Gold at (1:30 am est) $1231.90 down $17.00

silver was : $17.70:  down 74 CENTS

Access market prices:

Gold: $1234.80

Silver: $17.80

For comex gold:



For silver:


For silver: MARCH


Total number of notices filed so far this month: 1118 for 5,590,000 


In January reported that the total amount gold inventory at the FRBNY was 7,841 million dollars worth of gold valued at 42.21 dollars per oz.

In February:  the total amount of gold inventory at the FRBNY remains at 7,841 million dollars valued at 42.21 dollar per oz

Thus movement is zero.




Last night, I saw with the comex preliminary numbers that the open interest on gold fell sharply yet the silver open interest rose.  I wrote to friends that a rate was coming and boy did they ever. In 1/2 hr 30,000 contracts or 150 million oz of paper silver was supplied or roughly 21% of global annual production.  And our ever watchful regulators just stand by and laugh at this criminal activity.

Let us have a look at the data for today



In silver, the total open interest ROSE by 2,246 contracts UP to 199,985 with respect to YESTERDAY’S TRADING.    In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e.  0.9999 BILLION TO BE EXACT or 143% of annual global silver production (ex Russia & ex China).


In gold, the total comex gold FELL BY  5,239 contracts WITH THE FALL IN  THE PRICE GOLD ($3.70 with YESTERDAY’S trading ).The total gold OI stands at 440,842 contracts.

we had 15 notice(s) filed upon for 1500 oz of gold.


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



STRANGE!! with today’s whacking:

We had a huge change in tonnes of gold at the GLD: a deposit of 2.37 tonnes

Inventory rests tonight: 843.54 tonnes



we had no changes in silver into the SLV:

THE SLV Inventory rests at: 335.281 million oz



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

1. Today, we had the open interest in silver ROSE by 2,246 contracts UP to 199,875 AS SILVER WAS UP 2 CENTS with YESTERDAY’S trading.  The gold open interest FELL by 5,239 contracts DOWN to 440,842 WITH THE FALL IN THE PRICE OF GOLD OF $3.70  (YESTERDAY’S TRADING)

(report Harvey


2.a) The Shanghai and London gold fix report



2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg




i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 16.91 POINTS OR .52%/ /Hang Sang CLOSED DOWN 48.42 POINTS OR 0.20% . The Nikkei closed UP 171.26 POINTS OR 0.88% /Australia’s all ordinaires  CLOSED UP 1.21%/Chinese yuan (ONSHORE) closed DOWN at 6.8858/Oil FELL to 53.42 dollars per barrel for WTI and 55920 for Brent. Stocks in Europe ALL MIXED ..Offshore yuan trades  6.8787 yuan to the dollar vs 6.8858  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  NARROWS CONSIDERABLY AS POBC ATTEMPTS TO STOP USA DOLLARS FROM LEAVING CHINA’S SHORES. ONSHORE YUAN WEAKER AS IS OFFSHORE YUAN COUPLED WITH THE STRONGER DOLLAR


This is scary: the White House is exploring use of military force against North Korea

( zero hedge)


none today




Fillon’s home raided by investigators, his campaign is on the verge of collapse and yet he still stays on:

( zero hedge)





The very popular Arthur Berman gives us a detailed look at the huge Bakken oil-gas fields. He describes that yields are less, and also concentrated in more gas than oil.

His conclusions: it is the beginning of the end for this shale play

( Art Berman/


Venezuela is on its last legs before it default on loans:

( Calcuttawala/


i)We brought this story to you yesterday but it is worth repeating:  India has pent-up demand for gold as they imported 50 tonnes last month.  And this is only official gold.  The unofficial gold with all of the huge smuggling going on is much higher
( GATA,Reuters)

ii)This makes no sense: Bitcoin reaches parity with gold. Maybe Chinese citizens are having trouble locating physical gold and it is easier to get bitcoins( zerohedge)



( zerohedge

iv)Hugo Salinas Price:

Both Mexico and Russia should introduce a silver Peso and a silver rouble:

(courtesy Hugo Salinas Price)


i)Stockman goes on the air and pounds the table that Trump will create a debt crisis like never before.  The debt ceiling crisis will hit on March 15.  They have about 200 billion of cash and they will burn through that in the next 60 days.  Both sides, the Republicans and the Democrats are far apart on just about every issue and there is no way a budget will be approved.

( David Stockman, zerohedge)

ii)This is unbelievable: the yield curve is collapsing despite the obvious rate hike in March. It is now obvious that the street is thinking that the debt ceiling crisis advocated by Stockman will become a reality

( zero hedge)

iii)Cudmore: states that only a severe market correction will stop the Fed from hiking
( Cudmore, Bloomberg)

iv)Rate hike odds now 90%. What happens to their credibility if they do not raise rates?

( zero hedge)

v)Jeff Sessions is now accused of lying to Congess over a contact he had with the Russian Ambassador.  The democrats are going to going to run with this

( zero hedge)

vi)Well that did not take long:  The crook Pelosi demands the immediate resignation of Sessions:

( zero hedge)

vii)BCBG Max Azria, the huge fashion designer files for bankruptcy:

( zero hedge)

viii)A huge long term care insurer Penn Treaty Network of America has now failed leaving 4.6 billion in long term care claims for its 76,000 aging customers. This is another Ponzi scheme that failed because the premiums they take in will not cover the future claims.  The problem of course is the same as the Dallas Pension scheme: they just cannot earn 7.5 to 8.5% on assets

( zero hedge)

ix)The headquarters for Caterpillar have been raided by IRS and other Federal officials

( zero hedge)

x)Let’s conclude tonight’s commentary with this offering from Michael Snyder

( Michael Snyder/Economic Collapse Blog)


Let us head over to the comex:

The total gold comex open interest FELL BY 5,239 CONTRACTS DOWN to an OI level of 440,842 with THE  FALL IN THE  PRICE OF GOLD ( $3.70 with YESTERDAY’S trading). We are now in the contract month of MARCH and it is one of the poorer delivery months  of the year. In this MARCH delivery month  we had a LOSS of 34 contracts DOWN to 88. We had 23 contact(s) served upon yesterday, so we lost 11 CONTRACTS or 1100  ounces will not stand for delivery.  The next  active contract month is April and here we saw it’s OI FALL by 9611 contracts DOWN TO 271,270. The non active May contract month added 41 contracts and thus its OI is 103 contracts. The next big active month is June and here the OI ROSE by 4043 contracts up to 89,752.

We had 15 notice(s) filed upon today for 1500 oz

 And now for the wild silver comex results.  Total silver OI ROSE by 2,246 contracts FROM  197,629 UP TO 199,875 AS YESTERDAY THE PRICE OF SILVER ROSE TO THE TUNE OF 2 CENTS. We are moving CLOSER TO the all time record high for silver open interest set on Wednesday August 3/2016:  (224,540). The closing price of silver that day: $20.44

We are in the active delivery month is March and here the OI decreased by 898 contracts down to 3373 contracts. We had 480 notices served upon yesterday so we lost 418 contracts or an additional 2,090,000 oz  will not stand for delivery. This is totally unbelievable.  How could so many be late in rolling.

For historical reference: on the first day notice for the March/2016 silver contract:  19,020,000 oz. However the final amount standing at the end of March 2016:  6,755,000 oz as the banker boys were busy convincing holders of many silver contracts to cash settle just like they did today.


The April contract month gained 38 contracts to 991 contracts. The next active contract month is May and here the open interest gained 2860 contracts up to 157,774 contracts.

We had 289 notice(s) filed for 1,445,0000 oz for the MARCH 2017 contract.

VOLUMES: for the gold comex

Today the estimated volume was 272,015  contracts which is very good.

Yesterday’s confirmed volume was 336,763 contracts  which is excellent

volumes on gold are getting higher!

INITIAL standings for MARCH
 March 2/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
nil OZ
Deposits to the Dealer Inventory in oz nil oz


Deposits to the Customer Inventory, in oz 
No of oz served (contracts) today
15 notice(s)
1500 oz
No of oz to be served (notices)
73 contracts
7300 oz
Total monthly oz gold served (contracts) so far this month
39 notices
3900 oz
0.1213 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     oz
Today we HAD 0 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 0  customer deposit(s):
total customer deposits; nil oz
We had 0 customer withdrawal(s)
total customer withdrawal: nil oz
We had 0  adjustment(s)

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

To calculate the initial total number of gold ounces standing for the MARCH. contract month, we take the total number of notices filed so far for the month (39) x 100 oz or 3900 oz, to which we add the difference between the open interest for the front month of MARCH (88 contracts) minus the number of notices served upon today (15) x 100 oz per contract equals 11,200 oz, the number of ounces standing in this  active month of MARCH.
Thus the INITIAL standings for gold for the MARCH contract month:
No of notices served so far (39) x 100 oz  or ounces + {(88)OI for the front month  minus the number of  notices served upon today (15) x 100 oz which equals 11,200 oz standing in this non active delivery month of MARCH  (.3483 tonnes)
On first day notice for MARCH 2016, we had 2.146 tonnes of gold standing. At the conclusion of the month we had 2.311 tonnes standing. 
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/ 18.734 tonnes
March: 0.3483 tonnes
total for the 15 months;  245.077 tonnes
average 16.338 tonnes per month vs last yr  61.82 tonnes total for 15 months or 4.12 tonnes average per month (last yr).
Total dealer inventory 1,419,840.049 or 44.162 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,943,435.998 or 278.170 tonnes 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 278.170 tonnes for a  loss of 25  tonnes over that period.  Since August 8/2016 we have lost 76 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.
And now for silver
 March 2. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
nil 0z
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
 nil oz
No of oz served today (contracts)
(1,445,000 OZ)
No of oz to be served (notices)
3084 contracts
(15,420,000  oz)
Total monthly oz silver served (contracts) 1118 contracts (5,590,000 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  777,610.9 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 0 customer withdrawal(s):
 we had 0 customer deposit(s):
***deposits into JPMorgan have now stopped again.
total customer deposits;  nil  oz
 we had 1  adjustment(s)
i) out of Scotia:  1,248,290.25 oz leaves the customer and enters the dealer account of Scotia
The total number of notices filed today for the MARCH. contract month is represented by 289 contract(s) for 1,445,000 oz. To calculate the number of silver ounces that will stand for delivery in MARCH., we take the total number of notices filed for the month so far at 1118 x 5,000 oz  = 5,590,000 oz to which we add the difference between the open interest for the front month of MAR (3373) and the number of notices served upon today (289) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the March contract month:  1118(notices served so far)x 5000 oz  + OI for front month of Mar.( 3373 ) -number of notices served upon today (289)x 5000 oz  equals  20,995,000 oz  of silver standing for the Mar contract month. This is  now average for an active delivery month in silver.  We lost 418 contracts or an additional 2,090,000 oz will not stand.  
Volumes: for silver comex
Today the estimated volume was 95,135 which is huge!!!
FRIDAY’S  confirmed volume was 82,548 contracts  which is huge.
To give you an idea of volume today’s estimated volume::  95,135 contracts equates to 475 million oz or 68% of ANNUAL GLOBAL PRODUCTION EX CHINA EX RUSSIA. Also the 30,000 contracts provided by the bankers (short) equals 150 million oz or 21.4% of annual global silver production
Total dealer silver:  33.73 million (close to record low inventory  
Total number of dealer and customer silver:   186.703 million oz
The total open interest on silver is now further from   its all time high with the record of 224,540 being set AUGUST 3.2016.


And now the Gold inventory at the GLD

March 2/a deposit of 2.37 tonnes of gold into the GLD/Inventory rests tat 843.54 tonnes

March 1/no change in gold inventory at the GLD/Inventory rests at 841.17 tonnes

FEB 28/no changes in gold inventory at the GLD/Inventory rests at 841.17 tonnes

feb 27/no change in gold inventory at the GLD/Inventory rests at 841.17 tonnes

Feb 24/no changes in gold inventory at the GLD/Inventory rests at 841.17 tonnes

FEB 23/no changes in gold inventory at the GLD/Inventory rests at 841.17 tonnes

FEB 22/no changes in gold inventory at the GLD/Inventory rests at 841.17 tonnes

FEB 21/no changes in gold inventory at the GLD/Inventory rests at 841.17 tonnes

feb 17/a withdrawal of 2.37 tonnes of gold from the GLD/Inventory rests at 841.17 tonnes

FEB 16/we had no changes in the GLD inventory today/Inventory rests at 843.54 tonnes

Feb 15./another deposit of 2.67 tonnes of gold into the GLD inventory despite another attempted whacking of gold/inventory rests at 843.54 tonnes

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.

