the Lunar New Year,” said Gu Weiyong, chief investment officer at bond-focused hedge fund Ucom Investment Co, adding that a cash injection by the central bank was insufficient.
Crude oil prices regained some ground lost in the previous session when the dollar strengthened as investors turned their attention to upcoming government data on U.S. inventories. A stronger dollar makes dollar-denominated commodities more expensive for those holding other currencies. U.S. crude added 0.8 percent to $51.50 per barrel, after shedding 2.67% on Wednesday. Brent crude rose 0.7 percent to $54.32 after slipping 2.79%.
- S&P 500 futures down 0.2% to 2263
- Stoxx 600 down 0.3% to 362
- FTSE 100 down 0.6% to 7206
- DAX down 0.1% to 11585
- German 10Yr yield up 2bps to 0.38%
- Italian 10Yr yield up 3bps to 1.99%
- Spanish 10Yr yield up 3bps to 1.48%
- S&P GSCI Index up 0.2% to 395.9
- MSCI Asia Pacific down 0.2% to 140
- Nikkei 225 up 0.9% to 19072
- Hang Seng down 0.2% to 23050
- Shanghai Composite down 0.4% to 3101
- S&P/ASX 200 up 0.2% to 5692
- US 10-yr yield down less than 1bp to 2.42%
- Dollar Index up 0.18% to 101.11
- WTI Crude futures up 0.6% to $51.40
- Brent Futures up 0.7% to $54.28
- Gold spot down less than 0.1% to $1,204
- Silver spot down 0.5% to $16.98
Top Global News
- Netflix Soars, Esquire Goes Dark as More TV Viewers Move Online: Online video leader beats projections in U.S., foreign markets
- Credit Suisse Resolves U.S. Mortgage Probe for $5.3 Billion: Bank to pay $2.5 billion fine, $2.8 billion in consumer relief
- Safran to Buy Zodiac for $10 Billion in All-French Aviation Deal: Struggling seat supplier accepts bid from aero-engine maker
- Goldman Says Aluminum Poised for Big Gains If China Widens Cuts: China seen widening capacity cuts to aluminum from steel, coal
- Kremlin Said to Fear Trump Won’t Be a Great Deal After All: Top officials fret furor in U.S. over hacking could hurt thaw
- Russia Weighs FX Purchases as Strong Ruble Hits Exporters: Russia considers how to cut volatility of real exchange rate
- Vegemite Heads Back to Australia in $345 Million Bega Deal: Bega Cheese to acquire global trademark rights for Vegemite
- CSX Jumps on Report Hilal, CP Rail’s Harrison Targeting Company: WSJ reports, citing unidentified people familiar
- Oclaro Jumps 5.5% After 2Q Preliminary Revenue Tops Estimate
- Plexus Drops 2.6% Post-Mkt; Sees 2Q Revenue Below Estimates
- Canadian Pacific Railway 4Q Adj. EPS Misses Est.
Looking at regional markets, Asia stocks traded mixed following a similar lacklustre lead from Wall St, although exporters in Japan have been buoyed by a weaker JPY. This saw the Nikkei 225 (+0.9%) outperform with the power sector underpinned by TEPCO plans to resume bond issuances for the 1st time since the 2011 Fukushima disaster, while there were also reports that the nuclear regulator passed safety screenings for 2 Kyushu reactors. Elsewhere, ASX 200 (+0.2%) was marginally positive with healthcare outperforming after CSL upgraded its FY net guidance, while Hang Seng (-0.5%) and Shanghai Comp. (-0.4%) had been dampened following a reduced liquidity operation by the PBoC. Finally, 10yr JGBs saw spill-over selling to track T-notes lower amid heightened risk appetite for Japanese stocks, while a discouraging 5yr auction also pressured in which b/c fell from prior and lowest accepted price missed the consensus.
Top Asia News
- Takata Bidders Said to Favor Japan Bankruptcy; Shares Tumble: Takata says no decision has been made on turnaround plan
- Asia’s Worst EM Currency Seen Most Resilient in 2017 Survey: Philippine peso is forecast to be the most resilient to external risks this year
- Toshiba Drops 16 Percent on Reported Writedown Losses: the writedown may exceed 700 billion yen, Kyodo reports
- Indonesia, Malaysia Hold Rates as Fed Fuels Currency Weakness: Most economists predicted decision by the two central banks
- China Signals It May Aim Lower on Cleaner-Burning Fuel Target: Natural gas share in total energy mix will be 8.3% to 10%
European equities (Euro Stoxx 50: -0.2%) trade modestly in the red after a choppy start to the session. Earnings are beginning to come into focus, with Royal Mail (-5.2%) the notable laggard in the FTSE 100, with the Co.’s shares at 11 month lows. Similarly, Carrefour (1.3%) are among the worst performers in the CAC in the wake of their pre market earnings. Elsewhere, on a sector specific basis, commodities dictate play with materials seeing upside this morning, while energy names weigh on European indices. Fixed income markets have seen pressure throughout the morning, with Bunds back below the 163 level in tandem with some of the softness seen in T-Notes in the wake of comments from Fed’s Yellen yesterday, who suggested she sees a few hikes a year as the economy continues to recover. Elsewhere, ahead of today’s ECB rate decision and press conference, source reports have emerged that the ECB lacks a deal on how to buy bonds below deposit rate but will do so despite the lack of a deal.
Top European News
- ECB Said to Lack Agreement on How to Buy Debt Below Deposit Rate: Hold-up linked to complexity of $2.4 trillion QE program
- Goldman May Cut London Staff by 50% on Brexit, Handelsblatt Says: Firm says no decision has been made, doesn’t recognize figures
- U.K. House Price Gauge Declines for First Time in Five Months: Home prices in London decrease for 10th consecutive month
- May Says U.K. Must Accept the Road Ahead Will Be Uncertain
In currencies, much of the FX price action from Fed chair Yellen’s comments late yesterday played out through NY and Asia, while London tried to push USD/JPY towards 115.00, though sellers here have contained the move for now. The limited pullback shows intent on retesting these levels and higher, with higher UST yields recovering well as ‘skew’ moves to the right of the 2-3 rate hike expectation range for this year. Headwinds for EUR/USD though as the market remains wary of any taper talk at today’s ECB meeting. Sellers above 1.0700 will be a little unnerved by the lack of follow through on the downside, as we held off 1.0600 before the latest modest recovery, but this may all change past the press conference later today. The post Brexit speech analysis continues to pull Cable either side of 1.2300 in the meantime, but widespread reports of investment banks transferring some of their operations over to the continent have added some weight, helping to contain the short squeeze in the low 1.2400’s. EUR/GBP is now also in consolidation mode, trading the .8600-.8700 range over the last 24 hours.
In commodities, oil prices have have staged a modest rebound with no major catalyst seen other than longs perhaps unnerved by the US inauguration ahead. The API report suggested an inventory drawdown, but to little effect, offset by a surge in gasoline stocks, as such WTI maintains a USD51.00 handle. Gold has taken a hit after the USD rallied on Fed Chair Yellen’s comments late yesterday alluding to a steeper rate path as she highlighted the dangers of allowing the economy to overheat. Silver is down 1.5% this morning. This does not seem to have done the rest of the commodity complex much harm (the USD rise), with copper more or less flat on the day.
Looking at the day ahead, this morning in Europe there’s little in the way of data which instead clears the path to the aforementioned ECB policy meeting outcome at 7.45am ETwith Draghi due at 8.30am ET. Over in the US the data consists of December housing starts and building permits numbers, initial jobless claims and the Philly Fed business outlook. In addition to the data, the corporate reporting calendar today consists of American Express, IBM and Schlumberger, all after the close. Away from that, keep one eye on the apparent press briefing from Trump’s team at 2.15pm GMT. Finally after the US close Fed Chair Yellen will speak again, this time on Thursday evening (8pm) when she speaks to the Stanford Institute for Economic Policy Research. Any reaction to that will come during the Asia session.
