FEB 14 /Bankers attempt to whack gold and silver today but fail/Silver approaches 18.00 dollars per oz/GLD adds another 4.14 tonnes to its inventory/Comex silver open interest continues to rise despite bankers antics/Toshiba in Japan has a huge loss: in jeopardy of insolvency/China injects a whopping 1/2 trillion USA equivalent in funds/Janet Yellen delivers her Humphrey Hawkins report and as always gold and silver are hit/FINAL DRAFT

Gold at (1:30 am est) $1223.90 DOWN $0.50

silver was : $17.87:   UP 7 CENTS

Access market prices:

Gold: $1228.80

Silver: $17.95

THE DAILY GOLD FIX REPORT FROM SHANGHAI AND LONDON

.

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

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

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

And now the fix recordings:

TUESDAY gold fix Shanghai

Shanghai FIRST morning fix Feb 14/17 (10:15 pm est last night): $  1239.72

NY ACCESS PRICE: $1226.30 (AT THE EXACT SAME TIME)/premium $13.42

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

Shanghai SECOND afternoon fix:  2: 15 am est (second fix/early  morning):$   1242.88

NY ACCESS PRICE: $1228.40 (AT THE EXACT SAME TIME/2:15 am)

   SPREAD/ 2ND FIX TODAY!!:  14.48

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

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

London FIRST Fix: Feb 14/2017: 5:30 am est:  $1229.65   (NY: same time:  $1228.60   (5:30AM)

XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX

London Second fix Feb 14.2017: 10 am est:  $1230.75 (NY same time: $1231.40 (10 am)

 

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

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

end

For comex gold:

FEBRUARY/ 

NOTICES FILINGS FOR FEBRUARY CONTRACT MONTH:  1 NOTICE(S) FOR 100 OZ.  TOTAL NOTICES SO FAR: 5123 FOR 512,300 OZ    (15.934 TONNES)

For silver:

 

For silver: FEBRUARY

0 NOTICES FILED FOR nil OZ/

TOTAL NO OF NOTICES FILED: 360 FOR 1,800,000 OZ

 

Since the beginning of February, the GLD vaults have seen an net increase of 41 “tonnes” of gold into the GLD.  England is having trouble locating physical gold to supply the ever increasing investors wishing to take their gold obligations and turning them into real metal.  We have witnessed a huge amount of gold leave England via Switzerland and then onto Chinese shores. There are surely going to many angry shareholders of GLD when they find out that there is no gold behind this vehicle.

 

 

 

Let us have a look at the data for today

.

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In silver, the total open interest ROSE by 1,037 contracts UP to 196,090 with respect to YESTERDAY’S TRADING.    In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e.  .980 BILLION TO BE EXACT or 141% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT FEBRUARY MONTH: THEY FILED: 0 NOTICE(S) FOR NIL OZ

In gold, the total comex gold FELL BY 2,892 contracts WITH THE FALL IN  THE PRICE GOLD ($4.10 with YESTERDAY’S trading ).The total gold OI stands at 407,851 contracts

we had 1 notice(s) filed upon for 100 oz of gold.

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

GLD:

We had another huge change in tonnes of gold at the GLD: a deposit of 4.14 tonnes despite the attempted whacking of gold today.

Inventory rests tonight: 840.87 tonnes

.

SLV

we had no changes in silver into the SLV

THE SLV Inventory rests at: 334.713 million oz

end

.

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

1. Today, we had the open interest in silver RISE by 1,037 contracts UP to 196,090 AS SILVER WAS UP 11 CENTS with YESTERDAY’S trading. The gold open interest FELL by 2,892 contracts DOWN to 407,851 WITH THE FALL IN THE PRICE OF GOLD OF $4.10  (YESTERDAY’S TRADING)

(report Harvey

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 1.09 POINTS OR .03%/ /Hang Sang CLOSED DOWN 7.97 POINTS OR .03% . The Nikkei closed DOWN 220.17 POINTS OR 1.13% /Australia’s all ordinaires  CLOSED DOWN 0.03%/Chinese yuan (ONSHORE) closed UP at 6.8631/Oil ROSE to 53.36 dollars per barrel for WTI and 56.67 for Brent. Stocks in Europe ALL IN THE RED. Offshore yuan trades  6.8506 yuan to the dollar vs 6.8631  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS TO ZERO AS POBC ATTEMPTS TO STOP USA DOLLARS FROM LEAVING CHINA’S SHORES. ONSHORE YUAN STRONGER AS IS OFFSHORE YUAN COUPLED WITH THE WEAKER DOLLAR

 

REPORT ON JAPAN  SOUTH KOREA NORTH KOREA AND CHINA

3a)THAILAND/SOUTH KOREA

This does not look good especially with a maniac at the helm in North Korea. We are not sure who killed the brother, a north Korean spy or someone else.

 

( zerohedge)

 

b) REPORT ON JAPAN

Tobisha records a huge loss of 6.3 billion USA and warns of continual losses.  They also warn they their solvency is in jeopardy.  This is a huge problem as Toshiba is one of their big pillars of strength.  Another bad sign: the chairman is abandoning ship as he just resigned.

( zero hedge)

c) REPORT ON CHINA

i)No wonder China tried to tighten these past 6 weeks as both Chinese CPI and PPI skyrocketed higher in January

( zero hedge)

ii)China added a whopping 1/2 trillion USA dollars equivalent in debt in just one month.  If China has any thoughts of tightening, now is the time

( zero hedge)

4. EUROPEAN AFFAIRS

i)Italy

Renzi trying to promote an early congress so that he is elected leader.  The PD party is the only party that wants to stay in the Euro. However the delay will cause a splintering of the PD party.  The leader of the opposition, Beppo Grillo seems ready to take on Renzi. A delay in the election helps the PD party.

( Mish Shedlock/Mishtalk)

ii)Switzerland/Credit Suisse 

Credit Suisse announces another 6500 layoffs after reporting another loss

( zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

The Russians are now testing Trump: The secretly deploy a banned cruise missile:

( zero hedge)

6.GLOBAL ISSUES

7. OIL ISSUES

API reports continue to show inventory hitting record highs.  Down goes oil this afternoon

( zero hedge)

8. EMERGING MARKETS

9.   PHYSICAL MARKETS

i)This is interesting:  Greece may be considering ditching the euro in favour of the USA dollar!!(much like Zimbabwe)

( zero hedge)

ii)A thorough analysis of gold demand by China

(courtesy Koos Jansen)

10.USA STORIES

i)Mike Flynn resigns as National Security Advisor

( zero hedge)

ii)Is the firing of Flynn anti Russian sentiment? Is the Trump security team in “turmoil?”

( zero hedge)

iii)The Senate confirms Mnuchin and now the question as to whether he will continue to allow gold to leave USA soil

( zero hedge)

iv)As we reported to you yesterday, many traders are stunned at the failed Fed’s communication process.  They are basically all over the board.  Is the resignation of Tarullo a sign of someone jumping ship before the SHTF.

( zero hedge)

v)  a  Janet  delivers Humphrey Hawkins testimony and it is quite hawkish: “waiting too long to hike rates is unwise!”

( zero hedge)

 

v b)Janet warns of increased asset valuations and leverage remains elevated:

( zero hedge)

vi)The following is a terrific article as St Cyr outlines why he thinks the Fed Tarullo left 5 yrs ahead of schedule

( Mark St Cyr)

vii)This ought to be good for gold/silver:  USA producer prices jump up to .8% on higher energy costs etc

( Reuters)

 

Let us head over to the comex:

The total gold comex open interest FELL BY 1,037 CONTRACTS down to an OI level of 410,163 WITH THE FALL IN THE  PRICE OF GOLD ( $4.10 with YESTERDAY’S trading). We are now in the contract month of FEBRUARY and it is one of the better delivery months  of the year. In this next big active delivery month of February we had a LOSS of 284 contracts DOWN to 1077.   We had 0 notices served upon yesterday and therefore we LOST 284 contracts or an additional 28,400 oz will not stand for delivery and NO DOUBT THEY WERE CASH SETTLED.   The next non active contract month of March saw it’s OI FALL by 136 contracts DOWN to 1966.The next big active month is April and here the OI FELL by 4902 contracts DOWN to 269,091.

We had 1 notice(s) filed upon today for 100 oz

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And now for the wild silver comex results.  Total silver OI ROSE by 1,037 contracts FROM 195,053 UP TO 196,090 DESPITE THE FACT THAT the price of silver FELL IN PRICE TO THE TUNE OF 11 CENTS with respect to YESTERDAY’S trading.  We are moving CLOSER TO the all time record high for silver open interest set on Wednesday August 3/2016:  (224,540). We are also witnessing a divergence with the silver OI rising and gold OI declining.

The  active month of February saw the OI FALL by 115 contract(s) DOWN TO  124.  We had 113 notice(s) served YESTERDAY so we LOST 2 CONTRACTS  or an additional 10,000 oz will not stand for delivery.

The next big active delivery month is March and here the OI decrease by 5561 contracts down to 97,499 contracts. For comparison purposes last year on the same date only 78,261 contracts were standing.

We had 0 notice(s) filed for NIL oz for the FEBRUARY contract.

VOLUMES: for the gold comex

Today the estimated volume was 211,612  contracts which is good.

Yesterday’s confirmed volume was 187,889 contracts  which is fair

volumes on gold are getting higher!

INITIAL standings for FEBRUARY
 Feb 14/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
12,990.960 OZ
Brinks
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
16,205.96 oz
Scotia
No of oz served (contracts) today
 
1 notice(s)
100 oz
No of oz to be served (notices)
1076 contracts
107,600 oz
Total monthly oz gold served (contracts) so far this month
5123 notices
512,300 oz
15.934 tonnes
Total accumulative withdrawals  of gold from the Dealers inventory this month   NIL oz
Total accumulative withdrawal of gold from the Customer inventory this month  206,905.4   oz
Today we HAD 1 kilobar transaction(s)/
Today we had 0 deposit(s) into the dealer:
total dealer deposits:  nil oz
We had nil dealer withdrawals:
total dealer withdrawals:  nil oz
we had 1  customer deposit(s):
i) Into Scotia:  16,205.960 oz which is made up of the withdrawal of 12,990.96 oz from Brinks and an addition of 100 kilobars:  3215.000 oz/
total customer deposits; 16,205.96 oz
We had 1 customer withdrawal(s)
i) Out of Brinks:  12,990.96 oz
total customer withdrawal: 12,990.96 oz
We had 0  adjustment(s)
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For FEBRUARY:

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

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To calculate the initial total number of gold ounces standing for the FEBRUARY. contract month, we take the total number of notices filed so far for the month (5123) x 100 oz or 512,300 oz, to which we add the difference between the open interest for the front month of FEBRUARY (1077 contracts) minus the number of notices served upon today (1) x 100 oz per contract equals 619,900 oz, the number of ounces standing in this  active month of FEBRUARY.
 
Thus the INITIAL standings for gold for the FEBRUARY contract month:
No of notices served so far (5123) x 100 oz  or ounces + {(1077)OI for the front month  minus the number of  notices served upon today (1) x 100 oz which equals 619900 oz standing in this non active delivery month of FEBRUARY  (19.281 tonnes)
 
 we lost 284 contracts or an additional 28,400 oz will stand in this active delivery month and these were cash settled which is against comex contract law.
 
 
 
 
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On first day notice for FEB 2016, we had 20.124 tonnes of gold standing. At the conclusion of the month we had only 7.9876 tonnes standing. The data suggests that we had almost identical amounts standing in Feb ’16 and Feb 2017; however today’s totals already surpassed the final amt which eventually stood  in 2016.(already 15.934 tonnes vs 7.9876 at the end of Feb).
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I have now gone over all of the final deliveries for this year and it is startling.
First of all:  in 2015 for the 13 months: 51 tonnes delivered upon for an average of 4.25 tonnes per month.
Here are the final deliveries for all of 2016 and the first month of January 2017
Jan 2016:  .5349 tonnes  (Jan is a non delivery month)
Feb 2016:  7.9876 tonnes (Feb is a delivery month/deliveries this month very low)
March 2016: 2.311 tonnes (March is a non delivery month)
April:  12.3917 tonnes (April is a delivery month/levels on the low side
And then something happens and from May forward deliveries boom!
May; 6.889 tonnes (May is a non delivery month)
June; 48.552 tonnes ( June is a very big delivery month and in the end deliveries were huge)
July: 21.452 tonnes (July is a non delivery month and generally a poor one/not this time!)
August: 44.358 tonnes (August is a good delivery month and it came to fruition)
Sept:  8.4167 tonnes (Sept is a non delivery month)
Oct; 30.407 tonnes complete.
Nov.    8.3950 tonnes.
DEC.   29.931 tonnes
JAN/     3.9004 tonnes
FEB/ 19.281 tonnes
total for the 14 months;  245.285 tonnes
average 17.520 tonnes per month vs last yr  59.51 tonnes total for 14 months or 4.250 tonnes average per month (last yr).
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
Total dealer inventory 1,416,640.129 or 44.06 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,914,194.37 or 277.26 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 277.26 tonnes for a  loss of 26  tonnes over that period.  Since August 8/2016 we have lost 74 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
 
IN THE LAST 6 MONTHS  74 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE JANUARY DELIVERY MONTH
FEBRUARY INITIAL standings
 feb 14. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
453,777.310 0z
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
 1,779,896.770 oz
No of oz served today (contracts)
0 CONTRACT(S)
(NIL OZ)
No of oz to be served (notices)
124 contracts
(620,000  oz)
Total monthly oz silver served (contracts) 360 contracts (1,800,000 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   5,638,018.0 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: nil oz
we had nil dealer withdrawals:
total dealer withdrawals: nil oz
we had 2 customer withdrawal(s):
 i) Out of CNT:  25,107.400 oz
ii) Out of Scotia; 428,669.910 oz
TOTAL CUSTOMER WITHDRAWALS: 453,777.310 oz
 we had 3 customer deposit(s):
 i)Into Brinks: 600,840.920 oz
ii) Into CNT: 600,003.730 oz
iii) Into Scotia; 529,052.110 oz
x) Into JPMorgan:  zero  oz**
deposits into JPMorgan have now stopped.
total customer deposits;  1,779,896.700  oz
 
 we had 1  adjustment(s)
i) Out of CNT:  618,885.26 oz leaves the dealer and enters the customer account of CNT
The total number of notices filed today for the FEBRUARY. contract month is represented by 0 contract(s) for NIL oz. To calculate the number of silver ounces that will stand for delivery in FEBRUARY., we take the total number of notices filed for the month so far at  360 x 5,000 oz  = 1,800,000 oz to which we add the difference between the open interest for the front month of feb (124) and the number of notices served upon today (0) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the FEBRUARY contract month:  360(notices served so far)x 5000 oz  + OI for front month of FEB.( 124 ) -number of notices served upon today (0)x 5000 oz  equals  2,420,000 oz  of silver standing for the Feb contract month. This is  huge for a non active delivery month in silver. 
We lost 2 contracts or an additional 10,000 oz will  stand for delivery.
At first day notice for the FEB/2016 silver contract month we initially had 515,000 oz standing for delivery.  By the conclusion of the delivery month we had 835,000 oz stand as some of the bankers required immediate silver inventory.
END
Volumes: for silver comex
Today the estimated volume was 90,302 which is huge!!!
FRIDAY’S  confirmed volume was 74,252 contracts  which is excellent.
To give you an idea of volume today:  90,302 contracts equates to 451 million oz or 65% of ANNUAL GLOBAL PRODUCTION EX CHINA EX RUSSIA
 
Total dealer silver:  140 million (close to record low inventory  
Total number of dealer and customer silver:   183.064million oz
The total open interest on silver is NOW moving away from  its all time high with the record of 224,540 being set AUGUST 3.2016.

end

And now the Gold inventory at the GLD

FEB 14/another deposit of 4.14 tonnes of gold into the GLD inventory/rests at  840.87 tonnes

FEB 13/another deposit of 4.15 tonnes of gold into the GLD/Inventory rests at 836.73 tonnes

Feb 10/no changes at the GLD/Inventory rests at 832.58 tonnes

feb 9/no changes at the GLD/Inventory rests at 832.58 tonnes

Feb 8/another “deposit” of 5.63 tonnes of gold into the GLD/The addition is a paper addition/total inventory: 832.58 tonnes

Feb 7/another huge fake deposit of 8.30 tonnes of gold into the GLD/the addition is a paper addition and no doubt not physical/ total inventory: 826.95 tonnes

FEB 6/a huge deposit of 7.43 tonnes of gold into the GLD/Inventory rests at 818.65 tonnes

FEB 3/no change in gold inventory at the GLD/Inventory rests at 811.22 tonnes

Feb 2/another huge deposit of 1.48 tonnes/inventory rests at 811.22 tonnes

Feb 1/a huge “deposit” of 10.67 tonnes of gold into the GLD/Inventory rests at 809.74 tonnes.  this should stop GLD from sending gold to Shanghai.