March 2 /2017/ Inventory rests tonight at 843.54 tonnes


Now the SLV Inventory
March 2/no changes in silver inventory (despite the raid) at the SLV/Inventory rests at 335.281 million oz
March 1/no changes in inventory at the SLV/Inventory rests at 335.281 million oz/
FEB 28/no changes in inventor at the SLV/inventory rests at 335.281 million oz/
FEB 27/no change in inventory at the SLV/Inventory rests at 335.281 million oz/
FEB 24/no changes in inventory at the SLV/Inventory rests at 335.281 million oz.
FEB 23/no changes in inventory at the SLV/Inventory rests at 335.281 million oz
FEB 22/no changes in inventory at SLV/inventory rests at 335.281 million oz
FEB 21/a deposit of 568,000 oz into the SLV/Inventory rests at 335.281 million oz
feb 17/2017/again no changes in silver inventory at the SLV/Inventory rests at 334.713 million oz/
FEB 16/we had no changes in silver inventory at the SLV/Inventory rests at 334.713 million oz/
Feb 15./no changes in silver inventory at the SLV/inventory rests at 334.713 million oz
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
March 2.2017: Inventory 335.281  million oz

NPV for Sprott and Central Fund of Canada

1. Central Fund of Canada: traded at Negative 9.7 percent to NAV usa funds and Negative 9.9% to NAV for Cdn funds!!!! 
Percentage of fund in gold 59.8%
Percentage of fund in silver:40.0%
cash .+0.2%( Mar 2/2017) 
2. Sprott silver fund (PSLV): Premium RISES  to -.67%!!!! NAV (Mar 2/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to  – 0.18% to NAV  ( Mar 2/2017)
Note: Sprott silver trust back  into NEGATIVE territory at -0.67% /Sprott physical gold trust is back into NEGATIVE territory at -0.18%/Central fund of Canada’s is still in jail.


Major gold/silver trading/commentaries for THURSDAY


Trump Avoid Debt Crisis ? “Extremely Unlikely” – Rickards

By Mark O’Byrne March 2, 2017

Trump Avoid Debt Crisis ? “Extremely Unlikely” says Rickards

The upcoming March 15 U.S. debt ceiling deadline is something that is being largely ignored by markets and most media for now. Despite it being just 9 trading days away. This will change in the coming days and is one of the many reasons why we are bullish on gold.

Source: CNN

James Rickards writing for the Daily Reckoning today looks at the important ‘next signal to watch’ and explains that Trump and his advisors believe they can avoid a debt crisis through higher than average growth.

Total Deficits and Surplus

The Congressional Budget Office, CBO, estimates that inflation and real GDP will each grow at about 2% per year in the coming ten years. This means that nominal GDP, which is the sum of real GDP plus inflation, will grow at about 4% per year. Since debt is incurred and paid in nominal terms, nominal GDP growth is the critical measure of the sustainability of U.S. debt.

Rickards warns that while this is “mathematically possible”, it is “extremely unlikely”:

“A debt-to-GDP ratio is the product of two parts — a numerator consisting of nominal debt and a denominator consisting of nominal GDP. In this issue, we have focused on the numerator in the form of massively expanding government debt. Yet, mathematically it is true that if the denominator grows faster than the numerator, the debt ratio will decline.

The Trump team hopes for nominal deficits of about 3% of gross domestic product (GDP) and nominal GDP growth of about 6% consisting of 4% real growth and 2% inflation. If that happens, the debt-to-GDP ratio will decline and a crisis might be averted.

This outcome is extremely unlikely. As shown in the chart below, deficits are already over 3% of GDP and are projected by CBO to go higher. We are past the demographic sweet spot that Obama used to his budget advantage in 2012– 2016 (As I noted HERE – Obama Has Tied Trump’s Hands).”

Rickards explains in detail the challenges facing the U.S. in terms of the fiscal budget, growth of real GDP, debt to GDP ratios, inflation and how deficits are set to soar.

He points out how Trump will soon appoint five people “to the Fed board of governors in the next 16 months, including a new chair and two vice chairs” and how gold investors should consider these appointments in terms of readjusting their allocations to physical gold:

“If he appoints doves, that will be the signal that inflation in the form of helicopter money and financial repression is on the way. That will also be the signal to move out of cash and increase our allocation to gold beyond the current 10% level.

If Trump appoints hawks to the board, that will be a signal that his team does not understand the problem and is relying on overoptimistic growth assumptions. In that case, we could expect a recession, possible debt crisis and strong deflation. That is a signal to keep our 10% gold allocation as a safe haven, but also buy Treasury notes in expectation of lower nominal rates.

We are watching for a signal on Trump’s nominations to the Fed board. The first three should be announced soon. Once the names and their views are known, the die will be cast.”

We like the theory and the nuance of what Rickards is suggesting here. At the same time, given the scale of the myriad of risks facing investors and savers today, we believe higher allocations to precious metals are merited. These risks come in the form of very ‘toppy’ looking stock and bond markets and digital deposits being vulnerable to currency debasement, cyber warfare and bail- ins.

We believe that 20% to 30% allocations to physical precious metals – gold as the core position, then silver and smaller allocations to platinum and palladium – are merited.

Cyber war and technology risks underline the importance of not owning all one’s assets digitally – especially the safe haven assets of gold and silver. Avoid precious metal platforms where your liquidity is dependent on just one company and their single website interface, their servers, IT people and IT systems.

Being able to sell coins and bars to numerous dealers ensures competitive pricing and all important liquidity – being able to get cash for your bullion whenever you need to. The ability to visit the vaults and take delivery of your bullion at any time is vital in this regard.

Rickards entire ‘Next signal to watch’ article is well worth a read and can be accessed here crisis-extremely-unlikely-rickards/


We brought this story to you yesterday but it is worth repeating:  India has pent-up demand for gold as they imported 50 tonnes last month.  And this is only official gold.  The unofficial gold with all of the huge smuggling going on is much higher
(courtesy GATA,Reuters)

India’s February gold imports surge on pent-up demand, GFMS says


By Rajendra Jadhav
Wednesday, March 1, 2017

MUMBAI, India — India’s February gold imports surged to 50 tonnes, up more than 82 percent from a year ago, on pent-up jeweller demand and as retail consumers ramped up purchases for weddings, provisional data from consultancy GFMS showed on Wednesday.

The rise in imports by the world’s second-biggest consumer of the precious metal will support global prices that are trading near their highest level in 3 1/2 months, but could widen the South Asian country’s trade deficit.

“Pent-up demand on the ease of the cash crunch and wedding related demand lifted imports in February,” said Sudheesh Nambiath, a senior analyst at GFMS, a division of Thomson Reuters. …

… For the remainder of the report:


This makes no sense: Bitcoin reaches parity with gold. Maybe Chinese citizens are having trouble locating physical gold and it is easier to get bitcoins

(courtesy zerohedge)

Bitcoin Reaches Parity With Gold

For the first time ever (based on Bloomberg data), Bitcoin is trading at parity with an ounce of gold.

We got close in January…


But now it’s official…


China outflows are accelerating (via the local exchanges), chatter of Mexico being active (as well as Greece, Italy, and France), and the renewed enthusiasm for blockchain (thanks to the ethereum news this week) is all helping drive interest in the cirtual currency.


Which raises the question – is Bitcoin as good as gold?

Authored by Stefan Wieler of,


The price of Bitcoin seems to have exceeded the price of gold briefly for the first time this week; however, this comparison is completely arbitrary.

Gold is measured in weight, while Bitcoin, much like currency, is an abstract form of money and can only be measured in units of itself. One Bitcoin is worth a lot more than 1 gram of gold, but a lot less than 1 tonne. Despite Bitcoin’s stellar performance in 2016, the size and depth of the cryptocurrency market is dwarfed by the $7 trillion gold market.

Gold remains the only true global money with a size and volatility comparable to that of fiat currency.

Bitcoin – or cryptocurrency itself – is the most exciting monetary experiment in modern times.

Unlike fiat currency, it can’t just be printed, and it mimics the scarcity properties of gold in that it needs an enormous amount of energy to create one coin. The energy-proof of value is what links gold to the primary industries and allows it to maintain its purchasing power over incredibly long periods of time. Without it, any form of money will inevitably be corrupted over time and decay. Bitcoin has some of the same energy-proof of value that makes gold far superior to fiat currency, which can be created with the stroke of a key. Bitcoin, also like gold, is a global currency that may be universally accepted in the future. Even USD can’t make that claim.

Bitcoin has some qualities that are not shared by any other form of money, most notably the potential total anonymity in electronic transactions; however, some might feel that aspect that may prevent the universal adoption of Bitcoin as money. Today, the global stock of Bitcoin is just $20 billion (despite its price rally) and its transaction volume is tiny, even when compared to more exotic currencies. That said, as the adoption of Bitcoin increases, governments may no longer be happy with the fact that it can be used for anonymous transactions and may prevent legitimate businesses from accepting it as money if they see this as a threat. Only time will tell. In the meantime, Bitcoin remains the only alternative to gold (and other precious metals) for savers to escape the built-in decay function of fiat currency otherwise known as inflation.

Bitcoin is currently in the limelight because it has apparently exceeded the price of gold for the first time on some exchanges (although at the time of writing, Bloomberg still shows an average price of Bitcoin hasn’t crossed the gold price yet, but it seems just a question of time). We have no doubt that this will lead to a barrage of headlines in online media, and some mainstream outlets will jump on the bandwagon as well. After all, they already widely reported on a claim made by the Winklevoss brothers in mid-2016 that Bitcoin’s volatility had apparently fallen below the volatility of gold, and thus Bitcoin had become “better at being gold than gold”. We rebutted this claim and surely Bitcoin’s volatility shot back up to 100% shortly thereafter.

Bitcoin has rallied almost USD500 last year and USD100 in the first two days of 2017 alone. At the time of writing, 1 Bitcoin was trading at USD1,135, while 1 oz of gold was trading at USD1,164. To some, it may seem like Bitcoin is about to be more valuable than gold, and though this is of course conceptually incorrect, it probably won’t stop the media pundits from publishing the headline anyway.

Gold and elements can be measured by weight (oz, g, kg, t). Mass and weight are the measuring units endowed by nature. Fiat currencies, or any other abstract commodity or money (including Bitcoin), cannot be measured that way. An abstraction can only be measured in units of itself. Gold and silver are therefore the only form of money today that are traded in weight. Fiat currency on the other hand cannot be measured by anything other than other currency, at least since Nixon ended the convertibility to gold in 1971. In that respect, Bitcoin falls into the same category.

Thus, when comparing units of gold to units of Bitcoin, one must first define what unit it is measured against. Is it grams (currently USD37/g), kilograms (USD37,000/kg) or tonnes (USD 37 million/tonne)? Or are we measuring it in the rather obscure measure of troy ounce (USD1,157/ozt), which, apart from exchange traded metals, is not used for anything else?

Hence comparing the price of 1 Bitcoin vs 1 troy ounce of gold is a little bit like comparing the shares of Seaboard Corp. (USD4,179 per share) to those of Apple Inc. (USD116 per share) and concluding that Seaboard Corp. is worth 35 times as much. Clearly, measured accurately by market cap, Apple is the largest and most valuable company in the world and worth 126 times as much as Seaboard Corp.

The same basic principle applies to money. Combined above-ground gold stocks are currently worth around $7 trillion. As we noted last year, that is more than all banknotes in circulation of all currencies combined (see Eliminating cash will also eliminate the checks and balances on banking policy and practice, February 22, 2016), and it certainly dwarfs the market cap of Bitcoin at around $18 billion. In fact, all crypto-currencies combined (we count 710) have a market cap of just $21 billion (see Figure 2).

bitcoin market size full

There is another obvious obstacle when comparing Bitcoin with gold: Volatility. High volatility is often pointed out against gold being used as medium of exchange and store of value. We will look the volatility of gold in more detail in an upcoming report, but in a nutshell, we find the volatility of gold (measured as standard deviation) is roughly comparable with currency, and gold has proven to be a much better store of value than any currency over the long run – even when interest is taken into account. Bitcoin’s volatility significantly exceeds that of both gold and currency. At times, Bitcoin’s volatility declines for a short period and can even approach the volatilities of gold and currency, but tends to shoot up violently shortly thereafter.

Bitcoin major currencies

However, standard deviation should not be confused with a measure of risk. The standard deviation quantifies the dispersion of returns; what it does not do is distinguish whether that dispersion comes from upward or downward moves.

For example, an asset that has a 1% return every second day and 0% return every other day would exhibit an annualized standard deviation of 8%. An asset that has a -1% performance every second day and 0% every other day exhibits the same standard deviation. In an asset management context, the two assets may have the same risk. In fact, the negatively performing asset might reduce risk in a portfolio if it is negatively correlated to the other assets. But for a saver, the first asset is clearly less risky.