US Event Calendar
- 8:30am: Housing starts, Dec., est. 1.188m (prior 1.090m)
- 8:30am: Building permits, Dec., est. 1.225m (prior 1.201m)
- 8:30am: Initial jobless claims, Jan. 14, est. 252k (prior 247k)
- Continuing claims, est. 2.075m (prior 2.087m)
- 8:30am: Philadelphia Fed Business Outlook, Jan., est. 15.3 (prior 21.5)
- 9:45am: Bloomberg Consumer Comfort, Jan. 15 (prior 45.1)
- 10am: Freddie Mac mortgage rates
- 10:30am: EIA natural-gas storage change
- 11am: DOE Energy Inventories
- 8pm: Fed’s Yellen Speaks at Stanford
US Government events
- President-elect Donald Trump inaugural festivities begin
- 9:30am: Senate Energy and Natural Resources Cmte hearing on nomination of Rick Perry for Energy secretary
- 10am: Senate Finance Cmte hearing on nomination of Steven Mnuchin for Treasury secretary
- 1pm: Sen. Patty Murray, top Democrat on Senate Health Cmte, joins Democratic Sens. Debbie Stabenow of Mich. and Elizabeth Warren of Mass. to discuss “who would be hurt” by Obamacare repeal
DB’s Jim Reid concludes the overnight wrap
Today is ECB day and with that it means another Draghi press conference at 1.30pm GMT. Given the big tapering story at the last meeting in December, it’s hard to see this one as being quite as exciting. In terms of the message, our economists are expecting patience to be the key theme today. They don’t think that the ECB will feel challenged by recent strong data but if the current data trends continue, the outright taper decision could accelerate to June rather than September – although the latter remains their baseline for now. The key on this front is whether inflation, especially core, is becoming more likely to exceed ECB forecasts.
Yesterday we got confirmation that headline inflation rose to +1.1% yoy in December and +0.9% yoy at the core. Headline CPI could rise to +1.6% yoy and +1.8% yoy in January and February, respectively, according to our colleagues, although the earliest that the core will satisfy the minimum conditions for tightening is likely mid-year. That said the ECB won’t be afraid to change plans if necessary but today seems far too early but we’ll see what Draghi has to say later.
Interestingly, Draghi’s press conference coincides with another press briefing from the Trump camp at 2.15pm GMT. That said it appears that it won’t actually feature the President-elect himself and will instead be left to his team to brief the media so it remains to be seen how market moving this will actually be. At this stage there are no details about what is to be discussed but it’s possible that some questions are directed at the recent confusion over both the border tax and about the incoming administrations’ views on the dollar.
Yesterday’s comments out of the Davos shindig and in particular from commerce secretary nominee, Wilbur Ross, may have also added some spice to proceedings. Ross directed some tough talking at China, saying that the nation is the “the most protectionist country” amongst the large nations. He also said that “they talk much more about free trade than they actually practice” and “we would like to levelize that playing field and bring the realities a bit closer to the rhetoric”. Away from China Ross also said that the NAFTA discussion will happen very soon after Friday’s inauguration while also pitching that his “number one objective will be expanding our exports”. So it’ll be interesting to see if any of this gets brought up too.
Over in markets the main focus for the past 24 hours has been once again on the fairly large moves across rates and FX, albeit moves which largely ended up being a reversal of the previous day’s price action. 10y Treasury yields closed a shade over 10bps higher yesterday at 2.430% while the USD index rebounded +0.60% and finished higher for the first time in over a week. Those moves were given a late boost by comments from Fed Chair Yellen who said that “it is fair to say the economy is near maximum employment and inflation is moving toward our goal”. She also said that while “it makes sense to gradually reduce the level of monetary policy support” the actual timing of the next Fed rate hike “will depend on how the economy actually evolves over coming months”. So a fairly straight bat approach.
Meanwhile equity markets continue to trudge along in a fairly directionless pattern. The S&P 500 finished +0.18% with gains for financials offset by losses for telecoms and energy stocks. The latter were under pressure after WTI Oil tumbled -2.67% and back to $51/bbl after the IEA Chief warned that OPEC reigning in supply will likely result in a “significant” boost to US shale output. With regards to the gains for financials it was interesting to see that both Goldman Sachs (-0.62%) and Citigroup (-1.70%) closed in the red despite both banks adding to what has been a decent reporting season for US banks. Both reported beats at the profit line with the theme of stronger than expected FICC revenues once again playing out.
Over in Europe the Stoxx 600 also closed +0.18% while there was a similar weak theme in rates where 10y Bund yields crept up 3.3bps to close at 0.351%. Staying in Europe, another comment which caught our eye yesterday was that from JP Morgan CEO, Jamie Dimon. Commenting about the impact of Brexit and the potential for further nationalist politicians to come to power, Dimon said that the “eurozone may not survive” in an interview with Bloomberg TV. Quite fascinating for such a high profile banker to doubt it publically.
This morning in Asia we’ve seen the US Dollar continue to press on (+0.30%) which is putting some pressure on currencies in the region. Away from that equity bourses have been mixed once again, albeit on limited newsflow. The Nikkei is currently +0.81% with the Yen retreating a touch, while the Hang Seng (-0.59%) has weakened. Bourses in China, Korea and Australia are flat as we type. Moving on. Yesterday’s economic data didn’t sway too much from market expectations. In terms of the US December inflation report, headline CPI was reported as rising +0.3% mom which matched the consensus estimate and helped push the YoY rate up to +2.1% from +1.7%. The core rose +0.2%, also as expected, and helped nudge the YoY rate back up one-tenth to +2.2%. Away from that, industrial production was confirmed as rising +0.8% mom in December following a downwardly revised -0.7% mom in November. Finally the NAHB housing market index was a little softer than consensus, falling 2pts to 67. In the UK the ILO unemployment rate was unchanged at 4.8% in the three months to November, which matched expectations.
Before we look at today’s calendar, yesterday we got confirmation that the UK Supreme Court appeal decision about whether or not the UK Government has the authority to trigger Article 50 without parliamentary appeal, will be made next Tuesday (on January 24). One to mark in the diary for next week.
Looking at the day ahead, this morning in Europe there’s little in the way of data which instead clears the path to the aforementioned ECB policy meeting outcome at 12.45pm GMTwith Draghi due at 1.30pm GMT. Over in the US the data consists of December housing starts and building permits numbers, initial jobless claims and the Philly Fed business outlook. In addition to the data, the corporate reporting calendar today consists of American Express, IBM and Schlumberger, all after the close. Away from that, keep one eye on the apparent press briefing from Trump’s team at 2.15pm GMT. Finally after the US close Fed Chair Yellen will speak again, this time early on Friday morning (1am GMT) when she speaks to the Stanford Institute for Economic Policy Research. Any reaction to that will come during the Asia session so we’ll have a review on Friday morning.
i)Late WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 11.71 POINTS OR 0.38%/ /Hang Sang closed DOWN 48.30 OR 0.21%. The Nikkei closed UP 177.88 POINTS OR 0.94% /Australia’s all ordinaires CLOSED UP 0.20%/Chinese yuan (ONSHORE) closed DOWN at 6.866/Oil ROSE to 51.50 dollars per barrel for WTI and 54.41 for Brent. Stocks in Europe ALL IN THE RED. Offshore yuan trades 6.8439 yuan to the dollar vs 6.866 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE COMPLETELY NARROWS AS POBC ATTEMPTS TO STOP DOLLARS FROM LEAVING CHINA’S SHORES
b) REPORT ON JAPAN
c) REPORT ON CHINA
China injects a record 1.034 trillion yuan (151 billion usa) into bank liquidity ahead of their new year. Inflation is something that we must be cognizant of:
(courtesy zero hedge)
China Central Bank Injects A Record 1.035 Trillion In Bank Liquidity This Week
Heading into the Chinese Lunar New Year, local banks are suddenly starved for liquidity like never before. On Tuesday China’s benchmark money-market rate jumped the most in two years, with unprecedented cash injections by the central bank being overwhelmed by demand before the Lunar New Year holidays.