JAN 31/no change in gold inventory at the GLD/Inventory rests at 799.07 tonnes

jan 30/no change in gold inventory at the GLD/Inventory rests at 799.07 tonnes

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: 5.04 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

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Feb 14/2017/ Inventory rests tonight at 840.87 tonnes
*IN LAST 89 TRADING DAYS: 108.94 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 36 TRADING DAYS: A NET  16.27 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1:    41.80 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory
FEB 14/no changes in silver inventory at the SLV/Inventory rests at 334.713 million oz
FEB 13/no changes in silver inventory at the SLV/Inventory rests at 334.713 million oz
Feb 10/no change in silver inventory at the SLV/Inventory rests at 334.713 million oz
Feb 9/no changes in silver Inventory rests at 334.713 million oz
feb 8/No changes in inventory at the SLV/Inventory rests at 334.713 million oz
Feb 7/no change in inventory at the SLV/Inventory rests at 334.713 million oz
Feb 6/a we had no changes at the SLV/Inventory rests at 334.713 million oz
FEB3/ a tiny withdrawal of 136,000 oz to pay for fees etc/inventory rests at 334.713 million oz
Feb 2/no changes in silver inventory at the SLV/Inventory rests at 334.849 million oz
Feb 1/a withdrawal of 948,000 oz from the SLV/Inventory rests at 334.849 million oz
Jan 31.no change in inventory at the SLV/Inventory rests at 335.797 million oz
jan 30/no change in inventory at the SLV/Inventory rests at 335.797 million oz
Jan 27/we had a deposit of 758,000 oz into the SLV/Inventory rests at  335.797 million oz
Jan 26./ a huge withdrawal of 2.369 million oz from the SLV/Inventory rests at 335.039 million oz
Jan 25./another changes at the SLV/Inventory rests at 337.408 million oz
jan 24/ a withdrawal of 948,000 oz at the SLV/Inventory rests at 337.408 million oz
Jan 23/no changes in silver inventory at the SLV/Inventory rests at 338.356 million oz
Jan 20/no changes in silver inventory at the SLV/Inventory rests at 338.356 million oz
jan 19/no changes in silver inventory at the SLV/Inventory rests at 338.356 million oz
Jan 18/no changes in silver inventory/inventory rests at 338.356 million oz/
Jan 17/no change in silver inventory at the SLV/Inventory rests at 338.356 million oz/
Jan 13/2017/on changes in the SLV inventory/rests tonight at 338.356 million oz/
Jan 12.2017/ no changes in the SLV Inventory/ rests at 338.356 million oz
Jan 11/ A HUGE WITHDRAWAL F 2.843 MILLION OZ/INVENTORY RESTS AT 338.356 MILLION OZ/
JAN 10/no changes in inventory at the SLV/Inventory rests at 341.199 million oz
JAN 9/no changes in inventory at the SLV/Inventory rests at 341.199 million oz/
.
Feb 14.2017: Inventory 334.713  million oz
 end

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 8.6 percent to NAV usa funds and Negative 8.7% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.2%
Percentage of fund in silver:39.6%
cash .+0.2%( feb 14/2017) 
.
2. Sprott silver fund (PSLV): Premium FALLS to -.27%!!!! NAV (Feb 14/2017) 
3. Sprott gold fund (PHYS): premium to NAV FALLS TO – 0.10% to NAV  ( feb 14/2017)
Note: Sprott silver trust back  into NEGATIVE territory at -0.27% /Sprott physical gold trust is back into NEGATIVE territory at -0.10%/Central fund of Canada’s is still in jail.
 

end

Major gold/silver trading/commentaries for TUESDAY

GOLDCORE/BLOG/MARK O’BYRNE

Jim Rogers Buying Gold Bullion On Dips

  • Jim Rogers accumulating gold bullion on dips
  • “Get prepared” as “we’re going ‘to have the worst economic problems we’ve had in your lifetime or my lifetime’
  • Warns that Trump and his team are “very, very keen to have trade wars with China and other people”
  • History shows trade wars lead to real wars
  • Cashless Society – Cash-less means Freedom-less
  • Cashless societies are about governments “looking out for themselves first”
  • Gold and silver may head lower but advises accumulating bullion on the dip
  • Advocates storing gold in Singapore
Jim Rogers holds a gold coin (Digital Journal)

I want to own more gold and silver

In a wide ranging interview with MacroVoices’ Erik Townsend, legendary investor Jim Rogers, co-founder of Quantum Fund with fellow investor George Soros, has said that he wants to own more gold and silver and will continue to accumulate on any price dips.

Set against a background of thoughts regarding the both the political and economic outlook, Rogers echoes the growing theme we have been touching on in recent months – heightened and arguably unprecedented uncertainty.

Basing much of his analysis and thoughts on history, Rogers reminds us that it does repeat itself and we’re not to assume that the ways of modern life mean that things will turn out differently.

Mixed feelings on Trump

When it comes to what President Trump will mean for markets, Jim Rogers believe that if the new Commander In Chief says all the things that he will do then it will stand for some overwhelmingly poor results on an international scale.

Whilst Rogers believes that Trump’s promises to cut taxes, improve infrastructure and bring back $3 trillion worth of US company assets from overseas will be ‘wonderful, wonderful things.’ Yet, he seems more concerned about the idea of trade wars that a few in Trump’s ear seemed to have a thing for.

“Mr. Trump has also said he’s going to have trade war with China, Mexico, Japan, Korea a few other people that he has named. He swore that on his first day in office he would impose 45% tariffs against China. He’s been there three weeks, two or three weeks and he hasn’t done it yet but he still got it in his head I’m sure or maybe he’s just another politician like all the rest of them. He says one thing and he doesn’t mean it at all but he does have at least three people in high levels in his group who are very, very keen to have trade wars with China and other people.”

Rogers says it could be ‘happy days’ for a while if Trump doesn’t follow through on campaign promises to take on trade competitors, but warns that if Trump does pursue these ideas that “it’s all over. I mean history is very clear that trade wars always lead to problems, often to disaster, sometimes even to real war, a shooting war.”

We’re heading for war

Rogers is convinced that we are heading for war. Thanks to the seeming decline of the US, the rise of populism and push for protectionism. Indeed, he recently went as far as to warn that we are on the verge of a “biblical” collapse.

The decline of the US in the short-term may well be encouraged by President Trump. Should a recession, or worse, kick-in in the short-term then the new administration can blame Obama, and then seemingly swoop in and save the day.

How will they save the day? That remains to be seen, but it seems that much of the rhetoric being used by Trump is also being seen elsewhere in the Western world and Rogers believes this signals war.

“…whenever things are bad and things are going wrong people look for somebody to blame. They always throughout history wherever we are, whichever country we’re discussing the first people blamed are always the foreigners… it’s always happened that way to blame the foreigners for better or for worse it seems it is happening as you point out in the U.S. again but it’s also happening in other places in Germany, France, Italy many places they’re blaming the foreigners already again it’s even happening in Singapore to some extent where I live…

“And as you rile up against the foreigners most countries historically have closed off one way or the other they close their borders, they close their economies and when you close the economy it leads to economic problems and sometimes eventually if you get into real serious trade wars it leads to bankruptcy and even worse.

“It’s rare and I don’t think ever in history that one country has started a trade war and the other country says, “oh well that’s too bad but we’re not going to do anything we’re just going to sit here and let you hit us again and again and again.” No the other countries retaliate that’s the way human beings are.

“So if country X. starts a trade war then country Y. hits back and then country X. hit’s back and country Y. hits back and the next thing you know countries C and D and E are involved as well and everybody’s suffering and then as economies get worse more and more things happen more and more discrimination more and more blame and then eventually bullets start flying.

“…I don’t like at all what I see happening. There are many analogies to previous periods in history before the First World War and this sort of thing started happening certainly before the Second World War this sort of thing started happening. It’s been common throughout history.

And these wars when they start they usually– in 1914 nobody, nobody could conceive of war and then the next thing you knew, there was war and everybody said don’t worry it’ll be over by Christmas, well six months later everybody was saying, how did we get into this war? How do we get out of this war? It’s absurd. It’s ludicrous…”

Where does all this lead to?

Rogers told Barron’s in 2016 that

“… if Trump does what he says he’s going to do such as wage trade wars then it’s going to be bad news for all of us. Trade wars have led to bankruptcy and bankruptcy has often led to war. At that point, you’d better own a lot of gold.”

Cashless Society – Cash-less means Freedom-less

Whilst everyone is keen to jump in on what Trump means, Jim Rogers was keen to provide the wider picture and “governments are always looking out for themselves first.”

Whilst he argues that this has been going on for hundreds of years, at the moment he sees it most clearly in the war on cash.

He refers to the move by governments to reduce the amount of physical cash in circulation through controls and law enforcement as a way of taking away our personal freedoms.

In both Europe and India, where the war on cash is strongest, we are repeatedly told that it has something to do with security – generally money laundering and terrorist activities. To this Jim Rogers says that this is just a way to get us to give up our freedoms:

“Well history shows that people always would like a little more safety and a willing to “give up some things for more safety and security.” Benjamin Franklin said well anybody who would give up some freedoms for security is going to wind up with neither security nor freedom and they deserve to lose both and of course that’s the way it is.”

And the war on cash is facilitated, as we have discussed in past articles, by the rise in technology. But cashless societies isn’t the only freedom-reducing side to tech.

“So the Internet and the computers changing everything that we know, money can certainly be easily converted to computers not today because there are still, some people who don’t have computers and the system is not ready it but it can be done and when it’s done the governments are going to be very, very happy they going to say they’re doing it for our own good Eric, this is not them, this is for our good. That they’re doing this, but it’s coming and it’s going to be a whole different world in which we live. Probably we are not going to have as many freedoms as we have now even though we are already losing our freedoms at a significant pace.”

As outlined in our post Cashless Society – War on Cash to Benefit Gold? the war on cash is not only reducing our personal freedoms but makes us far more vulnerable to bail-ins and negative interest rates. With this in mind, we and Jim Rogers recommend investors diversify their portfolios and buy gold, even if you already have some.

Rogers plans to buy more gold

As mentioned in the beginning, Rogers is very clear that whilst he already owns gold and silver, he is looking to own more. When will he buy some? He’s expecting both metals to have another dip.

Readers should not be put off by a seemingly bearish attitude to the gold price. Mr. Rogers has previously said that he has never sold any of his gold and has high hopes for the long-term gold price, mainly thanks to his very low expectations of governments and central bankers running the economy.

He told Barron’s last year:

“Before this is over, gold is going to go through the roof and could turn into its own bubble – more and more people will lose confidence in governments and currencies and when that happens, they always turn to gold.”

Timing is tricky though, and Rogers hopes that he’ll realise at the right time if the dip isn’t coming and will be “smart enough to buy more if it doesn’t.”

Rogers has long been on record regarding his expectation of great things for gold, mainly thanks to governments debasing the currency.

“If the U.S. dollar becomes confetti, any number you want to make up. They’re printing U.S. dollars fast enough to turn them into confetti. Who knows how high gold will go …”

To those who are unaware, Jim Rogers resides in Singapore extolling the virtues of the Asian country that acts as the gateway to the gold market between East and West. It will come as no surprise that he also advocates storing gold in Singapore. He’s not alone, both Jim Sinclair and Dr Marc Faber are also advocating acting as your own central bank and owning physical gold coins and bars in Singapore.

Conclusion – take a different perspective

Jim Rogers once told Time Magazine:

“My success in the market has been predicated on viewing the world from a different perspective…”

We couldn’t agree more. During uncertain times like these – with increasing ‘fake news’ and misleading news, of rising alternative and radical political views, of confusing financial signals – it is important to look beyond the simple information and simple narratives provided in the mainstream media whose primary function is to serve the agendas of corporate and government masters and tom profit from the sale of advertising.

Powerful, big spending advertising corporations do not want media to focus on the real risks of another global financial crisis as it risks frightening the consuming masses and impacting their advertising spend and their return on investment (ROI).

In the mainstream, Brexit was not going to happen. In the mainstream Trump was not supposed to win the election. In the mainstream, reduced personal freedoms and the gradual erosion of our civil rights are good and necessary things. In the mainstream, the cashless society is a good thing for everyone.

These narrow, one sided perspectives and a lack of plurality of opinion regarding these matters, the increasinh financial risks and the benefits of owning some physical gold are endangering both our liberties and our financial well being.

We live in uncertain times. No one knows how political declarations or financial volatility will play out, needless to say there are more unknown unknowns than ever before.

One thing we do know is that history repeats or at least rhymes as Marc Twain said. With this in mind, we echo Jim’s advice and advocate owning actual bullion coins and bars, knowing that if owned either in your possession or in the safest vaults in the world, they are beyond the reach of incompetent and desperate politicians and the risks they pose to us in terms of a reduction of our personal freedoms, trade wars, currency wars, terrorism and actual wars.

