March 8/Gold and silver whacked again due to silver’s elevated comex OI/China suffers’ first trade deficit in 3 years/Crude oil clobbered today as well as the DOW/Sprott makes takeover bid for Central Fund of Canada/USA productivity in 4th Q falters again/USA wholesale inventories plummet by .2%/wholesale revenues also plummet which will be a negative to first quarter GDP/FINAL DRAFT

Gold: $1208.50  down $6.60

Silver: $17.26  down 23 cents

Closing access prices:

Gold $1208.50

silver: $17.27

For comex gold:

MARCH/ 

NOTICES FILINGS TODAY FOR MARCH CONTRACT MONTH:  1 NOTICE(S) FOR 100 OZ.  TOTAL NOTICES SO FAR: 47 FOR 4700 OZ    (0.1462 TONNES)

For silver:

 

For silver: MARCH

131 NOTICES FILED TODAY FOR 655,000 OZ/

Total number of notices filed so far this month: 1905 for 9,525,000 

Let us have a look at the data for today

.

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In silver, the total open interest FELL by ONLY 1449 contract DOWN to 192,398 with respect to YESTERDAY’S TRADING.    In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e.  0.961 BILLION TO BE EXACT or 137% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MARCH MONTH: THEY FILED: 131 NOTICE(S) FOR 565,000 OZ OF SILVER

In gold, the total comex gold FELL BY A CONSIDERABLE 5587  contracts WITH ANOTHER FALL IN THE PRICE GOLD ($9.00 with YESTERDAY’S trading ).The total gold OI stands at 434.401 contracts.

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

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

GLD:

:

We had no change in tonnes of gold at the GLD:

Inventory rests tonight: 836.77 tonnes

.

SLV

We had a big change in inventory at the SLV/a withdrawal of 1.515 million oz from the SLV

THE SLV Inventory rests at: 331.273 million oz

end

.

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

1. Today, we had the open interest in silver FELL by ONLY 1449 contracts DOWN to 192,398 AS SILVER WAS DOWN 18 CENTS with YESTERDAY’S trading. The gold open interest FELL BY 5587 contracts DOWN to 434,401 WITH ANOTHER FALL IN THE PRICE OF GOLD OF $9.00  (YESTERDAY’S TRADING).  It sure looks like Ted Butler is correct in that hedge funds are now longer playing the game.  They refuse to liquidate their longs on continual raids orchestrated by the bankers

(report Harvey

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 1.74 POINTS OR .05%/ /Hang Sang CLOSED UP 101.20 POINTS OR 0.43% . The Nikkei closed DOWN  90.12 POINTS OR 0.47% /Australia’s all ordinaires  CLOSED DOWN 0.04%/Chinese yuan (ONSHORE) closed DOWN at 6.9103/Oil FELL to 52.60 dollars per barrel for WTI and 55.33 for Brent. Stocks in Europe ALL MOSTLY IN THE RED ..Offshore yuan trades  6.9162 yuan to the dollar vs 6.9103  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  WIDENS CONSIDERABLY/ ONSHORE YUAN WEAKER AS IS THE OFFSHORE YUAN  COUPLED WITH THE STRONGER DOLLAR. CHINA SENDS A MESSAGE TO THE USA NOT TO RAISE RATES

3a)THAILAND/SOUTH KOREA/NORTH KOREA

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

China suffers her first trade deficit in 3 years as imports rise by 44% and exports up only 4%

(courtesy zero hedge)

4. EUROPEAN AFFAIRS

none today

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

none today

6.GLOBAL ISSUES

i)SWEDEN

Sweden is in a mess: in the town of Hallsberg, Sweden a brawl broke out between two migrant groups at a school of which none of the migrants attend:

( zero hedge)

ii)MEXICO

 

It is Mexico that fires first as they cancel the huge sugar export permit to the USA:

( zero hedge)

7. OIL ISSUES

i)API reports that we had a surge in gasoline draws despite a record crude glut. Up goes crude prices.  This is getting ridiculous as the banker boys are manipulating oil/

( zerohedge)

ii)Then oil; tanks into the 51 dollar handle

( zero hedge)

iii)Then crude crashed into the 50 column;

( zerohedge)

8. EMERGING MARKETS

9.   PHYSICAL MARKETS

i)This Singapore trader has amassed 6 million tonnes of sugar and as such these guys are controlling the market:

( zero hedge)

ii)Good luck to Mexico trying to get their gold back.  All of it is located at the Bank of England with 1/4 of this amt in ” non allocated” form.

(GATA/Barba)

iii)Ronan Manly agrees with Bix Weir on the odd withdrawal of Thomson Reuters and the CME from the silver fix

( Ronan Manly/Bullionstar)

iv)Hugo states correctly that if the uSA undergoes protectionism there will be a massive dollar shortage and thus there will be a need to replace the dollar as the reserve currency

(Hugo Salinas Price)

v)Seems that the Deputy Governor of the Bank of England forgot to tell them that her brother has a chief role at Barclay’s

( London Telegraph)

vi) Sprott to take over Central Fund of Canada.  It was about time!!

(Sprott)

10.USA STORIES

i) I would not read anything in this phony ADP report:

( zero hedge/ADP)

ii)This will be troublesome to Janet:  USA 4th quarter productivity slumped to only 1.3% instead of 1.5% expected.

( zerohedge)

iii)This will be a huge negative to first quarter GDP figures:  Wholesale inventories tumble at a huge .2% decline.  Not only that but wholesale sales also tumble:

( zero hedge)

iv)Professor Leslie Robinson an accounting professor at Tuck School of Business at Dartmouth has accused Caterpillar of carrying of tax and accounting fraud

( zero hedge)

v)This is interesting:  The Republican House Intelligence Committee is asking Comey and others for a hearing of the supposed Russian hacking of the uSA election:

( zero hedge)

vi)The bond king, Jeff Gundlach states that the US will continue to hike rates until the markets break.  He thinks it is a far better move to short German bunds:

( zero hedge)

vii)That did not take long:  The Atlanta Fed lowers first quarter GDP estimates to only 1.2% due to the poor business inventories reading/and sales

( zero hedge)

Let us head over to the comex:

The total gold comex open interest FELL BY 5587 CONTRACTS DOWN to an OI level of 434,401 WITH THE  FALL IN THE  PRICE OF GOLD ( $9.00 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 GAIN of 15 contract(s) UP to 72. We had 1 contact(s) served upon yesterday, so we GAINED 16 CONTRACTS or  AN ADDITIONAL 1600  ounces will  stand for delivery.  The next  active contract month is April and here we saw it’s OI FALL by 14,706 contracts DOWN TO 243,246 contracts.

For comparison purposes, the April 2016 contract at this time had an OI of 301,376 contracts. At the end of April/2016 only 12.3917 tonnes stood for physical delivery, although 21.306 tonnes stood initially at the beginning of April 2016.

The non active May contract month lost 1 contract(s) and thus its OI is 413 contracts. The next big active month is June and here the OI ROSE by 8402 contracts up to 109,364.

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

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 And now for the wild silver comex results.  Total silver OI FELL BY 1,449 contracts FROM  193,847 UP TO 192,398 CONTRACTS WITH YESTERDAY’S TRADING .    It sure seems that the hedge funds are now longer playing the game as they refuse to liquidate their silver longs.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 15 contracts down to 2250 contracts. We had 11 notices served upon yesterday so we lost 4 contract(s) or an additional 20,000 oz  will not stand for delivery.