Demand for cash in China tends to increase before the Lunar New Year holidays, when households withdraw money to pay for gifts and get-togethers. Month-end corporate tax payments are adding to the pressure this time, with the break running from Jan. 27 through Feb. 2. At that point the PBOC usually steps in with liquidity “injections” in the form of reverse repos. However, what it has done this year is literally off the charts.
On Wednesday, the People’s Bank of China put in a net 410 billion yuan ($60 billion) through open-market operations, the biggest daily “injection” on record. Despite this massive boost in liquidity, the interbank seven-day repurchase rate still jumped 35 basis points, the most since December 2014, to 2.76 percent, according to weighted average prices. Yesterday, the overnight repo rate rose 10 basis points to 2.50 percent, the highest since April 2015, according to weighted average prices.
So, with liquidity still scarce, moments ago on Thursday morning, the PBOC added another net injection of 190 billion consisting of 100Bn in 7-day repo and 150BN in 28-day repos, offset by 60bn yuan in previous loans maturing.
As a result, the PBOC has injected a net of 1.035 trillion yuan via reverse repos so far this week, an all time high.
It was unclear if the rise in 7-day interbank repo rate had continued to rise.
“The PBOC aims to ensure that the liquidity situation remains adequate, while the 28-day reverse repo is apparently targeted at covering the holidays,” said Frances Cheung, head of rates strategy for Asia ex-Japan at Societe Generale SA. “There could also be preparation for any indirect tightening impact from potential outflows.”
Liquidity conditions are under pressure also because loans are due to mature under the Medium-term Lending Facility, according to Long Hongliang, a trader at Bank of Hebei Co. in Beijing. There are 216.5 billion yuan of MLF contracts maturing this week, data compiled by Bloomberg show. The PBOC offered 305.5 billion yuan of loans to lenders using the tool on Jan. 13, compared with 105.5 billion yuan due that day.
As Bloomberg notes, China’s central bank has been offering more 28-day reverse repos than one-week loans in the past two weeks, while curbing the injection of cheaper, short-term funds amid efforts to lower leverage in the financial system. It drained a net 595 billion yuan in the first week of January, before switching to a net injection of 100 billion yuan last week as the seasonal funding demand started to emerge. However, this week’s injection so far of over CNY 1 trillion suggests that there may be something more to the banks’ liquidity needs than simple calendar action.
My goodness! China orders the local weather bureaus to stop issuing smog alerts as if citizens are not aware of its danger!
(courtesy zero hedge)
China Orders Local Weather Bureaus To Stop Issuing Smog Alerts
Nearly three years into a “war on pollution”, in which large swathes of northern China are periodically engulfed in thick, toxic smog, with dangerous air quality readings in major cities like Beijing, Tianjin and Xian forcing many people to stay in doors and shutting down industries, causing ship traffic jams in local ports, and even adversely impacting the local economy, China has realizing that it needs to take more “innovative” measure to make sure it does not lose this particular war. Which explains why local media reported on Tuesday that China is suspending local meteorological bureaus from issuing smog alerts, raising suspicions the government is attempting to suppress information about the country’s air pollution as public anger over the issue grows.
China’s Meteorological Administration notified local bureaus Tuesday to “immediately stop issuing smog alerts”, according to a photo of a notice posted on China’s Twitter-like social media platform Weibo, AFP reports. Instead, of smog, local departments can issue alerts for “fog” when visibility is less than 10 km, according to the notice.
The notice was issued because local “meterological bureaus and the environmental protection administration often disagree when they issue smog-related information,” a representative from the China Meteorological Administration told the Chinese website The Paper. “A joint alerting mechanism will be formulated to consult how to and who should issue alerts for smog,” the representative said.
Centralizing the government’s supervision over a topic that has lead to rising popular anger over the government’s inability to takle the toxic problem, one single department will now be responsible for issuing smog alerts, The Paper reported.
Upon learing the news, online commentators who have long doubted the credibility of official data on air pollution, and any other official Chinese data for that matter, slammed the reports with stinging criticism.
“Before, they cheated us separately, and now, they are going to cheat us together,” one person said on Weibo.
“Even though they are working on a unified alert standard, they should not stop the existing alert system,” another replied.
The feud even spread to various semi-public institutions: “The meteorological administration fought the environmental protection ministry and lost,” the Nanjing Meteorological Institute said on its official Weibo account. “Thus, early warnings about smog, a kind of meteorological calamity, cannot be issued by the meteorological administration,” it said.
The Chinese government has a color-coded system of smog alerts, topping out at red when severe pollution is likely to last more than 72 hours. The notice sets off a series of emergency measures, ranging from taking cars off the road to closing heavily polluting factories.
And like with everything else in China, there is a conflict of interest that sets off the people versus some economic goal. In this case, local authorities have long hesitated to issue the notices over fears that they will harm economic performance, even when pollution levels are literally off the charts. In late 2015, China issued its first ever red alert in response to public anger over the government’s reluctance to take action after a wave of suffocating smog hit the country’s northeast.
Prior instances of smog led to transitory forced shut downs of local industries, and the paralysis of domestic infrastructure and transportation, which in turn had a depressing impact on Chinese manufacturing production, and eventually, GDP. However, with 2017 a banner year for Xi
In the past, local and national authorities have issued contradictory, confusing alerts, one ordering factories and schools to be closed and one not.
Bad air is a source of enduring public anger in China, which has seen fast economic growth in recent decades but at the cost of widespread environmental problems. In recent weeks, AFP adds, parents in particular have expressed outrage over the miasma that regularly affect hundreds of millions and has led to high levels of lung cancer, demanding that schools be equipped with air purifiers.
Earlier this month, many took to social media to express their anger about the thick smog that choked Beijing for over a week around the New Year but found their articles quickly deleted, a move that only increased their frustration.
“When people are gagged, the sky will be blue,” said one sarcasm-laced Weibo comment. Of course, as long the people don’t rise up against their government, however, Beijing could care less
4 EUROPEAN AFFAIRS
No real change from the ECB: they leave QE at 60 billion euros per month but may revise higher or lower:
(courtesy zero hedge)
ECB Leaves Rates Unchanged, Keeps QE At €60BN But May Revise It Higher Or Lower
With the market not expecting any changes from the ECB this morning, so far that is precisely what it got, when moments ago the ECB announced that it kept all of its rates unchanged as expected, keeping the rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility at 0.00%, 0.25% and -0.40%, respectively.
In additional language relating to non-standard measures, the ECB also said that “it will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017 and that, from April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary” and “in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.”
It also said that “the net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP” and cautioned that “if the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.”
In other words, it may move QE up or down, depending on what happens with inflation, in line with the ECB’s December announcement.
Full ECB statement below.
Monetary policy decisions
At today’s meeting the Governing Council of the ECB decided that the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will remain unchanged at 0.00%, 0.25% and -0.40% respectively. The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.
Regarding non-standard monetary policy measures, the Governing Council confirms that it will continue to make purchases under the asset purchase programme (APP) at the current monthly pace of €80 billion until the end of March 2017 and that, from April 2017, the net asset purchases are intended to continue at a monthly pace of €60 billion until the end of December 2017, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim. The net purchases will be made alongside reinvestments of the principal payments from maturing securities purchased under the APP. If the outlook becomes less favourable, or if financial conditions become inconsistent with further progress towards a sustained adjustment in the path of inflation, the Governing Council stands ready to increase the programme in terms of size and/or duration.
The President of the ECB will comment on the considerations underlying these decisions at a press conference starting at 14:30 CET today.