Jim Rogers Interview with MacroVoices’ Erik Townsend can be accessed here

Dr Marc Faber On Owning Gold In Singapore here

 

 

END

 

This is interesting:  Greece may be considering ditching the euro in favour of the USA dollar!!(much like Zimbabwe)

(courtesy zero hedge)

Greece said considering ditching euro in favor of dollar

Section:

By Gareth Davies
Daily Mail, London
Tuesday, February 14, 2017

Greece is said to be considering ditching the euro in favour of the U.S. dollar in a devastating move that would humiliate Brussels.

Donald Trump’s pick for EU ambassador Ted Malloch claimed senior Greek economists are looking into taking on the American banknotes if the country turns its back on the European currency.

Due to Greece’s crippling financial crisis, officials are said to be desperately searching for an alternative to the Eurozone, which would “freak out” Angela Merkel, according to Malloch.

Professor Malloch was interviewed on Greek TV, where he said Greece leaving the EU would be the best option for residents, and added the current situation is “simply unsustainable.”

“I know some Greek economists who have even gone to leading think tanks in the U.S. to discuss this topic and the question of dollarization,’ he said, according to local press. …

… For the remainder of the report:

http://www.dailymail.co.uk/news/article-4222990/Greece-considers-ditchin..

end

 

A thorough analysis of gold demand by China

(courtesy Koos Jansen)

 

China Net Imported 1,300t Of Gold In 2016

By Koos Jansen

https://www.bullionstar.com/

For 2016 international merchandise trade statistics point out China has net imported roughly 1,300 tonnes of gold, down 17 % from 2015. The importance of measuring gold imports into the Chinese domestic gold market – which are prohibited from being exported – is to come to the best understanding on the division of above ground reserves in and outside the Chinese domestic market. 

Kindly be advised to have read my posts the Mechanics Of The Chinese Domestic Gold Market. If segments in this post are unclear please click the links provided.

The last bits of data are coming in from the countries that export gold to China, with which we can compute the total the Chinese have imported in 2016. There are four main gold exporters to China, which are Hong Kong, Switzerland, the UK and Australia (it’s not publicly disclosed how much South Africa exports directly to China ). Let’s start discussing the largest gold exporter to China.

Hong Kong

Since 2011 when the gold price slowly started to decline and China embarked importing gold at large, Hong Kong has been the main conduit to the mainland. According to data by the Hong Kong Census And Statistics Department (HKCSD) the special administrative region net exported 771 tonnes of gold to China in 2016, ranking first once again. Net exports were down 10 % compared to 2015.

Hong kOng China gold trade yearly

As I mentioned in November 2016 there were rumors that part of the bullion exports from Hong Kong to China were fake – over-invoiced to move capital out of the mainland – which overstated the flow of gold into China. Let’s investigate if the data by the HKCSD can substantiate this rumor. The net amount of bullion going from Hong Kong to China is the residual of exports (materials lastly fabricated in Hong Kong) plus re-exports (materials not altered in any way, shape or form but merely re-distributed by Hong Kong) minusimports (materials imported into Hong Kong from China through processing trade). If one is to engage in over-invoicing exports from Hong Kong are more suitable than re-exports, because the origin of exports are harder to track. For re-exports the origin of the material must be recognized by the HKCSD, which makes any illegal scheme more difficult to conceal.

Hong Kong China gold monthly

Notable is that from February through August 2016 there was an increase of gold exports relative to re-exports from Hong Kong to China (see dark green bars in the chart above). Usually the shipments from Hong Kong to China are re-exports, so the increase in exports was remarkable. But the HKCSD data is no hard evidence any transfers were overstated.

In another example: if we look at the composition of Hong Kong’s export and re-export to the UK in 2016, we can see something similar: the majority were exports.

Hong Kong UK gold trade

I doubt Hong Kong’s flow of gold to the UK has been overstated; UK residents have no motive to surreptitiously move capital abroad. And if the data on Hong Kong’s shipments to the UK are accurate, why can’t the data on Hong Kong’s shipments to China be accurate? Thereby, the Chinese customs department is not retarded. I’m quite sure the Chinese customs department is aware of over-invoicing schemes and as a consequence it can strictly monitor cross-border gold flows. My conclusion is that net shipments from Hong Kong to China in 2016 have likely been close to 771 tonnes. If I do ever find hard evidence it was less I will report accordingly.

Switzerland

Most likely Hong Kong’s position as the largest gold exporter to China will slowly fade in the coming years, as the State Council is stimulating gold freight to go directly to Chinese cities (hoping the Shanghai International Gold Exchange will eventually overtake Hong Kong’s role as the primary gold hub in the region). Consequently, gold exports to China are increasingly bypassing Hong Kong.

In December 2016 we got a preview of what is about to come: Switzerland net exported an astonishing 158 tonnes directly to China, up 418 % from November 2016, up 168 % from December 2015, and 106 tonnes more than what Hong Kong did.

China Switzerland Hong Kong China gold import export

It will take more time before Hong Kong’s role as supplier to China is fully over though. In the past years a significant part of gold exports to China has been used to quench Chinese jewelry demand. The core of the Chinese jewelry manufacturing industry is located in Shenzhen, which is right across the border from Hong Kong. But as far as I know there aren’t many flights going directly from Switzerland, Australia or the UK to Shenzhen yet. Hong Kong on the other is well connected; so in the near future Hong Kong’s airport is more convenient to supply gold from abroad to Chinese jewelry manufacturers.

Screen Shot 2017-02-13 at 12.50.56 pm

In total the Swiss net exported 442 tonnes directly to China mainland in 2016, up 53 % from 288 tonnes in 2015.

The United Kingdom

Direct gold shipments from the UK to China have been tepid in 2016. Only 15 tonnes have been net exported to the mainland over this time horizon. Noteworthy though, in December 2016 the UK exported 172 tonnes to Switzerland, which in turn moved 158 tonnes to China – as I mentioned in the previous chapter. So although the UK didn’t directly export metal to China in December, it sure was the main supplier.    

Uk gold china switzerland

xxx
The gold price and the UK net flow remain correlated.

Australia

Not all data from the Australian Bureau of Statistics (ABS) has been released for 2016, but from what we have Australia seems to have exported less to China than in 2015. From January through September direct shipments amalgamated to 53 tonnes, while Australia directly net exported 78 tonnes to China over the same months in 2015. (ABS has notified me they changed the way how they disclose gold export data, but they failed to clarify the details. Until I get more information I will stick to my own formula to compute Australia’s direct export to China, which was confirmed to be accurate by ABS early 2016.)

It can be Australia’s direct exports where strong in last three months of 2016 as the price of gold went down over this period and the Chinese increase gold purchases on a declining gold price.

Final Notes

Combining gold trade data by Hong Kong, Switzerland, the UK and Australia, reveals China has imported at least 1,281 tonnes in 2016. Though this figure excludes Australia’s exports for October, November and December, so I’m estimating total Chinese gold import will reach roughly 1,300 tonnes.

Largest Gold Exporters to China

According to the data at my disposal there have been practically zero tonnes of gold imported from China by other nations across the globe than the ones discussed above. Signalling there is very little gold being exported from the Shanghai International Gold Exchange (SGEI) located in the Shanghai Free Trade Zone. Possibly foreign central banks buy gold on the SGEI and ship it home as monetary gold which doesn’t show up in any customs reports. However, in the history of the SGE/SGEI a mere 3 tonnes has been traded in 12.5 Kg bars, all the rest was in smaller bars, mainly 1 Kg. And I assume central banks would prefer large bars. All in all I think that up till now the SGEI has mainly been used by Chinese banks to import gold from the Shanghai Free Trade Zone into the domestic market.

Weekly Volume 12 Kg Bars Traded On SGE

Total gold supply in China in 2016 was at least 1,753 tonnes (domestic mine output was 453 tonnes plus 1,300 tonnes import) while the China Gold Association discloses consumer demand at 975 tonnes. Meaning, Chinese institutional demand was at least 778 tonnes ( 1,753 minus 975), depending on the amount of scrap supply and disinvestment.

A few weeks ago I estimated Chinese gold import 2016 would aggregate to 1,300 tonnes, to which I calculated 5,000 tonnes of gold have been moved into the Chinese domestic market from 2007 through 2016 on top op the imports to satisfy Chinese consumer demand. In my post The West Has Been Selling Gold Into A Black Hole I explain how I think this will strengthen a forthcoming gold bull market.

chinese-gold-supply-and-demand

Last but not least: SGE withdrawals for January 2017 came in at 184 tonnes, down 18 % from January 2016.

Shanghai Gold Exchange SGE withdrawals January 2017

That’s all folks!

Koos Jansen
E-mail Koos Jansen on:
koos.jansen@bullionstar.com

end

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

 
 

1 Chinese yuan vs USA dollar/yuan STRONGER AT  6.8631(SMALL REVALUATION NORTHBOUND   /OFFSHORE YUAN NARROWS   TO 6.8506 / Shanghai bourse UP 1.09 POINTS OR .03%   / HANG SANG CLOSED DOWN 7.97 POINTS OR .03% 

2. Nikkei closed DOWN 220.17 POINTS OR 1.13%   /USA: YEN FALLS TO 113.40

3. Europe stocks opened ALL IN THE RED      ( /USA dollar index FALLS TO  100.76/Euro UP to 1.0626

3b Japan 10 year bond yield: RISES TO    +.098%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 113.40/ 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::  53.36  and Brent: 56.17

3f Gold UP/Yen UP

3g Japan is to buy the equivalent of 108 billion uSA dollars worth of bond per month or $1.3 trillion. Japan’s GDP equals 5 trillion usa./“HELICOPTER MONEY” OFF THE TABLE FOR NOW /REVERSE OPERATION TWIST ON THE BONDS: PURCHASE OF LONG BONDS  AND SELLING THE SHORT END

Japan to buy 100% of all new Japanese debt and by 2018 they will have 25% of all Japanese debt. Fifty percent of Japanese budget financed with debt.

3h Oil UP for WTI and UP for Brent this morning

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO  +.350%/Italian 10 yr bond yield DOWN  to 2.211%    

3j Greek 10 year bond yield RISES to  : 7.50%   

3k Gold at $1233.00/silver $17.98(8:15 am est)   SILVER BELOW RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP 62/100 in  roubles/dollar) 57.33-

3m oil into the 53 dollar handle for WTI and 56 handle for Brent/

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

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 113.40 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  1.0036 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0622 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/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT

3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.350%

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

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

4. USA 10 year treasury bond at 2.443% early this morning. Thirty year rate  at 3.043% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

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

Global Stocks, Dollar Falter As Yellen Testimony Looms; S&P Futures Pressured By Flynn Resignation

European, Asian stocks declined, halting a global rally that sent U.S. stocks surging to new all time highs faltered, weighing on the S&P although the index rebounded modestly after a kneejerk announcement lower overnight after Trump’s National Security Advisor announced his unexpected resignation.

The dollar dropped versus most of its Group-of-10 peers ahead of uncertainty surrounding Fed Chair Janet Yellen’s testimony to Congress later Tuesday, while the pound declined after U.K. consumer-price inflation data missed economists’ forecasts. Oil gains, copper advances. Treasuries steadied. As a result, the DXY dipped 0.2 percent against a basket of currencies to 100.74 but was still near its strongest since Jan. 20, while the euro was 0.3 percent firmer after three sessions of losses to stand at $1.0626. Against the yen, the dollar weakened 0.2% on the day to stand at 113.38 yen, off Monday’s high of 114.17 but well above a 10-week low of 111.59 yen touched a week ago.

Adding to pressure on the dollar was the resignation of President Donald Trump’s national security adviser Michael Flynn, who quit over revelations he had discussed U.S. sanctions against Moscow with the Russian ambassador to the United States before Trump took office, and misled Vice President Mike Pence about the conversations.

As Reuters notes, the prospect of Trump-led economic stimulus in the United States has underpinned the dollar and stocks in recent days, powering U.S. equity markets to record highs on Monday and helping Asian shares to eke out 19-month peaks on Tuesday. But the buoyant mood in global markets was tempered somewhat as attention turned to semi-annual testimony by Yellen on Tuesday and Wednesday that could highlight the likelihood of two or more U.S. interest rate hikes this year.

Attention now shifts to Yellen’s first Congress appearance since Trump was sworn in, as investors seek clues on whether the Fed will accelerate monetary tightening to make way for the administration’s promised fiscal stimulus.  The market will be hoping Janet Yellen doesn’t ruin Valentine’s Day as today marks her semi-annual testimony to the Senate Banking Panel before she repeats it tomorrow to the House Financial Services Committee. There are probably too many unanswered questions of the new Trump administration’s fiscal plans and also not enough additional hard data to make Yellen deviate much from her January 19th speech and the February 1st FOMC statement. The testimony might instead be used to emphasise that the economy is close to reaching its dual mandate goal and it’s possible that we also get a repeat of the “every meeting is live” mantra, although it would be surprising if Yellen signalled strongly about a March rate hike. Perhaps the most interesting part for markets might be what Yellen says about the Fed’s balance sheet, which as we know has been a topical discussion amongst policymakers of late and also drawn scrutiny from congressional Republicans in the past. The testimony is scheduled for 10am.

Dallas Fed President Robert Kaplan on Monday argued the Fed should move soon to avoid falling behind the curve, especially as fiscal policy could drive faster growth and inflation.

“If Yellen wants March to be a live meeting as other Fed officials have suggested it is, she will have to adopt a more hawkish tone beyond the usual reference to data dependency,” said ING senior rates strategist Martin van Vliet. “Currently we calculate a market implied probability of around 17 percent for a March rate hike.”

Europe reported Q4 GDP numbers, with German and Italian growth falling short of forecasts, casting doubt on the strength of two of the euro area’s biggest economies amid global uncertainties. German gross domestic product rose a seasonally-adjusted 0.4 percent in the three months through December, while Italian GDP expanded 0.2 percent, according to the nations’ statistics offices. Both figures missed predictions in Bloomberg surveys by 0.1 percentage point.

As Bloomberg adds, while Italy has lagged growth in the 19-nation euro area, Germany — which had annual growth of 1.9 percent last year — has driven Europe’s slow but steady recovery, aided by a weak euro, cheap oil and the European Central Bank’s stimulus policies. While those tailwinds boosted consumer spending and supported exports, rising inflation pressures and uncertain prospects for global trade have cast doubt over whether the pace of expansion can be maintained.

German fourth-quarter GDP was led by domestic demand, the statistics office said. Government spending increased markedly, and households raised consumption slightly. Investment also developed positively, bolstered by building. With imports outpacing exports, net trade was a drag on growth. “The data are alright — German growth is solid, and impulses came exactly from where we expected them to do,” said Marco Wagner, an economist at Commerzbank AG in Frankfurt. “Growth drivers will be similar in 2017.”

