Gold at (1:30 am est) $1188.10 DOWN $1.40
silver at $17.10: up 29 cents
Access market prices:
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 27/17 (10:15 pm est last night): $ 1204.39
NY ACCESS PRICE: $1185.20 (AT THE EXACT SAME TIME)/premium $19.19
Shanghai SECOND afternoon fix: 2: 15 am est (second fix/early morning):$ 1213.15
NY ACCESS PRICE: $1183.15 (AT THE EXACT SAME TIME/2:15 am)
HUGE SPREAD/ 2ND FIX TODAY!!: $20.06
China rejects NY pricing of gold as a fraud/arbitrage will now commence fully
London FIRST Fix: Jan 27/2017: 5:30 am est: $1183.15 (NY: same time: $1183.15 (5:30AM)
London Second fix Jan 27.2017: 10 am est: $1184.85 (NY same time: $1185.10 (10 AM)
It seems that Shanghai pricing is higher than the other two , (NY and London). The spread has been occurring on a regular basis and thus I expect to see arbitrage happening as investors buy the lower priced NY gold and sell to China at the higher price. This should drain the comex.
Also why would mining companies hand in their gold to the comex and receive constantly lower prices. They would be open to lawsuits if they knowingly continue to supply the comex despite the fact that they could be receiving higher prices in Shanghai.
Today was quite surprising as silver skyrocketed northbound by 29 cents even though China entered their week long New Years festivities. The gold open interest was obliterated to 438,000 and that should be a sound bottom. Strangely the OI for silver remained elevated despite the constant raid these past two days. Remember that we still have two trading days left before the options on London’s OTC gold/silver expire so expect our two precious metals to be under the weather for those days. Next Friday is also the jobs report and they always manipulate our precious metals on that day.
For comex gold:
NOTICES FILINGS FOR JANUARY CONTRACT MONTH: 0 NOTICE(S) FOR nil OZ. TOTAL NOTICES SO FAR: 1207 FOR 120,700 OZ (3.7542 TONNES)
NOTICES FOR JANUARY CONTRACT MONTH FOR SILVER: 34 NOTICE(s) FOR 170,000 OZ. TOTAL NUMBER OF NOTICES FILED SO FAR; 745 FOR 3,725,000 OZ
Let us have a look at the data for today
In silver, the total open interest surprisingly ROSE by 113 contracts UP to 177,408 with respect to YESTERDAY’S TRADING. In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e. .887 BILLION TO BE EXACT or 126% of annual global silver production (ex Russia & ex China).
FOR THE JANUARY FRONT MONTH IN SILVER: 34 NOTICES FILED FOR 170,000 OZ.
In gold, the total comex gold FELL BY A MONSTROUS 31,636 contracts WITH THE FALL IN THE PRICE GOLD ($7.80 with YESTERDAY’S trading ).The total gold OI stands at 438,856 contracts and a job well done by our crooked bankers.
we had 0 notice(s) filed upon for nil 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: 799.07 tonnes
we had a huge changes in silver into the SLV: a deposit of 758,000 oz into its inventory/
THE SLV Inventory rests at: 335.759 million oz
First, here is an outline of what will be discussed tonight:
1. Today, we had the open interest in silver RISE by 113 contracts UP to 177,408 AS SILVER WAS DOWN 13 CENTS with YESTERDAY’S trading. The gold open interest FELL by 31,636 contracts DOWN to 438,856 WITH THE FALL IN THE PRICE OF GOLD OF $7.80 (YESTERDAY’S TRADING)
2.a) The Shanghai and London gold fix report
2 b) Gold/silver trading overnight Europe, Goldcore
and in NY: Bloomberg
2c) COT report
3. ASIAN AFFAIRS
REPORT ON JAPAN SOUTH KOREA NORTH KOREA AND CHINA
b) REPORT ON JAPAN
i)The yen tumbles again to the 115 to one area as the Bank of Japan boosts bond buying again. This action was taken to stop the yield from rising further. However that action failed as yields rose to .84% from .7%
( zero hedge)
c) REPORT ON CHINA
i)With new capital controls in China which commenced on Jan 1 2017, we now see property bubbles blowing up in Sydney, England and Vancouver. Buyers are already walking away from their down deposits:
4 EUROPEAN AFFAIRS
i)My goodness: The German editor of newspaper Die Zeit, Joffe, when asked how to end the “Trump Catastrophe” his answer was “assassination”
( zero hedge)
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
Putin and Trump will talk by phone tomorrow in their first step for normalization of relations.
( zero hedge)
The war of words continue between Mexico and Donald Trump:
( zero hedge)
7. OIL ISSUES
With each passing week of new rigs being used to produce new amounts of oil, it is now wonder that the USA crude production is near a 10 month high. The number of rigs is at a 6 yr high:
(courtesy zero hedge)
8. EMERGING MARKETS
9. PHYSICAL MARKETS
i)As I highlighted to you yesterday, gold exports to China soar as we enter the Chinese New Year
ii)Now India is trying to revive old colonial era gold mines.
iii)Steve St Angelo comments on the future silver supply:
( Steve St Angelo/SRSRocco report)
i)USA GDP grows by 1.9% in the 4th quarter and thus the entire GDP for 2016 was only 1.6%. The sharp drop in GDP was due to faltering exports and higher imports as the higher dollar certainly played a key role
( zero hedge)
ii)Hard data as opposed to soft survey data seems to be the sentiment of the day. The USA durable goods for new orders are tumbling:
( zero hedge)
iii)The Trump factor is certainly bringing consumer confidence back to the USA
iv) a.Trump now questions his decision to border tax Mexico (20%) as avocados, Beer , Chilli Peppers and Tequila will all rise by greater than 20%.( zero hedge)
Today’s events in Trumpville:
i) Trump receives a call from Mexican President Nieto
ii) Trump and May (Great Britain) will make a press conference late in the day
iii) Trump pays a visit to the Pentagon
(courtesy zero hedge)
v)Oh OH! our hedge fund billionaires, owners of properties in the Hampton’s are seeing their luxury home prices crash 43% this year:
Let us head over to the comex:
The total gold comex open interest FELL BY A MONSTROUS BY 31,636 CONTRACTS DOWN to an OI level of 438,856 WITH THE FALL IN THE PRICE OF GOLD ( $7.80 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 13 contract(s) DOWN to 47. We had 3 notice(s) filed YESTERDAY so we LOST 10 contract(s) or AN ADDITIONAL 1000 oz WILL NOT 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 44,325 contracts DOWN to 85,679.(feb 2016: 73,174 contracts). March had a GAIN of 323 contracts as it’s OI is now 1273. We are now CONSIDERABLY ahead with respect to OI when we compare data for open interest this year vs last year with the same amount of time to expire:
We had 0 notice(s) filed upon today for 300 oz
And now for the wild silver comex results. Total silver OI ROSE by 113 contracts FROM 177,295 UP TO 177,408 AS the price of silver FELL IN PRICE TO THE TUNE OF 13 CENTS with respect to 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 REMAINED CONSTANT AT 34 CONTRACTS. We had 0 notice(s) filed on yesterday so we neither gained nor lost any silver contracts that will stand in this delivery month of January. The next non active month of February saw the OI fall by 3 contract(s) DOWN TO 226.
The next big active delivery month is March and here the OI FELL by 650 contracts UP to 132,388 contracts.
We had 34 notice(s) filed for 170,000 oz for the January contract.
VOLUMES: for the gold comex
Today the estimated volume was 356,356 contracts which is excellent.
Yesterday’s confirmed volume was 354,371 contracts which is excellent
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||nil 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||4,821,484.0 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 0 contract(s) of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped/ Received) by jPMorgan customer account.
March 2015: 2.311 tonnes (March is a non delivery month)
|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)||745 contracts (3,725,000 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||22,034,593.8 oz|
And now the Gold inventory at the GLD
Jan 27/no changes at the GLD/Inventory rests at 799.07 tonnes
Jan 26/no changes at the GLD/Inventory rests at 799.07 tonnes/
jan 25/another exactly the same withdrawal as yesterday: 50.4 tonnes and again this was used in the whacking of gold today/inventory rests at 799.07 tonnes
jan 24/a huge withdrawal of 5.04 tonnes and probably this was used today in the whacking of gold/inventory rests at 804.11 tonnes
Jan 23/a big change/this time a deposit of 1.19 tonnes of gold into the GLD/inventory rests at 809.15 tonnes. The drainage of gold from the GLD to Shanghai has now stopped!
Jan 20/no changes in gold inventory a the GLD/Inventory rests at 807.96 tonnes
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
|Gold COT Report – Futures|
|Change from Prior Reporting Period|
|non reportable positions||Change from the previous reporting period|
|COT Gold Report – Positions as of||Tuesday, January 24, 2017
At 3:30 pm est we get the COT report which gives position levels of our major players.
Let week we saw the commercials go net short getting ready for their whack which did happen
Our large specs:
those large specs that have been long in gold spilled their guts out by pitching 8290 contracts from their long side.
those large specs that have been short in gold covered 10,656 contracts from their short side.
those commercials that have been long in gold added 7601 contracts to their long side
those commercials that have been short in gold added 10,864 contracts to their short side.
Our small specs:
those small specs that have been long in gold pitched a tiny 273 contracts from their long side.
those small specs that have been short in gold covered 1170 contracts from their short side.
Conclusions: the commercials go net short by 3263 contracts which we suspected would happen due to the raid on Wed.. and Thur of this week.
And now for silver:
|Silver COT Report: Futures|
|Small Speculators||Open Interest||Total|
|non reportable positions||Positions as of:||146|
Our large specs:
those large specs that have been long in silver added 1481 contracts to their long side
those large specs that have been short in silver covered a tiny 58 contacts.
those commercials that have been long in silver added 2167 contracts to their long side
those commercials that have been short in silver from the beginning of time covered 3515 contracts from their short side.
Our small specs:
Those small specs that have been long in silver added 1395 contracts to their long side
those small specs that have been short in silver added 255 contracts to their short side.
Conclusions: the commercials go net short by only 1348 contracts. It seems that they have difficulty in covering their huge shortfall.
Major gold/silver trading/commentaries for FRIDAY
Dow 20K … US Debt $20 Trillion … Trump and $15,000 Gold
by Jan Skoyles, Editor Mark O’Byrne
In case you’ve been hiding under a rock, the Dow Jones Industrial Average reached 20,000 earlier this week for the first time in its 132 year history to much media fanfare.
Bigcharts via Financial Sense
Since Trump’s election US market indicators, including the Dow have been ticking up – it has been labelled the Trump rally. This latest milestone is something that the new President is happy to take credit for. In fact, he tweeted ‘Great! #Dow20K’ in response.