And now all eyes on Draghi at 8:30am Eastern
As we have warned you on the huge risks to the European economy, Draghi’s comments were extremely dovish. He suggests that inflation is something that he is not worried about. In other words: expect him to untaper!!! Down goes the Euro
(courtesy zero hedge)
EUR Plunges After Draghi Highlights “Downside Risks”, Downplays Inflation
Just as we warned was likely, Mario Draghi first remarks were dovish, highlighting the potential downside risks in the EU economy and suggest that inflation trends were not convincing…. in other words, the un-taper is on the cards. And EURUSD reacted instantly…
- *DRAGHI SEES NO CONVINCING UPWARD TREND IN UNDERLYING INFLATION
- *DRAGHI SAYS UNDERLYING INFLATION PRESSURES REMAIN SUBDUED
- *DRAGHI SAYS INFLATION PICKED UP DUE TO ENERGY
- *DRAGHI SAYS RISKS TO ECONOMIC OUTLOOK REMAIN ON DOWNSIDE
- *DRAGHI SAYS ECB HASN’T DISCUSSED REDUCING STIMULUS
And the result…
This has obviously sent the dollar index soaring to the highs of the day – how long until President Trump tweets?
And then there is this…
- *DRAGHI SAYS G-20 PLEDGED TO REFRAIN FROM COMPETITIVE FX MOVES
Jewish Trust Sues Deutsche Bank For $3 Billion
Just when it seemed that no more lawsuits are possible for Germany’s largest lender, which over the past two years has settled or otherwise paid billions to set aside a barrage of allegations of wrongdoing leading to the bank’s suspension of bonuses for most senior bankers, today we learn that Deutsche Bank was sued by a Jewish charitable trust in Florida, alleging that the bank wrongly withheld as much as $3 billion from the heirs to a wealthy German family.
According to Bloomberg, the lawsuit claims the bank refuses to return the funds initially deposited by the Wertheim family in accounts opened at what is now Credit Suisse Group AG before the rise of the Nazis in Germany. Those accounts were later transferred to Deutsche Bank, according to the complaint filed Wednesday in federal court by Wertheim Jewish Education Trust LLC.
Deutsche Bank has “refused to cooperate with the heirs of the Wertheim family fortune in the recovery and return of the monies that they are withholding from the rightful heirs,” and preventing the use of the funds for charitable and other purposes, according to the complaint filed in Fort Lauderdale.
While on the surface, the case looks mindane, the details are interesting.
The charitable trust is an heir to the descendants of Joseph Wertheim, a family that amassed a fortune by building the KaDeWe department store in Berlin and a textile and manufacturing empire in Frankfurt, according to the complaint. One of those descendants, Karl Wertheim, feared the German rise of anti-Semitism in the 1920s, moved his businesses to Spain and opened an account at Credit Suisse in 1931.
The Swiss bank protected the family assets through the rise of the Nazis in the 1930s and during World War II, using secret numbered accounts, pseudonyms and trust accounts, according to the complaint.
When Karl Wertheim died in 1945, the estate passed to his wife, Maria, who managed the fortune until the early 1970s, according to the lawsuit. The fortune included the sewing machine and office-machine business of Hispano Olivetti SA, accounts and investment portfolios in Swiss banks, land in Europe and the U.S. and art collections, it said. As the health of Maria Wertheim deteriorated, she turned to Ambrosius Wolfgang Bauml to help manage the assets. After she died in 1976, Bauml managed the Wertheim family fortune until his death in 1990, when control passed to the family of Rudolf Sutor.
This is where Deutsche bank comes in: “through a complex series of events, the assets were transferred in 1993 to Deutsche Bank, which misled the Wertheim heirs for many years about the accounts, according to the complaint.” The lawsuit thus seeks return of $3 billion and an accounting of the assets in dispute.
Understandably, being quietly accused of antisemitism did not strike Deutsche Bank as proper and it responded that is “taking the matter very seriously,” according spokesman Tim-Oliver Ambrosius. “The accusations are completely unfounded, and Deutsche Bank denies them,” he said. “All proceedings initiated against Deutsche Bank in this matter have been decided in favor of Deutsche Bank.”
To be sure, Deutsche Bank has had “sensitive” exposure in the past. Back in 1998, Deutsche Bank acknowledged that it had dealt in Nazi gold during World War II and said it ”regrets most deeply injustices that occurred.” The publication of a historian’s report commissioned by the bank, and the bank’s response to it expanded a class-action suit brought by lawyers in New York on behalf of Holocaust survivors against Deutsche Bank which had long been regarded by other historians as having played key roles in the financing of the Nazi war effort.
”Of course these transactions took place,” said Ronald Weichert, a Deutsche Bank spokesman, referring to the report’s conclusion that the bank had bought more than 4.4 tons of gold from the Reichsbank, the onetime central bank. ”This gold business was normal business during the war.” At wartime values and exchange rates, the gold was worth some $5 million, about one ninth of its estimated worth today.
The bank commissioned historians from Israel, the United States, Britain and Germany to produce an independent report on its wartime gold dealings — part of a wave of inquiries inspired by developments in Switzerland. The Swiss central bank was the biggest single purchaser of looted gold acquired by Nazi Germany from countries it occupied and from individual Jews robbed as they faced death in extermination camps.
The report said Deutsche Bank channeled gold transactions with the Reichsbank through branches in occupied Austria and Turkey, then a self-avowed neutral power. Of purchases totaling 4,446 kilograms of gold, the report concluded, 744 kilograms were dental gold taken from Jews’ teeth, wedding bands and personal jewelry amassed in Berlin by an SS officer named Bruno Melmer.
It is unclear whether DB’s Nazi war effort” roots will be unearthed as part of this lawsuit. However, with Deutsche Bank rolling over on virtually every other lawsuit it has been handed in recent years, it would not be surprising if the plaintiff’s case emerged as strong. Ultimately, should a court find in favor of the Trust, Deutsche Bank may just need to get that refinancing that it avoided when the DOJ slashed its “ask” on the US RMBS settlement by more than half.
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
Russia continues to act statesmanlike: they invite the new President elect to the Syrian peace talks and again snubbing Obama:
(courtesy zero hedge)
Russia Invites Incoming Trump Administration To Syria Peace Talks After Snubbing Obama
Three weeks after John Kerry’s State Department was humiliated one last time when Russia, Turkey and Syria sat down alone, demonstratively without inviting the US, to discuss the terms of a proposed Syrian ceasefire, Russia has already offered a diplomatic fig leaf to the incoming Trump administration when Russian Foreign Minister Sergey Lavrov told the press Russia has invited the United States to take part in the upcoming talks on Syria,
“As I said yesterday, we have already invited the US,” Lavrov told journalists in Moscow on Thursday.
And since the meeting on the Syrian settlement is scheduled to take place in the Kazakh capital of Astana on January 23, three days after Trump takes over, the implication is clear: the invite is for the Trump administration only. Lavrov confirmed:
“We think it would be the right thing to invite the representatives of the UN and the new US administration to the meeting,” Lavrov had said on Wednesday, at a press conference summing up the results of Russian foreign policy in 2016.
Quoted by RT, a spokesman for UN Secretary-General Farhan Haq told RIA Novosti on Wednesday that the UN “has received an invitation to take part” and will attend. He added that the UN representatives will “try to give maximum support” to the negotiations. UN Syria envoy Staffan de Mistura has also been invited to the talks, though his humanitarian advisor, Jan Egeland, said on Thursday the UN’s role at the talks was still under discussion. “I do however take it for granted that Russia, Turkey, Iran, will understand the immense responsibility they take upon themselves as guarantors of an agreement of another process to enable a new beginning for the civilian population of Syria,” Egeland told reporters in Geneva.
Syrian President Bashar Assad has said the peace talks in Astana will focus on achieving a ceasefire and allowing rebel groups to reach “reconciliation” deals with the government.