For historical reference: on the first day notice for the March/2016 silver contract:  19,020,000 oz stood for deliveryHowever 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/2017 contract month GAINED 10 contracts to 925 contracts. The next active contract month is May and here the open interest LOST 1676 contracts DOWN to 151,609 contracts.

FOR COMPARISON

Initially for the April 2016 contract, 1,180,000 oz stood for delivery.  At the end of April 2016: 6,775,000 oz as bankers needed much silver to fill major holes elsewhere.

We had 131 notice(s) filed for 655,0000 oz for the MARCH 2017 contract.

VOLUMES: for the gold comex

Today the estimated volume was 120,493  contracts which is poor.

Yesterday’s confirmed volume was 239,886 contracts  which is good

volumes on gold are getting higher!

INITIAL standings for MARCH
 March 8/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
32310.75 OZ
Scotia
Manfra
1005 kilobars
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
 nil oz
No of oz served (contracts) today
 
1 notice(s)
100 oz
No of oz to be served (notices)
71 contracts
7100 oz
Total monthly oz gold served (contracts) so far this month
47 notices
4600 oz
0.1462 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     50,443.5 oz
 This is very strange:  now for many days, nothing of substance enters the comex vaults.  They must have problems locating physical just like the LBMA>
Today we HAD 2 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 2 customer withdrawal(s)
 i) Out of Scotia:  32,150.000 oz 1000 kilobars
ii) Out of Manfra: 160.75 oz (5 kilobars)
total customer withdrawal: 32,310.75 oz
1005 kilobars
We had 0  adjustment(s)
For MARCH:

Today, 0 notice(s) were issued from JPMorgan dealer account and 0 notices were issued from their client or customer account. The total of all issuance by all participants equates to 1 contract(s)  of which 0 notices were stopped (received) by jPMorgan dealer and 0 notice(s) was (were) stopped/ Received) by jPMorgan customer account.

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To calculate the initial total number of gold ounces standing for the MARCH. contract month, we take the total number of notices filed so far for the month (47) x 100 oz or 4700 oz, to which we add the difference between the open interest for the front month of MARCH (72 contracts) minus the number of notices served upon today (1) x 100 oz per contract equals 11,800 oz, the number of ounces standing in this NON  active month of MARCH.
 
Thus the INITIAL standings for gold for the MARCH contract month:
No of notices served so far (47) x 100 oz  or ounces + {(72)OI for the front month  minus the number of  notices served upon today (1) x 100 oz which equals 11,800 oz standing in this non active delivery month of MARCH  (.3670 tonnes)
 
 
 
 
 
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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. 
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I have now gone over all of the final deliveries for this year and it is startling.
First of all:  in 2015 for the 13 months: 51 tonnes delivered upon for an average of 4.25 tonnes per month.
Here are the final deliveries for all of 2016 and the first month of January 2017
Jan 2016:  .5349 tonnes  (Jan is a non delivery month)
Feb 2016:  7.9876 tonnes (Feb is a delivery month/deliveries this month very low)
March 2016: 2.311 tonnes (March is a non delivery month)
April:  12.3917 tonnes (April is a delivery month/levels on the low side
And then something happens and from May forward deliveries boom!
May; 6.889 tonnes (May is a non delivery month)
June; 48.552 tonnes ( June is a very big delivery month and in the end deliveries were huge)
July: 21.452 tonnes (July is a non delivery month and generally a poor one/not this time!)
August: 44.358 tonnes (August is a good delivery month and it came to fruition)
Sept:  8.4167 tonnes (Sept is a non delivery month)
Oct; 30.407 tonnes complete.
Nov.    8.3950 tonnes.
DEC.   29.931 tonnes
JAN/     3.9004 tonnes
FEB/ 18.734 tonnes
March: 0.3670 tonnes
total for the 15 months;  244.627 tonnes
average 16.308 tonnes per month vs last yr  61.82 tonnes total for 15 months or 4.12 tonnes average per month (last yr).
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Total dealer inventory 1,419,840.049 or 44.162 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,894,600.148 or 276.665 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 276.665 tonnes for a  loss of 26  tonnes over that period.  Since August 8/2016 we have lost 77 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
 
IN THE LAST 6 MONTHS  77 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE MARCH DELIVERY MONTH
MARCH INITIAL standings
 March 8. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
334,727.106 oz
Delaware
CNT
Scotia
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
 nil oz
No of oz served today (contracts)
131 CONTRACT(S)
(565,000 OZ)
No of oz to be served (notices)
2119 contracts
(10,595,000  oz)
Total monthly oz silver served (contracts) 1905 contracts (9,525,000 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  2,068,984.1 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 3 customer withdrawal(s):
 i) Out of Delaware: 4,083.366 oz
ii) Out of CNT: 20,023.180 oz
iii) Out of Scotia: 310,620.56 oz
TOTAL CUSTOMER WITHDRAWALS: 334,727.106 oz
 we had 0 customer deposit(s):
***deposits into JPMorgan have now stopped.
total customer deposits;  nil  oz
 
 we had 1  adjustment(s)
i)Out of CNT:
647,911.650 oz was adjusted out of the customer and this landed into the dealer account of CNT
The total number of notices filed today for the MARCH. contract month is represented by 131 contract(s) for 565,000 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 1905 x 5,000 oz  = 9,525,000 oz to which we add the difference between the open interest for the front month of MAR (2250) and the number of notices served upon today (131) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the March contract month:  1905(notices served so far)x 5000 oz  + OI for front month of Mar.( 2250 ) -number of notices served upon today (131)x 5000 oz  equals  20,115,000 oz  of silver standing for the Mar contract month. This is  now average for an active delivery month in silver.  We lost 4 contracts or an additional 20,000 oz will not stand.  
 
END
Volumes: for silver comex
Today the estimated volume was 29,991 which is poor!!!
Yesterday’s  confirmed volume was 59,222 contracts  which is very good.
 
Total dealer silver:  36.112 million (close to record low inventory  
Total number of dealer and customer silver:   187.952 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.

end

And now the Gold inventory at the GLD

March 8/no change in gold inventory at the GLD/inventory rests at 836.77 tones

march 7/a huge withdrawal of 3.81 tonnes from the GLD inventory/inventory rests at 836.77 tonnes

March 6/No change in gold inventory at the GLD/Inventory rests at 840.58 tonnes

March 3/ a huge withdrawal of 2.96 tonnes of gold from the GLD/Inventory rests at 840.58 tonnes

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.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
March 8 /2017/ Inventory rests tonight at 836.77 tonnes
*IN LAST 105 TRADING DAYS: 113.04 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 51 TRADING DAYS: A NET  12.17 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1/2017: a net    37.60 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory
March 8/a big change; a withdrawal  of 1.515 million oz from the SLV/Inventory rests at 331.273 million oz/
march 7/no change in inventory at the SLV/Inventory rest at 332.788 million oz/
March 6/no change in inventory at the SLV/Inventory rests at 332.788 million oz/
March 3: two transactions:
i)March 3/ a small change, a withdrawal of 125,000 oz and this would be to pay for fees like insurance, storage etc/inventory now stands at 335.156 million oz.
ii) a huge withdrawal of 2.368 million oz/inventory rests this weekend at 332.788 million oz
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 8.2017: Inventory 331.273  million oz
 end

NPV for Sprott and Central Fund of Canada

will update later tonight the central fund of Canada figures

1. Central Fund of Canada: traded at Negative 5.0 percent to NAV usa funds and Negative 5.2% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.5%
Percentage of fund in silver:39.4%
cash .+0.1%( Mar 8/2017) 
2. Sprott silver fund (PSLV): Premium RISES  to -.02%!!!! NAV (Mar 8/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to  – 0.24% to NAV  ( Mar 8/2017)
Note: Sprott silver trust back  into NEGATIVE territory at -0.24% /Sprott physical gold trust is back into NEGATIVE territory at -0.24%/Central fund of Canada’s is still in jail  but being rescued by Sprott.
 

end

Press Release:  (Harvey: it was about time!!)