Meanwhile, Europe’s most battered economy, Greece, suffered yet another unexpected economic contraction with Q4 growth dropping 0.4% after 0.9% growth in Q3, suggesting that once again the country’s stuttering bailout talks are doing nothing to help boost the real economy and dimming hopes that growth is finally back on track.

Looking at global markets, the MSCI All-Country index was little changed at 441.02, near its all-time high of 442.70 reached in May 2015. The MSCI’s broadest index of Asia-Pacific shares outside Japan edged up 0.2 percent, trying for its fifth straight session of gains. Japanese shares ran into trouble after Toshiba Corp delayed an anxiously awaited earnings release. As reported earlier, Toshiba said it would take a 712.5 billion yen ($6.28 billion) writedown on its U.S. nuclear business, wiping out its shareholder equity and dragging the company to a full-year loss. There was also some eye-catching data from China, where producer price inflation picked up more than expected in January to near six-year highs, while consumer price inflation neared a three-year high.

The Stoxx Europe 600 Index slipped 0.1 percent, after a five-day rally brought it to the highest level in more than a year. Japan’s Topix slipped 1 percent. Toshiba tumbled after delaying a scheduled earnings announcement meant to show how much of a loss the company was facing from its nuclear-equipment operations. Futures on the S&P 500 fell 0.1 percent, after the benchmark index closed up 0.5 percent at a record 2,328.25 on Monday.

U.S. stock market futures pointed to a slightly weaker open on Wall Street stock indexes hit historic peaks on Monday, with the benchmark S&P 500’s market value topping $20 trillion as investors bet tax cuts promised by Trump would boost the economy.

In commodity markets, metals were on a tear thanks to supply disruptions and strong Chinese demand. Copper CMCU3 hit its highest since May 2015 after shipments from the world’s two biggest copper mines were disrupted. Iron ore climbed to its since August 2014 amid reports China plans to cut steel capacity by at least half in 28 cities across five regions during the winter heating season. Oil recouped some ground on OPEC-led efforts to cut output, though rising production elsewhere kept prices to a narrow range that has contained them so far this year. U.S. West Texas crude added 22 cents to $53.15 a barrel, having shed 1.7 percent overnight. Brent futures LCOc1 rose 33 cents to $55.90 a barrel.

Bulletin Headline Summary From RanSquawk

  • European equities enter the North American crossover with little in the way of direction as market’s await Fed Chair Yellen
  • GBP has felt the squeeze during the European session as the latest inflation data hampers investor sentiment
  • Looking ahead, highlights include Fed’s Yellen, Lacker, Kaplan and Lockhart

Market Snapshot

  • S&P 500 futures down 0.09% to 2,324.25
  • STOXX Europe 600 down 0.1% to 369.63
  • German 10Y yield rose 0.5 bps to 0.336%
  • Euro up 0.2% to 1.0619 per US$
  • Brent Futures up 0.8% to $56.05/bbl
  • Italian 10Y yield fell 4.6 bps to 2.225%
  • Spanish 10Y yield fell 1.1 bps to 1.651%
  • MXAP down 0.2% to 144.03
  • MXAPJ up 0.1% to 463.54
  • Nikkei down 1.1% to 19,238.98
  • Topix down 1% to 1,539.12
  • Hang Seng Index down 0.03% to 23,703.01
  • Shanghai Composite up 0.03% to 3,217.93
  • Sensex down 0.03% to 28,342.16
  • Australia S&P/ASX 200 down 0.09% to 5,755.24
  • Kospi down 0.2% to 2,074.57
  • Brent Futures up 0.8% to $56.05/bbl
  • Gold spot up 0.3% to $1,228.59
  • U.S. Dollar Index down 0.1% to 100.85

Top News from Bloomberg

  • White House National Security Adviser Michael Flynn resigned Monday amid a snowballing controversy over whether he lied about his contacts with a Russian official, throwing President Donald Trump’s security team into turmoil just weeks into his term
  • PSA Group, the maker of Peugeot and Citroen cars, is exploring an acquisition of General Motors Co.’s European business
  • Toshiba Corp chairman Shigenori Shiga will step down amid a 7.125 billion yen ($6.3b) writedown in its nuclear power business, citing cost overruns at a U.S. unit and diminishing prospects for its atomic-energy operations
  • Apple Inc. shares hit a record on optimism the next iPhone will drive a resurgence in sales and help the company’s services businesses grow
  • After posting a 4Q loss of 2.35b francs and taking a charge to settle a U.S. investigation into the role of its mortgage securities business in the 2008 financial crisis, Credit Suisse pledged to cut between 5,500 and 6,500 jobs this year
  • President Donald Trump assured Prime Minister Justin Trudeau that Canada isn’t the main target of his plans to reset U.S. trade relationships, as both leaders said they are committed to maintaining commercial ties and economic integration that support millions of jobs on both sides of the border
  • German and Italian growth fell short of forecasts, casting doubt on the strength of two of the euro area’s biggest economies amid global uncertainties

Asia equity markets traded subdued as the region failed to sustain the momentum from Wall Street where stocks  extended on record highs and financials outperformed amid a continuation of the reflation trade. ASX 200 (+0.1%)  was initially kept afloat by strength in real estate and the mining sector with the latter underpinned following continued  advances in iron ore, but then failed to sustain early gains and finished marginally negative while Nikkei 225 (-1.1%) was dampened by a firmer JPY with Toshiba shares slumping after the Co. delayed its earnings release. Shanghai Comp (-0.3%) and Hang Seng (flat) traded subdued despite an increased liquidity injection by the PBoC and stronger than expected Chinese CPI and PPI data which printed multi-year highs, as the firm inflation figures spurred concerns of overheating prices and prospects of tighter policy. 10yr JGBs saw minor gains amid weakness in Japanese stocks, although gains were only minimal with a mixed 5yr auction failing to spur prices while the curve steepened amid  underperformance in the super-long end.

Top Asia News

  • South Korean Prosecutor Again Seeks to Arrest Samsung’s Lee
  • Noble Group Surges as Trader Confirms Strategic Investor Talks
  • Bank Mandiri Posts First Annual Drop in Profits Since 2005
  • Top Nickel Shipper Intensifies Mine Crackdown as Prices Rise
  • China H-Share Rally Falters as Inflation Fuels Liquidity Concern
  • Maersk to Expand Online Freight Booking After Partnering Alibaba

European stocks traded modestly lower for the majority of the morning, however much of the initial losses have been pared in recent trade. In terms of a stock specific basis, Roll Royce (-5%) lags in the        FTSE 100 after announcing a record loss and as such is now on course for its largest one decline in 4-months. Elsewhere, Credit Suisse (+2.5%) outperforms in the SMI after the bank announced that profit before tax came ahead of analyst estimates. while material names are among the worst performers in Europe to pare some of yesterday’s  advances. Across fixed income markets, price action has been somewhat range bound thus far, however some of the initial  downside has been reversed led by gilts amid the aforementioned UK inflation report.

Top European News

  • German Economy Grows Slower Than Forecast as Trade Drags
  • Michelin to Raise Dividend as Europe Helps 2016 Profit Increase
  • EDF Profit Beats Estimates After French Utility Lowers Costs
  • U.K. Rejects 1.8 Million-Signature Petition Seeking Ban on Trump
  • Bund Futures Dip, Flows Muted; Downside Bought in Options
  • Germany, Italy Grow Less Than Forecast Amid Global Uncertainties
  • Rolls-Royce Profit Beats Estimates on Cost Cuts, Airbus Lift

In currency markets, AUD is firmer this morning in the wake of Chinese inflation figures overnight (Y/Y 2.5% vs. Exp. 2.45) subsequently eyeing last Friday’s high (0.7689), while option related barriers are  situated at 0.7700 which could  curb a move to the upside. GBP has been pressured following a surprise miss on UK inflation (1.8% vs. Exp. 1.9%),which is a blow for the hawkish members of the Bank of England advocating a rate hike. Elsewhere, in terms of data, this morning’s disappointing German ZEW survey and Eurozone GDP data failed to provide much in the way of traction for prices.

In commodities, gold (+0.2%) prices were mildly higher amid a subdued USD and downturn in risk sentiment, with participants now looking ahead to Fed Chair Yellen’s Semi-Annual testimony today. Copper has eroded some of its gains after the red metal reached its highest level since May 2015 due to supply disruptions, meanwhile, WTI crude futures nursed some of yesterday’s losses to barely reclaim the USD 53.00/bbl level to the upside.

Looking at the day ahead, the main focus will be on the January PPI report where headline PPI is expected to have increased +0.3% mom and the core +0.2%. Away from the data, the big focus for the market and as we mentioned at the top will be on Fed Chair Yellen’s semiannual testimony at 10am. It’s worth also highlighting that we’re due to hear separately from the Fed’s Lacker, Kaplan and Lockhart today too.

US Event Calendar

  • 6am: NFIB Small Business Optimism at 105.9, est. 105, prior 105.8
  • 8:30am: PPI Final Demand MoM, est. 0.3%, prior 0.3%
    • PPI Ex Food and Energy MoM, est. 0.2%, prior 0.2%
    • PPI Ex Food, Energy, Trade MoM, est. 0.2%, prior 0.1%
    • PPI Final Demand YoY, est. 1.5%, prior 1.6%
    • PPI Ex Food and Energy YoY, est. 1.1%, prior 1.6%
    • PPI Ex Food, Energy, Trade YoY, prior 1.7%

Central Banks

  • 8:50am: Fed’s Lacker to Speak at University of Delaware
  • 10am: Fed’s Yellen Appears Before Senate Banking Panel
  • 1pm: Dallas Fed’s Kaplan Speaks in Houston
  • 1:15pm: Fed’s Lockhart to Speak on Economy in Huntsville, Alabama

DB’s Jim Reid concludes the overnight wrap

The market will be hoping Mrs Yellen doesn’t ruin this special day as today marks her semi-annual testimony to the Senate Banking Panel before she repeats it tomorrow to the House Financial Services Committee. As we discussed yesterday there are probably too many unanswered questions of the new Trump administration’s fiscal plans and also not enough additional hard data to make Yellen deviate much from her January 19th speech and the February 1st FOMC statement. The testimony might instead be used to emphasise that the economy is close to reaching its dual mandate goal and it’s possible that we also get a repeat of the “every meeting is live” mantra, although we’d be surprised if Yellen signalled strongly about a March rate hike. Perhaps the most interesting part for markets might be what Yellen says about the Fed’s balance sheet, which as we know has been a topical discussion amongst policymakers of late and also drawn scrutiny from congressional Republicans in the past. The testimony is scheduled for 10am.

Markets look set to go in to today’s main event on a high after the four main US equity markets recorded fresh all time highs once again last night. Indeed the S&P 500 (+0.52%), Dow (+0.70%), Nasdaq (+0.52%) and Russell 2000 (+0.25%) indices all had another positive day with a rally for financials at the heart of that with the S&P 500 Banks index breaking out of the recent range to touch the highest level since February 2008. Tech stocks also had a decent day with Apple closing at its highest price ever, while the telecoms sector was the only sector to retreat. Prior to this moves in Europe had been even more impressive after the Stoxx 600 closed up +0.75% and FTSE MIB (+1.13%) and IBEX (+1.07%) also
rebounded.

Meanwhile there appears to be no stopping the Greenback in recent days after the Dollar index (+0.19%) rose for the ninth consecutive session, the longest streak since November when the index rose for ten sessions in a row. Treasury yields also continue to inch higher with 10y yields finishing 2.9bps higher yesterday at 2.436%. Yields are now 11bps off the lows of last week. With newsflow light there wasn’t a huge amount to drive markets yesterday leaving investors to instead debate the potential for hawkish appointees to the FOMC. Former Fed official Alan Blinder said that Trump’s administration could “really transform the board” with three spots now to fill. Interestingly Blinder also said that Yellen could look to signal a possible March rate hike at the testimony today with the clue being if she talks more than usual about inflation. Markets barely responded to that comment though with the market pricing in a low 30% probability according to Bloomberg of a hike (although other measures suggest the probability is lower).

Elsewhere, in commodity markets it was another overall decent day for base metals with Copper (+0.26%), Nickel (+0.66%) and Lead (+0.83%) continuing to edge higher. Even more eye catching was the rally for Iron Ore (+6.48%) which has now surged past $90/tn and touched the highest level since August 2014. Energy was however a bit of an underperformer yesterday with WTI Oil (-1.73%) back below $53/bbl despite Saudi Arabia announcing that it had cut production by more than it pledged last month under the OPEC agreement.

This morning in Asia the positive momentum has generally faded as the session has progressed. The Nikkei (-0.55%), Shanghai Comp (-0.26%), ASX (-0.10%) and Kospi (-0.25%) are in the red while the Hang Seng is little changed. Despite markets being quiet there has been some data out of China this morning though with the January inflation numbers released. CPI has printed at +2.5% yoy which is not only up from +2.1% in December, but also a tenth ahead of expectations and the highest since May 2014. Meanwhile the remarkable increase in producer prices has continued with PPI rising to +6.9% (vs. +6.5% expected) from +5.5%. That is the highest rate of growth since August 2011, with last month’s rise helped by a 31% surge for mining products prices. After 54 months of negative PPI prints January marked the fifth consecutive month of expansion for producer prices. Away from that we’ve also had the news of the first personnel casualty from the Trump administration with National Security Adviser Michael Flynn announcing his resignation. This follows the controversy surrounding the allegations of improper conduct with Russian officials according to Bloomberg.

Moving on. While yesterday was a fairly quiet day for newsflow, European politics continues to be one to watch. In France the latest Opinionway poll, released yesterday, showed that a second-round vote between Macron and Le Pen would have the former coming out on top at 63% versus 37%. Interestingly a second round vote between Fillon and Le Pen showed Fillon coming out on top at 58% versus 42% – that is the highest second round vote percentage for Fillon in Opinonway polls this year (a total of 7 separate polls). Meanwhile in Germany there was some criticism from the CDU about new SPD leader Schulz’s prior support for Eurobonds in the single currency bloc as a way of relieving its debt crisis. A CDU campaign manager said yesterday that the party intends to remind voters ahead of the election later this year that Schulz has long pushed for the introduction of EU wide debt. A reminder too then that German political developments will only likely pick up in the months to come.

Elsewhere, in Greece there wasn’t much in the way of developments yesterday, rather it was some strong words from Bank of Greece Governor Stournaras which seemed to stoke a near 50bps sell off in Greek 2y yields. The Governor warned that “any further delay in completion beyond this month will feed a new circle of uncertainty” and that “such a vicious circle could return the economy to recession and a rerun of the negative developments that took place in the first half of 2015”. As we noted yesterday the ball is back with the Greek government and we’ll have to wait to see further response from Tsipras’ administration as to the route they decide to take in the face of the demands from creditors.

Before we look at today’s calendar, the FT ran an interesting story yesterday suggesting that the EU and other US trading partners have already began early stage work for a potential legal challenge over the US border tax proposal in what the FT suggest could be the biggest case in WTO history. The article suggests that the basis of the argument is that the Republican plan is “definitely not compatible with global trade rules”, notwithstanding the fact that a tax change would lead to a major challenger to the global trading system. One to perhaps keep an eye on.