“So far, we believe that Astana will be about talks with terrorist groups over a ceasefire and allowing them to reach reconciliation deals,” Assad said in an interview with Japanese media outlet TBS, parts of which were published on the president’s Twitter feed on Thursday.
Russia’s own delegation to the talks in Astana will include representatives of the Foreign Ministry and the Defense Ministry, Deputy Foreign Minister Mikhail Bogdanov revealed on Thursday. He also noted that Russia supports the possible expansion of the Syrian opposition delegation to the negotiations opposition delegation to the negotiations, which currently represents 14 militant groups.
“The total number of groups that are represented by their leaders is only 14. This means that 14 groups have joined the ceasefire agreement, but we advocate for more to join,” Bogdanov said, as cited by RIA Novosti. A number of Syrian rebel groups indeed confirmed that they will attend the peace talks in Astana. A leader of Jaysh al-Islam, Mohammed Alloush, said he would head the rebel delegation and work to end the “crimes” of the government and its allies.
“All the rebel groups are going. Everyone has agreed,” Alloush told AFP news agency on Monday. The High Negotiations Committee, Syria’s main opposition bloc, last week also stated that it would support the delegation attending the talks.However, the pro-opposition Shaam News Network reported earlier this week that several other rebel groups, including Ahrar al-Sham, one of the main fighting forces on the ground, plan to boycott the talks over the army’s offensive on the village of Wadi Barada.
We have no doubt that should Trump’s new SecState, Rex Tillerson, be present, all the rebel groups will likewise be there, and a definitive peace treaty will emerge, especially if the US is no longer directly arming Assad’s opponents.
But more importantly, Monday’s meeting will be a good first test to gauge Trump’s resolve, at least when it comes to his foreign policy commitment: having stated previously that he is against the continuation of the Syrian war and is for a return of peace, should Trump snub the invite, it will be a strong first hint that the US military-industrial complex is still pulling the strings on yet another administration.
7. OIL ISSUES
DOE reports a huge crude inventory buildup and thus oil goes down again
(courtesy zero hedge)
Oil Tumbles After Unexpected Crude Inventory Build
A mixed bag of crude draw and gasoline builds from API combined with IEA comments on rising US Shale output offset by Saudi jawboning about more production cuts possible has pushedoil green before today’s DOE data. However, oil prices tumbled when DOE printed an unexpected 2.347mm barrel crude build (1mm draw expected) and another major build in gasoline inventories. US crude production remains at 9-month highs.
As Bloomberg’s Julian Lee notes,
Crude inventories rose in contrast to the draw reported yesterday by the API, combined with another big jump in gasoline, is going to undo all the good work done by Saudi Arabia’s oil minister in Davos trying to talk up prices.
- Crude -5.042mm (-1mm exp)
- Cushing -1.01mm (-500k exp)
- Gasoline +9.75mm
- Distillates +1.17mm
- Crude +2.347mm (-1mm exp)
- Cushing -1.274mm (+300k exp)
- Gasoline +5.951mm (+2mm exp)
- Distillates -968k (+1.5mm exp)
Following DOE’s big builds last week, this week’s data snubbed API’s draw with a surprising build of 2.347mm barrels in crude and another large build in gasoline inventories…
Crude inventories rose everywhere except for Cushing…
As Bloomberg notes, U.S. Combined crude oil and refined products inventories last week were 44 million barrels above the same week in 2016 and a whopping 296 million barrels, or 28%, above the 2010-2014 average for the first week of the year.
Two weeks into OPEC’s first agreement to cut production in almost a decade, its top official’s assessment is “so far, so good,” and ever hopeful to jawbone, Barkindo added that at $55 a barrel crude remains “far away from the equilibrium price.”
Saudis also jawboned desperately…
Saudi Arabia’s energy minister says there’s a chance of another production cut from OPEC countries this year.
Speaking at the World Economic Forum at the Swiss ski resort of Davos, Khalid Al-Falih says he “would not exclude” another cut to follow last year’s December agreement if higher prices don’t stick.
“U.S. shale-oil production will definitely react strongly,” Executive Director Fatih Birol said Wednesday in a Bloomberg Television interview in Davos, Switzerland. At $56 to $57 a barrel, “a lot of shale plays in the United States would make perfect sense to produce.”
And we note that US crude production continues to trend higher with lagged oil rig counts… strongly suggesting more US supply to come…
Gasoline demand over the four weeks ended Jan. 13 reached the lowest point in almost three years…
The market is underestimating U.S. shale’s ability to react to current prices, says Ole Hansen, head of commodity strategy at Saxo Bank. He also thinks there’s a risk oil will to drop to $50 a barrel.
I think the EIA numbers are conservative. When you look at the hedging activity continuing to go up and funding costs continue to go down, there is real increased incentive to get those drills out in the fields again.
The focus in the coming months is on production from the U.S., Iraq, Nigeria and Libya. But in the short term we need to basically see how much compliance we are seeing. OPEC’s reports should give us the first gauge and also the emergence of tanker tracking firms makes it a little bit more difficult to lie.
But U.S. shale is coming back. And we are underestimating its ability to react to current prices. We see hedging activity in the futures market rising and hitting record levels in WTI. We are seeing the cost of funding collapsing. The number of rigs coming back to work is rising; yes, they need to replace expiring rigs but at least we are seeing an upward trend. I think there is a risk we could be surprised how quickly they will return to previous levels. And that will be a headache.
It would be impressive if EIA reports large builds like API did and the market remains up, Kyle Cooper, director of research with IAF Advisors in Houston, says by phone. “The market is wanting to believe that OPEC is cutting”
8. EMERGING MARKETS
My goodness! The Supreme Court Justice presiding over Brazil’s political scandal dies in a plane crash
(courtesy zero hedge)
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings THURSDAY morning 7:00 am
Euro/USA 1.0668 UP .0041/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 FALLING RATE
USA/JAPAN YEN 114.62 DOWN 0.086(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 1.2335 pu .0076 (Brexit by March 201/UK government loses case/parliament must vote/PRIME MINISTER MAY DECIDES ON A HARD BREXIT)
USA/CAN 1.3271 UP .0009 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT FROM EU)
Early THIS THURSDAY morning in Europe, the Euro ROSE by 41 basis points, trading now WELL BELOW the important 1.08 level RISING to 1.0668; Europe is still reacting to Gr Britain HARD 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+ AND TODAY MONTE DEI PASCHI NATIONALIZATION / Last night the Shanghai composite CLOSED DOWN 11.71 or 0.38% / Hang Sang CLOSED DOWN 48.30 POINTS OR 0.21% /AUSTRALIA CLOSED UP 0.20% / 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 UP 177/88 OR 0.94%
Trading from Europe and Asia:
1. Europe stocks ALL IN THE RED
2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 48.30 OR 0.21% Shanghai CLOSED DOWN 11.71 POINTS OR 0.38% / Australia BOURSE CLOSED UP 0.20% /Nikkei (Japan)CLOSED UP 177.88 OR 0.94% / INDIA’S SENSEX IN THE GREEN
Gold very early morning trading: $1203.90
Early THURSDAY morning USA 10 year bond yield: 2.435% !!! UP 1 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 3.015, UP 1/2 IN BASIS POINTS from WEDNESDAY night.
USA dollar index early THURSDAY morning: 101.09 DOWN 20 CENT(S) from TUESDAY’s close.