He told ABC News that
“We just hit a record, and a number that’s never been hit before. So I was very honored by that … Now we have to go up, up, up …”
Trump’s senior advisor (and fellow advocate for a weaker dollar) Anthony Scaramucci took to Twitter to thank President Trump for bringing about the best stock-market performance after a presidential election win since 1900. UKIP Leader Nigel Farage agreed that this was thanks to the Donald and saw it has a ‘huge vote of confidence in @POTUS.’
Few commentators pointed out that this latest ‘bubblelicious’ Dow milestone of 20K comes at a time when the U.S. is drowning in a sea of red debt as debt levels continue to surge and will reach the even more important milestone of $20,000,000,000,000 (trillion) in the coming weeks. The digit two is in both and both have a lot of zeros but the latter is actually much more important than the former.
In value terms, the 20,000 milestone means very little. In fact, in real value terms (when priced in gold) the Dow isn’t much higher than when it first hit just 1,000 back in 1972.
Make America Great Again has to mean Make America have Value Again
The Dow has had an impressive performance since November 8th, it has climbed around 9.5%. The actions of Trump since both his election and inauguration (from tweets to signing Executive Orders) have driven positive market reactions … so far.
There is little doubt that since his inauguration the new President has worked hard to show that he will make good on his election promises. All of which come under the umbrella to ‘Make America Great Again.’ In turn, market activity does show signs of what Keynes would have called ‘animal spirits’ – the self-feeding frenzy in markets when confidence is high.
As a result, it appears US markets are doing well and so the DJIA reaches a new all-time high in nominal dollar terms. But, as we have learnt from both Obama’s administration and all the others before that, there is a serious falsehood in claiming new records in markets really mean something, particularly when you are basing your information on an already flawed monetary system involving the increasingly debased currency that is the dollar, not too mention currencies internationally which are all being debased.
The Dow has been on a winning streak since 2009, in the period of Obama’s two term presidency the index climbed 144%, the S&P 500 172% and the Nasdaq Composite 275%. No-one can claim that this was all thanks to the Obama administration and some argue that it is not a reflection of what the 44th President really did for the economy given the actions of central banks both at home and abroad – involving QE on an unprecedented scale and an unprecedented monetary experiment in zero percent and negative interest rates.
It is worth noting that Venezuela and previously Zimbabwe had the best performing stocks markets in recent years.
In fact, whilst Trump will be keen to beat Obama’s stock market performance figures, he was a vocal critic of the ‘falsehoods’ upon which his predecessor based his economic KPIs on. We wonder if Trump will remember this when he continues to publish self-congratulatory tweets about the DJIA’s success.
DJIA – the wrong way to value investment performance and an economy
For a start, the Dow Jones Industrial Average is an odd measure for a economy’s success. There are hundreds of publicly traded companies in the United States, but the DJIA only considers 30 of them. There is no clear reason why it includes those particular 30 and their performance is calculated using the Dow Divisor (which is currently 0.14602128057775).
Trump is celebrating something that has come about in the face of what he called ‘a false economy.’ An economy, that he inherited from Obama and continues to benefit from – the economy that has been pumped up by the Federal Reserve including a massive increase in public and national debt.
When you look at the DJIA against something that has held its value, as opposed to the debased dollar and the artificially stimulated US economy, then you will see a different story.
Dow Jones Versus Gold
‘Sir Charles’ over at pricedingold.com, draws our attention to the fact that the Dow priced in gold is nowhere near its high of 1110 grams of gold (49 oz) seen in 1999 when the DJIA rose to a record of 11,700 and gold was at a record low of $240 per ounce (see chart). Last Friday, when Trump was inaugurated the Dow was at 530g (18.1 oz).
Breaking through 20,000 is clearly an important psychological level for traders and markets, as it was in 1972 when it reached 1,000, then 5,000 in 1995 and 10,000 in 1999 and 15,000 in 2013. The difference though from the first big milestone in 1972 and today is that much of that was driven by a real economy, real company profits and real economic growth.
Sir Charles explains:
“Breaking the 1,000 barrier in November of 1972 was an emotional moment for traders on the floor and investors around the world. It seemed to mark a new era of prosperity, even as, behind the scenes, inflation and recession were preparing to set in. At that time, Dow 1,000 USD meant Dow 482 grams of gold, and through the rest of 1972, the Dow traded between 480 and 500 grams.’
It wasn’t until 1973 that the strings began to unravel and both the dollar and stock market began to fall, the Dow reached its all time low of 37g (1.3oz) in 1980. Were that to happen today with the DJIA at 20,000, we would need to see gold prices surge to $15,384 per ounce.
As you can see from the important chart above, the largest bull-market in the Dow Jones began in 1980, Sir Charles states that we need to ask if we are
“now following the trajectory of the early 1980s (on our way to the moon again) or if we are instead channeling the spirit of 1974 to 1977 (a major bear market rally, on our way to a retest of all-time lows).”
Trump, the Fed and gold
The answer to this question lies with Donald Trump. As we have explained already, whilst the recent highs in the DJIA might not mean much in real-terms, it is an important indicator of the high expectations traders have for Trump and his radical policies – at least in the short term anyway.
This is a President who has won an election on promises to grow a real economy and to bring it back to its former glory days, this surely means a currency that is worth something.
For all of Trump’s comments on the Fed during the election campaign and complaints about the strong dollar in the run-up to the inauguration, he actually hasn’t done much to reassure us that he is aware of how to fix the financial system. Instead, he talks about the strong dollar in relation to its exchange rate with another currency, not in terms of its real value.
For Trump the solution appears to lie in protectionism, which just seems to be a way of papering over very odgy vulnerable and cracked foundations. Economics and the Triffin Dilemma tells us that Trump can’t have his cake and eat it – there is an incompatibility between the domestic policy of a country (which operates a global reserve currency) and the international monetary order.
Instead, the solution may lie in real monetary reform. Something his recent pronouncements and cabinet appointees strongly suggest will not take place.
During the Republican nomination rounds, there was plenty of talk about the value of the dollar and how it could be reformed to some of its past glory through the gold-standard. Since Trump’s nomination, this has not been mentioned again.
From a Libertarian perspective, he is proving himself very disappointing indeed. Both in terms of economic and monetary policies and indeed in terms of his expansionist, some would say quasi-imperialist foreign policies.
If Trump really wants a reason to fist pump on social media, and show that he is bringing real value to the US economy, he would have to begin to focus on honest money and basing his monetary policies on something of real value – gold. So far there is little sign of this – quite the opposite as his fiscal policies are wildly expansionary and this needs to be paid for by the already massively indebted U.S. sovereign.
The New York Sun editorial summed it up well this week:
“This is a moment to press the importance of true monetary reform — a point that was marked on the Journal op-ed page January 24 in a piece by John Mueller. He argues precisely that Mr. Trump’s trade real trade problem is not a lack of protectionism but a lack of the right monetary system. “When America had a gold or silver standard, the federal budget ran an annual surplus averaging 0.4% of gross domestic product,” he writes. “When it hasn’t, the average deficit has been 2.7%.”
Who is going to carry this reform for Mr. Trump? He has an early chance to nominate two governors of the Federal Reserve and, before long, to replace the chairman and vice chairman. These choices will be important. Mr. Trump’s nominee as Treasury Secretary, Steve Mnuchin, seems lukewarm or even indifferent to the cause of honest money. Vice President Pence, however, gets it down to the ground. We’ve already suggested Senator Cruz as the next Fed chairman.
A long-shot, no doubt, though the senator of Texas was the first candidate to thrust monetary policy to the center of the campaign. This week, the editor of the Interest Rate Observer, James Grant, asks a craftier suggestion: “Is it so farfetched,” he quips, “to imagine Stephen Bannon as chairman of a Trumpian Federal Reserve?” We’ve met Mr. Bannon only glancingly, but he strikes us as having the kind of crust that will be needed if Mr. Trump is to get a monetary reform to undergird his radical presidency.”
A return to the gold standard may seem a way off, but if Trump’s presidency continues to be as radical as it initially appears it is not impossible to imagine monetary reform happening.
However, it may be that necessity rather than prudence forces the President’s hand. Given the scale of U.S. debt, a dollar crisis seems increasingly likely. The new President may then be forced to look to gold as a way to restore confidence in a battered greenback.
Conclusion – Dollar ‘great’ or dollar crisis?
To conclude, ‘Sir Charles’ sums it up nicely. He writes that gold is not perfect, but that
“it has stood the test of time, both as cash money and as a measure of value, for thousands of years – while hundreds of other currency systems have come and gone.”
Trump so far appears to be exacerbating and accelerating financial, monetary and geo-political trends that were already taking place. What was happening slowly and almost imperceptibly under Bush II and Obama is now becoming more apparent and intensifying under Trump. Wars are very expensive things to wage and have to be financed. Today they are being financed by stealth currency devaluation.
Will Trump accelerate the decline and devaluation of the US dollar during his Presidency? Or will he make the dollar “great again” and restore the greenback to its former glory?
The signs in the first few days of his Presidency are not good, underlining once again the importance of owning physical gold to protect against geo-political risks, stock and bond market bubbles and the continuing devaluation of all fiat currencies.
As I highlighted to you yesterday, gold exports to China soar as we enter the Chinese New Year
Gold exports to China soar in run-up to year of the rooster
Submitted by cpowell on Thu, 2017-01-26 19:55. Section: Daily Dispatches
By Ranjeetha Pakiam and Eddie Van Der Walt
Thursday, January 26, 2017
Gold exports to China soared in the run-up to the start of the lunar new year, with volumes increasing in December from major suppliers Switzerland and Hong Kong.
More gold was sent from Swiss refiners to the world’s top consumer than in any month since at least January 2014, according to data on the website of the Swiss Federal Customs Administration, while imports from the Asian city-state also increased compared with November.
China is the world’s top gold consumer, according to data from researcher Metals Focus Ltd., and the start of the Year of the Rooster this week is associated with gifting the precious metal. Lower prices at the end of last year, brought on by a stronger dollar as the U.S. increased interest rates, supported demand. …
… For the remainder of the report:
Now India is trying to revive old colonial era gold mines.
India mulls reviving colonial-era gold mines with $2 billion in reserves
Submitted by cpowell on Thu, 2017-01-26 20:00. Section: Daily Dispatches
By Neha Dasgupta
Thursday, January 26, 2017
NEW DELHI — India is planning to revive a cluster of colonial-era gold mines — shut for 15 years but with an estimated $2.1 billion worth of deposits left — as the world’s second-largest importer of the metal looks for ways to cut its trade deficit, officials said.
State-run Mineral Exploration Corp. Ltd. has started exploring the reserves at Kolar Gold Fields, in the southern state of Karnataka, to get a better estimate of the deposits, according to three government officials and a briefing document prepared by the federal mines ministry that was seen by Reuters.