Looking at the day ahead, there’s a fair bit of data to get through in Europe this morning. We’ll be kicking things off in Germany where we’ll get the preliminary Q4 GDP print (consensus for +0.5% qoq) and also the final revisions to the January CPI report. After that attention turns over to the UK where the January inflation data dump is due out with CPI, PPI and RPI prints all released. Thereafter we’ll get Euro area Q4 GDP (+0.5% qoq expected) and industrial production data, as well as the February ZEW survey out of Germany. Over in the US this afternoon the main focus will be on the January PPI report where headline PPI is expected to have increased +0.3% mom and the core +0.2%. The NFIB small business optimism reading will also be released. Away from the data, the big focus for the market and as we mentioned at the top will be on Fed Chair Yellen’s semiannual testimony at 3pm GMT. It’s worth also highlighting that we’re due to hear separately from the Fed’s Lacker (at 1.50pm GMT), Kaplan (at 6pm GMT) and Lockhart (at 6.15pm GMT) today too.

end

i)Late  MONDAY night/TUESDAY morning: Shanghai closed UP 1.09 POINTS OR .03%/ /Hang Sang CLOSED DOWN 7.97 POINTS OR .03% . The Nikkei closed DOWN 220.17 POINTS OR 1.13% /Australia’s all ordinaires  CLOSED DOWN 0.03%/Chinese yuan (ONSHORE) closed UP at 6.8631/Oil ROSE to 53.36 dollars per barrel for WTI and 56.67 for Brent. Stocks in Europe ALL IN THE RED. Offshore yuan trades  6.8506 yuan to the dollar vs 6.8631  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE NARROWS TO ZERO AS POBC ATTEMPTS TO STOP USA DOLLARS FROM LEAVING CHINA’S SHORES. ONSHORE YUAN STRONGER AS IS OFFSHORE YUAN COUPLED WITH THE WEAKER DOLLAR

3a)THAILAND/SOUTH KOREA/:

This does not look good especially with a maniac at the helm in North Korea. We are not sure who killed the brother, a north Korean spy or someone else.

 

(courtesy zerohedge)

Brother Of North Korea’s Kim Jong Un Assassinated In Malaysia

Just two days after North Korea embarrassed both the US and Japan by test-firing a new, nuclear-capable ICBM with a 2000 mile range, with neither Trump nor Abe able to articulate a clear retaliation strategy, moments ago Yonhap news agency reported that the elder half-brother of North Korean leader Kim Jong Un has been assassinated at Kuala Lumpur airport.

Kim Jong Nam

Kim Jong Nam, 45, who had lived outside North Korea for years, was reported to have been killed by poison needle by two women who fled the scene by taxi, the reports said.

He was once considered to be the heir to late North Korean leader Kim Jong Il but he fell out of favor with his father in 2001 after he was caught trying to enter Japan on a false passport, and was arrested at Tokyo airport, apparently en route to Disneyland. Kim Jong Nam had been critical of Kim Jong Un, reportedly saying in 2012 that he “won’t last long” because of his youth and inexperience. The two brothers have different mothers, Bloomberg reports.

Who is behind the murder? As BBG adds, Kim has carried out a series of executions since taking power in 2011, the most high profile of which was the 2013 killing of his uncle and one-time deputy Jang Song Thaek. If Kim Jong Nam was killed by a North Korean spy, it indicates that Kim Jong Un felt a sense of paranoia about his own future and wanted to remove any potential successors, according to Namkoong Young, who has been teaching inter-Korean politics at Hankuk University of Foreign Studies for more than 25 years.

“Jong Nam has been in exile for years away from North’s politics for a long time but he is still the eldest son of Kim Jong Il,” Namkoong said. “And if there was any move or plan by some elite there to have him replace Jong Un, he probably should be removed.”

Of course, it is just as likely that a certain spy agency could have staged the murder, making it seem like it was preemptive retaliation by Un. For now there are no further details.

A person in the Malaysian prime minister’s office, who did not want to be named, confirmed that a North Korean national had been killed at the airport and taken to hospital. The person said police were still waiting for the autopsy report. South Korean officials have yet to comment publicly on the matter. Malaysia’s foreign ministry is still waiting for information from the police on the identity of the deceased man. The death is under the purview of the home affairs ministry, she said. The police didn’t immediately respond to a request for comment.

In 2014, Kim Jong Un had about 50 officials executed on charges ranging from graft to watching South Korean soap operas. Two senior officials were executed with an anti-aircraft gun in August last year on Kim’s orders, South Korea’s JoongAng Ilbo newspaper reported, citing people it did not identify.

b) REPORT ON JAPAN

Tobisha records a huge loss of 6.3 billion USA and warns of continual losses.  They also warn they their solvency is in jeopardy.  This is a huge problem as Toshiba is one of their big pillars of strength.  Another bad sign: the chairman is abandoning ship as he just resigned.

(courtesy zero hedge)

 

Toshiba Warns Solvency In Jeopardy After Massive Nuclear Unit Writedown; Chairman Resigns

The last time the market was especially concerned about used to be one of the core pillars of “Japan, Inc.”, Toshiba, was in late December when in its second major accounting scandal announcement in as many years, Toshiba said cost overruns at U.S. nuclear reactors it is building were likely to force a write-down of as much as several billion dollars, crushing its turnaround plan after a previous accounting scandal revealed in 2015, and claiming the jobs of the company’s then CEO. The company said it may have to book several billion dollars in charges related to a U.S. nuclear power plant construction company acquisition, rekindling “concerns about its accounting acumen.”

At the time, Toshiba’s new CEO, Satoshi Tsunakawa, who only took the helm in June, also took the “apologetic” way out, and became the latest boss of the company to bow before the cameras after the 2015 scandal, which led to a clean sweep of top management after the company acknowledged it had padded its financial results for years. “I apologize to shareholders, business partners and all stakeholders for the trouble we have caused,” Mr. Tsunakawa said in a news conference at the company Tokyo headquarters.

Tsunakawa: “Sorry we couldn’t do math”

Fast forward to Tuesday, when Toshiba confirmed that it wasn’t kidding, and said that a 712.5 billion yen ($6.3 billion) impairment charge on its nuclear operations will lead to a 499.9 billion yen net loss for the nine months through December. The company also downgraded its earnings projection for the full year through March to a 390 billion yen loss, from the previous estimate of a 145 billion yen profit.

The numbers are not officially audited earnings as the company postponed the official announcement earlier in the day, requesting a one month extension.

And, in keeping with tradition, Toshiba also announced the resignation of Chairman Shigenori Shiga, effective on Wednesday.

The impairment loss came from a U.S. nuclear plant construction company, which Toshiba subsidiary Westinghouse Electric acquired in 2015. The company earlier explained that the labor and material costs for planned U.S. plant projects will be higher than expected, resulting in a downgrade of its entire nuclear business value.

As a result, shareholders’ equity stood at negative 191.2 billion yen as of the end of December. Which means that to avoid technical insolvency at the end of this fiscal year, Toshiba needs to repay debts by selling assets, or add equity through financing or turning a profit by the end of March. It has already decided to spin off its core chip business and said today it is considering selling a majority stake, for which multiple potential investors have made offers.

Speaking at a press conference at the company’s Tokyo headquarters, President Satoshi Tsunakawa said that a complete sell-off of its chip business “is a possibility.”

The company’s shares fell 8% as Toshiba sought a one-month extension of its earnings deadline to complete an auditor review of its results, after failing to publish the financial figures at noon in Tokyo as originally planned.

 

 

end

c) REPORT ON CHINA

No wonder China tried to tighten these past 6 weeks as both Chinese CPI and PPI skyrocketed higher in January

(courtesy zero hedge)

Chinese Inflation Follows Germany – Explodes To 2011 Highs

In an ominous sign of the need for more tightening, Chinese inflation (CPI and PPI) ripped higher in January.

Both Consumer and Producer prices rose more than expected but it was the 6.9% spike in PPI that is most troublesome – fastest rate of price expansion since August 2011…

And Consumer prices are rising at the fastest since 2013…

Driven largely by reflexive commodity exuberance, the relative input- versus output-cost inflation will likely be a huge drag on Chinese corporates and with Chinese food prices rising notably (especially pork), one wonders what trick China has up its sleeve next to suspend reality.

Notably, the China inflation data follows extremely strong German inflation data this morning as the world’s central bankers get cornered by their own reflexively-indcued commodity price inflation and are forced to pull the plug (or prick the bubble).

 

end

 

China added a whopping 1/2 trillion USA dollars equivalent in debt in just one month.  If China has any thoughts of tightening, now is the time

(courtesy zero hedge)

China Just Created A Record $540 Billion In Debt In One Month

One week ago, Deutsche Bank analysts warned that the global economic boom is about to end for one reason that has nothing to do with Trump, and everything to do with China’s relentless debt injections. As DB’s Oliver Harvey said, “attention has focused on President Trump, but developments on the other side of the world may prove more important. At the beginning of 2016, China embarked on its latest fiscal stimulus funded from local government land sales and a booming property market. The Chinese business cycle troughed shortly thereafter and has accelerated rapidly since.”

DB then showed a chart of leading indicators according to which following a blistering surge in credit creation by Beijing, the economy was on the verge of another slowdown: “That makes last week’s softer-than-expected official and Caixin PMIs a concern. Land sales, which have led ‘live’ indicators of Chinese growth such as railway freight volumes by around 6 months, have already tailed off significantly. “ 

As DB concluded, “If China starts to slow again, the current risk-friendly environment has a short sell-by-date, particularly given rising oil prices and our view that any Trump stimulus will take at least a few quarters to work its way into US growth.”

Yes… but not yet, because as China reported overnight, in January Beijing injected the greatest amount of aggregate monthly credit, between bank and shadow loans, i.e., Total Social Financing, on record, amounting to an all time high $540 billion.

While China injected Rmb 2,030 billion in new loans, slighlty below consensus estimates of 2,440bn – still the second highest number on record – it was the surge in TSF that stunned China watchers: in total, China added a record Rmb3,740 bn in aggregative financing last month, far greater than consensus expectations of Rmb3,000 bn, and more than double the December total of  Rmb1,626 bn. The implied month-on-month growth was 15.1% SA ann mom, up from 12.8% in December. (There was no issuance of local government bonds in January compared with Rmb102.3 bn of issuance in December according to WIND data.) According to the PBOC, TSF stock growth (not adjusting for local government bond issuance) was 12.8% yoy in January.

With loans coming below expectations, and total aggregate credit trouncing consensus, this means that in January, contrary to stated intentions to tighten and delever its shadow banking system, China unleashed the biggest shadow debt expansion on record, driven mostly by undiscounted bankers acceptances, as well as growth in both Trust and Entrusted Loans.

Some observations: although new loans at the beginning of the year tend to be seasonally high, in this January, the PBOC had been aggressive in keeping new RMB loans under check, on the back of inflationary pressures, rising leverage and solid activity growth. PBOC adopted a combination of measures including administrative intervention and market approaches such as raising the Open Market Operations rate. New RMB loans in January were, as a result, lower than market expectation, and its growth rate moderated slightly on sequential basis.

On the other hand, Total social financing surprised drastically on the, mainly due to the following reasons:

  1. substitution effect – because there was no local government bond net issuance and new RMB loan extensions were strictly monitored by the PBOC, commercial banks shifted to alternative credit channels such as bank acceptance bills (+Rmb613 bn in January vs. +Rmb159 bn in December last year) and trust loans (Rmb318bn in January vs. Rmb164 bn in December);
  2. lower real interest rates and better corporate profitability in 2016 compared with 2015, which raised credit demand.

More importantly, this surge in credit has also resulted in a major credit impulse not only in China, but also around the globe, resulting in the latest inflationary push higher, and also leading to better than expected economic data as the impact of China’s credit generosity entered the global economy. It also means that the inflection point envisioned by DB may not be here just yet.

In other monetary aggregate data, China reported that broad money growth accelerated slightly from December on a sequential basis. The drag from fiscal deposit change mostly dissipated (fiscal deposits increased by Rmb412.4 bn, lower than the increase in January 2016 and 2015). FX outflows have probably remained large in January, which would dampen M2 growth.

As Goldman notes, “January money and credit data highlights the difficulties facing the PBOC. It is increasingly difficult to control broad liquidity supply to the economy amid an increasingly sophisticated financial market.”

Curiously, according to Goldman this latest record credit push may be the last hurrah:

we see rising pressures for the monetary authorities to raise funding costs, even though we expect the central bank will be likely to continue with its stringent window guidance. Stronger sequential broad credit (adjusted TSF stock) growth tends to be supportive of short-term activity growth. We see rising upside risks to our forecast of meaningfully weaker sequential growth in 1Q, although qualitatively speaking, 1Q sequential activity growth is still likely to be weaker than it was in late 2016.”

Finally, the latest confirmation that Deutsche Bank may indeed be right following the record January credit expansion, comes from Moodys, which wrote that “a combination of tighter liquidity and stricter regulatory scrutiny on commercial lenders’ off-balance sheet activities will dampen fast-growing shadow banking activity in China, Broad shadow banking assets, including entrusted loans, financing through trust companies, undiscounted bankers’ acceptances, and wealth management products (WMPs) reached 58 trillion yuan ($8.42 trillion) in the first half of 2016, equivalent to 82% of gross domestic product, according to Moody’s. As Caixin redundantly adds, “the shadow banking business is still growing.” The Industrial and Commercial Bank of China (ICBC), the world’s largest bank by total assets, plans to issue additional WMPs worth 250 billion yuan in the first quarter of 2017, said employees of the state-owned lender. At the start of this year, ICBC managed 1.68 trillion yuan through WMPs.

While big banks are net fund suppliers in the interbank market, small and midsize banks, securities firms, and other financial institutions are net borrowers, the Moody’s report said. It pointed out that smaller banks rely heavily on wholesale funding, including aggressive issuance of certificates of deposit, and the purchase of WMPs in the interbank market as a way to boost profits amid declining net interest margins.

“Small and midsize banks are active investors in shadow banking products, including other banks’ WMPs, the trus and asset management plans of non-bank financial institutions,” the Moody’s report said. A growing reliance on wholesale funding exposes smaller banks to possible liquidity shocks caused by the withdrawal of funds by other financial institutions, especially when demand for cash increases at the end of the year or if default scandals occur, which in turn prompts the smaller banks to call back their own funds.

 

The growth of shadow banking may slow as regulation becomes more stringent, which mainly targets off-balance sheet WMPs, said Xu Jing, an assistant analyst with Moody’s Investor Service. In December, China’s central bank confirmed that it would include banks’ off-balance sheet WMP business in the Macro Prudential Assessment framework, a system to monitor commercial lenders’ credit exposure.