This ends early morning numbers THURSDAY MORNING
And now your closing THURSDAY NUMBERS
Portuguese 10 year bond yield: 3.88% UP 4 in basis point yield from WEDNESDAY (does not buy the rally)
JAPANESE BOND YIELD: +.077% UP 2 in basis point yield from WEDNESDAY/JAPAN losing control of its yield curve
SPANISH 10 YR BOND YIELD:1.479% UP 3 IN basis point yield from WEDNESDAY (this is totally nuts!!/
ITALIAN 10 YR BOND YIELD: 1.989 UP 3 POINTS in basis point yield from WEDNESDAY
the Italian 10 yr bond yield is trading 53 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.379% UP 4 IN BASIS POINTS ON THE DAY
IMPORTANT CURRENCY CLOSES FOR THURSDAY
Closing currency crosses for THURSDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM
Euro/USA 1.0619 DOWN .0007 (Euro DOWN 7 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 115.51 UP: 0.805(Yen DOWN 81 basis points/
Great Britain/USA 1.2288 UP 0.0031( POUND UP 31 basis points)
USA/Canada 1.3348 UP 0.0084(Canadian dollar DOWN 84 basis points AS OIL FELL TO $51.20
This afternoon, the Euro was DOWN by 7 basis points to trade at 1.0619
The Yen FELL to 115.51 for a LOSS of 81 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 ROSE 31 basis points, trading at 1.2288/
The Canadian dollar FELL by84 basis points to 1.3348, WITH WTI OIL FALLING TO : $51.20
Your closing 10 yr USA bond yield UP 10 IN basis points from WEDNESDAY at 2.485% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 3.059 UP 9 in basis points on the day /
Your closing USA dollar index, 101.58 UP 29 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: 1:00 PM EST
London: CLOSED DOWN 39.17 OR 0.54%
German Dax :CLOSED DOWN 2.50 POINTS OR 0.02%
Paris Cac CLOSED DOWN 12.26 OR 0.25%
Spain IBEX CLOSED DOWN 7.10 POINTS OR 0.08%
Italian MIB: CLOSED UP 132.86 POINTS OR 0.69%
The Dow was closed DOWN 72.29 OR .37%
NASDAQ WAS closed down 15.57 POINTS OR .28% 4.00 PM EST
WTI Oil price; 51.20 at 1:00 pm;
Brent Oil: 54.04 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 59.89 (ROUBLE DOWN 38/100 roubles from YESTERDAY)
TODAY THE GERMAN YIELD RISES TO +0.379% FOR THE 10 YR BOND 1:30 EST
This ends the stock indices, oil price, currency crosses and interest rate closes for today
Closing Price for Oil, 5 pm/and 10 year USA interest rate:
WTI CRUDE OIL PRICE 5 PM:$51.39
USA 10 YR BOND YIELD: 2.47% (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)
USA 30 YR BOND YIELD: 3.045%
EURO/USA DOLLAR CROSS: 1.0663 up .0035
USA/JAPANESE YEN:114.84 UP 0.135
USA DOLLAR INDEX: 101.12 down 17 cents ( HUGE resistance at 101.80)
The British pound at 5 pm: Great Britain Pound/USA: 1.2335 : up 76 BASIS POINTS.
German 10 yr bond yield at 5 pm: +.379%
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM
Trumphoria Fades – Dollar Down, Stocks Down, Bonds Down, Banks Down, Oil Down, Gold Up
Gold remains 2017’s big winner, Crude the big loser and The Dow in the red…
In fact The Dow and Small Caps are now red YTD…
Intraday saw a notable spike in VIX and dump in stocks…
Which was reflected in the biggest negative TICK of 2017 (and 2nd biggest since the election)
Down for the 5th day in a row, The Dow dropped to six-week lows…more than 300 points from Dow 20k… Aside from Fed rate hike day, this is the heaviest volume day since September
Banks were down again with Goldman leading the losses – down 6.5% from Friday’s spike open…
The dollar index traded in a relatively tight range today (with some action in EURUSD on Draghi dovishness) but ended the day lower…
After a terrible start Cable remains the week’s biggest winner against the greenback and the loonie the biggest loser…
While stocks fell on the day, bonds also fell alongside them for the second day in a row… (Risk Parity funds are down the last 2 days – deleveraging?)
But 30Y rallied modestly back as the dollar faded…
As The Dollar faded, so Gold rallied back into the green above $1200… (up 8 of last 9 days)
Gold and silver remain lower post-Trump but Palladium still seems Trump-proof…
Crude tested back to a $51 handle once again as Saudi jawboning failed to inspire as inventories surged…
I do not like the looks of this; The FBI and 5 other USA agencies are now officially probing on whether the Kremlin covertly funded the Trump election:
(courtesy zero hedge)
FBI, 5 Other Agencies Are Probing If The Kremlin Covertly Funded Trump
It’s official: after months of speculation that the Feds and other US intelligence agencies are probing whether Trump has any connections to the Kremlin, financial or otherwise, this afternoon McClatchy confirmed that indeed, the FBI and five other intelligence and law enforcement agencies have collaborated for months on an investigation into whether Russia’s government secretly helped President-elect Donald Trump win the election, including whether money from the Kremlin covertly aided President-elect Donald Trump.
The agencies involved in the inquiry are the FBI, the CIA, the National Security Agency, the Justice Department, the Treasury Department’s Financial Crimes Enforcement Network and representatives of the director of national intelligence.
According to McClatchy sources, the US investigators are examining how money may have moved from the Kremlin to covertly help Trump win. One of the allegations involves whether a system for routinely paying thousands of Russian-American pensioners may have been used to pay some email hackers in the United States or to supply money to intermediaries who would then pay the hackers, the two sources said. Considering that this method was first suggested by the former MI6 agent Chris Steele who was hired to develop politically damaging and unverified research about Trump, the pieces are slowly starting to fall into place. Yet according to the unsourced report, the inter-agency working group began to explore possible Russian interference last spring, long before the FBI received information from the former British spy, suggesting he may not have been the spark that launched the probe.
While the origin of the investigation remains a mystery for now, what is known is the key mission of the six-agency group: it is to examine who financed the email hacks of the Democratic National Committee and Clinton campaign chairman John Podesta, both of which were released by WikiLeaks last summer and in October. McClatchy adds that the working group is scrutinizing the activities of a few Americans who were affiliated with Trump’s campaign or his business empire and of multiple individuals from Russia and other former Soviet nations who had similar connections.
While they have provided zero evidence for public consumption to date, U.S. intel agencies not only have been unanimous in blaming Russia for the hacking of Democrats’ computers but also have concluded that the leaking and dissemination of thousands of emails of top Democrats, some of which caused headaches for the Clinton campaign, were done to help Trump win.
Meanwhile, Trump and Republican members of Congress have said they believe Russia meddled in the U.S. election but that those actions didn’t change the outcome. However, Democratic Sen. Dianne Feinstein of California, a former chair of the Senate Intelligence Committee, said Sunday on NBC’s “Meet the Press” that she believes that Russia’s tactics did alter the election result. The Senate Intelligence Committee has opened its own investigation into Russia’s involvement in the campaign. That panel will have subpoena power.
Additionally, the BBC previously reported that the FBI had obtained a warrant on Oct. 15 from the highly secretive Foreign Intelligence Surveillance Court allowing investigators access to bank records and other documents about potential payments and money transfers related to Russia. One of McClatchy’s sources confirmed the report.
Susan Hennessey, a former attorney for the National Security Agency who is now a fellow at the Brookings Institution, said she had no knowledge that a Foreign Intelligence Surveillance Act warrant had been issued. However, she stressed that such warrants are issued only if investigators can demonstrate “probable cause” that a crime has been committed and the information in Steele’s dossier couldn’t have met that test.
Yet ironically, while Trump has yet to say whether FBI Director James Comey will be retained, the rest of Trump’s newly appointed intelligence and law enforcement chiefs will inherit the investigation, whose outcome could create national and international fallout, should the FBI “conclude” that Russia indeed funded a hacking effort.
The emergence of this informal probe just one day prior to Trump’s inauguration will likely lead to even greater opposition to the Trump presidency, and while we hope it does not, may lead to violence on Friday. It is unclear if Trump’s arrival in the Oval Office will be sufficient to put an end to such ongoing probes into Russian funding of Trump, or if the risk of an intelligence agency “coup” to topple Trump remains.