Sprott Files Court Application Proposing a Plan of Arrangement involving Central Fund of Canada

  • Proposed arrangement would, effectively, involve the exchange of Central Fund of Canada Limited’s Class A shares for trust units of a newly-formed Sprott Physical Gold and Silver Trust
  • Sprott Physical Gold and Silver Trust would be substantially similar to the existing Sprott Physical Gold Trust and Sprott Physical Silver Trust
  • CFCL’s Class A shares were trading at a 9% discount to NAV as of March 7, 2017
  • Based on the relative trading value to NAV of CFCL’s Class A shares, the proposed arrangement is anticipated to unlock US$304 million in shareholder value1
  • The aggregate value of the proposed arrangement is approximately US$3.1 billion and the resulting Sprott Physical Gold and Silver Trust would be a highly-liquid, best-in-class bullion vehicle managed by a firm with a globally-recognized precious metals franchise
  • Sprott Physical Gold and Silver Trust would include Sprott’s industry-leading physical bullion redemption feature
  • Substantially similar transaction in 2016 at CFCL’s sister fund, Central GoldTrust, was supported by more than 96% of all votes cast

All figures are in United States dollars unless otherwise stated.

TORONTO, March 08, 2017 (GLOBE NEWSWIRE) — Sprott Asset Management LP (“Sprott”), a wholly owned subsidiary of Sprott Inc. (TSX:SII), today announced that it has filed an application (the “Application”) with the Court of Queen’s Bench of Alberta (the “Court”) to formally commence proceedings which, if successful, would result in the Class A shareholders of Central Fund of Canada Limited (“CFCL”) (NYSEMKT:CEF) (TSX:CEF.A), effectively, exchanging their Class A shares for trust units of a newly-formed Sprott Physical Gold and Silver Trust (the “New Sprott Trust”) on a net asset value (“NAV”) for NAV basis pursuant to a plan of arrangement (the “Arrangement”). The aggregate value of the proposed Arrangement is approximately US$3.1 billion and stands to unlock $304 million1 in shareholder value as a result of CFCL’s persistent discount to NAV.

The New Sprott Trust would be managed by Sprott and be substantially similar to the existing Sprott Physical Gold Trust (NYSE Arca:PHYS)(TSX:PHY.U) and Sprott Physical Silver Trust (NYSE Arca:PSLV)(TSX:PHS.U) and would include Sprott’s best-in-class physical bullion redemption feature.

John Ciampaglia, Sprott Asset Management’s Executive Vice President and Head of ETFs, said, “CFCL continues to significantly underperform the precious metals markets and is currently trading at a 9.0% discount to NAV. This underperformance has been consistent with CFCL failing to trade at or above NAV at any point over the past three years. During 2016, CFCL failed to eliminate its discount to NAV despite gold and silver prices rising by 8% and 15%, respectively, during the year. CFCL has had numerous opportunities to effect change for the benefit of all shareholders, particularly in considering the overwhelming success of the Central GoldTrust merger with Sprott Physical Gold Trust. However, the Spicer family seems to be comfortable with the numerous conflicts of interest that exist within their operations and is unwilling or unable to solve the persistent discount to NAV.”

Added Ciampaglia, “Many large investors have expressed to us, a fellow CFCL shareholder, that there is a real need for change and that they support the effort we are initiating today. Shareholders deserve an opportunity to choose how their assets are held and managed. They should not be impeded from that choice by an antiquated and punitive dual class share structure where all voting power is concentrated in the hands of those owning a very small percentage of CFCL’s equity.”

Concluded Ciampaglia, “By supporting Sprott’s proposed Arrangement and moving their assets into a Sprott managed vehicle, we believe CFCL shareholders will see a meaningful reduction in the persistent NAV discounts that have negatively impacted their investments. CFCL shareholders will also benefit from ownership of a product with best-in-class physical redemption features, high-visibility in the marketplace, and a team dedicated to ensuring that their investment accurately reflects the value of the gold and silver that underlies it.”

The Application seeks an interim order of the Court providing for the calling and holding of a special meeting of CFCL shareholders to consider and vote upon a statutory plan of arrangement under the Business Corporations Act (Alberta), i.e. the Arrangement, pursuant to which all or substantially all of the assets and liabilities of CFCL (other than its administration agreement with the Spicer family-controlled administrator, The Central Group Alberta Ltd. (the “Administrator”)) would be transferred to the New Sprott Trust and CFCL’s Class A shareholders would receive units of the New Sprott Trust in exchange for their Class A shares on a one-for-one basis. CFCL’s common shareholders would also have the ability to participate in the Arrangement on a substantially similar basis. The Application was filed without the consent of CFCL.

1 Based on the published NAV ($13.40) and closing price on the NYSE MKT ($12.20) for CFCL’s Class A Shares on March 7, 2017, the last trading day prior to the date of this press release, and an indicative discount to NAV of 9.0%, being based on the published NAV ($9.99) and closing price on the NYSE Arca ($9.96) for the units of Sprott Physical Gold Trust on March 7, 2017.

The Potential to Unlock Value at CFCL

Based on the closing price of the Class A shares on the NYSE MKT on March 7, 2017 CFCL’s Class A shares were trading at a 9% discount to NAV. This significant discount has been relatively consistent over a prolonged period of time. Over the last three years, the Class A Shares have traded at as much as a 13% discount to NAV (and have never traded at a premium to NAV). Over the same period, Sprott’s physical bullion vehicles Sprott Physical Gold Trust and Sprott Physical Silver Trust have traded near or above NAV, including periods during 2016 where they traded at premiums to NAV of over 2% and 6%, respectively.

Sprott’s Impact on Central GoldTrust

Sprott is an experienced manager of physical bullion and has been involved in transactions similar to the proposed Arrangement. In 2015 and early 2016, an affiliate of Sprott, Sprott Asset Management Gold Bid LP, and Sprott Physical Gold Trust, an industry leading physical gold bullion vehicle managed by Sprott, effected an unsolicited exchange offer and merger with Central GoldTrust, a vehicle that, at the time, was administered by an entity that is controlled by the Spicer family (the “Central GoldTrust Transaction”).

Central GoldTrust unitholders, when, as part of the Central GoldTrust Transaction, provided with an opportunity to express their preference between physical bullion vehicles managed by Sprott or by entities controlled by the Spicer family, overwhelmingly (in excess of 96% of the units voted in person or by proxy) chose to exchange their Central GoldTrust units for units of Sprott Physical Gold Trust.