The ministry has also appointed investment bank SBI Capital to assess the finances of the defunct state-run Bharat Gold Mines Ltd., which controls the mines, and the dues the company owes to workers and the authorities, said the officials, who are involved in the process.
India, the world’s biggest gold importer behind China, spends more than $30 billion a year buying gold from abroad, making the metal its second-biggest import item after crude oil. …
… For the remainder of the report:
Steve St Angelo comments on the future silver supply:
(courtesy Steve St Angelo/SRSRocco report)
Future Silver Supply Will Be More Vulnerable Than Other Metals
January 26, 2017
There has been a lot of discussion on the remaining global supply of certain precious metals on the alternative media. I continue to read articles that state there are only ten years worth of silver remaining. Unfortunately, many of these figures are inaccurate. So, I thought I would provide an update based on recent USGS – United States Geological Survey data and information.
For example, some analysts continue to say there are only ten years worth of silver reserves remaining. This was true back in 2009, before the USGS updated their figures. Unfortunately, the USGS had not updated their silver reserve figures for quite some time and the higher silver price (including higher prices for metals associated with by-product silver production) was as an additional factor that led to much higher silver reserve estimates in follow years.
Here is a table from the USGS Silver Commodity Mineral Survey in 2009:
If we take the estimated silver reserves (2009) of 270,000 metric tons (mt) and divide by the annual production of 20,900 mt in 2008, that would equal 12.9 years worth of remaining reserves. Again, this is where many in the precious metals community state that there are only ten years (close enough) worth of silver remaining.
However, the USGS started revising their silver reserve figures in the following years and also replaced the “NA” information in the table above with actual reserves. Basically, the low silver price in the early 2000’s did not motivate governments to revise their silver reserves. But, as the price of silver started to skyrocket after 2009, well then, it was time to put some REAL VALUE to these silver reserves.
Here is the most recent table by the USGS, of global silver reserves:
According to the USGS, total global silver reserves are now 570,000 mt. Thus, if we divide 2015 production of 27,300 mt, we end up with 20 years worth of global silver reserves remaining… at current rates of annual production. You will notice, that Chile now has silver reserves of 77,000 mt for 2015. However, the USGS had a “NA” next to Chile’s silver reserves in its 2009 Silver Commodity Summary.
Furthermore, the top three countries (Peru, Australia & Poland) account for 51% of the total world silver reserves at 290,000 mt.
That being said, here is a chart showing the years remaining of the top global precious and base metals:
According to the USGS, copper has the largest amount of reserves remaining at 38 years compared to silver (20 years), gold (19 years), lead (19 years) and zinc (15 years). Of the five metals shown in the chart above, silver has the second highest amount of reserves, based on years worth of supply remaining.
Interestingly, zinc has the least amount of metal reserves, at only 15 years of supply. Regardless, these official estimates are based upon business as usual continuing in the global economy for the next 30-40 years. While these reserve estimates provide an “official gauge” as to how many years worth of supply of each metal is remaining, I doubt they will last that long.
This will be due to the peak and decline of global oil production as well as the continued collapse of net energy from oil supplied to the market. That being said, silver reserves will likely fall the most as 70% of silver production comes as a by-product of base metal and gold production.
Once the global oil industry disintegrates under the weight of falling prices as costs continue to rise, the decline of base metal and gold production will impact silver the greatest. Not only will silver reserves plummet to a greater degree versus the other metal reserves, so will its annual production rate.
These two factors will make the future supply of silver more vulnerable than most other metals… even gold. More on this in future articles.
IMPORTANT NOTE: If you have not listened to my interview with Craig at TFMetals Report, please check it out here: A2A with Steve St. Angelo of SRSrocco Report
Your early FRIDAY 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 6.8840(ZERO DEVALUATION /CHINA UNHAPPY TODAY CONCERNING USA DOLLAR RISE/ CHINA/OFFSHORE YUAN WIDENS TO 6.8646 / Shanghai bourse CLOSED / HANG SANG CLOSED DOWN 13.39 PTS OR 0.06%
2. Nikkei closed UP 65.01 POINTS OR 0.34% /USA: YEN RISES TO 115.10
3. Europe stocks opened ALL IN THE RED ( /USA dollar index RISES TO 100.63/Euro UP to 1.0689
3b Japan 10 year bond yield: FALLS TO +.084%/ !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 115.10/ 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:: 53.37 and Brent: 55.66
3f Gold DOWN/Yen DOWN
3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS AND SELLING THE SHORT END
Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.
3h Oil UP for WTI and UP for Brent this morning
3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO +.477%/Italian 10 yr bond yield UP to 2.23%
3j Greek 10 year bond yield RISES to : 7.11%
3k Gold at $1183.65/silver $16.73(8:15 am est) SILVER BELOW RESISTANCE AT $18.50
3l USA vs Russian rouble; (Russian rouble UP 45/100 in roubles/dollar) 59.89-
3m oil into the 53 dollar handle for WTI and 55 handle for Brent/
3n Higher foreign deposits out of China sees huge risk of outflows and a currency depreciation (already upon us). This can spell financial disaster for the rest of the world/China forced to do QE!! as it lowers its yuan value to the dollar/GOT ZERO DEVALUATION from POBC.
JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 115.10 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 0.9998 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0685 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 +.477%
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 2.518% early this morning. Thirty year rate at 3.10% /POLICY ERROR)GETTING DANGEROUSLY HIGH
5. Details Ransquawk, Bloomberg, Deutsche bank/Jim Reid.
(courtesy Jim Reid/Bloomberg/Deutsche bank/zero hedge)
Dollar Rebound Continues, Europe Stocks Pressured By Banks As Much Of Asia Goes On Holiday
US equity futures are unchanged, trading near record highs after digesting a spate of earnings results on Thursday. The dollar pared its weekly loss as the yen and pound slid, while gold headed for its longest slump in three months. European equities fell and markets in Asia were mixed, while markets in China, South Korea, Taiwan and Vietnam were closed Friday for the start of Lunar New Year. Hong Kong, Malaysia and Singapore had shortened sessions.
The dollar continued its recovery against a basket of other currencies on Friday, while banks dragged European shares slightly lower following underwhelming results from Swiss major UBS. The two-day recovery comes after the dollar suffered a 4 percent drop in the three weeks from Jan. 3 as doubts emerged about how Trump’s policies will play out for the currency, particularly after both Trump and Treasury Secretary-designate Steven Mnuchin hinted at concerns over its strength. The yen extended its biggest decline in a week and Japanese bonds rose as the BOJ stepped in to buy more debt than expected. The pound also slid ahead of British Prime Minister Theresa May’s meeting with Donald Trump.
“The (dollar) has experienced a powerful rebound re-establishing post-U.S. election relationships between the performance of risk assets and U.S. bond yields on the one hand and the (dollar) on the other hand,” said Morgan Stanley FX strategists led by Hans Redekker, in a note to clients.
Trump suggested overnight he would push ahead with a 20 percent border tax on Mexico, spurring a slump on the peso and refocusing market expectations on his pro-business policies which, along with healthy corporate results, helped stocks on Wall Street to fresh record highs. However, the peso has since rebounded after the White House backtracked on its border tax proposal, when Sean Spicer said it was only “theoretical.”
On the political calendar, all eyes will be on the upcoming meeting between UK PM Theresa May and Donald Trump today. She will be the first leader to meet the President and a lot of attention will be placed on the outcome. May wants to try to pave the way for a free trade deal with the US post-Brexit and Mr Trump, in spite of his protectionist biases, would probably like to help the UK prosper if for no other reason than to help prove his point that the EU is flawed and the UK is better off outside of it. So although it’s a very early meeting where nothing will be decided it’ll be interesting to hear from the leaders afterwards. Trump’s ability to be confrontational on the global stage was demonstrated yesterday as we saw US-Mexico trade relations continue to grow strained as Mexico’s President Enrique Pena Nieto officially cancelled a planned meeting with Trump as the latter continued to signal intentions of building “the wall” and substantially increasing border security. He said that if the Mexicans had no intention of paying for the wall they should cancel next week’s trip. This is precisely what they’ve done.
Back to markets, where the global equity rally fizzled modestly after U.S. benchmarks reached all-time highs this week, as corporate results from Caterpillar Inc. to Microsoft Corp. delivered a mixed picture on the state of the American economy ahead of the Federal Reserve meeting next week. The Bank of Japan also meets and is expected to leave policy unchanged as recovering exports, strength in production and buoyant oil prices support reflation. The MSCI Asia Pacific Index fell 0.1%, while Japan’s Topix climbed 0.3%, bringing it near its highest point in more than a year. Australia’s S&P/ASX 200 Index rose 0.8 percent as the nation’s markets reopened after a holiday. India’s Sensex, also back from a holiday, gained 0.7 percent. Hong Kong’s Hang Seng Index slipped 0.1 percent, while Singapore’s Straits Times Index added 0.4 percent for its highest close since October 2015.
European stocks were headed for a weekly gain of about 1 percent though were slightly lower on Friday as weakness in the banking shares weighed. The Stoxx Europe 600 fell 0.3% following three days of gains. A fall in profits sent UBS shares down more than 3% as investors locked in some gains following a strong rally in financials stocks following the U.S. election. The European banking index fell 1.2 percent.
In the UK, the FTSE was also slightly lower but outperformed other regional benchmarks supported by merger activity as leading supermarket operator Tesco struck a deal to buy up wholesaler Booker to create what it claims will be Britain’s “leading food business”. The deal values Booker at 205.3p a share, or £3.7bn, a premium of 12 per cent over its closing price of 183.1p a share on January 26 according to the FT. Booker acquired grocery chains Budgens and Londis in 2015 and has over 170 cash and carry locations in the UK. Tesco said Booker shareholders will receive 42.6p in cash and 0.86 in new Tesco shares. The merger will result in Booker shareholders owning 16 per cent of the combined company. Tesco shares surged 10 percent.
Futures on the S&P 500 Index were down less than 0.1 percent. The benchmark slipped 0.1 percent Thursday after rising past 2,300 for the first time, while the Dow Jones Industrial Average extended an all-time high.
Benchmark German bonds are headed for their worst week since the aftermath of November’s U.S. election on Friday, as Trump’s first week in office fuels expectations of inflation and growth-boosting policies in the world’s biggest economy. The yield on 10Y Treasuries was up one basis point at 2.52%. It slipped one basis point Thursday after an auction of $28 billion in seven-year notes drew a record amount of buying from indirect bidders, signaling interest from foreign central banks and mutual funds. Japanese 10-year yields fell one basis point to 0.08%. As reported last night, the BOJ boosted the amount of 5-to-10-year bonds it buys in its outright purchase operations, underscoring a commitment to keep its yield-curve target.