Hence, instead of measuring volatility as standard deviation, we can measure just the downside deviation. This provides a better idea of the risks of money. How does this look for Bitcoin? Bitcoin’s downside deviation is still several orders of magnitude higher than that of gold or currency. Over the past two years, Bitcoin experienced a downside deviation of >45%. Since the beginning of data in 2010, it was >100%.

bitcoin deviation

The volatility – or to be precise, the downside risk – makes it difficult for Bitcoin to be more widely adopted as money. What speaks for Bitcoin is that it has shown stellar performance over its short lifespan, but this stellar performance comes with considerable downside risk. A merchant accepting Bitcoin as payment is exposed to this downside risk unless he instantly exchanges Bitcoins back to currency following the transaction. Even though a cycle takes about 6 minutes in theory, exchanging Bitcoin to currency actually takes about one hour to confirm the transaction and another hour to confirm the price, during which at the very least the merchant is exposed to the downside volatility. Holding Bitcoins permanently might hold huge upside, but that also comes with intolerable downside risk for a merchant. After all, merchants should spend their time and energy with what they are best at (selling goods) rather than trading currencies and Bitcoin.

Another claim we don’t agree with is that Bitcoin is as free of counter-party risk as gold. What we have seen with Ethereum, another nascent cryptocurrency, is that these virtual currencies ultimately have a master key. With Ethereum, that key is controlled by a council that decides its future inflation rate; with Bitcoin, that key is controlled by Gavin Andresen, an engineer based in Massachusetts. There’s no guarantee that they won’t change the source code for the Bitcoin blockchain in the future, and when you “own” a Bitcoin you simply refer to the blockchain – a distributed ledger that tells you what and how much you own. In this regard, we don’t agree that Bitcoin does not have custodial or counter-party risk; the blockchain itself is the fat tail.

This means that for now, gold remains the only global currency in which individuals and corporations can transact with no time delay, with price volatility comparable to that of major currencies yet without counter-party risk, and one that has been proven as a store of value for thousands of years.




(courtesy zerohedge)

Silver Is Collapsing On Massive Volume

At exactly 1130ET (as Europe closed), someone decided to unload over $2 billion notional of silver into the futures pits…

Over 23,000 Silver futures contracts suddenly puked into the market as soon as Europe closed…


Silver had managed to get back most of the losses post-election but once the selling broke 18.155 (200DMA) it accelerated…this is the biggest drop since The Fed hiked rates in December.


Gold is also getting hit but far less aggressively…


Yes, the dollar index is higher but not moving aggressively.

Both Mexico and Russia should introduce a silver Peso and a silver rouble:

(courtesy Hugo Salinas Price)

Hugo Salinas Price: “Putin should introduce silver ruble, restore monarchy”

Gold and silver have been money for thousands of years, and yet our Academics are so blind that they really think they can do away with what they call money – papers that are essentially no better than the Trillion Dollar Zimbabwe notes of Mugabe in Africa – and have us all carry on with digital “money” through credit cards. When they have achieved this, they will find that people will resort, once again, to gold and silver to carry on their lives and their business. But, the Academics cannot see this.

I am not too well-informed on this, but if I am not mistaken, Vladimir Lenin introduced a silver ruble coin to Russia, as well as a gold coin, the Chervonetz. So even a Communist like Lenin understood that there must be real money in the hands of Russians.

2. Now to Russia. What is your view of this country? Do you think Russia and not, for example, much more overtly gold-friendly China could be the place where the monetary role of gold and silver is restored?

My view of Russia is quite simple: I think Russia is the last hope for survival of what is known as “The West”. Quite miraculously in my opinion, Russia has returned to life as a Christian nation. The West was born of Christianity and will cease to exist without it, a process which we can see in operation in the news of every day. Russia is fundamentally a part of the West, and at present is mainly separated from Europe by the interests of the US and of the UK, who have a deathly fear of such a collaboration. A Europe that would join Russia in peaceful collaboration, would be joining a Russia-China collaboration that is presently growing to develop the vast potential of the Eurasian landmass. I think that Europe will eventually join Russia in peaceful collaboration, to form an economic area from Finisterre to Vladivostok.

Quite contrary to the hopes of US geo-strategists such as Brzezinski, the “Sanctions” imposed upon Russia (to the detriment of Europe) have only resulted in the further strengthening of Russia, as under “Sanctions” Russia has turned inward to advance its national productivity and become stronger, not weaker. And the attempt to weaken Russia, by having Russia enter Ukraine in a war to retain control of that country, failed to entice Russia into that conflict.

According to my limited knowledge, Russia has managed its economy quite carefully, and now has enough gold to abandon the dollar completely with a return to gold money. For this, see the article on the subject by my friend John Butler: his e-mail address is

The amount of debt outstanding in Russia is also quite low, which also is a sign of good government.

These facts lead me to believe that Russia could return to gold in some form, at the appropriate moment. China has an enormous stock of gold, a fact which it prudently hides, and has also been encouraging its population to acquire gold as a means of savings – unlike the countries of the West, which are deadly enemies of gold, which is true money. However, the amount of debt in China is simply colossal and it is this fact – in my opinion, of course – which makes it more likely that Russia will opt for gold money before China does so.

China was on a silver standard – silver was used as money – until about 1935, when the US decided to raise the price of silver. This had a disastrous effect upon the Chinese economy, for its silver money rose in value, and in a perfect world, silver prices of food and wages would then have to fall correspondingly, with no harm done. But ours is not a perfect world, and it is politically impossible to have the price of wages in silver fall; thus, marginally employed people were laid off, as it was impossible to continue paying them the same amount of silver as wages, when the value of silver had risen. Thus, silver was demonetized and China went on to a paper standard. I think it is likely that the ordeal that China suffered with the rise in the price of silver – a great deflation accompanied with massive unemployment – furnished the political unrest that Mao Tse Tung harnessed to take over China.

I have read that General Chiang Kai-shek had a large amount of silver in his possession as he fought Mao, but he made the mistake of keeping the silver to himself, and paying his soldiers with paper money. The soldiers would not risk their lives fighting the Communists, when paid with paper. And so, Mao won.

Under President Trump, the US is making some very big mistakes, which will turn out to be favorable to a return to gold as money around the world.

a) The US is turning inward, ostensibly to re- industrialize itself. Mr. Trump’s motto: “America First” says it all. As it turns inward, the US is intent on raising barriers to international commerce. This move cannot be reconciled with the idea of the US as a world leader. The world leader cannot be a country that cuts itself off from international commerce: on the contrary, it becomes irrelevant.

b) If Mr. Trump continues his attempt to reduce the Trade Deficit, what he will achieve will be an increasing scarcity of dollars around the world, for the US Trade Deficit is the spring from which flow out dollars to the rest of the world. The world is already in a credit contraction, as evidenced by the declines in International Reserves in central banks of the world – down 10%+ from the peak reached in August, 2014. Add to this the scarcity of dollars which Mr. Trump wants to produce, by cutting down on the US Trade Deficit, and you have a catastrophic scarcity of dollars for the world.

The world, in my opinion, will not tolerate this scarcity and will turn to an alternative. The SDR – Special Drawing Rights issued by the International Monetary Fund, called “Paper Gold” – will be one more paper money attempt to replace a worn-out paper money, the dollar. I do not think that this attempt will be successful, and another more down-to-earth alternative will be sought.

There is only one alternative of such a nature: gold. So the next few years will be extremely interesting, as the monetary system established in 1944 falls apart. From a pessimistic point of view, it would seem that such a development would normally be accompanied with war. However, the next world war would be the last one in history. We hear that Russia is very well protected with the S-400 and the S- 500 anti-missile batteries in place, sealing off its borders from incoming missiles. I hope this is true.

3. Please tell us about your silver ruble proposition.

Thinking of Russia as the single, great remaining nation of what was once “The West”, I thought that the Russian people would also welcome, with great joy, the possibility of putting their savings into silver money. I still think this is possible, and I put my thinking into a series of articles dealing with the monetization of the silver ruble coin. I had planned to present these articles at a meeting of the St. Petersburg International Economic Forum – SPIEF – in June, 2016. However, on account of illness it was not possible for me to be present. I do not wish to continue to harp upon the proposal; I presented my thoughts, and they are surely in the hands of responsible persons, and I must defer to their judgment on a matter which affects Russia internally, however much I believe in the value of my proposal. Perhaps – after I am gone – my proposal may be put into effect in Russia.

As a postscript, now that Mexico is in grave problems, due to the tempestuous decisions of Mr. Trump, our Congress has revived – motu propio – of its own accord, the proposal of a monetized silver coin for Mexico.

The national indignation at the treatment the Trump is giving Mexico, has produced a wave of national feeling that may, perhaps, give life to the proposal of a parallel currency based on the silver coin as money. I think it would be a master-stroke of “asymmetrical” politics, and would elevate to the skies the prestige of Mexico around the world. Many millions of Americans who have been saving large amounts of silver coins would be thrilled to hear that Mexico had monetized a silver coin.

We shall see what transpires in the coming weeks and months. salinas-price-putin-should-introduce-silver-ruble-restore- monarchy/


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


1 Chinese yuan vs USA dollar/yuan WEAKER AT  6.8858(SMALLER DEVALUATION SOUHBOUND   /OFFSHORE YUAN NARROWS TOWARDS ONSHORE   TO 6.8787/ Shanghai bourse DOWN 16.91 POINTS OR .52%   / HANG SANG CLOSED DOWN 48.42 POINTS OR 0.20% 

2. Nikkei closed UP 171.26 POINTS OR 0.88%   /USA: YEN FALLS TO 114.34

3. Europe stocks opened ALL MIXED     ( /USA dollar index RISES TO  102.08/Euro DOWN to 1.0513


3c Nikkei now JUST BELOW 17,000

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

3e WTI::  53.42  and Brent: 55.92

3f Gold DOWN/Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO  +.310%/Italian 10 yr bond yield UP  to 2.152%    

3j Greek 10 year bond yield RISES to  : 7.03%   

3k Gold at $1240.60/silver $18.34(8:15 am est)   SILVER CLOSE TO RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 24/100 in  roubles/dollar) 58.56-

3m oil into the 54 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 A SMALLER   DEVALUATION SOUTHBOUND   from POBC.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  1.0122 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0641 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.


3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.310%


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 2.481% early this morning. Thirty year rate  at 3.078% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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


S&P Futures Drop As Global Market Rally Pauses; Dollar Rises On Rate Hike Concerns

The relentless risk rally which took the Dow above 21,000 and the S&P over 2,400, has taken a breather overnight, with S&P futures modestly lower tracking European stocks, while Asian stocks advanced on US momentum; late Wednesday comments by a unexpectedly hawkish Lael Braniard has pushed the dollar higher, pressuring oil lower.

Fed Governor Lael Brainard said late Wednesday it will probably be “appropriate soon to remove additional accommodation,” boosting expectations for higher borrowing costs. Traders are pricing in an 86% chance of a rate increase at the March 15 decision, more than double the odds last Friday, Fed fund futures showed.

As rates creep higher, threatening to disrupt the basis of the Fed’s argument for why stocks are not in a bubble, the goalseeked narrative continues to thread a fine line, and while higher interest rates would raise U.S. companies’ costs, they are also being “explained” as a sign of confidence in the economy and, along with U.S. President Donald Trump’s speech to Congress, were cited as factors behind Wall Street’s rise.

In Europe, today we got February CPI data which as expected rose to 2.0% for the first time since 2013 – matching the ECB’s inflation target – while core inflation rose 0.9% Y/Y, on one hand pressuring the ECB to move, on the other giving it a loophole to tell the Bundesbank that core inflation is still low.

However, while CPI was in line, PPI rose more than expected, with headline PPI risin 3.5% Y/Y, well above the 3.2% expected. Meanwhile, major slack remains in the European labor force, which printed at 9.6% unemployment for January.

The European STOXX 600 index fell 0.1% after adding 1.5% on Wednesday and hitting its highest since December 2015, as losses on consumer-related stocks outweigh gains in miners and construction companies, which are among shares deemed most sensitive to economic growth. The biggest contributor to gains on the Stoxx 600 was Roche Holding AG, up 5.8 percent after its breast-cancer medicine Perjeta succeeded in the company’s most anticipated patient study, a key step for a franchise that could exceed $9 billion in sales by 2021. Among shares active on corporate results, Travis Perkins Plc slid 6.6 percent after the building-materials distributor said the post-Brexit slump in sterling is pressuring its supply chain. Melrose Industries Plc jumped 13 percent after posting a jump in 2016 underlying profit.