Following the record January expansion, China will have no choice but to take action if it hopes to have its “tightening” actions be taken seriously by the market and the global financial community.

4. EUROPEAN AFFAIRS

Italy

Renzi trying to promote an early congress so that he is elected leader.  The PD party is the only party that wants to stay in the Euro. However the delay will cause a splintering of the PD party.  The leader of the opposition, Beppo Grillo seems ready to take on Renzi. A delay in the election helps the PD party.

(courtesy Mish Shedlock/Mishtalk)

Italy’s Renzi Promotes Renzi-ism As Alternative To Trump-ism, Le Pen-ism, Grillo-ism

Submitted by Mike Shedlock via MishTalk.com,

Former Italian prime minister Matteo Renzi announced today that he would call a PD party congress, effectively putting his role as party leader into question.

In his speech, Renzi stated “Some people wanted a party congress to find an alternative to Renzi-ism. It needs to be done as an alternative to Trump-ism, Le Pen-ism and even Grillo-ism.”

Recall that Renzi resigned as prime minister following a landslide defeat of a referendum he sponsored. He did not have the decency to disappear, instead he called for early election with him as party leader.

Italy is in the midst of a 4th consecutive technocrat prime minister, with Paolo Gentiloni now heading the government.

Renzi has now concluded early elections in June would give an advantage to Beppe Grillo’s Five Star Movement, so he first wants a party congress to affirm his leadership. He also seeks parliamentary rule changes that would benefit him in any coalition movement.

Renzi’s Gamble

Please consider Renzi Gambles on Leadership Contest to Unite Party.

Matteo Renzi has triggered a leadership contest in his ruling centre-left Democratic party, opening up a tussle that he hopes to use as a springboard for a comeback at Italy’s next general election.

He said the party needed to unite around a platform that would confront surging populism across the world, rather than be consumed by infighting.

“Some people wanted a party congress to find an alternative to Renzi-ism. It needs to be done as an alternative to Trump-ism, Le Pen-ism and even Grillo-ism,” he said, referring to the US president, leader of the French National Front, and founder of Italy’s anti-establishment Five Star Movement.

During the party leadership battle, likely to be fought in April or May, Mr Renzi is expected to be challenged by one of a group of left-wingers who consistently criticised him for his centrist policies and domineering style during nearly three years in office.

New elections are not due until February 2018, but both Renzi and some leading opposition figures have been pushing for the national poll to be held earlier in order to clarify the will of the people.

This has raised the possibility that an Italian election could join the list of consequential elections in Europe this year, alongside the Netherlands, France and Germany. But Mr Renzi’s decision to call a leadership contest this spring means that any early Italian election would probably be pushed back to the autumn.

Rules Changes

The above article did not discuss rules changes but Eurointelligence fills in the details.

Renzi is pressing the Gentiloni government to pass the electoral reforms quickly – essentially an extension to the Senate of the new system for the chamber of deputies, minus the bits challenged by the constitutional court. Crucially, Renzi wants a majority premium not only for parties but also for coalitions. We infer from this that Renzi could be seeking a majority premium for a hypothetical alliance with Forza Italia, hoping that both parties would together surpass the 40% threshold. Renzi, however, favours everybody running individually, and then forming a coalition afterwards. In this case the majority premium would be irrelevant since no single party in Italian politics comes close to 40%.

Needless to say, there is opposition to Renzi’s plans within his own party. The mildest opposition is from the new prime minister, Paolo Gentiloni, who expressed doubts whether it would be possible to form such a coalition. He said Italy might end up like Spain last year – without a government for a long time (we think that would be that most benign of all scenarios). Another establishment politician who has already voiced his opposition to Renzi’s planned coup is Romano Prodi, still influential in Italian politics. He wants to wait until 2018, and favours Giuliano Pisapia, the former mayor of Milan.

La Repubblica recorded a negative reaction also from the Left of the PD, unsurprisingly, amid reports that Massimo D’Alema and even the fiercely loyal Pier Luigi Bersani are considering splitting away from the party.

Europeans are used to the idea that Grand Coalitions are the ultimate solution to an electoral impasse. But we find it hard to see how this could work in Italy. We are not even sure that such an alliance would necessarily have a majority. And would Berlusconi support Italy’s membership of the eurozone? He himself would be neither in government nor in parliament, as he is barred from holding office until 2018. So this raises the question of how stable such a construct would be.

Complicated Political Mess

This is a complicated mess. Berlusconi wants election in 2018 so he would be able to run. Renzi wants an election this year as does Beppe Grillo. But Renzi also wants to squash opponents of Renzi-ism first.

This may push back elections to August. Alternatively, the president may just decide to wait until 2018. A delay until 2018 is to the benefit of Berlusconi, and a delay also runs the risk of splintering PD with more infighting even if Renzi were to remain as party leader.

Given PD is the only major party that wants to stay in the Eurozone, coalition math favors Grillo.

Renzi struggles to get out of the box he is in, but it looks increasingly difficult.

 

 

END

Switzerland/Credit Suisse

 

Credit Suisse announces another 6500 layoffs after reporting another loss

(courtesy zero hedge)

Credit Suisse Announces Another 6,500 Layoffs After Reporting 2016 Loss

After Credit Suisse reported yet another significant loss for the full year 2016, amounting to 2.35 billion Swiss francs, more than the CHF2.07bn expected, the Swiss banking giant said it was looking to lay off up to 6,500 workers and said it was examining alternatives to a planned stock market listing of its Swiss business.

“We’re setting a target now of between 5,500 and 6,500 for 2017,” Chief Financial Officer David Mathers said in a call with analysts on Tuesday after the bank published earnings. The bank did not specify where the extra cuts would come but said this would include contractors, consultants and staff, Reuters reported.

For the fourth quarter, Credit Suisse reported a 2.35 billion franc net loss, largely on the back of a roughly $2 billion charge to settle U.S. claims the bank misled investors in the sale of residential mortgage-backed securities.  Despite the loss, Credit Suisse proposed an unchanged dividend of 0.70 francs per share, in line with market expectations.

CEO Tidjane Thiam, who took over at Switzerland’s second biggest bank just over 18 months ago, is shifting the group more toward wealth management and putting less emphasis on investment banking. As part of his turnaround plans, the bank is looking to cut billions of dollars in costs and cut a net 7,250 jobs in 2016 with more to follow this year.

Additionally, Credit Suisse said it was still preparing sell 20-30% of its Swiss business in an initial public offering but left the door open to alternative options to strengthen its balance sheet. It said a flotation depended on market conditions and board approval. “So we will continue as planned our preparations for an IPO in the second half of ’17,” Thiam told analysts on the call. “That said, we will also continue to analyze the evolution of our regulatory environment which is key in this and, as we always do, continuously examine a broad range of options to determine if there are ways to reach a more attractive risk/reward outcome for our shareholders.”

Aside from the “one-time charge”, the bank’s other results showed a modest improvement. “Capital ratios were much better than expected. On a divisional level, results in IWM (International Wealth Management) and IBCM (Investment banking and Capital Markets) were better than expected,” Vontobel analyst Andreas Venditti, who has a “hold” rating on the stock, wrote in a note.

Still, just like Deutsche Bank, in wealth management, Credit Suisse said it suffered net outflows in the fourth quarter due to clients pulling cash to participate in tax amnesty programs and a decision to drop certain external asset managers. Offsetting that, however, the bank said all its wealth management divisions had seen positive inflows year to date. At the end of the fourth quarter, Credit Suisse’s common equity Tier 1 capital ratio, an important measure of balance sheet strength, was 11.6 percent, down from 12 percent in the third quarter but ahead of market expectations.

The bank’s shareholders greeted the news of fresh layoffs, sending the stock 3% higher in early trading.

 

 

end

 

The Russians are now testing Trump: The secretly deploy a banned cruise missile:

(courtesy zero hedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

Russia “Secretly” Deploys Banned Cruise Missile In “Latest Challenge To Trump”

First a spy ship off the US East Coast, now a banned missile.

According to the NYT, Russia has (not so) “secretly” deployed a new ground-launched intermediate-range cruise missile in violation of a 1987 treaty with the US which helped end the Cold War, despite complaints from American officials.

According to the NYT, the move presents a “major challenge for President Trump, who has vowed to improve relations with President Vladimir Putin” and comes at a very sensitive time for Trump, currently reeling to stabilize the fallout from Flynn’s departure over his communication with Russia. The new Russian missile deployment also comes as the Trump administration is struggling to fill key policy positions at the State Department and the Pentagon — and to settle on a permanent replacement for Michael Flynn.


Russia’s Ground-launched cruise missile

The ground-launched cruise missile at the center of American concerns is one that the Obama administration said in 2014 had been tested in violation of a 1987 treaty that bans American and Russian intermediate-range missiles based on land.

Back in 2014, a State Department annual report on international compliance with arms control agreements said that “the United States has determined that the Russian Federation is in violation of its obligations under the I.N.F. treaty not to possess, produce or flight test a ground-launched cruise missile (GLCM) with a range capability of 500 kilometers to 5,500 kilometers or to possess or produce launchers of such missiles.”

As the NYT adds, the Obama administration had sought to persuade the Russians to correct the violation while the missile was still in the test phase. Instead, the Russians have moved ahead with the system, deploying a fully operational unit.

Administration officials said the Russians now have two battalions of the prohibited cruise missile. One is still located at Russia’s missile test site at Kapustin Yar in the country’s southeast.

 

The other was shifted in December from that test site to an operational base elsewhere in the country, according to a senior official who did not provide further details and requested anonymity to discuss recent intelligence reports about the missile.

In light of this news, the NYT predicts that it is unlikely that the Senate would agree to ratify a new strategic arms control accord unless the alleged violation of the intermediate-range treaty is corrected. Trump has said the United States should “strengthen and expand its nuclear capability.” But at the same time, he has talked of reaching a new arms agreement with Moscow that would reduce arms “very substantially.”

Before he left his post last year as the NATO commander and retired from the military, Gen. Philip M. Breedlove warned that deployment of the cruise missile would be a militarily significant development that “can’t go unanswered.”

Additionally, the deployment of the missile – which may well be defensive in light of the recent build up of NATO forces on Russia’s borders – could also “increase the military threat to NATO nations, which potentially would be one of the principal targets”, and lead to an even bigger build up of NATO forces around Russia, and so on.

6.GLOBAL ISSUES

7. OIL ISSUES

API reports continue to show inventory hitting record highs.  Down goes oil this afternoon

(courtesy zero hedge)

WTI/RBOB Tumble As US Crude Inventory Hits Record High

Following last week’s massive inventory build (and hope for improved gasoline demand), API reports another much bigger-than-expected build (Crude +9.94mm versus +3.5mm exp) and WTI and RBOB prices tumbled.

 

API

  • Crude +9.94mm (+3.5mm exp)
  • Cushing -1.27mm (+500k exp)
  • Gasoline+720k
  • Distillates +1.5mm

This wil be the 6th weekly build in a row for crude (and 3rd week of major builds)…

 

If the DOE data is anything loike the API data then this will be a new record for US crude inventory…

 

Notably Energy stocks and the broad market decoupled for now from oil prices…

 

As one trader noted, “Right now, the dollar is affecting the market more than anything,” but WTI and RBOB algos reacted immediatley with selling pressure (WTI below $53)

 

8. EMERGING MARKETS

end

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

Euro/USA   1.0626 UP .0027/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 RISING RATE/EUROPE BOURSES MOSTLY IN THE RED  

USA/JAPAN YEN 113.40 DOWN 0.282(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 1.2480 DOWN .0041 (Brexit by March 201/UK government loses case/parliament must vote/PRIME MINISTER MAY  DECIDES ON A HARD BREXIT/LOWER HOUSE PASSES BILL TO BEGIN THE BREXIT PROCESS)

USA/CAN 1.3027 UP .0044 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU)

Early THIS TUESDAY morning in Europe, the Euro ROSE by 27 basis points, trading now WELL BELOW the important 1.08 level FALING to 1.0626; 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 MONTE DEI PASCHI NATIONALIZATION / Last night the Shanghai composite CLOSED UP 1.089 POINTS OR 0.03%     / Hang Sang  CLOSED DOWN 7.97 POINTS OR .03%    /AUSTRALIA  CLOSED DOWN 0.03%  / EUROPEAN BOURSES ALL IN THE RED EXCEPT SPAIN

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

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

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

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

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

The NIKKEI: this TUESDAY morning CLOSED DOWN 220.17 POINTS OR 1.13% 

Trading from Europe and Asia:
1. Europe stocks MOSTLY IN THE RED (EXCEPT SPAIN) 

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 7.97 POINTS OR .03%       / SHANGHAI CLOSED UP 1.09   OR 0.03%Australia BOURSE CLOSED DOWN 0.03% /Nikkei (Japan)CLOSED DOWN 220.17 POINTS OR 1.13%  /  INDIA’S SENSEX IN THE RED

Gold very early morning trading: $1229.50

silver:$17.91

Early TUESDAY morning USA 10 year bond yield: 2.445% !!! UP 1 IN POINTS from MONDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. THE RISE IN YIELD WITH THIS SPEED IS FRIGHTENING

 The 30 yr bond yield  3.043, UP 1 IN BASIS POINTS  from MONDAY night.

USA dollar index early TUESDAY morning: 100.76 DOWN 26 CENT(S) from MONDAY’s close.

This ends early morning numbers TUESDAY MORNING

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And now your closing TUESDAY NUMBERS

Portuguese 10 year bond yield: 4.042% UP 4  in basis point yield from MONDAY 

JAPANESE BOND YIELD: +.098%  UP 5/10  in   basis point yield from MONDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD:1.667%  UP 1/ 2 IN basis point yield from  MONDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.223 DOWN 1/5 POINTS  in basis point yield from MONDAY 

the Italian 10 yr bond yield is trading 66 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.366% UP 3 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR TUESDAY

Closing currency crosses for TUESDAY night/USA DOLLAR INDEX/USA 10 YR BOND YIELD/1:00 PM 

Euro/USA 1.0569 DOWN .0029 (Euro DOWN 29 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 114.41 UP: 0.726(Yen DOWN 73 basis points/ 

Great Britain/USA 1.2465 DOWN 0.0065( POUND DOWN 65 basis points)

USA/Canada 1.3083 UP 0.0013(Canadian dollar DOWN 13 basis points AS OIL ROSE TO $53.20

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This afternoon, the Euro was DOWN by 29 basis points to trade at 1.0600

The Yen FELL to 114.41 for a LOSS of 73 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 56  basis points, trading at 1.2465/

The Canadian dollar FELL  by 13 basis points to 1.3083,  WITH WTI OIL RISING TO :  $53.20

The USA/Yuan closed at 6.8610/
the 10 yr Japanese bond yield closed at +.098% UP 1/2 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 5 IN basis points from MONDAY at 2.488% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.082  UP 5 in basis points on the day /

Your closing USA dollar index, 101.32 UP 30 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 TUESDAY: 1:00 PM EST

London:  CLOSED DOWN 10.36 OR 0.14% 
German Dax :CLOSED DOWN 2.52 POINTS OR 0.02%
Paris Cac  CLOSED UP 7.63 OR 0.16%
Spain IBEX CLOSED UP 26.10 POINTS OR 0.28%
Italian MIB: CLOSED UP 123.00 POINTS OR 0.65%

The Dow closed UP 92.25 OR 0.45%

NASDAQ WAS closed UP 18.82 POINTS OR 0.32%  4.00 PM EST
WTI Oil price;  53.20 at 1:00 pm; 

Brent Oil: 55.90  1:00 EST

USA /RUSSIAN ROUBLE CROSS:  57.37 UP 58/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD RISES TO +0.366%  FOR THE 10 YR BOND  1:30 EST

END

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

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

WTI CRUDE OIL PRICE 5 PM:$53.02

BRENT: $55.84

USA 10 YR BOND YIELD: 2.473%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 3.061%

EURO/USA DOLLAR CROSS:  1.0573 down .0026 

USA/JAPANESE YEN:114.13   up 0.445

USA DOLLAR INDEX: 101.23  up 21  cents ( HUGE resistance at 101.80)

The British pound at 5 pm: Great Britain Pound/USA: 1.2467 : down 55   BASIS POINTS.