In a report citing EPFR data, Bank of America reported that investor flows continue to point to a preference for so-called “reflation” trades. Funds investing in TIPS, high-yield bonds and Japanese equities, attracted inflows over the past week, the data showed. “But the re-positioning feels grudging and flows have yet to show big asset allocation capitulation out of bonds into stocks,” BofA’s Michael Hartnett said.
In commodity markets, oil prices gave up earlier gains as rising crude output from the United States was seen offsetting efforts by OPEC and other producers to prop up the market by cutting supplies. Trading was choppy as volumes were lighter than average with much of Asia closed due to the start of the Lunar New Year holiday. Brent crude futures, the international benchmark for oil prices, were trading at $55.98 per barrel, down 0.5 percent from their last close. U.S. West Texas Intermediate (WTI) crude futures were down 0.2 percent at $53.67 a barrel
- S&P 500 futures down less than 0.1% to 2292
- Stoxx 600 down 0.5% to 366
- FTSE 100 down 0.1% to 7152
- DAX down 0.3% to 11816
- German 10Yr yield down less than 1bp to 0.48%
- Italian 10Yr yield up 2bps to 2.26%
- Spanish 10Yr yield up less than 1bp to 1.58%
- S&P GSCI Index down 0.4% to 399.2
- MSCI Asia Pacific down less than 0.1% to 142
- Nikkei 225 up 0.3% to 19467
- Hang Seng down less than 0.1% to 23361
- Shanghai Composite closed
- S&P/ASX 200 up 0.7% to 5714
- US 10-yr yield up less than 1bp to 2.51%
- Dollar Index up 0.24% to 100.62
- WTI Crude futures down 0.7% to $53.41
- Brent Futures down 0.9% to $55.71
- Gold spot down 0.3% to $1,184
- Silver spot down 0.3% to $16.76
- U.S. Edges Toward Trade War as Trump Clash With Mexico Escalates
- Microsoft, Intel, Alphabet Results Buoyed by Cloud Boom
- PayPal Has Been Talking With Amazon on Payments, CEO Says
- Morgan Stanley to Reduce Wealth Fees Even With Rule Uncertainty
- Resignation Threatens to Bring Federal Pipeline Rulings to Halt
- Biggest U.S. Takeover in China in Decade Hangs on Board Spat
- Tesco Agrees to Buy Wholesaler Booker for About $4.6 Billion
- UBS Clients Pull Net $15 Billion in Quarter as Margins Decline
- Wynn’s New Macau Palace Helps Chinese Unit Beat Estimates
- Asahi Looks for China Beer Exit After Tsingtao Disappointment
- Toshiba Outlines Plans to Raise Capital Via Chip Stake Sale
- Hong Kong Yuan Deposits Post Record Monthly Drop in December
- U.S. Steel to Negotiate With Hesteel on Sale of Slovak Unit: HN
- Ford’s Farley Sees Up to $600m Impact From GBP Drop in ’17: Sky
- Lions Gate in Talks to Sell Epix Stake to MGM, Viacom: Reuters
- Digital Bridge Said to Buy Vantage Data Centers for >$1b: Reuters
- Trump, Merkel Expected to Talk by Phone Saturday: Reuters
In Europe, shares trade lower but only marginally (EuroStoxx 50 -0.6%). The main equity story of the day is Tesco’s (TSCO LN) GBP 3.7bIn merger with wholesaler Bookers (BOK LN). Elsewhere, the banking sector is the worst performing sector with UBS down after an earnings update this morning. Aside from stock specific stories, macro newsflow has remained light for the morning thus far. Bunds are trading sideways this morning stuck with a tight range between 161.35 to 161.80. Italian BTP’s initially showed some weakness again, wider 3bps vs Bund: 10yr yield 2.26%, spread 178bps this after further weakness seen yesterday after the Italian court ruling regarding voting laws. However, Italian paper over the course of the morning has been able to reverse the initial downside to pare the move with little in the way of new fundamental catalysts to sway price action in what has been an erratic morning thus far. Of note, after market we see rating agencies rate Spain, UK and Turkey.
Top European News
- Tesco Agrees to Buy Wholesaler Booker for About $4.6 Billion: CEO Lewis makes M&A debut, entering out-of-home food market
- U.S. Regulators Hang Tough at Basel as Trump Rollback Looms: U.S. will push hard for consensus on output floor, Petrou says
- Betting on Nordic Rain Pays Better Than Your Average Hedge Fund:Danish manager made 15 percent, 5 times commodity fund index
Asia equity markets traded mostly higher despite a mixed lead from Wall Street where earnings were in focus and the DJIA further extended above 20,000, although upside in the Asia-Pac region was reserved amid holiday-thinned trade. ASX 200 (+0.8%) outperformed as it played catch up on return from yesterday’s public holiday and took its first opportunity to react to the DJIA conquering the 20k level, while Nikkei 225 (+0.3%) was kept afloat by a weaker JPY. Hang Seng (+0.1%) slightly lagged on early profit taking and position-squaring heading into the Lunar New Year, with a lack of demand also attributed to various market closures as mainland China, South Korea and Taiwan remained shut for holiday. 10yr JGBs were higher with outperformance in the long-end after the BoJ announced its bond buying operations, in which it increased purchases of government debt with 5yr-10yr maturities to JPY 450b1n from a previous JPY 410bIn.
Top Asian News
- Jakarta Stocks Miss Gain as Governor Race Takes Islamic Turn: Indonesia is only SEAsian market to see stock outflows in 2017
- Little Room to Beat India Cash Ban Gloom With Budget Goodies: Overspending triggers risk of downgrade due to wide deficit
- Biggest U.S. Takeover in China in Decade Hangs on Board Spat: Majority board asks Air Products to proceed with due diligence
In currencies, the Bloomberg Dollar Spot Index rose 0.2 percent as of 8:17 a.m. in London, after jumping 0.6 percent Thursday. The measure is down 0.3 percent for the week, headed for a fifth straight weekly decline — the longest stretch since May 2015. It hit the highest in more than a decade in early January. The yen slid 0.5 percent to 115.13 per dollar after dropping 1.1 percent the previous session. The currency is down 0.4 percent for the week, its worst showing since Dec. 16. The pound fell 0.4 percent following a 0.3 percent decline Thursday, though it remains in line for a 1.4 percent weekly gain. The peso dropped 0.6 percent, extending Thursday’s 0.7 percent retreat. Mexico’s president scrapped his trip to Washington after Donald Trump doubled down on campaign pledges to rewrite the North American Free Trade Agreement and charge his southern neighbor to build a border wall.
The Turkish lira continued to touch new lows, falling 0.8 percent.
In commodities, West Texas Intermediate crude was little changed at $53.79 a barrel after surging 2 percent Thursday on optimism that OPEC and other producing nations would adhere to their pledged output cuts. The standout mover in commodities was Gold, which retreated 0.4 percent to $1,184.32 an ounce after dropping 1 percent Thursday. It is headed for a fourth straight loss, which would be the longest slump since October as the combined pressure from USD upside and risk on sentiment see the safe haven ‘metal’ offloaded. We still have room before we get to the Dec lows ahead of USD1120, but the pressure continues for now. USD based losses having limited impact on Copper, similarly Oil prices showing a small down in this respect also. A standout gainer is Nickel, which has been rising on strong demand out of China (see Copper also), whilst inventories have been falling.
Taking a look at some of the upcoming data today, in Europe we saw the December M3 money supply numbers (+5.0%, Exp. +4.9% YoY, vs. +4.8% previous) for the Euro area and the January consumer confidence indicator in France (100, vs 100 expected; 99 previous). In the US the advance Q4 GDP print (+2.2% QoQ annualized; +3.5% previous) will be closely watched alongside preliminary data on durable and capital goods orders in December, followed by the final University of Michigan sentiment reading for January (98.1 expected; 98.1 previous). So a fairly busy end to the week alongside the Trump/May meeting.
US Event Calendar
- 8:30am: GDP Annualized QoQ, 4Q A, est. 2.2% (prior 3.5%)
- 8:30am: Durable Goods Orders, Dec. P, est. 2.5% (prior -4.5%)
- Capital Goods Orders Nondef Ex-Air, Dec. P, est. 0.2% (prior 0.9%)
- 10am: U. of Mich. Sentiment, Jan. F, est. 98.1 (prior 98.1)
- 1pm: Baker Hughes rig count
DB’s Jim Reid concludes the overnight wrap
The state rooms at the White House will no doubt be prepared for UK PM Theresa May’s visit to see Donald Trump today. She will be the first leader to meet the President and a lot of attention will be placed on the outcome. Mrs May wants to try to pave the way for a free trade deal with the US post-Brexit and Mr Trump, in spite of his protectionist biases, would probably like to help the UK prosper if for no other reason than to help prove his point that the EU is flawed and the UK is better off outside of it. So although it’s a very early meeting where nothing will be decided it’ll be interesting to hear from the leaders afterwards. Mr Trump’s ability to be confrontational on the global stage was demonstrated yesterday as we saw US-Mexico trade relations continue to grow strained as Mexico’s President Enrique Pena Nieto officially cancelled a planned meeting with Mr Trump as the latter continued to signal intentions of building “the wall” and substantially increasing border security. He said that if the Mexicans had no intention of paying for the wall they should cancel next week’s trip. This is precisely what they’ve done. The Peso was down over 1% after the news and the Bovespa -1.4% yesterday. The story took a further twist later as after US markets closed White House Press Secretary Sean Spicer suggested that “When you look at the plan that’s taking shape now, using comprehensive tax reform as a means to tax imports from countries that we have a trade deficit from, like Mexico, if you tax that $50 billion at 20 percent of imports……… we can do $10 billion a year and easily pay for the wall just through that mechanism alone.” After only 4 days of Mr Trump’s presidency this is escalating pretty quickly. Despite volatility being very low now I can’t see this being a permanent feature of 2017 even if overall growth is eventually higher.
Over to markets and global equity bourses were largely mixed yesterday. Broader US equities ran out of steam with the S&P500 -0.07% on the day although the Dow edged up +0.16%. European equities maintained momentum with the Stoxx up +0.25% on the day, driven largely by the healthcare sector (+1.6%). At the other end of the risk spectrum, bonds generally sold off for most of the day although a late US rally led to UST 10yr falling 1bps (4-5bps off the highs) after German 10yr yields climbed +2bps earlier, while UK 10yr yields rose by +4 bps. Euro periphery bonds also sold off with 10yr Italian BTP yields rising by +12bps likely on the back of Wednesday’s court ruling which our own Marco Stringa thinks encourages fragile coalition governments going forward with little chance of serious structural reform. It also perhaps increases the chances of an early election. See yesterday’s EMR with a link to Marco’s piece for more on this.