For now the biggest support for European stocks appears to be a technical one: it is shown with the purple and green lines in the chart below.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 percent, while Japan’s Nikkei .N225 closed up 0.9 percent after hitting a 14-month high as a weaker yen helped exporters.

In currencies, the dollar index hit a seven-week high. The euro fell 0.1 percent to $1.0535, the yen fell 0.5 percent to 114.26 per dollar and sterling was flat at $1.2290, having earlier touched a six-week low around $1.2260.

In rates, the prospect of higher rates and a potential $1 trillion boost to U.S. infrastructure sought by Trump pushed U.S. Treasury bond yields higher on Wednesday, but they pulled back from those highs on Thursday. Rate-sensitive two-year yields edged up to 1.292%, off Wednesday’s peak of 1.308 percent, its highest since 2009. German 10-year yields pulled back from the day’s highs after data showing euro zone inflation hit the European Central Bank’s 2 percent target last month, as expected. ING’s global head of debt and rates strategy Padhraic Garvey said prior to the data that such a reading could extend the bearish momentum in bonds.

Commodities were focused on the third consecutive drop in oil prices after data showed another record build-up in U.S. crude inventories. Brent crude fell 11 cents to $56.25 a barrel. The stronger dollar weighed on metals prices, which wee buoyed however, by signs of growing demand. Chinese factory activity expanded faster than expected in February, purchasing manager data showed on Wednesday. Copper fell 0.3 percent to $5,995 a tonne. Gold fell 0.3 percent to $1,245 an ounce.

* * *

Bulletin Headline Summary from RanSquawk

  • European equities take a breather from some of the rampant gains seen in recent days to trade relatively flat across the board
  • The USD may be on the front foot, but further gains from levels achieved yesterday are modest at best
  • Looking ahead, highlights include U.S Initial Jobless Claims, Canadian GDP, Fed’s Powell and ECB’S Lautenschlager

Market Snapshot

  • S&P 500 futures down 0.1% to 2391
  • STOXX Europe 600 down 0.2% to 375.00
  • MXAP up 0.2% to 145.06
  • MXAPJ up 0.1% to 466.34
  • Nikkei up 0.9% to 19,564.80
  • Topix up 0.8% to 1,564.69
  • Hang Seng Index down 0.2% to 23,728.07
  • Shanghai Composite down 0.5% to 3,230.03
  • Sensex down 0.6% to 28,816.51
  • Australia S&P/ASX 200 up 1.3% to 5,776.59
  • Kospi up 0.5% to 2,102.65
  • Brent Futures down 0.9% to $55.83
  • Gold spot down 0.4% to $1,244
  • U.S. Dollar Index up 0.2% to 101.98
  • German 10Y yield rose 1.3 bps to 0.295%
  • Euro down 0.2% to 1.0526 per US$
  • Brent Futures down 0.6% to $56.00/bbl
  • Italian 10Y yield rose 3.8 bps to 2.124%
  • Spanish 10Y yield rose 2.5 bps to 1.716%

Top Overnight News via BBG

  • Sessions Met Twice With Russian Envoy During Trump Campaign
  • Snap IPO Values Photo-Chat App Maker at Twice Facebook’s Worth
  • Henkel to Buy GCP’s Darex in First Major Adhesive Deal in a Decade
  • Mexico Said to Consider Fed Swap Line; Carstens Denies It
  • West Corp. Said to Attract Bids From Advent, Apollo and KKR
  • Cisco Victory in Second Case Against Arista to Be Reviewed
  • Icahn to Sell Trump Taj Mahal to Group Led by Hard Rock
  • Mystery Traders Said to Make Millions Illegally on Fortress Deal
  • Yahoo Chief Counsel Exits After Hack Probe Finds Inaction
  • Tesla Overcomes China Stumbles as Sales Triple, Pass $1 Billion
  • Intercept’s Ocaliva Recommended by U.K.’s NICE
  • Seacor Postpones 4Q on Possible Weaknesses in Internal Controls

Asia stocks traded mostly higher as regional markets carried over the momentum from the record day on Wall St. where the DJIA and the S&P 500 broke above 21,000 and 2,400 respectively, as financials led on increased prospects of a March Fed rate hike. This bolstered ASX 200 (+1.3%) and Nikkei 225 (+0.9%) with the former led by strength in mining and material sectors. Elsewhere, Hang Seng (-0.2%) and the Shanghai Comp. (-0.5%) lagged after the PBoC kept its daily liquidity operations at a paltry CNY 30bIn and as the banking regulator signalled to restrict shadow banking growth. 10yr JGBs were flat as early pressure alongside strength in riskier assets was reversed following a 10yr JGB auction where the b/c and average prices increased from prior, while the tail-in-price also narrowed.

Top Asian News

  • China’s Didi Said to Weigh Raising Billions in Fresh Capital
  • Malaysia Holds Rates as Faster Inflation Limits Scope to Ease
  • China’s New Watchdog to Tackle Shadow Banking, Property Bubbles
  • Investors With $6.6 Trillion Reveal Bets on Chinese Politics
  • Nalco to Pay Higher-Than-Expected Interim Dividend; Shares Rise
  • Yuan’s Calm Faces Test With Dollar Rally as Fed Rate Bets Surge
  • Brokerage Misreported 6b Yen of Tokai Carbon OTC Trades: JSDA
  • Inflation Spike Puts Southeast Asian Central Banks on Watch
  • Poor Man’s Gold Spurned as Indian Farmers Strapped for Cash
  • ONGC Said to See Spending Plans Curtailed by Potential Merger
  • Delhi Municipal Body to Conduct Auction of Taj Mansingh Property

European bourses have taken a breather from some of the rampant gains seen in recent days to trade relatively flat across the board. As such, stock specific news took major focus with SMI large cap Roche leading the way higher after positive developments regarding their breast cancer treatment. Elsewhere, earnings from Capita, Adecco, Luxottica and AB Inbev have seen their respective shares trade lower, with LafargeHolcim’s earnings report seeing the Co.’s shares trade in the green. Fixed income markets have seen gilts outperform this morning amid touted short covering, while elsewhere Bunds trade in negative territory and below the 165 level, with supply from France, UK and Spain digested by the market. Contacts also highlighted a midmorning wave of BTP selling in screens in the belly of the curve of around EUR 400mln according to some contacts.

Top European News

  • Roche’s Aphinity Succeeds, Boosting Breast-Cancer Business
  • Sberbank Shakes Off Recession to Earn Record Profit in 2016
  • Credit Suisse CFO Sees Bank’s Growth Slowing Capital Build
  • U.K. Construction May Weaken as ‘Intense’ Brexit Inflation Bites
  • Switzerland’s Economy Grows Less Than Expected on Weak Exports
  • Sessions Spoke With Russian Envoy During Trump’s 2016 Campaign
  • Engie Sees 2017 Earnings Growth on Cost Cuts Following 2016 Dip
  • Is Investment Recommends Taking Profit in Turkish Stocks
  • Turkish Lira Slides on Concern Over Central Bank Bond Buying
  • GAM Beats Profit Estimates Even as Performance Fees Drop 96%
  • JCDecaux Gains; Guidance Less Severe Than Expected, Kepler Says

In currencies, the USD is again on the front foot, but further gains from levels achieved yesterday are modest at best, with some key levels coming into focus and containing some of the euphoria over the likelihood over a March Fed rate hike. USD/JPY has fared the best, posting a comfortable move through 114.00, but exporter offers are said to wait above 114.50 as Japanese year end looms (at month end) with billions said to be left to hedge. The second reading of EU inflation produced no surprises, and with French and Dutch election headlines thin on the ground, we continue to see the EUR spot rate meandering in the low 1.0500’s. Many anticipated some congestion at these levels, and there are few signs as yet that this will change materially over the session. Gains seen against the AUD to suggest s delayed reaction to the much larger than expected drop in the Australian trade surplus, but this has come in tandem with losses in NZD and CAD, though the latter is now coming against some strong resistance at 1.3400. AUD/USD is still trading on a 0.7600 handle though, having dropped a modest 1.2 cents since the turnaround in USD sentiment.

In commodities, precious metals lower still in line with the higher USD and lower Treasuries, but today’s price action shows modest losses as yet as the progress in the greenback slows. The March rate hike odds have clearly driven trade, but some notable resistance starting to materialise. Gold looks to be content around the USD1245.00 level for now. Silver pivots on USD18.30-40. Oil prices have backed off again as supply issues dictate. The overall range — in WTI and Brent — are largely influential however, and the former ahead of USD55.00 looks well contained irrespective of inventory levels and/or news on OPEC/non OPEC compliance. All base metals showing modest losses on the day so far, but we have seen strong gains over the last 24-48 hours, where Copper and Iron Ore have been bolstered by production curbs (China) and broader supply issues (strikes in Chile).

The day ahead looks set to be a fair bit lighter for data. In the US the sole data release is the latest weekly initial jobless claims print. The Fedspeak looks set to go quiet with no officials scheduled to speak while at the ECB Lautenschlaeger is due to speak this evening.

US Event Calendar

  • 8:30am: Initial Jobless Claims, est. 245,000, prior 244,000; Continuing Claims, est. 2.06m, prior 2.06m
  • 9:45am: Bloomberg Consumer Comfort, prior 48
  • 7pm: Fed’s Mester Speaks on Leadership in New York

* * *

DB’s Jim Reid concludes the overnight wrap

The biggest questions from investors last night centred around whether Trump trades would ever fully materialise or were more based on a mirage and also on everything happening with European Government bonds at the moment. There was a big post mortem into the extreme events in German government bonds from last week. Clients didn’t really buy the redenomination risk story but our own Francis Yared didn’t think anything has majorly changed on the collateral shortage front to justify the recent large move. So still difficult to put a finger on the full reason for some of the recent fixed income moves except to say that in what is a traditionally risk free market, some investors have absolutely no tolerance for risk and therefore buying Bunds last week when French risk was at a local peak made sense to them. And given these were particularly risk averse investors then perhaps the rest of the market could ignore it as a market signal to run for cover in other assets.

Those questions about Mr Trump are still unanswered in the wake of his speech yesterday given the lack of any additional detail but the market has been in party mood over the last 24 hours. The spotlight for markets was well and truly hogged by the comments from the Fed’s Dudley and Williams the night before which helped the S&P 500 close up +1.37% – its best day since November 7th. That is also the first 1% move (up or down) since December 7th or a run of 57 consecutive days which was the longest run in nearly 3 years. The Dow (+1.46%) also closed above 21,000. Back on the 26th of January we highlighted how the Dow had just crossed the 20,000 level and that it had only taken 64 calendar days to go from 19,000 to 20,000 which was the second quickest ever. Well the next 1000 point move to 21,000 took just 35 days which in fact matches the quickest ever. Obviously the percentages get smaller as the index goes higher but it is notable nonetheless. Meanwhile the risk on mood was shared in Europe too yesterday with the Stoxx 600 (+1.47%) also surging higher. Credit markets weren’t left out. CDX IG closed 2.4bps tighter and the iTraxx Main and Crossover indices were 2bps and 9bps tighter respectively. This morning we’ve seen Asian bourses follow suit with the Nikkei (+1.14%), Hang Seng (+0.41%), Kospi (+0.48%) and ASX (+1.18%). China is flat perhaps reflecting some caution ahead of this weekend’s National People’s Congress gathering.

Elsewhere the moves for rates have unsurprisingly been concentrated at the short end of the Treasury curve. Before we dig through them it’s worth highlighting that late last night the Fed’s Brainard – who is considered one of the most dovish Fed officials – said that a rate hike will be “appropriate soon to remove additional accommodation”. 2y Treasury yields, at 1.290% this morning, are up about 10bps from the moments prior to Williams and Dudley speaking and hit the highest on an intraday basis since 2009. 10y yields are at 2.458% and up about 10bps too. Bloomberg’s calculator (which slightly overstates things) continues to show an 80% probability priced in for March, from 52% earlier this week. Yields also surged in Europe yesterday. 10y Bund yields rose 7.5bps to 0.278% and had their weakest day since January 3rd.

There is clearly a lot of political risk that resides in markets in 2017 and this is something we still think creates periodic bouts of volatility. However data will be the key to risk asset performance over the whole year assuming political risk is eventually contained. With that yesterday’s global PMIs showed that the recent up move in equities can be justified. In the PDF today we republish the charts we’ve often used with PMIs from major countries alongside the YoY change in equity markets with a table as to where the PMI suggest equity markets should be YoY. At the moment the PMIs across the key markets suggest equities should be approximately 10-20% higher than a year ago. This is pretty much where they are with some regional variations. We always say this should be a general guide to valuations and works best looking across the board rather than to individual markets where quirks can lead to temporary divergence from ‘fair value’. While data remains this strong, equities are doing what they should be expected to. We still think political risk (and perhaps later rising yields) will likely lead to a temporary dislocation but not a lasting one over the coming months.