Following the completion of the Central GoldTrust Transaction, gold and silver prices fluctuated, including a bull market for gold and silver during the middle of 2016. During this bull market, gold and silver reached prices of US$1,366/oz and US$20.62/oz, respectively and Sprott Physical Gold Trust (which had merged with Central GoldTrust resulting in the formerly captive unitholders of Central GoldTrust benefiting from Sprott management) and Sprott Physical Silver Trust generally traded at a premium to NAV. Also during this time period, the Spicer family administered CFCL consistently traded at a discount to NAV (and never traded at or a premium to NAV).

Central GoldTrust unitholders greatly benefited from joining the Sprott platform, and Sprott would like to offer CFCL shareholders the same opportunity.

A Unique Opportunity to Exit CFCL, an Underperforming and Conflicted Vehicle

As was publicly revealed by Sprott in connection with its CFCL meeting requisition in 2015 and the successful Central GoldTrust transaction, the current and former directors and officers of CFCL and its Spicer family-controlled Administrator have significant conflicts of interest that appear to have resulted in significant underperformance by CFCL, gross mismanagement at the Administrator and questionable side payments to various current and former directors and officers of CFCL and other friends of the Spicer family. Various current and former directors and officers of CFCL are interconnected with the Spicer family, which has been the architect of a system of vague and/or undisclosed consulting contracts, payments and fees to these very same directors and officers that are supposed to act in the best interest of CFCL Shareholders and free from conflict.

Through the Arrangement, CFCL shareholders would have a unique opportunity to exit underperforming securities that consistently fail to track the value of the underlying bullion investors have purchased. CFCL shareholders should consider the following:

  • CFCL’s expenses are grossly disproportionate to the work of the Administrator and the CFCL Board. In fact, the Administrator does not reinvest fees in the promotion or management of CFCL, and has no responsibilities related to the redemption of physical bullion. Simply put, the Administrator, i.e., the Spicer family, appears to have retained all the fees paid by CFCL shareholders and done absolutely nothing effective to support the investment of CFCL shareholders.
  • Despite their persistent underperformance, the Spicer family (in connection with the Central GoldTrust transaction) engaged in wrongful conduct adjudged to be “defensive tactics” by the Ontario Superior Court, including forcing securityholders of Central GoldTrust to pay millions in costs incurred through wasteful litigation initiated by the Spicer family and various current members of the CFCL Board in a transparent attempt to protect Spicer family profits.
  • Sprott, on the other hand, reinvests fees collected from Sprott Physical Gold Trust and Sprott Physical Silver Trust into marketing those funds, creating buying demand that supports the price of Sprott Physical Gold Trust and Sprott Physical Silver Trust units, enhances liquidity, and leads to asset growth. Sprott will similarly manage the proposed Trust.
  • The Spicer family made payments worth millions of dollars in the aggregate to “independent” CFCL Board members and awarded consulting contracts to their families, the details and extent of which had never been publicly disclosed.
  • CFCL Board members do not possess the expertise or infrastructure to address the persistent discount to NAV at CFCL and seem content to assist the Spicer family collect fees, whatever the cost to CFCL Shareholders.
  • The New Sprott Trust is offering CFCL shareholders an ability to exchange their CFCL shares with the assurance of management by a regulated entity that is committed to their best interests.

Benefits of Sprott Relative to Central Fund of Canada

Sprott is a globally recognized leader in precious metals industry

 

end

Major gold/silver trading/commentaries for WEDNESDAY

GOLDCORE/BLOG/MARK O’BYRNEet.

Gold Investing 101 – Beware Unallocated Gold Accounts With Indebted Bullion Banks and Mints (Part II)

Gold Investing 101 – Beware Unallocated Gold Accounts With Indebted Bullion Banks and Mints (Part II)

  • Investors looking to gold again but gold buyers need to exert caution
  • Royal Mint – a royally expensive way to help the government
  • Unallocated gold – unsecured creditor of a bank?
  • If you cannot hold it, you do not own it
  • Own gold bullion coins as insurance, to reduce counter party risk and to preserve wealth
  • Conclusion – Reduce counter parties, Don’t over complicate

gold-investing-101

Yesterday we pointed out how the gold market is seeing renewed interest from new, first time gold buyers and gold investors. Concern unites them – they are concerned about the current trajectory of the world – politically, financially, economically, monetarily and environmentally.

As the old adage goes though – ‘all the glitters is not gold’ and novice, and indeed experienced, investors need to be careful that they are not seduced by ‘shiny trinkets’ which look ostensibly attractive but in fact are fraught with risk and not the safe haven that gold bullion is – when owned in the safest ways possible.

We looked at collectible gold and silver coins with massive premiums, gold plated coins masquerading as “pure gold coins” and the assortment of such coins for sale on eBay and other online retail platforms.

Today, we move up the food chain of the gold market and look at some of the bigger beasts who offer various gold investment schemes – two of which are unallocated gold accounts with bullion banks and with government institutions and mints.

gold-bullion-sovereign-2017

Below we take a look at some of these popular options and explain why they might not be the gold standard of gold investment.

For all of our talk about avoiding gold scams you might think that the wisest thing to do would be to go straight to the source in order to buy your commemorative coin or even a bullion coin. Whilst this does remove the risk of buying a fake, it certainly does not remove the chances of being royally ripped off when it comes to the price and buying intrinsically worthless coins are very high prices. This is most likely the case when it comes to newly minted commemorative coins.

The Telegraph writes that the Royal Mint’s London Olympic 2012 coins set was priced at £1,295, almost twice the value of each coin’s gold content (38 grams of 22-carat gold). One wonders how much a 2008 ‘Olympic handover’ coin is now going for given it was trading for 5% below the original retail price, in 2009 despite a 30% climb in the sterling price of gold.

The mark-up of such coins is not the only problem with the Royal Mint. In recent years there has been a push to bring in more investors who are keen to hold both their bullion and bullion coins in storage with the government owned institution.

When investors decide to invest in gold, one of the contributing factors is that they are looking for an investment that not only has reduced counter party risk, but also is kept out of the reach of those institutions that are responsible for the financial crisis that has caused you, the investor, to want to invest in gold.

Most investors accept that the global financial crisis was in large part due to irresponsible banks with reckless trading and lending policies. Many also believe that “regulatory capture” and a lack of prudent regulation of banks by governments contributed to the crisis.

If you are concerned about the solvency of banks and governments, why would you invest some of your hard earned savings in institutions and governments who are heavily indebted and vulnerable in the event of another debt crisis?

The Royal Mint is 100% owned by the UK Treasury and pays a dividend to the UK government, each year. Whilst the Royal Mint’s decision to offer storage solutions is a great way to alert people to the possibilities of gold investing, it distracts somewhat from the key reasons why investors choose to hold gold in the first place.

The UK national debt – the accumulation of years of massive overspending and more recently the bailing out of banks – continues to surge and is now over £1.82 trillion and over 90% of the value of the UK economy.

uk-national-debt

Whilst gold confiscation has never happened in the UK, there is evidence of other forms of financial confiscation that have happened with the support of British government and associated institutions.

Investors choose gold, and gold has lasted for hundreds of years as a preferred investment asset, because it is border less and autonomous.

Gold cannot be printed or devalued by currency debasement and negative interest rates. When stored in allocated, segregated storage outside of the banking and government system but within safer jurisdictions, then it will be nigh impossible to be removed from you whether through bail-ins or asset confiscation.