On the commodity spectrum, crude rose by +1.9% and to around 3-week highs and actually fairly close to 18-month highs. In Asia the BoJ have been active again this morning buying 450bn of 5-10 year paper which has been seen as an attempt to prevent the 10 year climbing further. We hit 0.085% yesterday and many think that the BoJ zero yield target for 10 years has an upper bound of around 0.1%. The 10yr has rallied 1.4% today to 0.067% as we type. We think this area of the curve could face pressure as the year progresses if we’re right on global yields. Remember that the BoJ implemented their change of direction (yield and yield curve targeting) in September last year which was pretty much the lowest level for government bond yields at a global level in history. Elsewhere in Asia the Nikkei is +0.2% and the Hang Seng was slightly lower before the early close with Chinese markets off for Lunar New Year. Many other markets in Asia have closed early with China extending the closure next week.
Staying with Asia, it is worth highlighting that our Chinese economists have published the first edition of a new monthly publication entitled China Macro in Charts. This report aims to provide a comprehensive set of charts tracking, amongst other things, developments in economic activity, trade, inflation, financial markets and fiscal policy.
The data out of Europe yesterday was broadly positive. The GfK consumer confidence reading from Germany for February improved more than expected (10.2 vs. 10 expected; 9.9 previous). We also saw the advance Q4 GDP reading for the UK which beat expectations at +0.6% QoQ (vs. +0.5% expected; +0.6% Q3), although there were concerns about the unbalanced nature of the growth – services accounted for nearly the entire expansion while production and construction sectors dragged on growth.
We had a busy day over in the US where we saw a more mixed bag of data. First we saw the advance goods trade balance data for December where the deficit decreased (-$65.0b vs. -$65.3b expected; -$65.3 previous) while preliminary wholesale inventories unexpectedly grew at +1.0% mom in December (vs. +0.1% expected). The Chicago Fed National Activity Index reading for December was also unexpectedly positive (0.14 vs. -0.05 expected) while the conference board leading index came in line with expectations (+0.5%). Flash PMIs for January beat expectations with the services PMI ticking up to 55.1 (vs. 54.4 expected) and thus driving the flash composite up to 55.4 (vs. 54.1 previous). Labour market data was on the weaker side as initial jobless claims rose more than expected to 259k (vs. 247k expected; 237k previous), and new home sales for December disappointed at 536k (vs. 588k expected; 598k previous). The claims number may still have seasonal distortions in after a strong Xmas period.
Taking a look at some of the upcoming data today, in Europe we will see the December M3 money supply numbers (+4.9% YoY expected vs. +4.8% previous) for the Euro area and the January consumer confidence indicator in France (100 expected; vs. 99 previous). Over in the US the advance Q4 GDP print (+2.2% QoQ annualized; +3.5% previous) will be closely watched alongside preliminary data on durable and capital goods orders in December, followed by the final University of Michigan sentiment reading for January (98.1 expected; 98.1 previous). So a fairly busy end to the week alongside the Trump/May meeting
i)Late THURSDAY night/FRIDAY morning: Shanghai closed HOLIDAY/ /Hang Sang closed DOWN 13.39 OR 0.06%. The Nikkei closed UP 65.01 POINTS OR 0.34% /Australia’s all ordinaires CLOSED UP 0.69%/Chinese yuan (ONSHORE) closed DOWN at 6.8840/Oil ROSE to 53.37 dollars per barrel for WTI and 55.66 for Brent. Stocks in Europe ALL IN THE RED. Offshore yuan trades 6.8646 yuan to the dollar vs 6.8840 for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE WIDENS A BIT AS POBC ATTEMPTS TO STOP DOLLARS FROM LEAVING CHINA’S SHORES. HOWEVER BOTH CHINESE YUANS FALL WITH THE HIGHER DOLLAR
b) REPORT ON JAPAN
The yen tumbles again to the 115 to one area as the Bank of Japan boosts bond buying again. This action was taken to stop the yield from rising further. However that action failed as yields rose to .84% from .7%
(courtesy zero hedge)
Yen Tumbles After BOJ Boosts Bond Buying
With the Trump reflation trade once again spooking global government bonds and sending rates higher around the world, overnight Japan’s 40-year JGB rose to 1% for the first time in 11 months as Treasuries led a global debt sell-off amid rising inflation fears. Quoted by Bloomberg overnight, Barclays’ rates strategist Naoya Oshikubo said that “the 40-year yield has further to go, but the speed of its rise has been very fast” and suggested that “the BOJ might take action if the yield rises further rapidly.”
On Wednesday, before the latest move, there was some speculation that the BOJ might increase the amount of bonds it buys for super-long zones as yields climbed, but the BOJ bought just the regular amount, which suggested to traders that the BOJ is willing to tolerate the rise, putting pressure on the USDJPY.
Heading into today’s session, the BOJ was expected to announce its last regular market operation for this month. According to Katsutoshi Inadome, a senior bond strategist at Mitsubishi UFJ Morgan Stanley Securities, while the BOJ was expected to offer to buy 420bn yen in 1-to-3 year category, 400bn yen in 3-to-5 year category, and 410bn yen in 5-to-10 year zone, he cautioned that if the BOJ does not expand its purchases on the long end, it would disappoint the market, leading to a jump in the yen and bond selling: “If BOJ does what would be in line with the schedule as above, it is likely to spark bond selling on disappointment.”
He added that “super-long yields have risen to levels the markets saw as the upper end of the range for the BOJ’s yield curve control so if there is no action to stem these rises, it would raise doubts about its stance.”
Moments ago, the BOJ decided to avoid any “doubts about its stance” and when it announced the quantities for today’s POMO operations, it did not disappoint because whereas it previously bought “only” 410bn yen in the 5-10 year zone, today it increased the amount by 10%, to 450bn, effectively increasing the amount of debt the central bank is monetizing on the long end of the belly.
And with the telegraphed explicit support by the BOJ, any further selling in bonds has for now been halted, while the USDJPY spiked, as expected, tagging 115, before modestly dipping now that instead of concerns about tapering its QQE “with yield control” the BOJ has shown it is quite happy to keep the curve under control and from overshooting, despite Japanese December CPI printing stronger than expected across the board earlier in the session.
That said, even today’s “intervention” did not appease everyone, and as SMBC Nikko Securities in Tokyo wrote, the BOJ operation rose uncertainty about the BOJ’s February plan as the central bank’s operations this week suggest it is seeking to flatten the 2s10s curve which had been steepening. SMBC’s Souichi Takeyama added that “it raises uncertainty to what the buying plan will be for February” noting that “raising the amount of longer- dated bonds it buys at this time will strengthen expectations for further changes, such as making 450 billion yen the amount for the 5-to-10 year zone.”
One can sympathize: what until recently was supposed to be an intervention to gradually steepen the JGB yield curve has now become an attempt to flatten it. Our condolences to Kuroda, who lately no matter what he does, he always gets the undesired outcome.
c) REPORT ON CHINA
With new capital controls in China which commenced on Jan 1 2017, we now see property bubbles blowing up in Sydney, England and Vancouver. Buyers are already walking away from their down deposits:
Chinese Capital Controls Threaten Property Bubbles All Over The Globe As Buyers Lose Access To Cash
For months/years we’ve covered the many real estate bubbles that have been inflating all over the world courtesy of Chinese billionaires looking to launder money offshore (here are just a couple of examples: Vancouver, Sydney and New York). But a new set of capital controls enacted in China on January 1st, and aimed specifically at curbing foreign real estate investments, may just be the needle that finally pops all those bubbles.
As Bloomberg pointed out earlier this month, the following new restrictions on foreign currency transaction were implemented earlier this year.
- Customers must pledge money won’t be used for overseas purchases of property, securities, life insurance or investment-type insurance. While such rules aren’t new, citizens previously didn’t have to sign such a pledge
- Customers must give a more detailed account of the planned use of funds, such as business travel, overseas study, family visits, medical treatment, merchandise trade or purchases of non-investment insurance policies, including the timing, by year and month
- Violators of foreign-exchange rules will be be added to the currency regulator’s watch list, denied foreign-exchange quota for three years and subjected to anti-money-laundering investigations
- Customers must confirm compliance with restrictions on money laundering, tax evasion and underground bank dealings
- Customers must now confirm they aren’t lending or borrowing quotas to or from other citizens
And while some of the new capital controls above may not seem that onerous, they’re already threatening real estate deals from London to Melbourne as Chinese buyers are finding it increasingly difficult to fund down payments.
In London, Chinese citizens who clamored to purchase flats at the city’s tallest apartment tower three months ago are now struggling to transfer their down payments. In Silicon Valley, Keller Williams Realty says inquiries from China have slumped since the start of the year. And in Sydney, developers are facing “big problems” as Chinese buyers pull back, according to consultancy firm Basis Point.
“Everything changed’’ as it became more difficult to send money offshore, said Coco Tan, a broker at Keller Williams in Cupertino, California.
Less than a month after China announced fresh curbs on overseas payments, anecdotal reports from realtors, homeowners and developers suggest the restrictions are already weighing on the world’s biggest real estate buying spree. While no one expects Chinese demand to disappear anytime soon, the clampdown is deterring first-time buyers who lack offshore assets and the expertise to skirt tighter capital controls.
“If it’s too difficult, I’m out,’’ said Mr. Zheng, 66, a retired civil servant in Shanghai who declined to give his first name to avoid attracting regulatory scrutiny. He may abandon a 2.4 million yuan ($348,903) home purchase in western Melbourne, even after shelling out a 300,000 yuan deposit last August. He’s due to make another big payment next month.
As further evidence that the tighter controls are working, Chinese banks last month registered net inflows under the capital account for the first time since the yuan’s devaluation in August 2015.
Moreover, as Bloomberg points out, several new construction luxury buildings are now at risk of losing contracted sales as Chinese buyers, once flush with cash, are finding it very difficult to make progress payments.
At The Spire in London, a 67-story tower with sweeping views of the River Thames and flats starting at 595,000 pounds ($751,901), prospective buyers were caught off guard by the new rules. Less than 70 percent of clients who signed purchase contracts last year have made their initial payments, with the rest now facing “problems,’’ a press official at Greenland Holdings Corp., the project’s Shanghai-based developer, said on Jan. 12. The official asked not to be named, citing company policy.
While Beijing’s policy tweak may appear symbolic on the surface, it’s likely to cause a “notable reduction” in Chinese purchases of Australian property, according to Christopher Todd ‘CT’ Johnson at Basis Point, a consulting firm that specializes in business relations between the two nations. Australia approved A$24 billion ($18.1 billion) of real estate investments from China in the fiscal year ended June 2015, the most recent figures available, making the country by far the biggest source of foreign buyers.