While we’re mentioning politics there was an update to highlight in the French presidential race yesterday. It centred on Francois Fillon following the news that a formal investigation has now been launched over the alleged arrangement of a fictitious job for his wife. Fillon had previously said that he would quit the presidential race should a formal investigation be launched however yesterday he pledged to continue with his candidacy, despite one of his more senior advisers resigning in the process. We’ll wait to see how much of an impact that has on the polls, if any. Staying in Europe, the latest polls for the Dutch elections have revealed fading momentum for Geert Wilders’ Freedom Party. The Peilingwijzer poll aggregator now has the Liberals as taking between 23 and 27 seats versus 22 to 26 for the Freedom Party. That is the first time since November that the Liberals have gone ahead in the poll of polls. Finally in the UK the House of Lords voted in favour (by 358 votes to 256) of an amendment to the Brexit bill that will protect the rights of EU nationals to remain living in the UK when the country leaves the EU. The legislation is now to return to the House of Commons, so worth watching when it lands.

In terms of yesterday’s data, it was the solid 1.7pt rise in the ISM manufacturing print in the US in February to 57.7 (vs. 56.2 expected) which stood out most. That is the best reading since August 2014 while the details revealed a decent jump in the new orders index to 65.1 from 60.5. On the inflation front the January personal income reading did reveal a slightly bigger than expected +0.4% mom rise in income (vs. +0.3% expected) although there was a little bit of disappointment in the spending data with personal spending up only +0.2% mom (vs. +0.3% expected). Real spending also declined more than expected (-0.3% mom vs. -0.1% expected). The PCE deflator rose +0.4% mom which lifted the YoY rate to +1.9% from +1.6% while the core came in at +0.3% mom as expected and so leaving the annual rate at +1.7%. The remaining data consisted of a soft construction spending print in January (-1.0% mom vs. +0.6% expected) and vehicle sales data which showed annualized sales as holding steady in February. It’s worth noting that as a result of the real personal consumption data, the Atlanta Fed lowered their Q1 GDP forecast to 1.8% from 2.5%.

Before we wrap, for completeness yesterday’s Markit manufacturing PMI in the US was confirmed at 54.2 which is a small one-tenth downward revision from the initial flash. The Euro area PMI was confirmed at 55.4 (from 55.5) compared to 55.2 in January and is now at the highest level since 2011. Regionally in Europe the standouts were Germany (56.8; 69-month high), Italy (55.0; 14-month high) and the Netherlands (58.3; 70-month high). The UK came in at a slightly more disappointing 54.6 from 55.7 in January. Staying with the UK, mortgage approvals data yesterday revealed that approvals printed at 69.9k in January which was a fair bit ahead of the 68.7k expected. Unsecured lending came in at £1.4bn which was in-line but down from the £1.6bn average of the previous six months. The last data to note yesterday was that out Germany. Headline inflation rose +0.7% mom in February which has had the effect of pushing the YoY rate up from +1.9% to +2.2% and at a four and a half year high.

The day ahead looks set to be a fair bit lighter for data. In Europe this morning  the most notable release is likely to be the February CPI data for the Euro area where the consensus is for a two-tenths lift in the headline rate to +2.0% but the core to hold steady at +0.9% yoy. PPI and the latest unemployment rate for the Euro area will also be released. In the US this afternoon the sole data release is the latest weekly initial jobless claims print. The Fedspeak looks set to go quiet with no officials scheduled to speak while at the ECB Lautenschlaeger is due to speak this evening.


i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed DOWN 16.91 POINTS OR .52%/ /Hang Sang CLOSED DOWN 48.42 POINTS OR 0.20% . The Nikkei closed UP 171.26 POINTS OR 0.88% /Australia’s all ordinaires  CLOSED UP 1.21%/Chinese yuan (ONSHORE) closed DOWN at 6.8858/Oil FELL to 53.42 dollars per barrel for WTI and 55920 for Brent. Stocks in Europe ALL MIXED ..Offshore yuan trades  6.8787 yuan to the dollar vs 6.8858  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  NARROWS CONSIDERABLY AS POBC ATTEMPTS TO STOP USA DOLLARS FROM LEAVING CHINA’S SHORES. ONSHORE YUAN WEAKER AS IS OFFSHORE YUAN COUPLED WITH THE STRONGER DOLLAR


This is scary: the White House is exploring use of military force against North Korea

(courtesy zero hedge)

White House Is Exploring Use Of Military Force Against North Korea

An internal White House strategy review on North Korean options includes the possibility of both military force and regime change to counter the country’s nuclear-weapons threat, the WSJ reports, a prospect that has some U.S. allies in the region on edge. The review comes amid recent events have strained regional stability including last month’s launch by North Korea of a ballistic missile into the Sea of Japan, and the assassination of the estranged half brother of North Korean leader Kim Jong Un in Malaysia.

The WSJ adds that U.S. officials have underscored the possible military dimensions of their emerging strategy in recent discussions with allies, suggesting that the planning is at an advanced stage.

President Trump has taken steps to reassure allies that he won’t abandon agreements that have underpinned decades of U.S. policy on Asia, his pledge that Pyongyang would be stopped from ever testing an intercontinental ballistic missile—coupled with the two-week-old strategy review—has some leaders bracing for a shift in American policy. During Japanese Prime Minister Shinzo Abe’s two-day summit in February with Mr. Trump, U.S. officials on several occasions stated that all options were under consideration to deal with North Korea, according to a person familiar with the discussions.

It was clear to the Japanese side that those options encompassed a U.S. military strike on North Korea, possibly if Pyongyang appeared ready to test an ICBM. The Japanese side found that scenario “worrisome,” he said.

The proposal emerged roughly two weeks ago, when Deputy National Security Adviser K.T. McFarland convened a meeting with national-security officials across the government and asked them for proposals on North Korea, including ideas that one official described as well outside the mainstream.

The request was for all options, ranging from U.S. recognition of North Korea as a nuclear state to military action against Pyongyang. Ms. McFarland’s directive was for the administration to undergo a comprehensive rethink of America’s North Korea policy.

The national-security officials reported back to Ms. McFarland with their ideas and suggestions on Tuesday. Those options now will undergo a process under which they will be refined and shaped before they’re given to the president for consideration.

In addition to concerns about US intervention, there is speculation that China may itself pre-empt a move by Washingont: the heightened prospect of U.S. military action in North Korea could encourage China, which fears the fallout of a military confrontation with its neighbor, to take steps Washington has long sought to choke off Pyongyang’s economic lifeline.

Another unknown is how South Korea will act. In the wake of Mr. Trump’s election, leaders in Tokyo and Seoul have sought to intensify the existing U.S. strategy of exerting economic and diplomatic pressure against North Korea. “We will make sure that the North changes its erroneous calculations by further enhancing sanctions and pressure,” South Korea’s acting President Hwang Kyo-ahn said in a speech on Wednesday.

The speech came on the same day that South Korea and the U.S. kicked off major annual military exercises, part of a long-running strategy of prioritizing defensive military preparedness to ward off North Korean aggression. As annual military exercises were set to begin, U.S. Defense Secretary Jim Mattis spoke Tuesday to South Korean Defense Minister Han Min-Koo, emphasizing that “any attack on the United States or its allies will be defeated, and any use of nuclear weapons will be met with a response that is effective and overwhelming,” said the Pentagon spokesman, Capt. Jeff Davis.

Finally, there is Japan, which is concerned it could get sucked into a regional conflict by a U.S. military strike on North Korea, said Tetsuo Kotani, a senior fellow at the Japan Institute of International Affairs, a Tokyo think tank. Another fear for Japan is a scenario in which the U.S. instead holds talks with North Korea and reaches a deal that would lead to Washington disengaging from the region, he said.

Japan, under its pacifist constitution, remains heavily dependent on U.S. military support, not only to counter North Korea, but also China, which has stepped up a territorial challenge against Japanese-administered islands in the East China Sea.

“Direct talks between Mr. Trump and Kim Jong Un would be a nightmare scenario for Japan,” Mr. Kotani said.

Trump has recently stated the U.S.’s commitment to defending both Japan and South Korea to leaders of both countries. A spokeswoman for Japan’s foreign ministry declined to comment on the details of Mr. Abe’s talks with Mr. Trump, while a spokesman for South Korea’s foreign ministry couldn’t be reached for comment.

Meanwhile, in yet another potential escalation point, the U.S. is in the process of installing advanced missile defenses, known as the Terminal High Altitude Area Defense system, or THAAD, in South Korea. As part of that, South Korea said this week that it has completed a transfer of land needed as a station for the system, Capt. Davis said. In response to this deployment, on Wednesday China and Russia announced they have agreed to intensify their opposition to the US’ controversial THAAD missile defense system.

“Both sides said they will continue to strengthen their coordinated opposition to THAAD (Terminal High Altitude Area Defense system),” the Chinese Foreign Ministry wrote on its website on Wednesday.

The statement follows a Tuesday meeting between China’s assistant foreign minister, Kong Xuanyou, and Russian Deputy Foreign Minister Igor Morgulov in Beijing. Russia’s Ministry of Foreign Affairs also released a statement, saying that “both parties emphasized that collective political and diplomatic efforts should be stepped up to ease tensions and initiate the process of military and political detente across the board in Northeast Asia, in order to create conditions conducive to resolving the nuclear issue, as well as other issue, on the Korean Peninsula.”

It comes after the South Korean government signed a land swap deal with retail giant Lotte on Tuesday, which will see the company exchange a golf course for military-owned land near Seoul. The golf course will become the future home of THAAD. THAAD is an advanced system designed to intercept short, medium, and intermediate-range ballistic missiles during their terminal flight phase. Equipped with long-range radar, it is believed to be capable of intercepting North Korea’s intermediate-range ballistic missiles.

China has repeatedly spoken out against THAAD over fears that it will undermine its own ballistic missile capabilities, and previously urged Seoul and Washington not to go ahead with the system’s planned deployment.

Terminal High Altitude Area Defense (THAAD) interceptor

Ahead of the Tuesday signing of the deal, Chinese Foreign Ministry spokesman Geng Shuang warned of “consequences” against Washington and Seoul if the agreement were to go ahead, claiming the system “severely disrupts regional strategic balance and jeopardizes the strategic security interests of regional countries including China.”

China “will definitely take necessary measures to safeguard its security interests,” he said during a news briefing, adding that “all the consequences entailed will be borne by the US and the Republic of Korea.” Beijing has already taken measures which some claim are retaliatory against the deal, including halting Lotte’s multibillion dollar real estate project in China and canceling the visits of South Korean celebrities to the country.

As for Russia, the country previously urged those involved in the THAAD system to consider the escalated tensions it will inevitably cause. Last month, Moscow appraised the situation around the Korean Peninsula as “exhibiting a high likelihood of becoming volatile,” and emphasized the “counter-productiveness of the line being taken by certain governments in exacerbating these tensions and instigating an arms race in the subregion, as well as the increase in the scale of military drills.”

However, the US and South Korea maintain that THAAD is a defensive measure against Pyongyang. South Korean officials have said they expect the missile system to be deployed and operational this year, with one stating earlier this month that deployment could be completed by August.

* * *

And just like that, suddenly the very precarious peace in East Asia suddenly depends on the actions of an irrational dictator. While for now the US appears to be on the fence about a military intervention – or regime change – that will surely change should Kim Jong Un decide, unexpectedly, to launch another ballistic missile, something he is known to do with increasing frequency. Which means that suddenly the stability of a great part of Asia is in the hands of the man in the photo below.





none today



Fillon’s home raided by investigators, his campaign is on the verge of collapse and yet he still stays on:

(courtesy zero hedge)

Fillon’s Home Raided By Corruption Investigators; Campaign On Verge Of Collapse

One day after French presidential candidate Francois Fillon revealed that a judges are to place him a under formal criminal investigation later this month over allegations that he illegally employed his British wife and children at taxpayers’ expense, detectives raided his home in the capital’s elegant 7th arrondissement. At the same time, former French PM Alain Juppe was reportedly poised to replace Fillon as a result of the sprawling investigation.  As the Telegraph reports, sources close to Mr Juppé, who had previously ruled out being a “plan B”, told Libération newspaper he had reconsidered because of the deepening crisis in the Républicains party provoked by Mr Fillon’s refusal to stand aside despite haemorrhaging support.

Even without today’s raid, it appeared almost certain that Fillon’s presidential bid was close to collapse after more than 20 centre-Right MPs and councillors publicly withdrew support for him and key members of his campaign team quit. About 20 mayors also urged him to stand aside in favour of another candidate better placed to regain the Elysée Palace. Allies of Mr Juppé, who came second to Mr Fillon in the Republicain primaries, said he was “ready but loyal” and would only step in if asked to do so by the beleaguered candidate.