German 10 yr bond yield at 5 pm: +.66%

END

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

TRADING IN GRAPH FORM

Dow Hits 20,500 – Hawkish Yellen Sparks (Another) Buying Panic In Banks, Batters Bonds

86 days in a row without a 1% drop… Buy The No Dip…

 

6 up in a row for S&P… (longest winning streak in 2 months), Trannies ended the day lower…Dow leads on the back of GS, JPM, and AAPL (45 of 90 total points)

 

VIX slammed back to a 10 handle as The Dow hit 20,500

 

Another VIX tail signal?

Of course Janet Yellen was the big event of the day and her hawkishness (and asset valuation warnings) sparked an immediate surge in the dollar, bond yields, and bank stocks…we note that gold managed to get back to unch…

 

Financials led markets and while everything else lagged initially, the tail of bank wagged the entire indices higher and dragged everyhing but Utes into the green…

 

4th bigly day in banks in a row…

 

A big squeeze on Yellen and into the close saved the day…

 

March rate-hike odds did rise but from 30 to 34%… not exactly priced in how Yellen would like it…

 

Bonds broke first, and then the broad stock market caught up…NOTE – 10Y yields capped at 2.50% almost perfectly

 

Bonds kneejerked higher on Yellen hawkishness…

 

Pushing into the red for the year, but 30Y managed to rally back to unchanged…

 

The dollar spiked on Yellen, then faded…NOTE – when Flynn resignation headlines hit overnight the dollar got hit hard…

 

But ended the day higher… led by  more yen weakness

 

As a reminder, Yuan is notably STRONGER vs the dollar in 2017…

 

Copper was clubbed like a baby seal (after massive China inflation print) and we note that PMs bounced back in the afternoon after dropping on Yellen..

 

Of course, stocks don’t care about oil anymore…

 

end

 

This ought to be good for gold/silver:  USA producer prices jump up to .8% on higher energy costs etc

(courtesy Reuters)

U.S. producer prices jump on higher energy costs

February 14, 2017

WASHINGTON, (Reuters) – U.S. producer prices rose more than expected in January, recording their largest gain in four years amid increases in the cost of energy products and some services, but a strong dollar continued to keep underlying inflation tame.

The Labor Department said on Tuesday its producer price index for final demand jumped 0.6 percent last month. That was the largest increase since September 2012 and followed a 0.2 percent rise in December.

Despite the surge, the PPI only increased 1.6 percent in the 12 months through January. That followed a similar gain in the 12 months through December.

Economists polled by Reuters had forecast the PPI rising 0.3 percent last month and the year-on-year increase moderating to 1.5 percent. The rise in producer prices comes as manufacturers are reporting paying more for raw materials.

The gains largely reflect increases in the prices of commodities such as crude oil, which are being boosted by a steadily growing global economy. Oil prices have risen above $50 per barrel.

But with the dollar strengthening further against the currencies of the United States’ main trading partners and wage growth still sluggish, the spill-over to consumer inflation from rising commodity prices is likely to be limited.

Last month, prices for final demand goods increased 1.0 percent, the largest rise since May 2015. The increase followed a 0.6 percent gain in December.

Wholesale food prices were unchanged after climbing 0.5 percent in December. Healthcare costs rose 0.2 percent. Those costs feed into the Fed’s preferred inflation measure, the core personal consumption expenditures (PCE) index.

The volatile trade services component, which measures changes in margins received by wholesalers and retailers, shot up 0.9 percent in January after being unchanged in the prior month.

A key gauge of underlying producer price pressures that excludes food, energy and trade services rose 0.2 percent. That followed a 0.1 percent gain in December. The so-called core PPI increased 1.6 percent in the 12 months through January, slowing from December’s 1.7 percent gain.

-END-

 

Mike Flynn resigns as National Security Advisor

(courtesy zero hedge)

Mike Flynn Resigns As National Security Advisor

As many had expected, multiple sources have now confirmed that former General Mike Flynn has resigned from his role as President Trump’s national security advisor. The White House has confirmed that Lt. General Joseph Keith Kellogg, Jr. has been appointed Acting National Security Advisor.

President Donald J. Trump Names Lt. General Joseph Keith Kellogg, Jr. as Acting National Security Advisor, Accepts Resignation of Lt. General Michael Flynn

President Donald J. Trump has named Lt. General Joseph Keith Kellogg, Jr. (Ret) as Acting National Security Advisor following the resignation of Lt. General Michael Flynn (Ret).

General Kellogg is a decorated veteran of the United States Army, having served from 1967 to 2003, including two tours during the Vietnam War, where he earned the Silver Star, the Bronze Star with “V” device, and the Air Medal with “V” device.

He served as the Commander of the 82nd Airborne Division from 1997 to 1998. Prior to his retirement, General Kellogg was Director of the Command, Control, Communications, and Computers Directorate under the Joint Chiefs of Staff.

The full text of General Flynn’s resignation letter is below:

February 13, 2017

In the course of my duties as the incoming National Security Advisor, I held numerous phone calls with foreign counterparts, ministers, and ambassadors. These calls were to facilitate a smooth transition and begin to build the necessary relationships between the President, his advisors and foreign leaders. Such calls are standard practice in any transition of this magnitude.

Unfortunately, because of the fast pace of events, I inadvertently briefed the Vice President Elect and others with incomplete information regarding my phone calls with the Russian Ambassador. I have sincerely apologized to the President and the Vice President, and they have accepted my apology.

Throughout my over thirty three years of honorable military service, and my tenure as the National Security Advisor, I have always performed my duties with the utmost of integrity and honesty to those I have served, to include the President of the United States.

I am tendering my resignation, honored to have served our nation and the American people in such a distinguished way.

I am also extremely honored to have served President Trump, who in just three weeks, has reoriented American foreign policy in fundamental ways to restore America’s leadership position in the world.

As I step away once again from serving my nation in this current capacity, I wish to thank President Trump for his personal loyalty, the friendship of those who I worked with throughout the hard fought campaign, the challenging period of transition, and during the early days of his presidency.

I know with the strong leadership of President Donald J. Trump and Vice President Mike Pence and the superb team they are assembling, this team will go down in history as one of the greatest presidencies in U.S. history, and I firmly believe the American people will be well served as they all work together to help Make America Great Again.

Michael T. Flynn, LTG (Ret)
Assistant to the President / National Security Advisor

*  *  *

END

 

Is the firing of Flynn anti Russian sentiment? Is the Trump security team in “turmoil?”

(courtesy zero hedge)

Trump Security Team “In Turmoil” After Flynn Resignation, Russia Calls It An “Internal Matter”

Less than a month into the new administration, President Trump security team has been plunged into “turmoil” following last night’s unexpected resignation announcement by his now former National Security Advisor Mike Flynn. In some additional back story color, Flynn reportedly infuriated VP Pence by misleading him about the call, then not fully apologizing, the NYT reported and also added that Steve Bannon pushed for his resignation since Friday.

Flynn stepped down on Monday night over his phone conversations with Russia’s ambassador to Washington, Sergey Kislyak. In a statement announcing his resignation, the general said he had “inadvertently briefed the Vice President Elect and others with the incomplete information” about the calls.

Flynn’s resignation comes at a delicate time for the president as Trump struggles to cement his national security apparatus, just as the president and his cabinet officials are preparing for a series of meetings and summits with foreign leaders in the coming months, starting this week in Europe, and followed by various trips abroad, mostly to Europe.

As reported last night, Trump is now contemplating to replace Flynn with retired Army Lieutenant General Keith Kellogg, who had been Flynn’s chief of staff.  Along with Kellogg, the White House is considering retired Vice Admiral Robert Harward and former CIA director David Petraeus as permanent replacements for Flynn. None of the three has a history with the president like Flynn’s, who was an early supporter and ardent campaigner during Trump’s improbable campaign for the White House.

First, the bad news: Flynn leaves as the U.S. confronts serious challenges on two strategic fronts: the Middle East and Asia, as Bloomberg notes. Trump has yet to define his plan for combating the Islamic State and other radical Islamists that he’s said are the No. 1 threat to the U.S. In Asia, North Korea has tested the new administration by launching a ballistic missile while Trump was meeting Prime Minister Shinzo Abe of Japan. China also is asserting itself, forcing Trump to back down from the notion of using Taiwan as a bargaining chip in dealing with the world’s second biggest economy.

Though Trump campaigned primarily on domestic issues, national security was a central element of his message and it’s been dominant in the early days of his presidency. Following on his meeting with Abe in Washington, Trump is set to meet on Wednesday with Israeli Prime Minister Benjamin Netanyahu. Vice President Mike Pence and other top administration officials, meanwhile, are heading to the annual Munich Security Conference at the end of the week, where European allies are desperate for any clues to Trump’s intentions and will be looking to divine what role the U.S. plans to play.

Then, some good news: Trump will hope to use Flynn’s departure to put an end to the questions about whether Flynn had improper contact with Russia. “This seemed inevitable when it became clear Flynn had misled Vice President Pence over the calls,” said Brendan Thomas-Noone, a research fellow at the University of Sydney’s United States Studies Centre. “Trump’s administration needs to distance itself from the suspicion it has close links with Russia and this may give it some space.”

Possible replacements: If Trump taps Robert Harward it may further empower Defense Secretary James Mattis, under whom Harward served as a deputy commander of U.S. Central Command. Harward served on the National Security Council’s staff and at the National Counterterrorism Center under President George W. Bush. He has served as a Navy SEAL and commanded forces in Iraq and Afghanistan. Harward currently is chief executive of Lockheed Martin United Arab Emirates.

On the other hand, Gen. Petraeus is well known as a retired four-star general lauded for his leadership in the wars in Afghanistan and Iraq. But his ability to repair the reputation of Trump’s National Security Council may be compromised by another matter that brought him notoriety: a 2015 plea deal including two years of probation for a misdemeanor, after he shared classified documents with a biographer with whom he had an extramarital affair. The episode forced his resignation as CIA director under President Barack Obama. He was under consideration by Trump for the secretary of state job that ultimately went to Rex Tillerson.

* * *

The Democrats, who have been calling for Flynn’s resignation for the past week, are feeling further emboldened and will press Trump for more details. “The reality is General Flynn was unfit to be the National Security Advisor, and should have been dismissed three weeks ago,” Representatives John Conyers of Michigan and Elijah Cummings of Maryland, the top-ranking Democrats on the House Judiciary and Oversight committees, wrote in a joint statement.

“Now, we in Congress need to know who authorized his actions, permitted them, and continued to let him have access to our most sensitive national security information despite knowing these risks,” they added. “We need to know who else within the White House is a current and ongoing risk to our national security.” Rep. Eliot Engel of New York, the top Foreign Affairs Committee Democrat, called for a “thorough, bipartisan investigation to get the complete picture of Russia’s interference” in the U.S. presidential election following Flynn’s resignation.”

Trump’s team will be under a microscope following a WaPo report last night according to which a warning about Flynn’s Russian connections was delivered to the White House counsel’s office by then acting Attorney General Sally Yates. Yates was concerned Flynn was potentially vulnerable to being “blackmailed by Russia.” Trump fired Yates after she refused to defend his executive order banning travel from seven predominately Muslim nations.

* * *

Meanwhile, early on Tuesday Russia opined on the matter saying the resignation of General Michael Flynn is a domestic US issue, and not one for Russia to comment on, according to the Kremlin.  “We would not like to comment on it in any way,” Kremlin spokesman Dmitry Peskov told journalists on Tuesday, when asked about Flynn’s resignation. “This is a domestic issue of the Americans and the Trump administration, not ours.”

Some Russian officials were more vocal about Flynn’s resignation than the Kremlin. “The resignation of Michael Flynn was probably the speediest for a national security advisor in all history. But the target is not Flynn, but rather relations with Russia,” Senator Aleksey Pushkov tweeted.

Additionally, senior Russian lawmakers said on Tuesday Flynn’s resignation showed that efforts were being made to undermine Russian-U.S. relations.

“It’s obvious that Flynn was forced to write the letter of resignation under a certain amount of pressure,” Leonid Slutsky, head of the lower house of parliament’s foreign affairs committee, was quoted as saying by the RIA news agency. “The target was Russia-U.S. relations, undermining confidence in the new U.S. administration,” Slutsky said, without specifying who he thought was responsible.

Fellow lawmaker Konstantin Kosachev, who leads the upper house of parliament’s international affairs committee, said the resignation could be a sign of growing anti-Russian feeling in the White House. “Either Trump has not gained the requisite independence and he is gradually being (not unsuccessfully) backed into a corner, or Russophobia has already infected the new administration also from top to bottom,” Kosachev said on social media.

* * *

The matter is far from over, with attention now turning to Trump’s official statement on the matter which has yet to come. Meanwhile, reporters will bombard White House spokesman Sean Spicer with questions about what and when did Trump know and why he didn’t act on it, with the main line of questioning focused on why was Flynn fired just now if the White House was aware of potential Russian ties for a month, and how long did Trump plan to keep Flynn on board. Also, attention will focus on whether Flynn acting on his own when he discussed the Russian sanctions with the ambassador, and whether he was authorized to have the conversation, which will then shift the spotlight to Trump’s own allegations of close ties with the Kremlin.

 

END

 

The Senate confirms Mnuchin and now the question as to whether he will continue to allow gold to leave USA soil

(courtesy zero hedge)

Senate Confirms Steven Mnuchin As Treasury Secretary With 1 Democrat Breaking Party Lines

After nearly a full month has passed since his original confirmation hearing back in mid-January, the Senate has finally voted to confirm former Goldman Sachs banker, Steven Mnuchin, as Trump’s Treasury Secretary, adding one more official former vampire squid to the team of Trump’s “Goldman Guys.”  One Democrat, Joe Manchin of West Virginia, broke party lines and voted in favor on Mnuchin resulting in a final vote tally of 53-47.  Mnuchin’s confirmation once again puts a Goldman Sachs veteran in charge of the Treasury for the first time since Hank Paulson departed the office in 2009.