As a reminder, yesterday Vladimir Putin warned that he sees attempts in the United States to “delegitimize” Trump using “Maidan-style” methods previously used in Ukraine, and slammed the creators of the Trump report, saying “people who order fakes of the type now circulating against the U.S. president-elect, who concoct them and use them in a political battle, are worse than prostitutes because they don’t have any moral boundaries at all.” While the organizers behind this ongoing effort to deligitimize Trump remain unknown, his suggestion that Trump could be the target of a Ukraine-like coup is troubling.
Earlier today Russian Foreign Minister Sergey Lavrov turned the table on the ongoing Russian witch hunt, and lashed out at the US election scapegoating campaign, saying that leaders and top officials from the UK, Germany, and France have “grossly interfered” in US internal affairs, “campaigned” for Hillary Clinton, and openly “demonized” Donald Trump. Lavrov said his angry outburst was because Moscow “is tired” of accusations it meddled in the US election. At this rate, Russia will be even more tired over the coming weeks and months as the “informal” probe picks up pace.
Lavrov also said that it is time to “acknowledge the fact” that it was the other way around. “US allies have grossly interfered in America’s internal affairs, in the election campaign,” Lavrov said, quoted by RT. “We noticed that Angela Merkel, Francois Hollande, Theresa May, and other European leaders” did so. He added that official representatives of some of the European countries did not mince words, and essentially “demonized” Donald Trump during the election campaign.
For now, the covert war between US intel and Democrats on one hand, and Donald Trump and, well, Russian, shows no signs of slowing down.
The key figure here is that over 700,000 more poor souls are claiming continual benefits than before the election two months ago. The crazy seasonal adjustments cause the initial claims to crash to 44 yr lows. Do not believe the latter data point..utter trash.
(courtesy zero hedge/BLS)
Initial Claims Crash To 44 Year Lows But Over 700,000 More People Are On Jobless Benefits Since Trump Was Elected
1.74mm people were ‘continuing’ to claim jobless benefits before Donald Trump was elected. In a mysterious fluke of statistical smoke and mirrors, that marked the absolute trough in the data series – showing just how awesome the economy was for Hillbama. Last week’s 2.46mm print for continuing claims suggests (while seasonal aspects are at play), over 700,000 more people are now claiming unemployment benefits than before Trump was elected.
This is a good sign: housing starts rise (rental units) as well as single family permits
Housing Starts Beat On Jump In Rental Units, Single-Family Permits Rise To Highest Since 2007
Confirming the recent strength in economic data, today the Commerce Department reported that housing starts jumped to 1,226k up from a revised 1,102k in the prior month, and above the 1,188K estimate, driven by a 54% surge in multi-family units, which rose from last month’s disappointing 271K to 417K in December, returning to the trending observed in past years.
On a percentage bases, starts rose 11.3% in December sequentially, after falling 16.5% the prior month. Offsetting the spike in multifamily starts, single family starts fell to 795k from 828K the month before. This was the lowest print since September.
Offsetting the strong starts number, and in somewhat of a mirror image to the starts numbers, building permits fell modestly to 1,210k vs 1,212k in Nov.; missing estimates of a 1,225k print. Permits fell 0.2% in Dec. after falling 3.8% the prior month.
Looking at the components, single-family permits jumped to 817K, the highest print since 2007, while multi-family permits dipped once again, declining from 395K, to 355K, the lowest since March of 2016, suggesting that future rental inflation may accelerate as builders are once again shifting their attention to single-family units.
Another good sign: the Philly Fed index rises including almost all sub components. A worrying sign is the prices paid category as it indicates inflation is coming!
Philly Fed Soars As Prices Paid Spike To 5 Year Highs
Philly Fed continued to surge higher post-election with almost all subcomponents rising (apart from a decline in the average workweek).
However, while the headline index is at two-year highs, Prices Paid soared to the highest since Feb 2012, and expectations for Prices Received dropped.
The stagflationary pressures continue to build, but for now survey respondents seem happy about it…
With one day to go before he leaves the Presidency, Obama gives one last attempt to clean up the mess he started in Libya with the creation of ISIS:
(courtesy zero hedge)
Obama’s Last Attack: US B-2 Bombers Strike ISIS Camps In Libya, Killing Dozens
With just 24 hours left in Obama’s tenure, the U.S. president launched his final airstrike on ISIS after two B-2 bombers carried out airstrikes on two ISIS camps in Libya overnight, defense officials said Thursday, part of an operation targeting militants driven out last year from their coastal stronghold. The stealth bombers struck jihadis 45 kilometers southwest of Sirte, located halfway between Tripoli and Benghazi.
A map showing location of Sirte, Libya.
A U.S. official told NBC News that “several dozen” militants were believed to have been killed in the strikes
According to Reuters the mission was coordinated with Libya’s UN-backed Government of National Accord (GNA). The Pentagon added that many of the targets had previously been inside Sirte until it was liberated from ISIS late last year.
ISIS was believed to have about 5,000 fighters in the area at the height of its influence, according to estimates from the head of the United States Africa Command. However, that number is now believed to be around 2,000.
US Precision airstrikes in support of Libyan government forces against ISIS were launched in August 2016.
Below is the statement released shortly after the bombing by Pentagon Press Secretary Peter Cook on Airstrikes in Libya:
In conjunction with the Libyan Government of National Accord, the U.S. military conducted precision airstrikes Wednesday night destroying two ISIL camps 45 kilometers southwest of Sirte. The ISIL terrorists targeted included individuals who fled to the remote desert camps from Sirte in order to reorganize, and they posed a security threat to Libya, the region, and U.S. national interests. While we are still evaluating the results of the strikes, the initial assessment indicates they were successful. This action was authorized by the President as an extension of the successful operation the U.S. military conducted last year to support Libyan forces in freeing Sirte from ISIL control. The United States remains prepared to further support Libyan efforts to counter terrorist threats and to defeat ISIL in Libya. We are committed to maintaining pressure on ISIL and preventing them from establishing safe haven. These strikes will degrade ISIL’s ability to stage attacks against Libyan forces and civilians working to stabilize Sirte, and demonstrate our resolve in countering the threat posed by ISIL to Libya, the United States and our allies.
Following the strikes, GNA officials said they would continue to clear the territories around Sirte of IS jihadists. The GNA mission to drive out IS militants from Sirte has frequently been aided by US airstrikes.
Islamic State gained a foothold in Libya after the country plunged into chaos following the NATO-backed ouster of Muammar Gaddafi in 2011.
OH OH!! The USA government has been caught massively fabricating student loan defaults. The taxpayer is one the hook for billions of dollars!
(courtesy zero hedge)
US Government Caught Massively Fabricating Student Loan Default Data
Ever since 2012 we have warned that one of the biggest threats in the student loan bubble is not that it is soaring at an unprecedented pace, with the latest loan total number over $1.4 trillion, rising at a pace of nearly $100 billion per year, but that the government – either on purpose or due to miscalculation – was not correctly accounting for the true extent of delinquencies and defaults. Today, we finally got confirmation that, as speculated, the US government was indeed fabricating student loan default data, making it appear far lower than it was in reality.
An the WSJ reported overnight many more students have defaulted on or failed to pay back their college loans than the U.S. government previously believed. The admission came last Friday, when the Education Department released a memo saying that it had overstated student loan repayment rates at most colleges and trade schools and provided updated numbers. This also means that the number of loan defaults in various cohorts is far greater than previously revealed.
A spokeswoman for the Education Department said that the problem resulted from a “technical programming error.”
And so, the infamous “glitch” strikes again.
How bad was the data fabrication? When The Wall Street Journal analyzed the new numbers, the data revealed that the Department previously had inflated the repayment rates for 99.8% of all colleges and trade schools in the country. In other words, virtually every single number was made to appear better than it actually was. And people mock China for its own “fake data.”