Whilst history has shown that gold has held its value and can preserve the value of the your portfolio, there are still checks that investors need to make to protect the gold that they are buying.

When placing gold in storage, that is not only allocated but also segregated and in a safe jurisdiction then the investor is doing their utmost to do not only reduce counterparty risk but to also ensure the integrity of the gold’s chain of custody.

The Royal Mint’s Gold Sovereigns and Britannia’s are some of our biggest selling coins, so we’re not against the government-owned organisation. But, as with buying gold on eBay or choosing collectors coins, it is not a huge leap to argue that by storing gold with the Royal Mint you are undoing some of the reasons you chose to hold gold in the first place.

Unallocated gold

Despite the fact that the financial crisis is still wreaking havoc around the world, (see the Euro and sovereign debt levels for just two examples) some investors and even family offices still appear to trust the banking system when it comes to storing their wealth. This is also why it is surprising that people choose to hold gold in the Royal Mint.

But it is not just the Royal Mint that investors should consider carefully. Even once investors have made the wise decision to allocate some money to gold, they decide to do it with the ‘help’ of their banks.

More often than not holding gold with a bank includes what is referred to as unallocated gold storage.

Holding physical gold with a bank is no different to when you deposit cash with them. You instantly become a creditor to the bank. You are now longer the legal owner of that gold. Suddenly ‘free storage’ should seem a very costly arrangement.

Investors buy gold for several reasons but as mentioned when talking about the Royal Mint, one of these reasons is to reduce counter party risk and the exposure to the institutions that have lead to the current economic situation and significant wealth destruction. So when gold buyers choose to do so with a bank or an institution that offers unallocated gold, this conflicts somewhat with many of the key reasons to hold gold.

When there is unallocated gold, the gold may or may not exist. Even if it does exist then the bank may be putting it to use, in the same way they do with your cash in the bank. When you hold unallocated gold with a bank then you are the creditor and they are the legal holder of the gold.

Whilst on file this gold may appear to be unallocated to you, the regulators will see it as part of the bank’s liquid reserves. A great deal for the bank that is able to show liquidity that it has not had to pay anything for. Not so great for you when the bank runs into further financial difficulties.

In contrast, allocated gold accounts mean that you are the legal owner of your gold. That means that if anything happens to the gold provider, then the bullion is still yours. Unallocated gold just means that there is a promise by the gold provider or bank to give you your gold (or pay you for your gold) should you come to request it or sell it. But imagine how high the counterparty risks are here. You are relying on the promise of an institution, most likely a financial institution to protect your gold investment that may or may not physically exist.

Allocated gold is of little use to banks and, therefore, if they offer it, they usually charge a far higher premium for the service than the likes of GoldCore do. Even if banks and other reputable bullion dealers offer reasonable allocated storage (where the gold is legally owned by you) then this is still not enough. GoldCore advises investors opt for allocated and segregated storage with outright legal ownership of individual coins and bars (including serial numbers).

If you cannot visit, inspect and hold your gold or take delivery of it in a matter of days then you do not own your gold and you are exposed.

Perth Mint Unallocated gold remains the exception to the rule. We would not allow our clients to buy and own Perth Mint certificates if we considered them risky.

The Perth Mint of Western Australia remains a AA+ rated government institution (est. 1899) and therefore there is far less risk in being an unsecured creditor of the Perth Mint than in your typical unallocated account with a bank or bullion dealer.

The safety of Perth Mint Certificates is due to the fact that you have a direct relationship with the Perth Mint. We advise clients to have a combination of PMCP and GoldCore Secure Storage – private offshore storage in Zurich, Singapore and Hong Kong. Geographic diversification is important in these uncertain times and it is good to not have all your eggs in the one basket.

Ultimately, owning physical gold coins and bars in your possession is the safest way to own gold and we urge all clients to own some physical – however we realise that for certain clients and indeed for companies and institutions, this will not be suitable for them.

Conclusion – Reduce Counterparties, Don’t Overcomplicate

Despite what you might read, gold is a very simple commodity and form of money and as a result investing in it can and should be a very simple process.

The problem with today’s financial system is that banks have created an environment where we think we can get greater returns for less, or that we don’t need to understand what we are really investing in.

Or worse, they have made us so untrusting of them that we seek to find profit in areas outside of the financial system – in places such as eBay marketplaces or coins that happen to have a certain person or event recorded on them.

Investors need to look for simple gold products such as gold bars and sovereign coins, as well as services that offer both allocated and segregated storage.

You are investing in gold in order to protect your wealth and reduce the risks associated with counterparties. You also want a service that means you can sell when you want to, in the knowledge that you have not bought something that came with a huge markup and relied on the fashions of the marketplace, as we see with certain coins.

Instead, investors considering gold need to realise that the precious metal in its purest physical form – coins and bars – has maintained its role as a key component in portfolios and as a store of value across hundreds of years. They must ask, therefore, does anything really need to change in the way that I buy and store it?

The answer is no – keep it simple by taking delivery of actual bullion coins and bars or storing in an allocated and segregated manner in the safest vaults in the safest jurisdictions in the world.

 

 

end

 

This Singapore trader has amassed 6 million tonnes of sugar and as such these guys are controlling the market:

(courtesy zero hedge)

Meet The Singapore Futures Trader Who Has Bought 3,000 Swimming Pools Worth Of Sugar

There is a new powerhouse dominating the U.S. futures market for raw sugar contracts and it’s creating a bit of confusion among the the more established trading houses of the world’s most volatile commodity markets.  The firm is Wilmar International, a Singapore-based agribusiness whose major shareholders include the family of Malaysian billionaire Robert Kuok and Chicago-based Archer Daniels Midland.  Founded 26 years ago, Wilmar is one of the world’s largest palm-oil producers but was essentially non-existent in the sugar market until just a couple of years ago.

Now, in just two short years, Wilmar has scooped up more than 6 million tons of raw sugar, enough to fill roughly 3,000 Olympic-size swimming pools at a cost of some $2.3 billion, by physically settling tens of thousands of futures contracts and collecting the commodity from ports across South America and elsewhere.

The timing and size of the purchases have raised some concerns among other futures traders that Wilmar may be looking to manipulate global sugar prices.  As the Wall Street Journal points out, purchases made by Wilmar in 2015 were large enough soak up the entire global supply glut that pushed sugar prices to multi-year lows. 

The effects of Wilmar’s moves have been the subject of debate among traders. At one point in 2015, when sugar prices were at multiyear lows because of a world-wide glut, Wilmar bought so much that traders say the company in effect mopped up that year’s global oversupply. In the rally that followed, sugar prices more than doubled.

Then, as prices peaked in September last year, Wilmar changed course and delivered excess sugar it owned to other traders on the exchange. Sugar prices fell 24% in the ensuing months.

The company’s size and scale, however, are sowing concerns among some traders that it could control a large amount of the world’s tradable sugar and influence prices.

“They are a market mover,” Nick Gentile, head trader of New York commodities trading firm Nickjen Capital, said of Wilmar. Around two-thirds of the world’s sugar production is consumed in the countries that produce it, and the rest is traded internationally.

Sugar

Of course, Wilmar denies the importance of their massive trades in determining global sugar prices saying they represent just a small component of a very fragmented commodity market.