After an opinion poll indicated that three-quarters of voters would prefer Mr Fillon to withdraw, key figures in his party voiced fears that he will be knocked out in the first round of voting at the end of next month.

Still defiant, Mr Fillon responded that his “support base is holding” as he addressed a rally of 3,000 supporters in the southern city of Nimes last night. “You see before you a fighter,” he declared. “I will never give up.”

Juppé had previously been blocked from seeking to take over by supporters of Nicolas Sarkozy, the former president. Yesterday Mr Sarkozy appeared to lift his objections. His ally, the MP Georges Fenech, said he was now supporting Mr Juppé because he could not accept “his political family being taken hostage”.

As the Telegraph adds, the Républicains party has been thrown into chaos after Mr Fillon vowed to fight on until the election in less than two months. In a defiant speech on Wednesday, he attacked the justice system for seeking his “political assassination”. Some of Mr Fillon’s supporters were alarmed by his plan to hold a rally in Paris on Sunday which he said would be a protest against “the coup d’état by the judges”.

Meanwhile, president Hollande warned him not to turn his meetings into demonstrations against the judiciary. Franck Riester, an MP who had backed Mr Fillon, said: “We have to say stop. Enough is enough.” The Republicains’ woes further boosted Mr Macron, now the front-runner, who is standing as the candidate of an Obama-inspired “change and hope”.

His comeptitor, Marine Le Pen, has also been facing legal prosecution: as reported earlier, in a separate case involving inflammatory tweets, the European parliament where she is an MEP, voted to lift her parliamentary immunity. This will allow French prosecutors to bring charges against the National Front leader for tweeting graphic images of Isil atrocities.  The case, which is not expected to be resolved for several months, is unlikely to affect her presidential ambitions.

For Fillon, however, it may be too late.





The very popular Arthur Berman gives us a detailed look at the huge Bakken oil-gas fields. He describes that yields are less, and also concentrated in more gas than oil.

His conclusions: it is the beginning of the end for this shale play

(courtesy Art Berman/

Beware The Bakken

Via Arthur Berman of,

It’s the beginning of the end for the Bakken Shale play.

The decline in Bakken oil production that started in January 2015 is probably not reversible. New well performance has deteriorated, gas-oil ratios have increased and water cuts are rising. Much of the reservoir energy from gas expansion is depleted and decline rates should accelerate. More drilling may increase daily output for awhile but won’t resolve the underlying problem of poorer well performance and declining per-well reserves.

December 2016 production fell 92,000 barrels per day (b/d)–a whopping 9 percent single-month drop (Figure 1). Over the past two years, output has fallen 285,000 b/d (23 percent). This was despite an increase in the number of producing wells that reached an all-time high of 13,520 in November. That number fell by 183 wells in December.

(Click to enlarge)

Figure 1. Bakken Production Declined 92,000 bopd (9 percent) in December. Source: North Dakota Department of Mineral Resources and Labyrinth Consulting Services, Inc.

Well Performance Is Declining

Well performance was evaluated for eight operators using standard rate vs. time decline-curve analysis methods. These operators account for 65 percent of the production and also 65 percent of producing wells in the Bakken play (Table 1).

(Click to enlarge)

Table 1. Operators, Cumulative Oil Production, Total Producing Wells and 2012-2015 Wells Used for Decline-Curve Analysis (DCA) in this study. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Estimated ultimate recovery (EUR) decreased over time for most operators and 2015 EUR was lower for all operators than in any previous year (Figure 2). This suggests that well performance has deteriorated despite improvements in technology and efficiency.

(Click to enlarge)

Figure 2. Bakken EUR (Estimated Ultimate Recovery) Has Generally Decreased Over Time. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Figure 3 shows Bakken EUR and the commercial core area in green. The map on the left shows all wells with 12-months of production history and the map on the right, all wells with first production in 2015 and 2016.

Most 2015-2016 drilling was focused around the commercial core area. The fact that EURs from these core-centered locations were lower than earlier, less favorably located wells indicates that the commercial core is showing signs of depletion and well interference.

(Click to enlarge)

Figure 3. Bakken EUR map showing all wells with 12-months of production and all wells with first production in 2015 and 2016. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Well-level analysis indicates a fairly systematic steepening of decline rates over time. Figure 4 shows Continental Resources wells with first production in 2012 and 2015. 2012 wells have a shallow, super-harmonic (b-exponent = 1.3) decline rate but 2015 wells have a steeper, weakly hyperbolic (b-exponent=0.2) decline rate.

Oil reserves for 2012 wells averaged 343,000 barrels but only 229,000 barrels for 2015 wells–a 33 percent decrease in well performance. Steeper decline rates result in lower EURs.

(Click to enlarge)

Figure 4. Well-level analysis shows steeper decline rates for more recent wells than for older wells. Source: Drilling Info and Labyrinth Consulting Services, Inc.Related: One Shocking Chart On The Death Of A Gold Nation

Gas-oil ratios (GOR) for most operators increased from 2012 through 2014 and then, decreased for wells with first production in 2015 (Figure 5).*

(Click to enlarge)

Figure 5. Bakken gas-oil ratios generally increased over time but then decreased in 2016. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Changing GOR is important because it suggests decreasing reservoir energy. The Bakken has a solution gas drive mechanism. Initially, oil is produced by liquid expansion across the pressure drop from the reservoir to the well bore. Later, gas dissolved in the oil expands and this is the mechanism that lifts oil to the surface.

Rapidly increasing GOR in the Bakken probably indicates partial reservoir depletion and subsequently decreasing GOR suggests more advanced depletion accompanied by declining reservoir pressure, declining oil production and increasing water cut (Figure 6).

(Click to enlarge)

Figure 6. Increasing gas-oil ratio indicates partial reservoir depletion–Decreasing gas-oil ratio indicates advanced depletion. Source: Schlumberger and Labyrinth Consulting Services, Inc.

The sequence of events summarized in Figure 6 is demonstrated in Bakken field production shown below in Figure 7. Gas increased before oil production peaked in December 2014 and continued increasing through March 2016, and then declined.

(Click to enlarge)

Figure 7. Bakken gas production increased as oil production peaked and then it declined. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Water cut—water as a percent of total liquid produced—has increased for most operators over time (Figure 8) and this provides additional support for progressive Bakken depletion.

(Click to enlarge)

Figure 8. Bakken water cut has generally increased over time. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Company Performance, Break-Even Prices and Future Drilling Locations

Well performance for the 8 key operators shown above in Table 1 above provides a framework for company performance and break-even prices for the Bakken play.

Reserves were estimated for more than 4,400 wells with first production in 2012 through 2015 using standard rate vs. time methods. Decline-curve analysis (DCA) was used to evaluate wells with at least 12 months of production history for key operators. Production group DCA was done separately by operator and year of first production for oil, gas and water.

Results are summarized in the following tables.

(Click to enlarge)

Table 2. Summary tables of key operator EUR and break-even prices and economic assumptions. Source: Drilling Info and Labyrinth Consulting Services, Inc.

None of the key operators’ average well breaks even at current Bakken wellhead prices of $42.50 per barrel although ConocoPhillips ($43.08 break-even price) is very close. EOG, XTO and Marathon all break even at prices less than $50 per barrel but other operators need higher oil prices to break even. It is worth noting that Bakken wellhead prices are about $10 per barrel less than WTI benchmark prices.

Current well density was calculated by measuring the area of the $50 commercial area (406,000 BOE cutoff) and dividing by the number of horizontal wells within that area. There are 5,500 producing wells within the 1.2 million acre commercial area shown in Figure 9. That equates to a current well density of 215 acres per well.

Figure 9. Bakken EUR map showing the $50 (406,000 BOE EUR) commercial area and well density table. Source: Drilling Info and Labyrinth Consulting Services, Inc.

Tight oil operators describe infill spacing of 40 to 120 acres per well favoring the lower end of that range. Current well density in the Bakken core of 215 acres per well suggests substantial infill locations remain yet declining EURs, increasing water cut and falling GOR do not support further infill drilling.

The Bakken is unique because of the extraordinary lengths of lateral wellbores compared with other tight oil plays. Laterals are commonly more than 10,000 feet in length and often approach 12,000 feet.

Figure 10 shows lateral lengths in the Bakken. It is clear that within the commercial core area, most laterals exceed 8,000 feet. Available evidence suggests that current well density is sufficient to fully drain reservoir volumes. That implies that further drilling will not result in producing new oil volumes but will interfere with and cannibalize production from existing wells.

(Click to enlarge)

Figure 10. Bakken lateral length map. Source: Drilling Info and Labyrinth Consulting Services, Inc.

The Downside of Technology

The Bakken play represents the fullest application of modern horizontal drilling and hydraulic fracturing technologies. The Middle Bakken and Three Forks reservoirs are tight, naturally fractured sandstones that respond exceptionally well to long laterals and multi-stage fracture stimulation. Field rules allowed long laterals well before these were feasible in other plays.

The downside of efficiency and technology is that depletion has accelerated. Resulting higher initial rates masked underlying field decline that is becoming apparent only in wells with first production in 2015. The evidence for depletion is compelling but pressure data is not publicly available and is needed to complete the case.

The most appealing aspect of resource plays is their apparent lack of risk. Source rocks are the drilling target so finding oil and gas is given. Because the plays are continuous accumulations, there is no need to map and define a trap. Since the reservoirs are tight, seals are not an issue either. But commercial risk should be more of a concern for investors than it seems to be so far.

The downside is that there is no way to stay away from water and it is produced from day one in large volumes. The Bakken has produced 1.5 billion barrels of water along with its 2.2 billion barrels of oil over the decades. Where are they putting it and what does that cost?

Investors should be worried. As analysts cheered the resilience of shale plays after the 2014 price collapse, nearly a billion barrels of Bakken oil were produced at a loss–about 40 percent of total production since the 1960s. Vast volumes of oil were squandered at low prices for the sake of cash flow to support unmanageable debt loads and to satisfy investors about production growth. The clear message is that investors do not understand the uncertainties of tight oil and shale gas plays.

And all major Bakken producers continue to lose money at current wellhead prices. If observations presented here hold up, there may be nowhere for the Bakken to go but down. Higher oil prices may not help much because the best days for the play are behind us. Future profits were sacrificed for short-term objectives that lost the companies and their shareholders money.

The early demise of the Bakken should serve as a warning about the future of other tight oil plays.


Venezuela is on its last legs before it default on loans:

(courtesy Calcuttawala/

Venezuela Is Down To Its Last $10B As Debt Payments Loom

Via Zainab Calcuttawala of,

Venezuela’s central bank is down to its last $10.5 billion in foreign reserves, according to the institution’s most recent report on the country’s financials.

Over the remainder of 2017, Caracas needs to fund $7.2 billion in debt payments – an amount that it can only meet if oil prices spike far higher than the ongoing boosts caused by OPEC’s output reduction agreement.

Current reserves stand 66 percent lower than levels in 2011, when the government held $30 billion in foreign currencies to spend on loan repayments and other official business (and down 75% from 2008 highs)

“The question is: Where is the floor?” Siobhan Morden, head of Latin America fixed income strategy at Nomura Holdings, told CNN Money. “If oil prices stagnate and foreign reserves reach zero, then the clock is going to start on a default.”

Venezuela’s financial report for 2016 stated that roughly $7.7 billion of the remaining $10.5 billion in foreign reserves had been preserved in gold. Last year, in order to fulfill debt obligations, Caracas began shipping gold to Switzerland.

The drastic fall in oil prices in 2014 and widespread corruption have both caused an economic meltdown in the South American country, where citizens had become accustomed to imported goods paid for by fossil fuel revenues.

President Nicolas Maduro has resorted to opening the country’s border with Columbia to allow Venezuelans to purchase necessary medical and day-to-day supplies.

Venezuelan state-run oil company PDVSA’s default is probable, according to the ratings agency Fitch, which cited the oil giant’s weak liquidity position and high amortization scheduled for 2017 as the causes of the default problem last month.

“Should oil prices remain around current levels, average recovery may lead to additional future defaults to further reduce obligations and allow for necessary transfers to the government,” said Fitch’s senior director Lucas Aristizabal.

The company has projected that its oil production will maintain its 23-year-low in 2017.