According to an analysis of the revised data, at more than 1,000 colleges and trade schools, or about a quarter of the total, at least half the students had defaulted or failed to pay down at least $1 on their debt within seven years. This is a stunning number and suggests that the student loan crisis is far greater than anyone had anticipated previously. It also means that the US taxpayer will be on the hook for hundreds of billions in government-funded loans once attention finally turns to who is expected to foot the bill for years of flawed lending practices.
As the WSJ adds, this isn’t the first time data problems have affected the Education Department: a recent government report criticized how the department tracks information including the budgetary implications of student loan forgiveness. “This is a quality control issue with a Department of Education that has been facing criticism already for other data issues,” Robert Kelchen, an assistant professor of higher education at Seton Hall University. The department “needs to be regularly audited so these issues can be discovered sooner.”
There is another interpretation: as we reported yesterday, when we revealed that a Chinese province admitted it had fabricated fiscal data for the period 2011-2014, the reason the data were made up “because officials wanted to advance their careers.” One can imagine that the career pressure for those government workers who would report, and be held accountable, for revealing the true picture of America’s disastrous student loan bubble, would be likewise staggering.
* * *
Going back to the report findings, the student loan repayment rates were originally released in 2015 as part of the Obama administration’s College Scorecard, which followed an aborted attempt to rate colleges and tie federal funds to those ratings.
At the time, the Journal reported that at 347 colleges and vocational schools, more than half of students had defaulted or failed to pay down their debt within seven years. Those figures were based on students were supposed to start repaying loans in 2006 and 2007. In September, the Department released data tracking students who should have begun repayment in 2007 and 2008, and that number rose to 477. But with the updated number released last week, that number grew to 1,029. Worse, no college saw its repayment rate improve under the revision, and some schools saw their seven-year repayment rates fall by as much as 29%.
The worst offender was the University of Memphis which had one of the largest drops in its repayment rate following the recalculation. Previously, the Department said that 67% of its students were repaying loans within seven years of entering the repayment period. That number fell to 47% after the recalculation.
The University was not happy. In a statement, the school said it “was not contacted by or made aware of the data changes” from the Education department. “Given the magnitude of the numerical changes in the report released by the Department of Education, the University of Memphis will be challenging the accuracy of the newly adjusted data,” the statement said.
The far more dire implications, however, are for broader student loan market, because if the latest unfabricated data suggesting that loan delinquencies are rapidly rising toward 50% across most of America’s colleges, then the US is facing a default problem of staggering proportions. Recall that back in December 2014, The Treasury Borrowing Advisory Committee forecast that in an aggressive scenario, as much as $3.3 trillion in student loans could be outstanding by 2024. Incidentally, that is the scenario that has captured the growth of student loans since it was presented.
Apply default rates of 40-50% to this number, and the bill to the US taxpayer for the next mass bailout starts taking its very dire shape..
Michael Snyder comments on the end of the Obama administration and the huge problems he created but we are still in a mess:
(courtesy Michael Snyder)
The End Of The Obama World Order
For the past eight years, Barack Obama has been using the power of the U.S. presidency to impose his vision of a progressive world order on the entire globe. As a result, much of the planet will greatly celebrate once the Obama era officially ends on Friday. The Obama years brought us the Arab Spring, Benghazi, ISIS, civil war in Syria, civil war in Ukraine and the Iran nuclear deal. On the home front, we have had to deal with Obamacare, “Fast and Furious”, IRS targeting of conservative groups, Solyndra, the VA scandal, NSA spying and the worst “economic recovery” since the end of World War II. And right at the end of his presidency, Barack Obama has committed the greatest betrayal of Israel in U.S. history and has brought us dangerously close to war with Russia.
So is the end of the Obama world order worth celebrating?
You better believe it is.
Of course Obama and his minions are in a great deal of distress that much of their hard work over the past eight years is about to be undone by Donald Trump. On Wednesday, Vice President Joe Biden warned the elitists gathered at the World Economic Forum in Davos that their “liberal world order” is in danger of collapsing…
The gist of his speech was simple: At a time of “uncertainty” we must double down on the values that made Western democracies great, and not allow the “liberal world order” to be torn apart by destructive forces.
And without a doubt, we definitely want it to collapse.
During his time in the White House, Barack Obama has used the full diplomatic power of the government to promote “abortion rights”, “gay rights” and other “liberal values” to the farthest corners of the globe. Here at home, the appointment of two new Supreme Court justices under Obama paved the way for the Supreme Court decision that forced all 50 states to recognize gay marriage. During his final press conference on Wednesday, Barack Obama told the media that he was particularly proud of this…
Obama said he’s particularly proud of the “transformation” on gay rights during his presidency, which saw monumental Supreme Court decisions on gays in the military and same-sex marriage. Obama said his role was mostly to deliver “a good block downfield to help the movement advance.”
He said gay and lesbian activists deserve most of the credit, and singled out talk-show host Ellen DeGeneres, to whom he awarded the Presidential Medal of Freedom last year.
And the final press conference of his presidency also afforded Obama the opportunity to talk about UN Security Council Resolution 2334. Sadly, Obama still does not have any regrets for betraying Israel so dramatically…
“It was important for us to send a signal, a wake-up call, that this moment may be passing, and Israeli voters and Palestinians need to understand that this moment may be passing,” he said.
As far as many of us are concerned, January 20th cannot get here soon enough.
Somehow we have survived as a nation for the last eight years, but without a doubt a massive amount of damage has been done.
Many are hoping that Donald Trump will be able to start repairing that damage and will work hard to set this nation on a positive course once again.
It still doesn’t seem quite real to me that Donald Trump will soon be residing in the White House. Perhaps after I watch him being inaugurated on Friday I will feel differently. And I certainly am not expecting any miracles under Trump, but it sure will be nice to have a new face in the Oval Office.
Right at this moment, moving trucks are in the front of the White House and those that worked for Obama are packing up and leaving. This is a somber moment for them, but a joyous one for tens of millions of patriotic Americans. Many of us have been waiting for this for eight long years, and by Friday morning the current White House staff will all be gone…
In between closing out final projects and typing up reports on the work they’ve done, White House staffers are packing away their knickknacks, coffeemakers and photos. The boxes stack up in offices already vacated by staffers who have departed over the past few weeks.
By Thursday night, all must be gone to make way for Trump’s team.
Before they leave the building for the final time, they’ll go through a checklist that completes their formal separation from the White House: cell phones handed in, computers locked and papers properly filed to be archived. The last step, aides said, is the hardest: handing in the badge that provides access to the complex day or night.
But just because the left lost the election does not mean that they are ready to roll over and give up.
On the contrary, emotions are running extremely high on the left, and many of them are preparing to make the inauguration of Donald Trump as chaotic as possible.
For instance, on Tuesday night a man actually set himself on fire in front of the Trump International Hotel in Washington…
A protester set himself on fire outside Trump International Hotel in Washington DC on Tuesday.
The 45-year-old man, who has not yet been identified, said the act was in protest of the President-elect’s looming inauguration.
Witnesses described how he yelled ‘Trump’ several times as ‘flames ran up his back’ before lying down in the street.
And it is being reported that radical leftists plan to blockade major roads and metro lines throughout the D.C. region on Friday in an attempt to prevent people from getting to the inauguration of Trump.
So let us rejoice that the Obama world order is ending, but let us also understand that the battle is not over.
In fact, the truth is that the war for America is just beginning.
The election of Donald Trump has energized the left like never before, and they are going to hit his administration with everything that they have got.
Donald Trump is going to need our support, our voices and our prayers if he is going to have any chance to succeed.
And all Americans should want him to succeed, because our nation is at a crossroads, and if we go off on the wrong path we may never find our way back.
Well that is all for today
Tomorrow is a big day, inauguration day
and I will see you then