And with one bubble on the verge of popping, the only question to answer now is which asset class speculative Chinese billionaires will cause to bubble over next?
4 EUROPEAN AFFAIRS
My goodness: The German editor of newspaper Die Zeit, Joffe, when asked how to end the “Trump Catastrophe” his answer was “assassination”
(courtesy zero hedge)
German Newspaper Editor: Assassination Easiest Way To End “Trump Catastrophe”
Josef Joffe, the editor-publisher of German weekly Die Zeit, suggests the easiest way to end the “Trump catastrophe” is to murder the president in the White House.
As The Daily Caller’s Jacob Bojesson reports Joffe joined panel show ARD-Presseclub to answer questions from the public. A viewer called in to ask if it was possible to impeach President Donald Trump and end the “catastrophe.”
“There has to be a qualified two-thirds majority of the Senate in order for a removal of office to take place,” a female panelist responded.
“These are politically and legally pretty high hurdles, a lot would have to happen for it, we’re far away from that.”
Joffe then jumped in with a calm response.
“Murder in the White House, for example,” he said.
Joffe recently authored an op-ed in The Guardian where he argues Trump will do “untold damage to Europe.”
The president elect praises Brexit, cosies up to Putin and promises to take an axe to Nato and established trading systems. Prepare for a remake of the 1930s…
Won’t reality bite? Yes, it will. But the 20th century whispers that it may not bite in time, as the depression and the rise of the Pied Pipers of authoritarianism suggest. In the next four years, Trump can do impressive damage. The upside today is that the demagogues of the 1930s did not have to stand for re-election.
One wonders if Joffe and Madonna should get together (in a cell)
5. RUSSIAN AND MIDDLE EASTERN AFFAIRS
Putin and Trump will talk by phone tomorrow in their first step for normalization of relations.
(courtesy zero hedge)
Putin, Trump To Talk By Phone On Saturday: “Getting Along With Russia Is A Great Thing”
Presidents Vladimir Putin and Donald Trump will have their first official discussions since the inauguration in a phone call planned for Saturday, the Kremlin said, a first step towards what Trump has billed as a normalization of relations after three years of tensions marked by open hostility during the Obama regime.
The two leaders are scheduled to exchange views on Russia-U.S. relations while Putin will congratulate Trump on his Jan. 20 inauguration, presidential spokesman Dmitry Peskov told reporters on a conference call Friday cited by Bloomberg. Trump and Putin last spoke in November, when Putin rang Trump to congratulate him on winning the presidential election. Asked by reporters if Ukraine would come up, Peskov said: “This is the first telephone contact since President Trump took office, so one should hardly expect that this phone call will involve substantive discussions across the whole range of issues. We’ll see, let’s be patient.”
Trump has said in the past that, as part of the rapprochement he is seeking with Russia, he is prepared to review the sanctions that Washington imposed on Russia over its 2014 annexation of Ukraine’s Crimea Peninsula. Such a move is likely to face resistance from both domestic and foreign politicians, who argue sanctions should only be eased if Moscow complies with the West’s conditions on Ukraine. Peskov said he had no information on reports that Trump is considering lifting U.S. sanctions on Russia imposed over the 2014 annexation of Crimea and the conflict in eastern Ukraine.
If Putin and Trump can establish a rapport, it could pave the way for deals on Ukraine and Syria, two sources of friction during the administration of Barack Obama according to Reuters.
Trump and Putin have never met and it was unclear how their very different personalities would gel. Trump is a flamboyant real estate deal-maker who often acts on gut instinct, while Putin is a former Soviet spy who calculates each step methodically.
Trump has repeatedly spoken about ending the enmity that has dragged U.S.-Russia relations to their lowest ebb since the Cold War. In an interview with Sean Hannity on Fox News on Thursday night, Trump said it would be to the advantage of both Russia and the US to mend ties and pool their efforts in the fight against terrorism. “I don’t know Putin, but if we can get along with Russia that’s a great thing, it’s good for Russia, it’s good for us, we go out together and knock the hell out of ISIS, because that’s a real sickness,” he said.
“Wouldn’t it be nice if we actually got along with people? Wouldn’t it be nice if we actually got along, as an example, with Russia? I am all for it,” Trump told a news conference in July last year.
Putin, at a news conference in December, said he would reciprocate. “Mr Trump …. said he believes it’s right to normalize Russian-American ties and said it definitely won’t be any worse, because it couldn’t be worse. I agree with him. Together we’ll think about how to improve things.”
For Putin there is much to gain: he is expected to run for re-election next year, but is hampered by a sluggish economy. A softening or removal of sanctions would allow Western investment and credit to flow in, lifting growth and strengthening Putin’s election prospects.
For Trump, a rapprochement with Russia carries political risks. Powerful Congressional figures say they will block any move to lift Ukraine-related sanctions. That would displease some of Washington’s European allies too. The source in Berlin familiar with plans for the Trump-Merkel call said it would be “unpleasant” if Trump were to lift sanctions against Russia, but added: “It doesn’t mean that we go along.” The European Union has its own set of sanctions against Russia that it imposed over Ukraine. Trump is also vulnerable to allegations at home of being too cozy with Moscow.
In addition to to his Saturday phone call with Putin, Trump will also have a telephone conversation the same day with German Chancellor Angela Merkel, and that call is expected to focus on Russia, according to a Reuters source. Expect many tweets to follow both phone calls.
The war of words continue between Mexico and Donald Trump:
(courtesy zero hedge)
Trump Warns Mexico: “Taken Advantage Of US For Long Enough… Must Change Now”
Well, Trump slept on it, and… nothing changed.
Confirming that the tensions between the US and Mexico are only set to escalate after a diplomatically volatile day, in which president Pena Nieto unexpectedly pulled out of his Jan. 31 meeting with the US president, prompting the White House to first suggest it could impose a 20% border tax on Mexican imports, only to back off from the statement hours later, moments ago Trump tweeted that “Mexico has taken advantage of the U.S. for long enough. Massi
ve trade deficits & little help on the very weak border must change, NOW!”
Can you spot when NAFTA was signed? (Hint: when the trade balance went red)
Interstingly, the peso is rallying hard today, erasing most of yesterday’s losses from the constant headlines…
The tweet comes just hours ahead of Trump’s first official meeting with UK PM Theresa May, where the main topic, in addition to US support for NATO and Russia, will be trade.
Trump also brought up the topic of vote-rigging in his morning tweet-storm – ensuring the news cycle stays focused on it for the weekend…
These Are Mexico’s Top Exports
While readers are aware by now of the intricate trade link that binds Mexico to the US, it is more than merely autos and avocados. As the chart below shows, of the $302 billion in total Mexican exports (offset by $179 billion in imports), the largest two categories were electrical machinery & equipment, followed by nuclear reactors, boilers machinery & equipment, with motor only coming in third spot. But no matter the breakdown in categories, one thing is clear: Mexico needs the US – which imports over 80% of Mexico’s net exports – and the NAFTA agreement far more than the US does (which is not to say that the US won’t be impacted once NAFTA is eliminated).
Here are some further thoughts from SocGen’s Dev Ashish on the trade relationship between Mexico and the US:
Apart from the rhetoric coming out of the US in the past two-three months, particularly after the US election results, this week’s executive order by President Trump, essentially pulling the US out of the TPP trade agreement, has removed some of the uncertainty over the trade and investment outlook for Mexico. To a large extent this was already priced in by the market and few were hopeful of the deal going through under the new US regime.
What has become a greater uncertainty now is the likely path and shape of NAFTA. As we have said in the past, NAFTA has considerable value for the Mexican economy. Mexico’s exports to the US over past 12 months were at USD302bn or 81% of its total exports. During the same time, however, Mexico’s imports to the US were USD178.9bn or 46% of Mexico’s total imports. Mexico runs a trade surplus of nearly USD123bn with the US while it runs significant trade deficit with rest of the world.
Put simply, trade with the US has profound implications for Mexico’s investment and overall growth outlook. In a situation when the rhetoric is fast threatening to become reality, the impact of a possible change in the NAFTA provisions for Mexico can’t be overstated.
This is precisely what Trump was relying on when he called Pena Nieto’s bluff yesterday. And despite the fireworks, eventually, Mexico will have to come to the negotiating table as otherwise a substantial percentage of Mexico’s total annual exports, shown below, will suddenly find themselves with no willing buyer. Here is a list of the Top Mexican exports in the past year:
Mexico’s Richest Man Carlos Slim Calls Rare Press Conference As Trump Tensions Rise, Live Feed
Update: Speaking at a press conference in Mexico City, Mexican billionaire Carlos Slim said announced he is willing to help the government negotiate with Donald Trump, and called on Mexicans from all political parties to unite behind President Enrique Pena Nieto. In a rare news conference by the generally media-shy mogul, Slim said Mexico needed to negotiate from a position of strength, noting that Trump, who he called a “great negotiator,” represented a major change in how politics is conducted.
Here are a couple of the key comments so far:
- SLIM SAYS HE’S PLEASED TO SEE HOW MEXICO HAS UNITED
- MEXICANS COMING TOGETHER IN SUPPORT SURPRISED ME, SLIM SAYS
- THIS IS AN ARDUOUS, DIFFICULT NEGOTIATION W/U.S.
- SLIM SAYS BORDER TARIFFS WOULD BE PAID BY U.S. CONSUMERS
- TRUMP HAS MORE STRENGTH DUE TO STRENGTH OF U.S. ECONOMY
- MEXICO SHOULD TURN TOWARD DEVELOPING DOMESTIC ECONOMY
* * *
Just over a month ago, President-elect Trump and Mexico’s richest man, Carlos Slim, enjoyed what was described by Trump as “a lovely dinner with a wonderful man” at Mar-a-Lago in Palm Beach, Florida. Many viewed the meeting a start toward thawing relations with Mexico after a hard-fought campaign in which Trump relentlessly hammered our southern neighbor over jobs and illegal immigration. Per the Washington Post:
Trump and Slim’s dinner was designed to open a friendly line of communication rather than delve into policy details, according to people briefed on the discussions.
Slim’s visit to Mar-a-Lago came after Corey Lewandowski, a former Trump campaign manager who remains a confidant of the president-elect, quietly visited Mexico City on Dec. 9 to meet with Slim.
After the election, Slim connected with Lewandowski — someone he saw as having Trump’s ear but not as a formal member of his staff — and arranged for them to discuss trade, economic and other issues, according to people with knowledge of the session.
Trump even commemorated the dinner with a tweet:
That said, all may not be well between the two billionaires who butted headed several times during the contentious 2016 Presidential campaign cycle after Slim’s TV station in Mexico referred to Trump as a “racist” and refused to cover his Miss Universe pageant. Trump later released a statement accusing Slim of colluding with the New York Times and Hillary to undermine his campaign: “The New York Times strings are being pulled by Mexico’s Carlos Slim, a billionaire who benefits from Nafta and supports Hillary Clinton’s open border policies.”