Per the Wall Street Journal, the delay between presidential administrations in filling the Treasury post for Trump’s administation was the longest in the nation’s history. Moreover, the lack of bipartisan support for a Treasury secretary is unusual.  Previously, the closest vote for the job came in 2009 for President Barack Obama’s first Treasury secretary, Timothy Geithner, who won confirmation on a 60-34 vote with 10 votes from Republicans. His nomination became controversial after disclosures that Mr. Geithner failed to pay some employment taxes in a timely manner.

Given that Mnuchin is being confirmed weeks later than the Treasury Secretaries of previous administrations, he faces numerous immediate challenges including a debt ceiling expiration on March 15th and a meeting of the G20 Finance Ministers on March 17th.  Per Reuters:

Lawmakers, lobbyists and business groups have been waiting for Mnuchin to fill in the many blanks on how he will pursue tax reform and handle delicate economic cooperation efforts with China, Mexico and other trading partners worried about President Donald Trump’s “America First” trade strategy.

Mnuchin faces immediate challenges with the March 15 expiration of a U.S. debt ceiling suspension, ushering in the threat of a new default showdown, and a March 17 meeting of finance ministers from the Group of 20 major economies, where he will face tough questions about Trump’s plans to increase trade protections.

“There is a real open question as to whether this administration is going to cut itself off from international monetary cooperation, whether it’s exchange rate policies or attitudes towards multilateral institutions or international regulatory policy,” said Edwin Truman, a former Treasury and Federal Reserve official now with the Peterson Institute for International Economics

Truman said Mnuchin’s hardest job would be managing a sprawling tax reform effort with Congress that seeks to slash business tax rates and enact a new border tax adjustment system aimed at boosting U.S. exports. He noted that was a longer-term project.

Mnuchin

With his confirmation now complete, Mnuchin will have to get to work building a team which is expected to consist of several former Wall Street bankers, including David Malpass of Bear Stearns, Jim Donovan of Goldman Sachs and Justin Muzinich of Morgan Stanley.

Treasury and White House representatives did not respond to requests for comment on Monday on reports that Trump would soon nominate David Malpass, a former economist at failed Wall Street bank Bear Stearns, as Treasury undersecretary for international affairs, the agency’s top economic diplomacy job.

Malpass, a Trump campaign adviser who had been leading Treasury transition efforts, was seen as a leading candidate for the job, with experience from international economic posts in the Ronald Reagan and George H.W. Bush administrations.

Other names that have been floated for senior posts include Goldman Sachs banker Jim Donovan for deputy Treasury secretary and Justin Muzinich, a former Morgan Stanley banker, for undersecretary of domestic finance.

With Mnuchin now confirmed, all eyes will anxiously turn toward General Michael Flynn to see whether the embattled National Security Advisor will keep his position in light of recent revelations regarding with his apparently unapproved discussions about sanctions with a Russian ambassador

 

END

 

As we reported to you yesterday, many traders are stunned at the failed Fed’s communication process.  They are basically all over the board.  Is the resignation of Tarullo a sign of someone jumping ship before the SHTF.

(courtesy zero hedge)

 

What Will Janet Do? Trader Stunned At Fed’s Failed Communications Strategy

“There is quite significant uncertainty about what’s actually going to happen, I don’t think anyone quite knows,” Fed Vice Chair Stanley Fischer said on Saturday, but with Chair Yellen set to testify today before the Senate Banking Committee, Bloomberg’s Richard Breslow is amazed how a debate can continue to rage about how hawkish she may or may not be. That’s neither a testament to the effectiveness of the Fed’s communication strategy nor how effectively their messaging is being processed.

If you take the weight of everything they’ve said, it would indeed be a shock if she actually does make an attempt to put March back on the table.

And frankly, whatever is said about June and beyond, is only just another forecast, to be priced by the market another day.

I thought it was a mistake that the FOMC’s January minutes left March out of the conversation. But they did. And little has changed since then to make the chances of an about-face obvious.

Core PCE hasn’t seen the 2% level since 2012. And let’s face it, the wage numbers in the latest non-farm payrolls were decidedly underwhelming. They were willing to raise last December, even short of their mandates, but seem likely to only take that so far, so fast.

Minneapolis Fed President Kashkari laid out the case for waiting to see inflation actually at target before pulling the trigger again. I got the sense he probably won’t be one of the one’s declaring “mission accomplished” the first time it happens. But you never know.

More interestingly, and I thought ominously, Vice Chairman Fischer said, “At the moment we are going strictly according to what we see as our responsibility according to law.” The use of the word “law” rather than “mandate” struck me as purposely done to acknowledge this is a board that feels under siege. He was likely giving his boss cover for when she faces what very well could be a hostile congress on the subject of Fed independence.

Made all the more problematic with now three governor vacancies. Markets were sanguine about Governor Tarullo resigning, but are said to have dropped when Michael Flynn stepped down. I think they have it the wrong way around.

On the subject of the balance sheet, nothing is imminent. It’s a big deal and re-investment policy won’t change without a lot of debate, a slew of academic papers and, yes, taking “advice” from the banks. Somethings don’t change.

I’m very sympathetic to the notion that the Fed may eventually do more than is currently priced in. But sooner rather than later doesn’t convincingly imply March.

Still we are sure the algos will pivot on every turn of phrase and keyword she utters… or will we finally break the 85-day streak of no 1%-losses?

 

end

 

Janet  delivers Humphrey Hawkins testimony and it is quite hawkish: “waiting too long to hike rates is unwise!”

(courtesy zero hedge)

Janet Yellen’s ‘Humphrey Hawkins’ Testimony: “Waiting Too Long To Hike Is Unwise” – Live Feed

 Prior to the speech:

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Janet warns of increased asset valuations and leverage remains elevated:

(courtesy zero hedge)

 

Fed Warns: “Asset Valuation Pressures Have Increased”, “Leverage Remains Elevated”

It is a long-running Fed tradition to quietly incorporate material warnings (deep within) about asset prices in the semi-annual Monetary Policy Report submitted as part of the Chair’s congressional testimony, and it did not disappoint this time either, when it made the following warning: “Nonfinancial corporate business leverage has remained elevated by historical standards even though outstanding riskier corporate debt declined slightly last year. In addition, valuation pressures in some asset classes increased, particularly late last year.

And elaborated:

Nonfinancial corporate business leverage has remained elevated by historical standards, and household borrowing has increased modestly, leaving the household debt-to-income ratio about unchanged. On balance, the ratio of aggregate nonfinancial credit to gross domestic product (GDP) has moved up a little in recent years to about its level in the mid-2000s but remains well below its recent peak. Valuation pressures in some asset classes have been rising, particularly late last year.

 

Asset valuation pressures have increased, on balance, since mid-2016, along with several indicators of investors’ risk appetite. Although yields on Treasury securities and term premiums increased as market expectations about future growth shifted higher in the fall, they both remain low. In addition, the spread of yields on corporate bonds over those on comparablematurity Treasury securities narrowed. Estimates of risk premiums in equity markets also declined. Outstanding riskier corporate debt edged down over the past year, but gross issuance of leveraged loans was strong and the share of bond issuance rated B or below remained in the fourth quarter at the high end of its range over the past few years.

 

Commercial real estate (CRE) valuations, which have been an area of growing concern over the past year, rose further, with property prices continuing to climb and capitalization rates decreasing to historically low levels. While CRE debt remains modest relative to the overall size of the economy and the tightening in bank lending standards for CRE loans in the second half of last year may reflect some reduction in the appetite for CRE lending, the heightening of valuation pressures may leave some smaller banks vulnerable to a sizable CRE price decline. Also, residential home prices continued to rise briskly through November.

Of course, considering that we are now nearly two years, and 300 points higher, after Yellen’s May 2015 warning that “I would highlight that equity market valuations at this point generally are quite high,” adding that “there are potential dangers there”, expect the market to fully ignore today’s warning too.

The following is a terrific article as St Cyr outlines why he thinks the Fed Tarullo left 5 yrs ahead of schedule

(courtesy Mark St Cyr)

 

:

Did The Fed Just Experience A “Margin Call” Moment?

Mark St.Cyr
12 Feb 2017

For those not familiar, the reference is attributed to a scene from the movie “Margin Call” (2011, Lionsgate™) where John Tuld (Jeremy Irons) makes the sanguinary argument for dumping its portfolio of toxic holdings immediately against contradictory arguments that it’ll be seen as panicking by others with the line, “It’s not panicking if you’re first.”

That one line in fiction contains volumes as to the reality about how Wall Street, bankers, and more view the world. Which is precisely why when I read the news that Federal Reserve member, and “Regulatory Point Man” Daniel Tarullo resigned unexpectedly I just sat back in my chair thinking, “Of course he did” as that afore-mentioned scene came to mind.

The reason why this sudden departure (remembering his term expires in 2022 some 5 years away) inspired thoughts as the above that will surely be met with retorts such as “tinfoil wearing, conspiracy type” nonsense was not just the timing. But his resignation letter. To wit:

“After more than eight years as a member of the Board of Governors of the Federal Reserve System, I intend to resign my position on or around April 5, 2017. It has been a great privilege to work with former Chairman Bernanke and Chair Yellen during such a challenging period for the nation’s economy and financial system.”

Yep, that’s it. No alluding “health reasons.” No “need more time with family” qualifiers. Nor, anything else. Just a corporate styled, “Thanks, see Ya!” as to vacate 5 years early one of the most prestigious jobs in banking (Board of Governors) with quite possibly one, if not “the” most powerful agencies in the world, bar none. e.g., The Federal Reserve. Right, “Nothing to see here people, just move along, thanks for stopping by.”

If this doesn’t ring alarm-bells, than I guess Barron’s™ is right and “Next Stop Dow 30,000” here we come! Or, was that cover-story what signalled Mr. Tarullo to heed what it may portend (i.e., marking market tops) and thought, “Getting outta Dodge” before this thing falls apart first was the next prudent banking and career move? All one can do is speculate.

That said: It’s a fun thought experiment on one hand. But on the other? All I’ll say is this:

If you’re into market signals? These aren’t what you want to see emanating from the Fed. if you’re one of those still buying every dip horns-over-hooves. Because the next “dip” just may be a cliff. That is, unless you’re a vaunted investment “guru” on CNBC™ and your mail arrives 2 days late crushing your prior invest advice to then flip, then flip again only 6 days later back to what you argued was wrong to begin with. But I digress.

So again: Why would a member of the Fed suddenly resign?

Unless?

And that one word, much like the one line from the movie speaks volumes. The difference this time? It’s not in a fictional setting – it’s reality. And what it portends doesn’t have anything close to the intention of any movie. e.g., entertainment.

No, these signals are troubling at their root cause. i.e., The realization that the entire monetary system may in fact be teetering on the verge of chaos. And the finger-pointing has already begun directed squarely at central bankers, and in particular The Fed.

The abdication, its timing, along with its terse reasoning reinforces the argument that things are not as “great”, or “under-control” as the powers that be (e.g., central bankers) would have one believe. Especially from an institution that is supposedly hell-bent on making sure “signalling” or “policy” interpretations are delivered in a manner as to not be misconstrued.

From the outside looking in, it would appear either someone didn’t get that memo, or didn’t care.

The only thing more concerning is, what if they did – and still didn’t care.

Again, there seems to be far more to this resignation by the very manner in which it was brought forth. And that’s not an “interpretation problem” for others to overcome. No: That’s a problem of interpreting at face value anything now emanating from the Fed. Period.

Why? I’ll propose it’s occurring at precisely the exact wrong time where “believe” and or “trust” that the Fed. knows or understands the implications of its decisions are needed.

And what is the current Fed. “smoke signals?” Utter shambles for anything resembling coherent, concise messaging.

Think I’m exaggerating or being hyperbolic? Fair point. Here’s just a few of the prevailing “arguments” one needs to try to decipher when attempting to understand current monetary policy and what it may, or may not, portend for the future.

One down, (e.g., Mr. Turullo) how many will follow? e.g., Is Fed. Governor Lael Brainard next? After all, Ms, Brainard was not only an ardent supporter of Mrs. Clinton, but she also appears misaligned with current policy messaging. i.e., Not to keen about hiking rates.

Or how about other arguments, along with statements such as this from Vice Chair Stanley Fischer: “There is quite significant uncertainty about what’s actually going to happen, I don’t think anyone quite knows.” when responding to a question about future fiscal policy which may, or may not, be forth coming in the U.S.

To me, the real trouble was what followed when he said: “At the moment we are going strictly according to what we see as our responsibility according to law.”

So, maybe it’s just me. But I’m quite sure that his boss, Chair Yellen, quite confidently alluded to at the last FOMC presser exactly what was needed and forthcoming, regardless of what came out of the current administration. i.e., Three rate hikes (via the Dot Plot) and possibly even more should they (The Fed.) see fit in reaction to anything “fiscal.” Has that changed? Again? And if it hasn’t? Is that still not an even bigger problem for the “markets?”

If the above referenced conference and articles are any clue? The messaging, and signaling are bordering on incoherent. Again!

Think there’s no reason to “panic” if you’re on the inside, let alone trying to gain insights from the outside looking in?

Remember when the scariest notion viewed by Wall Street was the possibility that the Fed. would even consider, let alone float the idea of winding down its balance sheet first, before exhausting all other “tools” or options? How many “think tank” aficionados along with the gaggle of Ivy Leagued Ph.D economists touted such a thing as “crazy talk” when the notion was ever brought up?

This even caused the former Chair to take to the keyboard on Jan. 26th 2017 and ask (or plead) that it wasn’t so.

Can you say “Oh, Oh?”

From St. Louis Fed. President Bullard’s discussion on 2/9/2017 for 2017 Monetary Policy. To wit:

“Now that the policy rate has been increased, the FOMC may be in a better position to allow reinvestment to end or to otherwise reduce the size of the balance sheet,”

So, are we to infer that if we are to get only one or two rate hikes, what we might actually see concurrent with that is the only other thing deemed even scarier in the eyes of Wall Street? e.g., Selling by the Fed. rather than buying?

Again, can you say, “Oh, Oh?” Or is this all “conspiracy”, “tin-foiled” cap wearing crazy talk?

Could be. Or, it could be fiction transforming into reality straight out of a scene in “Margin Call.” After all, as of November 15, 2016 Mr. Tarullo’s position was to carefully watch market reaction to Trump administration. And his conclusion?

Hint: Re-read the first paragraph while remembering: When it comes to “bag holders?” That’s not in their job description, that’s yours.

© 2017 Mark St.Cyr

end

end

Well that about does it for tonight

I will see you tomorrow night

H.

 

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