Jean-Luc Bohbot, the 48-year-old Frenchman who runs Wilmar’s sugar business, said there is no evidence that the company’s trades affect market prices. That is “very much an incorrect view,” he said in a recent interview. “Sugar is an extremely fragmented commodity, with a very large number of players around the globe.”

While Wilmar’s sugar purchases and sales appear in some cases to have preceded rising and falling prices, Mr. Bohbot said, “There is no clear correlation” between the two. Over the past few decades, sugar prices have gone in both directions when there were large physical deliveries, he added.

But perhaps even more rare than Wilmar’s quick rise to become one of the world’s largest sugar traders, is their propensity to take physical delivery of the sweet stuff and ship it to refineries in Asia and the Middle East, often at a loss.

Physical settlements of futures trades, however, are rare. Exchange operator Intercontinental Exchange Inc. estimates that fewer than 0.5% of trades result in the actual delivery of commodities. The vast majority of futures contracts are unwound by traders before they expire because most firms want to avoid the hassle of transporting commodities to or from inconvenient locations. With sugar futures, buyers don’t know where in the world they will have to pick up the sweetener until after the contracts expire.

That hasn’t deterred Wilmar. Mr. Bohbot said the company has found it economical to purchase sugar in bulk using futures contracts, because the exchange’s rules require sellers to deliver the sugar on board buyers’ ships, which facilitates international trading. In other commodity markets, such as grains or metals, the handover usually happens inside warehouses in locations that often might not be easily accessible.

Mr. Bohbot said Wilmar ships and sells most of the raw sugar it buys to refineries in Asia and the Middle East, where consumption is growing. This sort of trading, however, is often barely profitable when shipping and other costs are factored in, he said, noting, “There is very little margin, and sometimes no margin.”

And while their strategy may be confusing to other large trading houses, it certainly seems to be working as the company’s sugar division posted a 33% year-over-year increase in revenue in 2016 on the back of substantially higher sugar prices…which we’re sure has nothing to do with their massive trading volume but rather was just the result of a little bit of ‘luck’.

end
Good luck to Mexico trying to get their gold back.  All of it is located at the Bank of England with 1/4 of this amt in ” non allocated” form.
(Barba/GATA)

Guillermo Barba: A quarter of Mexico’s gold reserve is ‘unallocated’ at Bank of England

Section:

12:33p ET Tuesday, March 7, 2017

Dear Friend of GATA and Gold:

Mexican financial journalist Guillermo Barba reports today that Mexico’s central bank has finally provided him with a list of the bars of its gold reserve and has disclosed that nearly all its gold is held at the Bank of England and that about a quarter is held there on an “unallocated” basis. Presumably this gold has been leased into the market.

Barba urges the Bank of Mexico to recover the “unallocated” gold and repatriate at least half the reserves to Mexico.

Barba’s report is headlined “The Bank of Mexico Reveals Its Gold Bar List” and it’s posted at his internet site here:

http://www.guillermobarba.com/the-bank-of-mexico-reveals-its-gold-bar-li…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 

END

Ronan Manly agrees with Bix Weir on the odd withdrawal of Thomson Reuters and the CME from the silver fix

(courtesy Ronan Manly/Bullionstar)

Ronan Manly reflects on odd withdrawal of Thomson Reuters, CME from silver pricing

Section:

2:40p ET Tuesday, March 7, 2017

Dear Friend of GATA and Gold:

Gold researcher Ronan Manly reports today that the withdrawal of Thomson Reuters and CME Group from the London Bullion Market Association’s silver price benchmark now is being attributed to a European Commission financial regulation that is to take effect next January. Manly does not find this persuasive and wonders if Thomson Reuters and CME Group anticipate some scandal involving the LBMA. Manly’s report is headlined “More Bad News for the LBMA Silver Price, but an Opportunity for Overhaul” and it’s posted at Bullion Star here:

https://www.bullionstar.com/blogs/ronan-manly/bad-news-lbma-silver-price…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 

 

END

 

Hugo states correctly that if the uSA undergoes protectionism there will be a massive dollar shortage and thus there will be a need to replace the dollar as the reserve currency

(Hugo Salinas Price)

 

Hugo Salinas Price: Where are we today?

Section:

7:08p ET Tuesday, March 7, 2017

Dear Friend of GATA and Gold:

Hugo Salinas Price, president of the Mexican Civic Association for Silver, notes today that if the United States resorts to protectionism and stops running huge trade deficits, the world will run out of money and will need to find a currency to replace the dollar. Salinas Price’s commentary is headlined “Where Are We Today?” and it’s posted at the association’s internet site, Plata.com.mx, here:

http://www.plata.com.mx/mplata/articulos/articlesFilt.asp?fiidarticulo=3…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
CPowell@GATA.org

 

END

 

Seems that the Deputy Governor of the Bank of England forgot to tell them that her brother has a chief role at Barclay’s

(courtesy London Telegraph)

Bank of England deputy governor with brother in senior Barclays role faces calls to resign

Section:

By Tim Wallace
The Telegraph, London
Tuesday, March 7, 2017

Charlotte Hogg is facing calls to resign as deputy governor of the Bank of England after she failed to notify its ruling body that her brother is director of group strategy at Barclays, which she monitors closely in her new job.

Ms. Hogg has been given a verbal warning by Governor Mark Carney in her first week in the job as his deputy, but members of Parliament are increasingly concerned about her failings, given her key role in charge of regulating banks and markets.

The error came to light a week after Ms. Hogg appeared before the House of Commons Treasury Select Committee, during which she said that she had told the bank of her brother’s job at the time she joined the central bank as chief operating officer in July 2013.

However, in a letter sent following the hearing to committee chairman Andrew Tyrie, which was published today, she admitted that she had not done so. …

… For the remainder of the report:

http://www.telegraph.co.uk/business/2017/03/07/bank-england-deputy-gover…

 

 

END

Your early WEDNESDAY 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 MUCH WEAKER AT  6.90103( DEVALUATION SOUTHBOUND   /OFFSHORE YUAN WIDENS  TO 6.9162/ Shanghai bourse DOWN 1.74 POINTS OR .05%   / HANG SANG CLOSED UP 101.20 POINTS OR 0.43% 

2. Nikkei closed DOWN 90.12 POINTS OR 0.47%   /USA: YEN FALLS TO 114.00

3. Europe stocks opened MOSTLY IN THE RED      ( /USA dollar index RISES TO  101.94/Euro DOWN to 1.0559

3b Japan 10 year bond yield: RISES TO    +.080%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 114.00/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  52.60  and Brent: 55.33

3f Gold DOWN/Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO  +.349%/Italian 10 yr bond yield UP  to 2.245%    

3j Greek 10 year bond yield RISES to  : 7.20%   

3k Gold at $1213.65/silver $17.42(8:15 am est)   SILVER  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 21/100 in  roubles/dollar) 58.39-

3m oil into the 52 dollar handle for WTI and 55 handle for Brent/

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

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 114.00 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  1.0125 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0693 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

3p BRITAIN VOTES AFFIRMATIVE BREXIT/LOWER PARLIAMENT APPROVES BREXIT COMMENCEMENT

3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.349%

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 2.54% early this morning. Thirty year rate  at 3.132% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

HELICOPTER MONEY STILL ON THE TABLE FOR THE FUTURE

Stocks Mixed As Treasuries Suffer Longest Losing Streak Since 2012, Dollar Pops Ahead Of ADP

Asian markets dropped following disappointing China trade and Japan GDP data, while European stocks rebounded for the first time in five sessions led by miners and banks. US futures were little changed as the dollar strenghtened, pressuring oil further below $53; sterling slid for the eighth day out of nine, dropping under 1.215 before the chancellor of the exchequer delivers his spring budget. Treasuries are headed for their longest losing streak since 2012 ahead of a 10Y U.S. debt auction, and today’s ADP private payrolls report.