Now, just yesterday the relationship between Trump and Mexican President Pena Nieto seemingly soured over Twitter starting with the following tweets…
…which sent the Mexican Peso gyrating all over the place as perplexed traders tried to figure out what the Twitter wars will actually mean from a practical perspective…
…and has culminated with Carlos Slim calling a very rare press conference scheduled for 2PM EST….will he call for an economic truce or take more of a Vicente Fox approach to the “fucking wall”?
7. OIL ISSUES
With each passing week of new rigs being used to produce new amounts of oil, it is now wonder that the USA crude production is near a 10 month high. The number of rigs is at a 6 yr high:
(courtesy zero hedge)
US Crude Production Nears 10-Month Highs As Rig Count Soars Most In Over 6 Years
Following last week’s massive 29 rig jump in the US oil rig count (the largest since April 2013), Baker Hughes reports another 15 rig surge to 566 in the last week (with the entire rise dominated by horizontal/Permian rigs). US Crude production continues to track the surging rig count and that is weighing on WTI futures prices (back below $53 once again).
From the 316 count lows on May 27th, US oil rigs are up 250 overall (up 15 to 566 this week).. This is the biggest 2-week surge in rig counts since Dec 2011
And US Crude production is tracking the lagged oil rig count…
The surge in oil rig counts since May 2016 has been dominated by Permian…
And WTI Futures are back below $53…
8. EMERGING MARKETS
Your early morning currency/gold and silver pricing/Asian and European bourse movements/ and interest rate settings FRISDAY morning 7:00 am
Euro/USA 1.0689 UP .0006/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 115.10 UP 0.680(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 1.2541 DOWN .0053 (Brexit by March 201/UK government loses case/parliament must vote/PRIME MINISTER MAY DECIDES ON A HARD BREXIT)
USA/CAN 1.3109 UP .0019 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT FROM EU)
Early THIS FRIDAY morning in Europe, the Euro ROSE by 6 basis points, trading now WELL BELOW the important 1.08 level RISING to 1.0689; 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 FOR THE WEEK/NEW YEARS / Hang Sang CLOSED DOWN 13.39 POINTS OR 0.06% /AUSTRALIA CLOSED UP 0.69% / 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 FRIDAY morning CLOSED UP 65.01 OR 0.34%
Trading from Europe and Asia:
1. Europe stocks ALL IN THE RED
2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 13.39 OR .06% Shanghai CLOSED FOR THE WEEK: NEW YEAR’S CELEBRATION / Australia BOURSE CLOSED UP 0.69% /Nikkei (Japan)CLOSED UP 65.01 OR 0.34% / INDIA’S SENSEX IN THE GREEN
Gold very early morning trading: $1184.00
Early FRIDAY morning USA 10 year bond yield: 2.518% !!! UP 2 IN POINTS from THURSDAY 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 3.10, UP 2 IN BASIS POINTS from TUESDAY night.
USA dollar index early FRIDAY morning: 100.63 UP 10 CENT(S) from THURSDAY’s close.
This ends early morning numbers FRIDAY MORNING
And now your closing FRIDAY NUMBERS
Portuguese 10 year bond yield: 4.141% UP 2 in basis point yield from WEDNESDAY
JAPANESE BOND YIELD: +.084% DOWN 1 (DESPITE INTERVENTION) in basis point yield from THURSDAY/JAPAN losing control of its yield curve
SPANISH 10 YR BOND YIELD:1.587% UP 2 IN basis point yield from THURSDAY (this is totally nuts!!/
ITALIAN 10 YR BOND YIELD: 2.227 DOWN 1 POINTS in basis point yield from THURSDAY
the Italian 10 yr bond yield is trading 64 points HIGHER than Spain.
GERMAN 10 YR BOND YIELD: +.462% DOWN 2 IN BASIS POINTS ON THE DAY
IMPORTANT CURRENCY CLOSES FOR FRIDAY
Closing currency crosses for FRIDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM
Euro/USA 1.0688 UP .0006 (Euro UP 6 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/
USA/Japan: 115.19 UP: 0.761(Yen DOWN 76 basis points/
Great Britain/USA 1.2534 DOWN 0.0055( POUND DOWN 55 basis points)
USA/Canada 1.3130 UP 0.0039(Canadian dollar DOWN 39 basis points AS OIL FELL TO $52.82
This afternoon, the Euro was UP by 6 basis points to trade at 1.0688
The Yen FELL to 115.19 for a LOSS of 74 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016
The POUND FELL 55 basis points, trading at 1.2534/
The Canadian dollar FELL by 39 basis points to 1.3130, WITH WTI OIL FALLING TO : $52.82
Your closing 10 yr USA bond yield DOWN 2 IN basis points from THURSDAY at 2.499% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic USA 30 yr bond yield: 3.079 DOWN 2 in basis points on the day /
Your closing USA dollar index, 100.65 UP 12 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 FRIDAY: 1:00 PM EST
London: CLOSED UP 23.00 OR 0.32%
German Dax :CLOSED DOWN 34.36 POINTS OR 0.29%
Paris Cac CLOSED DOWN 27.26 OR 0.56%
Spain IBEX CLOSED DOWN 8.70 POINTS OR 0.09%
Italian MIB: CLOSED DOWN 110.39 POINTS OR 0.57%
The Dow closed DOWN 7.13 OR .04%
NASDAQ WAS closed UP 5.61 POINTS OR .10% 4.00 PM EST
WTI Oil price; 52.82 at 1:00 pm;
Brent Oil: 55.08 1:00 EST
USA /RUSSIAN ROUBLE CROSS: 59.92 ROUBLES/DOLLAR (UP 42/100 roubles from YESTERDAY)
TODAY THE GERMAN YIELD FALLS TO +0.462% 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:$53.12
USA 10 YR BOND YIELD: 2.486% (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)
USA 30 YR BOND YIELD: 3.06%
EURO/USA DOLLAR CROSS: 1.0698 UP .0015
USA/JAPANESE YEN:115.07 UP 0.643
USA DOLLAR INDEX: 100.59 UP 6 cents ( HUGE resistance at 101.80)
The British pound at 5 pm: Great Britain Pound/USA: 1.2544 : DOWN 49 BASIS POINTS.
German 10 yr bond yield at 5 pm: +.462%
And now your more important USA stories which will influence the price of gold/silver
TRADING IN GRAPH FORM
Stocks Soar To Record Highs As Peso Jumps Most In A Year
Just seemed appropriate…
Ugly GDP helped take US Macro to its worst weekly drop in over 3 months…
Stocks had their best week in 2 months…(Trannies best, S&P worst)
Banks had a great week…(post-Inauguration)
But we wanted to bring this to stock traders’ attention…
Note however that the short-squeeze highs were hit on Wednesday’s open…
VIX plunged to its 2nd lowest close in 11 years… and note the desperate VIX plunge to get Dow back above 20100 into the close…
As realized vol crashed…
The VIX curve has steepened drastically…
The collapse in VIX has pushed the relative risk of stocks to bonds to near-record lows (something that has not ended well previously)…
With all the excitment in stocks, bonds ended the week barely unchanged (0-2bps higher)…
The USD Index fell for the 5th week in a row, closing at 2-month lows…
Yuan sold off into golden week (which is seasonally normal)…
The Mexican Peso surged to its best week in almost a year – the 3%-plus spike is the best since Feb 2016…
Oil ended the week unchanged, glued around the $53 level…
But RBOB (amid major inventory builds) tumbled for the 4th week in a row…
Silver spiked back to unchanged on the week…
And gold was monkeyhammered to its worst week in 6 weeks, back below $1200…
Top-down things don’t seem so awesome…
And the gap between reality and hope is at a record high…
USA GDP grows by 1.9% in the 4th quarter and thus the entire GDP for 2016 was only 1.6%. The sharp drop in GDP was due to faltering exports and higher imports as the higher dollar certainly played a key role
(courtesy zero hedge)
Q4 GDP Misses Big As Exports Tumble: US Economy Grows A Paltry 1.6% In 2016
It appears that Deutsche Bank’s warning that the global economy is about to roll over was spot on, because moments ago the Bureau of Economic Analysis reported that GDP in Q4 rose only 1.9%, barely above the lowest forecast of 1.7%, and below both the consensus estimate of 2.2% and the whisper estimate of 2.5%-2.6%. The reason for the big miss, and nearly 50% drop from the 3.5% print in Q3: a collapse in contribution to GDP from trade (net exports and imports) which subtracted a whopping 1.7% from the headline number. So much for that bumper soybean bumper boost to the US economy. The silver lining: Business investment picked up to 0.67% of the final print, potentially a harbinger for faster capital spending in 2017.
Net exports subtracted 1.7% points from Q1 GDP, the most since the second quarter of 2010, as the trade deficit widened following a jump in soybean shipments that helped add to growth in the third quarter. The chart below shows just how big the trade slowdown was in the last quarter.
The adverse impact from trade is shown in the contribution chart below: the -1.7% reduction from the bottom-line annualized number was the largest since 2010.
Inventory expansion added 1 percentage point to GDP growth, as stockpiles were rebuilt at a $48.7 billion annualized pace following a $7.1 billion rate.
Personal Consumption Expenditures, while not distressing, slowed down again, and contributed just 1.7% of the final number, the lowest since Q1. In addition to household spending, the economy got help from business spending on equipment, which rose 3.1% for the first gain in five quarters. Inventory accumulation added the most to growth since early 2015, housing made the strongest contribution in a year and government spending picked up.
Nonresidential fixed investment increased at a 2.4% annualized pace, adding 0.3% point to growth, the most in five quarters. Investment in nonresidential structures, including office buildings and factories, fell at a 5 percent rate after a 12 percent jump. Residential construction increased at a 10.2 percent annualized rate, adding 0.37 percentage point to growth. That followed a 4.1 percent decline in the previous three months.
Government spending grew at a 1.2 percent rate as state and local outlays picked up. Spending by federal agencies fell for the third time in a year, dropping at a 1.2 percent pace.
After-tax incomes adjusted for inflation climbed at a 1.5 percent annual rate, a three-year low. The saving rate decreased to 5.6 percent from 5.8 percent.
The big drop in Q4 GDP growth means that full year 2016 GDP stood at only 1.6%, the slowest print of the decade.
Some more details from the report:
The increase in real GDP in the fourth quarter reflected positive contributions from personal consumption expenditures (PCE), private inventory investment, residential fixed investment, nonresidential fixed investment, and state and local government spending that were partly offset by negative contributions from exports and federal government spending. Imports, which are a subtraction in the calculation of GDP, increased.