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





Early THIS THURSDAY morning in Europe, the Euro FELL by 44 basis points, trading now WELL BELOW the important 1.08 level FALLNG to 1.0525; 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 DOWN 16.91 POINTS OR 0.52%     / Hang Sang  CLOSED DOWN 48.42 POINTS OR 0.20%    /AUSTRALIA  CLOSED UP 1.21%  / EUROPEAN BOURSES MIXED

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

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

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

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

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

The NIKKEI: this THURSDAY morning CLOSED UP 171.26 POINTS OR 0.88% 

Trading from Europe and Asia:
1. Europe stocks  ALL MIXED 

2/ CHINESE BOURSES / : Hang Sang CLOSED DOWN 48.42 POINTS OR 0.20%       / SHANGHAI CLOSED DOWN 16.91  OR 0 .52%/Australia BOURSE CLOSED UP 1.21% /Nikkei (Japan)CLOSED UP 171.26 POINTS OR 0.88%  /  INDIA’S SENSEX IN THE RED

Gold very early morning trading: $1240.00


Early THURSDAY morning USA 10 year bond yield: 2.481% !!! UP 3 IN POINTS from WEDNESDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. THE RISE IN YIELD WITH THIS SPEED IS FRIGHTENING

 The 30 yr bond yield  3.078, UP 1 IN BASIS POINTS  from WEDNESDAY night.

USA dollar index early THURSDAY morning: 102.08 UP 31 CENT(S) from WEDNESDAY’s close.

This ends early morning numbers THURSDAY MORNING


And now your closing THURSDAY NUMBERS

Portuguese 10 year bond yield: 3.951% UP 2  in basis point yield from WEDNESDAY 

JAPANESE BOND YIELD: +.069%  UP 1  in   basis point yield from WEDNESDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD:1.702%  UP 1 IN basis point yield from  WEDNESDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.139 UP 1 POINTS  in basis point yield from WEDNESDAY 

the Italian 10 yr bond yield is trading 44 points HIGHER than Spain.





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

Euro/USA 1.0508 DOWN .0028 (Euro DOWN 28 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 114.49 UP: 0.379(Yen DOWN 38 basis points/ 

Great Britain/USA 1.2262 DOWN 0.0007( POUND DOWN 7 basis points)

USA/Canada 1.3389 UP 0.0036(Canadian dollar DOWN 36 basis points AS OIL FELL TO $52.74


This afternoon, the Euro was DOWN by 28 basis points to trade at 1.0508


The POUND FELL 7  basis points, trading at 1.2262/

The Canadian dollar FELL  by 36 basis points to 1.3389,  WITH WTI OIL FALLING TO :  $52.74

The USA/Yuan closed at 6.8867/
the 10 yr Japanese bond yield closed at +.069% UP 1 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 4  IN basis points from WEDNESDAY at 2.498% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.0920 UP 2  in basis points on the day /

Your closing USA dollar index, 102.14 up 37 CENT(S)  ON THE DAY/1.00 PM 

Your closing bourses for Europe and the Dow along with the USA dollar index closing and interest rates for THURSDAY: 1:00 PM EST

London:  CLOSED DOWN 0.55 OR 0.01% 
German Dax :CLOSED DOWN 7.62 POINTS OR 0.06%
Paris Cac  CLOSED UP 2.97 OR 0.06%
Italian MIB: CLOSED UP 76.23 POINTS OR 0.39%

The Dow closed DOWN 112.58 OR 0.53%

NASDAQ WAS closed DOWN 42.81 POINTS OR 0.73%  4.00 PM EST
WTI Oil price;  52.74 at 1:00 pm; 

Brent Oil: 55.20  1:00 EST




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

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


BRENT: $55.03


USA 30 YR BOND YIELD: 3.076%

EURO/USA DOLLAR CROSS:  1.0507 down .0029

USA/JAPANESE YEN:114.39   up 0.279

USA DOLLAR INDEX: 102.15  up 38  cents ( HUGE resistance at 101.80 broken)

The British pound at 5 pm: Great Britain Pound/USA: 1.2266 : down 4 BASIS POINTS.

German 10 yr bond yield at 5 pm: +.317%


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


Dow Dumps Below 21,000 As Fed Hawks Batter Bonds & Bullion

So after the biggest inflows to SPY in 27 months sending stocks soaring on dropping volume and plunging GDP expectations, today saw Stocks Down, Bonds Down, Gold Down, VIX Down, USD Up, Rate Hike Odds Up

But it was all so easy yesterday!

Rate hike odds soared to 90%… (Powell joined the crowd today following Brainard, Williams, Dudley, Kaplan, and Harker)


And the USD went with it… (USD Index is up 5 days in a row – longest streak since May 2016) – NOTE: The USD Index has rallied back to pre-rate-hike levels from December


We wonder just what it is that has panicced The Fed into such a rapid shift in communication? It’s not the economy…


So is it this? These are not the ‘norms’ that Janet was looking for…


No matter how hard they tried to crush VIX, stocks wouldn’t bite (note the drop in the last hour as John Sessions announced a press conference) – Dow dropped below 21,000!! Time to Panic?


Today was the worst day for stocks since January… most major indices gave back around half yesterday’s gains with Trannies and Small Caps worst…


After yesterday’s huge short squeeze, “most shorted” stocks drifted lower today…


Notably, Financials had their worst day in 6 weeks today, erasing half of yeterday’s gains… (Utes erased their losses from yesterday despite higher bond yields)


In case you missed it, Snap’s IPO started trading today…

We found this entertaining – MacroTourist @Gloeschi You can either own SNAP for $35bn or the two largest gold miners in the world ABX (20bn) and NEM (17bn). Vanishing cat pics vs. gold…

CAT was also slammed after what seems like the entire regulatory and crime world raided their Peoria offices…


Bonds bloodbath’d again with 10Y taggng 2.50% and 30Y tagging 3.10%


The yield curve flattened again…


NOTE – 30Y yield pushed all the way up to the pre-rate-hike-levels from December (just like the USD)


The Loonie remains the worst performer of the majors as the USD rallied once again…


USD strength weighed on the entire commodity space…


Silver was clubbed like a baby seal right after Europe closed (breaking below its 200dma)… (and gold followed) – just look at the extreme moves in the PMs over the last month


Interestingly, gold’s major outperformance today was off pre-rate-hike-levels…

Today was gold’s biggest outperformance of silver since Dec 14th.

And Bitcoin surged above the price of an ounce of gold…


WTI and RBOB tumbled as the USD strengthened (gasoline now at its lowest since November)


Finally we can’t help but note this…



Stockman goes on the air and pounds the table that Trump will create a debt crisis like never before.  The debt ceiling crisis will hit on March 15.  They have about 200 billion of cash and they will burn through that in the next 60 days.  Both sides, the Republicans and the Democrats are far apart on just about every issue and there is no way a budget will be approved.

(courtesy David Stockman, zerohedge)

Stockman: “Trump Will Create A Debt Crisis Like Never Before”

Having warned that “everything will grind to a halt on March 15th” due to the under-appreciated debt-ceiling debacle that looms over Washington, and exclaiming that “what is going on today is complete insanity,” former Reagan Budget Director David Stockman is rapidly losing faith that anything can be done… 

“I’ve thrown in the towel because he’s not paying attention and he’s not learning anything and he’s making ridiculous statements.”

Reflecting on Trump’s address to Congress, and what we know of The White House agenda, Stockman told Fox Business’ Neil Cavuto:

We don’t need a $54 billion increase in defense when the budget already is ten times bigger than that of Russia. We don’t need $6 trillion of defense spending over the next decade because China is going nowhere except trying to keep their Ponzi scheme together.”

Stockman rejected Trump’s dynamic scoring hope…

“Trump is so deep in fiscal la-la-land, he won’t even find the wrong envelope… he is saying crazy things.”

And wasn’t sold on Speaker Ryan’s Obamacare plan.

“If you look at the Ryan draft that came out over the weekend, it’s basically Obamacare-like. It’s not really repealing anything,” he said.

“It’s basically reneging and turning the Medicaid expansion into a block grant, turning the exchanges into tax credits [and] it’s still going to cost trillions of dollars.

Last week, Trump’s Treasury Secretary Steven Mnuchin, told FOX Business the administration is “focused on an aggressive timeline” to produce a tax reform plan by August Opens a New Window. , but in Stockman’s opinion, tax reform won’t happen this year.

He also warned that the administration’s run up against the debt ceiling this summer could lead to a debt crisis.

“I don’t think we will see the tax cuts this year at all,” he said.

“There is going to be a debt ceiling crisis like never before this summer and that’s what people don’t realize. They’ve burned up all the cash that Obama left on the balance sheet for whatever reason.”

Stockman added that “…by the time we get to June or July, we are going to see a debt ceiling crisis like never before.”

As a reminder, Stockman warned last week: 

“I think what people are missing is this date, March 15th 2017.  That’s the day that this debt ceiling holiday that Obama and Boehner put together right before the last election in October of 2015.  That holiday expires.  The debt ceiling will freeze in at $20 trillion.  It will then be law.  It will be a hard stop.  The Treasury will have roughly $200 billion in cash.  We are burning cash at a $75 billion a month rate.  By summer, they will be out of cash.  Then we will be in the mother of all debt ceiling crises.  Everything will grind to a halt.  I think we will have a government shutdown.  There will not be Obama Care repeal and replace.  There will be no tax cut.  There will be no infrastructure stimulus.  There will be just one giant fiscal bloodbath over a debt ceiling that has to be increased and no one wants to vote for.”

Stockman also predicts very positive price moves for gold and silver as a result of the coming budget calamity.





This is unbelievable: the yield curve is collapsing despite the obvious rate hike in March. It is now obvious that the street is thinking that the debt ceiling crisis advocated by Stockman will become a reality

(courtesy zero hedge)

Yield Curve Collapse & The Fed’s “Surprising Economic Strength”

As Lael Brainard piled on The Fed’s sudden utter hawkishness, following Dudley, Harker, Kaplan, and Williams, we noticed a common thread behind the need to hike rates in March – each implicitly or explicitly noted America’s “surprisingly strong economy.” This led to a stunning WTF moment…

What’s wrong with this chart?

To explain in simple terms – the collapse in Fed Funds Futures signals an increasing probability of a rate-hike very soon, driven by all the jawboning, who could blame the market? But why is The Fed screaming about how great the economy is how an imminent rate hike is needed when The Fed’s own economic growth forecast is collapsing? The correlation in the chart above is 100% opposite of what one would expect – more dismal economic expectations, higher probability of a rate hike?’s Mike Shedlock is as surprised as us and dives into the details…

Curve Watchers Anonymous is taking a hard look at the yield curve in light of the now odds-on market view of a March rate hike.

Before looking at the chart below, where do you think rates are relative to January 2014? Up, down, or sideways?

Yield Curve Since 1998


The chart shows monthly closing values except for the current month.

Change Since January 2014

The 2-30 spread flattened by a whopping 181 basis points in just over two years.

The 2-10 spread flattened by 149 basis points.

A flattening of the yield curve is not good for bank profits. Rising 10-year yields since mid-2016 are not good for mortgages or housing affordability.

Not to worry, despite poor economic reports, Fed governors have stated: “This is a surprisingly strong economy.”

Surprisingly Strong Economy Links

  1. March Rate Hike Odds Surge to 80 Percent: New Standard for “Surprisingly Strong” Economy
  2. Inflation-Adjusted Spending Declines Most Since September 2009: Stagflation Coming?
  3. Construction Spending Unexpectedly Declines One Percent
  4. New Home Sales Rise Half of Economists’ Expectations, Supply Surges
  5. 4th Quarter GDP Unexpectedly Undershoots Consensus: What’s Ahead?
  6. Trade Deficit Unexpectedly Widens: Exports Sink, Imports Up Sharply
  7. GDPNow 1st Quarter Forecast Plunges to 1.8% Following Personal Income and Outlays Report

Somewhere in that set of links, there is hidden “surprising strength”. I leave it to the reader to find the surprises and report back.




Cudmore: states that only a severe market correction will stop the Fed from hiking
(courtesy Cudmore, Bloomberg)

Cudmore: “Now Only A Severe Market Correction Will Stop The Fed From Hiking In March”

From Mark Cudmore, a former FX trader who writes for Bloomberg

March Hike Is Now Base Case as U.S. Data Game Shifts: Macro View

Lael Brainard’s hawkish comments confirm that a March rate rise must now be the base case for investors, and it’s unlikely the upcoming data even matters.

Brainard is not only part of the Fed’s core, she’s arguably the most dovish member of it. When she sends a hawkish message, you need to pay attention.

I didn’t believe a March hike was coming. I was wrong. Brainard’s speech wasn’t an anomaly -– Dudley had laid the groundwork already on Tuesday.

It’s not a completely done deal, but investors must now be studying the calendar to see what could derail a March hike. How quickly things change. Only a week ago, we were debating what could be the catalyst to make March likely.