Following four sessions of losses, European shares edged up on Wednesday, with the Stoxx 600 index fractionally in the green, after minor gains driven by Chinese import data which signaled a recovering economy (just ignore the huge miss in exports), while the dollar rose before jobs numbers that could help cement expectations that U.S. interest rates will rise next week. Banks rose, while healthcare stocks fell after U.S. President Donald Trump said on Tuesday he was developing a plan to encourage competition in the drug industry. Britain’s FTSE 100 index rose 0.1% before finance minister Philip Hammond unveils his first budget since the UK voted to leave the European Union.

Today’s key event ahead of Friday’s payroll report is the latest ADP report where expectations are for 189k. It’s important only in so far as it will give us a guide to Friday’s payrolls which in turn will be the last employment data before next week’s FOMC meeting. With the probability of a hike now 96% (according to Bloomberg’s calculator which overstates a bit) it seems that the only economic data that could cause this probability to reverse would be employment on Friday or US CPI on Wednesday – the day of the decision. However the numbers would have to be large outliers to shift expectations markedly now.

Meanwhile, volatility for virtually all asset classes continues to slide. Ever since Donald Trump gave his speech to a joint session of Congress last week and Fed officials including New York Fed President William Dudley ramped up odds of an interest-rate hike this month, volatility metrics across the board have plunged.

Most Asian stocks fell amid lower trading volume.  As noted last night, China’s imports in February grew 44.7% from a year earlier on a yuan-denominated basis and 38.1% in dollar terms, accelerating from the previous month and leading to a rare trade deficit. Exports rose 4.2%, missing expectations of a 14.6% rebound, and down from the 15.9% January gain.

On the other hand, as Goldman wrote after the report, the apparent weakness in export data seems to be inconsistent with (1) signs of stronger global growth (our global leading indicator is at a multi-year high), and (2) strong early readings of exports from neighboring economies such as Korea. Several factors might be at work, including The strength in global data has been more evident in terms of survey than hard data so far. However, the biggest culprit is said to be Chinese New Year distortions:

Our seasonal adjustment process is supposed to correct for these distortions when calculating the level of sequential growth. However, these distortions are often changing and with a small and changing effective sample there are large uncertainties related to these estimates. March data is likely to look better as the Chinese New Year distortion reverses. If year-over-year growth bounces back to January level, 1Q growth will still reach a decent mid-single digit level, a long way up from the trough a year ago.

China’s trade data briefly pushed the MSCI Asia-Pac index ex-Japan higher, although it later traded flat. Mainland Chinese shares dipped but Hong Kong stocks rose 0.4 percent. The Nikkei 225 (-0.5%) dropped after Japan’s Final Q4 GDP missed expectations. Hang Seng (+0.4%) and Shanghai Comp. (-0.1%) were choppy after the PBoC drained liquidity via reverse repo operations, leading to a 10th consecutive day of net outflows.

The Stoxx Europe 600 was fractionally in the green, rising 0.01 in latest trading, after declining a fourth straight session on Tuesday. S&P 500 Index futures pared earlier declines to trade little changed. The S&P500 lost 0.3% on Tuesday, completing the first back-to-back declines since January. Health-care shares declined after Republicans released details of a replacement for Obamacare and the president tweeted about lowering drug costs for Americans.

In the US, The yield on 10-year U.S. notes climbed for an eighth session and most government debt in Europe followed suit according to Bloomberg. Bank and commodity producer shares responded positively, putting the Stoxx Europe 600 Index on course for its first gain in five days. The British pound slid for the eighth day out of nine before the chancellor of the exchequer delivers his spring budget. There’s “a bit of supply pressure but there are bigger issues going on,” Padhraic Garvey, London-based global head of strategy at ING Groep NV told Reuters. “The bigger issue is the realization that we’re facing into a Fed hike event and a reasonably positive environment from a European growth perspective.”

In currencies, Sterling was an underperformer on currency markets, down 0.3 below $1.215. Below-forecast consumer spending data on Tuesday pushed the pound lower as it came after months of robust numbers and suggested the economy might be slowing. The euro weakened 0.1 percent to a day before a meeting of European Central bank policymakers. The dollar rose 0.2 percent against a basket of currencies. It hit a seven-week high last week as a host of Federal Reserve officials talked up the chances of a rise in interest rates as soon as the March 14-15 meeting. Traders were waiting for Friday’s U.S. jobs data as a final piece of evidence supporting a 25 basis point rise, which futures prices indicate is an 83 percent probability. The yen declined following the European open, trading up to 114.10.

“Unless the market were to price in a significantly more upbeat picture for the US, which would imply the Fed might move much more dynamically than is currently priced in, whether they hike two time or three times this year isn’t going to matter for the dollar,” said Sonja Marten, FX strategist at DZ Bank in Frankfurt.

Looking ar rates, attention has turned to the ECB ahead of the central bank’s Thursday announcement whose ongoing monetization of German bunds and speculation of scarcity in German securities have pushed yields on short-dated German government bonds to record lows in recent weeks. Two-year yields edged down 1 basis point to minus 0.88 percent while 10-year yields rose 4 bps to 0.36 percent, taking the gap between them to 122 bps, its widest since July 2014.

In commodities, oil prices fell in anticipation of data expected to show growing U.S. crude stockpiles. Brent fell 31 cents a barrel to $55.61, while WTI was back under $53. “Oil is range-bound. If prices dip below $50 a barrel, OPEC will cut more; if it goes above $55 the U.S. will produce more,” said Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney. Gold fell 0.3% to $1,211 an ounce, weighed down by the prospect of higher U.S. interest rates.

Market Snapshot

  • S&P 500 futures down 0.02% to 2,366.00
  • STOXX Europe 600 up 0.01% to 372.31
  • MXAP down 0.2% to 144.39
  • MXAPJ down 0.03% to 465.62
  • Nikkei down 0.5% to 19,254.03
  • Topix down 0.3% to 1,550.25
  • Hang Seng Index up 0.4% to 23,782.27
  • Shanghai Composite down 0.05% to 3,240.67
  • Sensex down 0.3% to 28,904.36
  • Australia S&P/ASX 200 down 0.03% to 5,759.66
  • Kospi up 0.06% to 2,095.41
  • German 10Y yield rose 3.1 bps to 0.35%
  • Euro down 0.1% to 1.0553 per US$
  • Brent Futures down 0.6% to $55.57/bbl
  • Italian 10Y yield rose 2.7 bps to 2.192%
  • Spanish 10Y yield rose 1.4 bps to 1.752%
  • Brent Futures down 0.6% to $55.57/bbl
  • Gold spot down 0.3% to $1,212.49
  • U.S. Dollar Index up 0.2% to 101.96