The deceleration in real GDP in the fourth quarter reflected a downturn in exports, an acceleration in imports, a deceleration in PCE, and a downturn in federal government spending that were partly offset by an upturn in residential fixed investment, an acceleration in private inventory investment, an upturn in state and local government spending, and an acceleration in nonresidential fixed investment.
Current-dollar GDP increased 4.0 percent, or $185.5 billion, in the fourth quarter to a level of $18,860.8 billion. In the third quarter, current dollar GDP increased 5.0 percent, or $225.2 billion
The price index for gross domestic purchases increased 2.0 percent in the fourth quarter, compared with an increase of 1.5 percent in the third quarter (table 4). The PCE price index increased 2.2 percent, compared with an increase of 1.5 percent. Excluding food and energy prices, the PCE price index increased 1.3 percent, compared with an increase of 1.7 percent (appendix table A).
Hard data as opposed to soft survey data seems to be the sentiment of the day. The USA durable goods for new orders are tumbling:
(courtesy zero hedge)
Durables Goods ‘Hard’ Data Crushes Post-Trump ‘Soft’ Survey Dreams
With Manufacturing and Services PMIs and ISMs, stock markets, and sentiment data soaring post-Trump, one would imagine that ‘everything is awesome’ in American business… but the ‘soft’ survey data appears to be wrong as ‘hard’ data on durable goods new orders is tumbling.
With analysts’ expectations of a 2.5% surge in new orders in December, the preliminary print of -0.4% is a disaster and comes after a downwardly revised November. This pushed the YoY shift to -0.8% – the worst since July.
It appears ‘hard’ truths are not as appealing as ‘soft’ hope.
Of course all that really matters is where The Dow is…
Consumer Confidence Is The Highest In 13 Years
The final UMichigan consumer confidence print is in, and it was even higher, printing at 98.5, up from 98.2 in December, and above the 98.1 consensus estimate. This was the highest print since January 2014, or as the survey emphatically notes, “consumers expressed a higher level of confidence January than any other time in the last dozen years.”
The reason for this ongoing surge in US consumer confidence, once again, continues to be Trump:
The post-election surge in confidence was driven by a more optimistic outlook for the economy and job growth during the year ahead as well as more favorable economic prospects over the next five years. Consumers also reported much more positive assessments of their current financial situation due to gains in both incomes and household wealth, and anticipated the most positive outlook for their personal finances in more than a decade.
Consumers also naively believe that the Fed’s rising rates will translate into higher savings rate; it also states that expectations of higher rates are promptly more Americans to borrow:
Consumers have become more convinced that the stronger economy would finally prompt the Fed to increase interest rates at a quicker pace, which caused one-in-five consumers to favor borrowing-in-advance of anticipated increases in mortgage rates, the highest level in more than twenty years.
This can be seen in inflation expectations, which recently hit record low, but have since rebounded from 2.2% in December to 2.6% in the final January print, and from 2.3% to 2.6% for 5 year inflation expectations.
Finally, the survey cautions that “the post-election surge in consumer confidence was based on political promises, and not, as yet, on economic outcomes. Moreover, over the past half century the surveys have never recorded as dominant an impact of partisanship on economic expectations. When the same consumers were re-interviewed from six months ago, the survey recorded extreme swings based on political party affiliation, with Democrats becoming much more pessimistic and Republicans much more optimistic. Such divergences will ultimately converge since consumers hold economic expectations.”
Expect a prompt reversal once reality clashes with Trump’s yuuge promises.
Trump now questions his decision to border tax Mexico (20%) as avocados, Beer , Chilli Peppers and Tequila will all rise by greater than 20%.
(courtesy zero hedge)
Avocados, Beer, Chilli Peppers And Tequilla: Expect Soaring Prices Under A Mexican Border Tax
While the White House floated, then quickly backed off, a proposal for a 20% tax on Mexican imports to “pay for the wall”, in addition to collecting an approximate $10 billion per year in tax revenues, there would be a notable flipside to a tax that would raise prices on Mexican imports by up to 20%, and would immediately affect a wide range of agricultural goods. Mexico exported $21 billion of food and drink north of the border in 2015, according to data from the U.S. Department of Agriculture, making Mexico the 2nd largest supplier of agricultural imports to the US.
Of note, Mexico is by far the biggest supplier of avocados to the US. A trade war with Mexico would mean guacamole could become more valuable than gold.
Some other examples:
- Fresh vegetables — Imports of tomatoes, onions, chili peppers and other vegetables totaled $4.84 billion. That’s more than four times what was purchased from Canada, the next biggest importer.
- Fresh fruit — $4.28 billion of shipments, including raspberries, strawberries and avocados. Mexico sells more than twice as much fresh fruit to the U.S. as the No. 2 importer, Chile.
- Wine and beer — Hold that Corona? Mexico led this category, importing $2.7 billion, almost $1 billion ahead of its biggest competitor, Italy.
- Snack foods — With $1.72 billion of imports, Mexico is No. 2 here, although Canada sells roughly twice as much into the U.S.
In total, in 2015 Mexico exported some $316 billion in goods and services to the US, among which vehicles ($74 billion), electrical machinery ($63 billion), machinery ($49 billion), mineral fuels ($14 billion), and optical and medical instruments ($12 billion). Under a border tax, US based buyers of any Mexican imports would seen almost instant 20% passthru surcharge.
On the other hand, food exporters to Mexico would benefit from not paying taxes. As Bloomberg notes, despite running an overall trade deficit with Mexico, U.S. food and drink exports to its southern neighbor don’t lag far behind, at $17.7 billion for 2015. The U.S. typically carries a trade surplus with its southern partner in years when grain and oilseed prices are high, as they were for most of the previous decade. Mexico was the biggest buyer of U.S. corn, soybean meal, rice and dairy products in 2015.
Lindsay Graham – who this afternoon reminded Trump that Mexico is America’s third largest trading partner, and that any tariff we can levy they can levy – probably put it best when he said:
Simply put, any policy proposal which drives up costs of Corona, tequila, or margaritas is a big-time bad idea. Mucho Sad. (2)
Today’s events in Trumpville:
i) Trump receives a call from Mexican President Nieto
ii) Trump and May (Great Britain) will make a press conference late in the day0
iii) Trump pays a visit to the Pentagon
(courtesy zero hedge)
Trump, Mexican President Hold Hour-Long Phone Call
Is the Mexican president looking to salvage something from yesterday’s dramatic diplomatic devastation?
According to AP, shortly before his meeting with Theresa May, President Donald Trump spent one hour talking on the phone to the president of Mexico, Pena Nieto, amid “rising tensions” over Trump’s proposed wall along the border. Two administration officials confirmed Friday’s call.
According to Reuters, citing the Mexican government, the conversation between the two presidents included discussions on the trade deficit between the US and Mexico, and also discussed the need for both to work together to stop trafficking of drugs and illegal arms. Furthermore, the president agreed not to speak publicly for now on the “controversial” subject of payment for the border wall. During the Theresa May press conference, Trump said that the call was “very good” and “friendly”, and has a “very good relationship” with Nieto, but added that “Mexico has made us look foolish” and the trade deals will be renegotiated.
Trump and Pena Nieto had been expected to meet in Washington next week, but the Mexican president abruptly canceled his visit on Thursday. His decision came after Trump moved forward with plans to construct a wall along the U.S.-Mexico border and have Mexico pay for construction. Following the cancellation, Trump’s spokesman said the White House would seek to pay for the border wall by slapping a 20 percent tax on all imports from Mexico, as well as on other countries the U.S. has a trade deficit with. The White House later cast the proposal as just one option to pay for the wall.
The strong reaction from Mexico signaled a remarkable souring of relations between Washington and one of its most important international partners just days into the new administration. The U.S. and Mexico conduct some $1.6 billion a day in cross-border trade, and cooperate on everything from migration to drug enforcement to major environmental issues.
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Following his imminent press conference with Theresa May, later in the day, the president is expected to travel to the Pentagon, where he was expected to sign a trio of executive actions, including one to halve the flow of refugees into the United Sates and stop all entries from some majority-Muslim nations. White House spokesman Sean Spicer said Trump also intended to sign actions related to military readiness and the National Security Council. Details of those directives were not immediately clear.
According to a draft of the refugee order obtained by The Associated Press, Trump would move to indefinitely stop accepting Syrian refugees. The order also calls for a pause in the nation’s broader refugee program for at least 120 days. While at the Pentagon, Trump was expected to meet with the Joint Chiefs of Staff and attend a ceremonial swearing-in for Defense Secretary James Mattis
Oh OH! our hedge fund billionaires, owners of properties in the Hampton’s are seeing their luxury home prices crash 43% this year:
Hedgies Panic As Hamptons Luxury Home Prices Crash 43% Year-Over-Year
As U.S. equity markets continue to surge to new all-time highs with each passing day, something you would expect to benefit the titans of high finance in Manhattan, demand for luxurious, multi-million dollar weekend getaways in the Hamptons has all but completely disappeared.
According to a new 4Q report from Douglas Elliman, the Hamptons real estate market is in full-on crash mode with average prices down 29.7% YoY in 4Q16 and volumes down 14.5%.
Meanwhile, the “luxury” market in the Hamptons, which apparently includes homes with an average price tag of ~$7 million, is faring even worse with prices down 42.6% YoY and volumes down 14.5%.
Seems that New York’s hedge fund billionaires just can’t seem to make money at work or on their homes.
As the Wall Street Journal noted, Jonathan Miller of Douglas Elliman doesn’t expect the carnage in the Hamptons to slow anytime soon as he says there is still ““too much overpriced inventory—and it is rising.”
Brokers said the luxury market was particularly weak in 2016, despite some trophy sales reflecting the last gasp of a stronger market that surged at the end of 2014.
“Softness at the top continues,” Mr. Miller said. There is “too much overpriced inventory—and it is rising.”
Of course, the soft market didn’t stop the hedgies from recording a couple of trophy sales in 2016. Per Douglas Elliman, the most expensive sale of the year was $109.8 million with the second highest sale a mere $70 million…must have been a dump.
The top transaction of the year was the $109.8 million sale of three parcels on Lily Pond Lane in East Hampton by hedge-fund manager Scott Bommer. Mr. Bommer had paid $93.9 million for the properties several years earlier. The buyer, brokers said, was Michael S. Smith, a natural-gas executive and investor.
The second-most-expensive sale was a waterfront home just down the street, at 199 Lily Pond Lane. The price was $70 million.
Oh well, on the bright side, all of these real estate losses can quickly be wiped away with less than 1 year of management fees charged to America’s insolvent pension funds in return for below-S&P performance…life is good!
Let’s close out the week with this wrap up courtesy of Greg Hunter of USAWatchdog
I wish everyone to have a wonderful weekend and I will see Monday night
Bye for now