The key inflation data came out last night and hardly presented a compelling case for monetary-policy tightening. In fact, the broad data picture has been more indicative of an economy that could probably cope with a hike rather than one at risk of overheating and in need of tightening.

This implies that the Fed’s motivation for tightening is more related to the resilient sentiment of markets rather than data-driven. Perhaps annoyed by its failure to raise rates by more earlier in the economic cycle, it is now keen to hike whenever it’s confident it can get away with it.

The corollary is that any data disappointment in the next two weeks will be unlikely to stop the Fed from tightening, and only a severe market correction will stop them acting now. And we haven’t seen one of those in more than a year.

The consequences of a March hike are not yet fully priced. Many in the market will wait for Janet Yellen’s Friday message to confirm the plan. That may be prudent, but don’t look to the data calendar to save you.

Always remember when trading, the only relevant question is “will they hike?” Not “should they hike?”



Rate hike odds now 90%. What happens to their credibility if they do not raise rates


(courtesy zero hedge)

March Rate Hike Odds Reach 90%

The Fed jawboning has gone well… too well. Dudley, Harker, Kaplan, Williams, and Brainard have managed to push the market-implied probability of a March rate hike from around 20% to 90% in a week. The Fed is now cornered…


(we do note that Bloomberg’s WIRP function uses midpoints and is likely overvaluing the probability but the trend is unmistakable)

What happens to Fed credibility if they do not hike rate now?



Jeff Sessions is now accused of lying to Congess over a contact he had with the Russian Ambassador.  The democrats are going to going to run with this

(courtesy zero hedge)

AG Sessions Accused Of Lying To Congress Over Contact With Russian Ambassador

Just when you thought the ‘Russians-did-it’ meme was fading, WaPo reporters manage to find DoJ officials who say then-Senator Jeff Sessions spoke twice last year with Russia’s ambassador to the United States – encounters he did not disclose when asked about possible contacts with Moscow during his confirmation hearing to become attorney general.

At his Jan. 10 Judiciary Committee confirmation hearing, Sessions was asked by Sen. Al Franken, a Minnesota Democrat, what he would do if he learned of any evidence that anyone affiliated with the Trump campaign communicated with the Russian government in the course of the 2016 campaign.

“I’m not aware of any of those activities,” he responded.

He added: “I have been called a surrogate at a time or two in that campaign and I did not have communications with the Russians.

And now, as The Hill reports that according to The Washington Post report, President Trump’s attorney general, Jeff Sessions, spoke twice with Russia’s ambassador to the United States while Trump was on the campaign trail.

Justice Department officials said one of the meetings was a private conversation between Sessions and Russian Ambassador Sergey Kislyak in Sessions’s office. The private meeting reportedly took place during the same time intelligence officials have said Russia was interfering with the U.S. presidential election through a hacking campaign.

Officials said Sessions did not consider the conversations relevant to the lawmakers’ questions and did not remember in detail what he discussed with Kislyak.

“There was absolutely nothing misleading about his answer,” said Sarah Isgur Flores, Sessions’s spokeswoman.

A Sessions spokeswoman said Sessions was acting as a member of the Armed Services Committee, not as a Trump surrogate, when he spoke with the ambassador, and was not trying to mislead senators when he said during his confirmation hearing that he had not had contacts with Moscow. She added that Sessions last year had more than 25 conversations with foreign ambassadors as a senior member of the Armed Services Committee, including the British, Korean, Japanese, Polish, Indian, Chinese, Canadian, Australian and German ambassadors, in addition to Kislyak.

When asked to comment on Sessions’s contacts with Kislyak, Franken said in a statement to The Washington Post on Wednesday:

“If it’s true that Attorney General Sessions met with the Russian ambassador in the midst of the campaign, then I am very troubled that his response to my questioning during his confirmation hearing was, at best, misleading.

Franken added: “It is now clearer than ever that the attorney general cannot, in good faith, oversee an investigation at the Department of Justice and the FBI of the Trump-Russia connection, and he must recuse himself immediately.”

And just like that, the “russians-did-it” meme is back on top of the news cycle into the weekend.

We leave it to WaPo to conclude (with the narrative of choice)…

The previously undisclosed discussions could fuel new congressional calls for the appointment of a special counsel to investigate Russia’s alleged role in the 2016 presidential election. As attorney general, Sessions oversees the Justice Department and the FBI, which have been leading investigations into Russian meddling and any links to Trump’s associates. He has so far resisted calls to recuse himself.

We suspect Trump will tweet-splode again soon on the back of this – so much for the conciliatory “end the small-thinking” tone he called for in his congressional address.





Well that did not take long:  The crook Pelosi demands the immediate resignation of Sessions:

(courtesy zero hedge)

(courtesy zero hedge)

BCBG Max Azria Files For Bankruptcy

If a decade ago, someone had said that BCBG Max Azria would file for bankruptcy before perpetual insolvency candidate Sears, they would be laughed out of the room, and yet overnight it was the fashion house that submitted a voluntary petition for Chapter 11 bankruptcy at the infamous courthouse on the southern tip of Manhattan. The company, known for party dresses worn by celebrities including Selena Gomez and Drew Barrymore, became the latest casualty of the struggling US retail sector. It listed assets in the range of $100 million to $500 million and liabilities in the range of $500 million to $1 billion.

The fashion house, which ironically was on the verge of bankruptcy during the peak of the financial crisis in February 2009 – and survived – yet was unable to do so the second time around, when allegedly the economy is in a full blown recovery, received a DIP loan commitment of up to $45 million, which will be used for working capital and to ensure normal operations during the Chapter 11 process, the company said in a statement.

As part of the bankruptcy process, the company is taking steps to close its freestanding stores in Canada and consolidate its operations in Europe and Japan, in addition to the 120 retail stores closed as part of the restructuring efforts. Reuters had reported last week that BCBG Max Azria Group was preparing to file for bankruptcy.

“The steps we are taking now, to address the shift incustomer shopping patterns and the growth of online shopping, will allow us to focus on our partner relationships, digital, ecommerce, selected retail locations, and wholesale and licensing arrangements,” Marty Staff, acting interim chief executive of the company said in the statement.

The reorganization process is expected to be completed within six months and the stores will remain open duringthe process, the company said. AlixPartners LLP and Jefferies LLC advised the company on its restructuring.

BCBG is the latest high fashion retailer to fold: competing specialty retailers, including The Limited and American Apparel filed for bankruptcy in recent months. BCBG, an acronym for the French phrase “bon chic, bon genre”, a Parisian slang meaning “good style, good attitude”, was founded by Tunisian fashion designer Max Azria in 1989. It grew through its retail shops and distribution in department stores including Saks Fifth Avenue and Bloomingdale’s.

Full bankruptcy filing below




A huge long term care insurer Penn Treaty Network of America has now failed leaving 4.6 billion in long term care claims for its 76,000 aging customers. This is another Ponzi scheme that failed because the premiums they take in will not cover the future claims.  The problem of course is the same as the Dallas Pension scheme: they just cannot earn 7.5 to 8.5% on assets

(courtesy zero hedge)


The Next Ponzi: $4.6BN Long-Term-Care Insurer To Liquidate In Pa; Biggest Healthcare Failure Ever

We spend a lot of time talking about the various pension ponzi schemes that will inevitably wreak havoc on the global financial system at some point in the not so distant future.  That said, you should also be keeping an eye on so-called long-term-care (LTC) health insurance providers who, as Penn Treaty Network of America Insurance teaches us this morning, have been perpetuating a ponzi scheme of their own.

After eight full years of legal battles between state regulators, investors, and policyholders, Pennsylvania Court Judge Hannah Leavitt signed off on a plan Wednesday to liquidate Penn Treaty Network America Insurance and its affiliate, American Network Insurance, the largest such health insurance liquidation in history.  The decision leaves solvent insurers, their owners, and customers to pick up the cost for more than 70% of the up to $4.6 billion in projected long-term-care claims expected for 76,000 aging Penn Treaty customers nationwide.

Pennsylvania Insurance Commissioners Teresa Miller said that after a grueling eight-year legal battle the companies’ financial difficulties were deemed “too great to be remedied.”  Per the PA Insurance Department:

Insurance Commissioner Teresa Miller today announced the Commonwealth Court approval of petitions to liquidate Penn Treaty Network America Insurance Company and American Network Insurance Company, with policyholder claims to be paid through the state guaranty association system, subject to statutory limits and conditions.


“After a long and difficult eight-year legal process, the Court’s decision to approve the liquidation recognizes the companies’ financial difficulties are too great to be remedied, and that consumers are best protected through the state guaranty association system,” Commissioner Miller said.

Penn Treaty


Just like their pension ponzi brethren, long-term-care health insurance providers take in premiums today and make a series of actuarial assumptions that justify a promise that they’ll be able to satisfy a steady stream of payments at some point in the distant future.  Unfortunately, like with pensions, the math all works out beautifully when the insurance companies model 7.5% annual returns on assets, but, in the real world where global bond yields are hovering just above 0%, the math is slightly less rosy.

Over the past several years, long term care insurance has posed significant challenges to insurers on a national level. The pricing of these policies for many insurance companies has proved to be insufficient as a result of claims greatly exceeding expectations and low investment returns.  Claims have exceeded expectations due to incorrect assumptions concerning the number of policyholders who would drop their coverage and the number of policyholders who would utilize their policy benefits, as well as the cost of providing those benefits. The pricing deficiencies and resulting financial losses have resulted in many long term care insurers seeking large premium rate increases and some leaving the market.


In the case of Penn Treaty and American Network, the Pennsylvania Insurance Department determined that the magnitude of additional premium rate increases needed to remedy the companies’ financial difficulties (exceeding 300% on average) would severely harm policyholders and would not be permitted by state regulators, leaving no alternative other than to place the companies into liquidation.

And while payments from other insurance companies will cover these abandoned Penn Treaty policyholders, only so many insurers can fail before taxpayers will be called upon to bail them out.

“Policyholder claims will continue to be covered by the state guaranty association system pursuant to law, and policy claims will be paid subject to the applicable state guaranty association coverage limit and conditions. Policyholders should continue to file claims as they have been in the past, and must continue to pay their premiums in order to be eligible for guaranty association coverage,” Commissioner Miller said.  “State guaranty associations were created to protect state residents who are policyholders of an insolvent company that has gone out of business.  In each state, other insurance companies licensed in that state pay into a guaranty fund, and that money is used to cover claims when a company becomes insolvent and is liquidated.”

But don’t worry, there’s only about $2 trillion worth of LTC claims that will need to be covered at some point in the future…should be fine.





The headquarters for Caterpillar have been raided by IRS and other Federal officials

(courtesy zero hedge)


Federal Officials Are Searching Caterpillar’s Corporate Headquarters; Stock Plunges

According to the Journal Star, Federal officials have executed search warrants at three Caterpillar, Inc. facilities in the Tri-County Area — including the corporate headquarters — Thursday morning. Company officials confirmed the presence in a statement without specifying which agency was performing the search or what the search was in regard to. A spokeswoman declined by email to provide further details.

Dow Jones adds that agents from the IRS, FDIC and Commerce Department are involved in the searches. They are probably not looking for CAT profits.

“Caterpillar is cooperating,” the brief statement said.

The spokeswoman for the U.S. Attorney for the Central District of Illinois confirmed that facilities in three communities were the subject of the activity — Peoria, East Peoria and Morton. At the Downtown Caterpillar global headquarters building, at least some company employees were directed to the building’s cafeteria and were told to remain there and not leave, according to one employee at the facility.

At least some of the agents entering the headquarters building wore jackets bearing an Internal Revenue Service logo, others appeared to be from the Federal Deposit Insurance Corporation. Others simply denoted that they were federal agents. A placard in the window of one of the federal vehicles noted it was used by police from the U.S. Department of Commerce Bureau of Industry and Security Office of Export Enforcement.

CAT stock, which traditionally soars on bad news and reports of losses, is inexplicably sliding on the news.


Maybe investigators are trying to figure this out?


To be sure, this is not the first time CAT has gotten into regulators’ sights: as a reminder, back in 2014 CAT and PWC got in trouble before Congress for evading taxes using offshore locations when this infamous line came up: “What the heck, we’ll all be retired when this audit comes up on audit.” In retrospect, perhaps not all will be retired.

(courtesy Michael Snyder/Economic Collapse Blog)



  1. Obviously the selling party (silver futures) isn’t trying to get the best price, why else would they sell right after the Euro close (at the market?). The SEC is at best incompetent or worse complicit. There must be some world silver market makers out there that could bring a WTO complaint or something. Might the counterparty buyers of the contracts be complicit? This isn’t just a black mark on the PM market but markets in general – why would anyone want to play – fiat is losing faith faster every year.


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