Top Overnight News

  • Apollo Said to Seek $20 Billion by May for New Buyout Fund
  • CSX Bets Up to $300 Million on CEO for Worst-to-First Turnaround
  • CSX Says It’s Working With Authorities at Site of Deadly Crash
  • Credit Agricole Said to Weigh $2.4 Billion Saudi Stake Sale
  • Armstrong World 5.25m-Share Block Said Offered at $44.90-$45.40
  • Lockheed Unit Awarded $1b U.S. Air Force Contract
  • Caterpillar Sees ‘Significant’ China Improvement, Stays Cautious
  • Amgen Sues Coherus Biosciences for Alleged Trade Secret Theft
  • Republicans Give Rich Investors a Tax Break in Obamacare Revamp
  • Pertamina in Talks to Swap Part of Its U.S. LNG Cargoes

Asia equity markets traded mixed as the region digested several disappointing data releases and after a downbeat close on Wall Street, where healthcare names suffered from US President Trump comments that he will work to lower drug prices. ASX 200 (Unch) was subdued amid weakness in commodities, while Nikkei 225 (-0.5%) was dampened after Japan’s Final Q4 GDP missed expectations. Hang Seng (+0.4%) and Shanghai Comp. (-0.1%) were choppy after the PBoC kept liquidity operations weak which led to a 10th consecutive day of net outflows and as participants mulled over the latest trade figures which showed weaker than expected exports and an unexpected trade deficit, while imports surged 44.7%. 10yr JGBs were slightly lower as a mild bid tone from weaker than expected GDP data and risk averse sentiment in Japan was overshadowed following a reserved Rinban buying operation in which the BoJ were in the market for a reserved JPY 750b1n of government debt.

  • Top Asian News
  • China Imports Surged in February as Exports Missed Estimates
  • China Proposes North Korea-U.S. Compromise to Defuse Tensions
  • Indonesia Gears Up for First Nickel Ore Exports Since 2014
  • Southeast Asian Startup Fave Buys Groupon Singapore
  • Japan Post in Talks With Large Shippers to Raise Delivery Fees
  • Yingde Gases Changes Venue for Both EGMs, External PR Says
  • Yingde Shareholders Said to Reject Proposal to Oust Sun, Strutt
  • CDB Aviation Set to Announce Order for 30 Boeing Max 8s: Reuters

Equity markets are trading within a tight range this morning ahead of upcoming key risk events. There have been some notable stock stories this morning, with Adidas (+7.1 %) after reporting a rise in net income of 41 %. Elsewhere, EDF shares are subdued after the French utility company begins a EUR 4bn capital raising. In Fixed income markets, the PO-GE spread was initially wider with notable PGB underperformance. The 10Y PGB/Bono spread eyed 226bps ahead of impending supply which was later digested by the market . Today it’s also worth looking at the 2/10Y spread which has fallen to-121.5bps as the short end outperforms. Bunds have broke through Mondays lows of 160.81 before being dealt a further blow by an uncovered Bobl auction.

Top European News

  • U.K. Budget Offers Sliding Bonds Chance of Respite
  • Endesa Pares Gains After Enel Denies Takeover Report to Reuters
  • Deutsche Post Shares Drop After Parcel Division Earnings Slowed
  • Monte Paschi Said to Seek Fast Sale of Debt After EU Consent
  • Cetinkaya Says Turkey Central Bank Will Tighten Policy If Needed
  • Foxtons Warns London Home Sales Market Will Remain ‘Challenging’
  • Wilders Targets Turkey Amid Poll Slip Week Before Dutch Vote
  • Inmarsat Rises After Winning In-Flight Web Access Deal From IAG
  • French Worry More About Climate Change Than Neighbors Do
  • EDF Drops as France Sells Capital-Increase Rights at Discount
  • Slovenia’s NLB IPO May Boost East’s Capital Markets, EBRD Says

In currencies the Bloomberg Dollar Spot Index rose 0.2 percent, heading for a third day of gains. The British pound slipped 0.3 percent to $1.2163, falling for a third day, and the euro fell 0.1 percent to $1.0557. With the House of Lords adding to PM May’s woes by voting for a ‘meaningful’ vote on the final Brexit terms, traders seem to be going with the negative impact on GBP. A few months ago, this would have been taken ion a positive light, but with Article 50 (triggering) now close, nervousness seems to be dictating, along with real money flow in thin market conditions. 1.2150 continues to hold in Cable, but looks vulnerable, with 1.2100-10 now the next target unless the tide turns later today — based on the UK budget or otherwise. With the 10yr UST yields testing the recent 2.55% high, USD/JPY has seen a modest pop after the European open, rising above 114.00. Still, the pair appears rangebound due to heavy Japanese exporter offers from 114.50 is deterring an aggressive push higher from 114.15-20 or so. EUR/USD remains hemmed inside 1.0500-1.0650, with ECB meeting on Thursday set to keep bids ahead of the lower limit intact given the ‘risk’ of a less dovish tone by president Draghi. AUD, more so than NZD has come under some pressure in early London after weak trade data out of China. Commodities have fallen further to also pull the spot rate back into the mid 0.7500’s, while AUD/NZD is back under 1.0900 as NZD/USD losses slow in the mid 0.6900’s. USD/CAD is probing higher into the 1.3400’s again, as the USD (buying) shift works its way through the currency spectrum.

In commodities, losses in base metals rest squarely on the Chinese trade data, which has shown a deficit of just over USD9bIn —the last deficit seen in early 2014. Copper prices have toppled to lows just shy of USD2.60, leading the way across the board. Steel exports have dropped to 3 year lows specifically, adding to the pressure. For precious metals, it is the same story running through the week, tracking US Treasuries to see Gold hit USD1211.00 and Silver just below USD17.40. Oil prices still in a range, with current inventory levels still having a modest impact on trade, though comments out of CERA suggest further/extension to production cuts are under question.

Looking at the day ahead, the 2017 Budget in the UK will then be released just after midday. In the US we’ve got the ADP employment report as well as Q4 nonfarm productivity and unit labor costs, and finally the January wholesale inventories and trade sales report.

US Event Calendar

  • 7am: MBA Mortgage Applications, prior 5.8%
  • 8:15am: ADP Employment Change, est. 187,000, prior 246,000
  • 8:30am: Nonfarm Productivity, est. 1.5%, prior 1.3%; Unit Labor Costs, est. 1.6%, prior 1.7%
  • 10am: Wholesale Inventories MoM, est. -0.1%, prior -0.1%; Wholesale Trade Sales MoM, est. 0.5%, prior 2.6%

DB’s Jim Reid concludes the overnight wrap

While the general feeling is that today’s Budget is unlikely to throw up any real surprises, our economists note that the most interesting aspect of it from a market point of view is the positive fiscal performance in 2016/17 thanks largely to better than expected revenues, the benefit of which will by and large carry forward to the next fiscal year. This means that the Chancellor has a choice; either spend some of the additional fiscal space or increase the size of his £27bn rainy day fund. Our colleagues expect him to do a little of both, so worth keeping an eye on that especially with Brexit round the corner.

As well as the UK Budget we have the latest ADP report in the US where expectations are for 189k (DB 185k). It’s important only in so far as it will give us a guide to Friday’s payrolls which in turn will be the last employment data before next week’s FOMC meeting. With the probability of a hike now 96% (according to Bloomberg’s calculator which overstates a bit) it seems that the only economic data that could cause this probability to reverse would be employment on Friday or US CPI on Wednesday – the day of the decision. However the numbers would have to be large outliers to shift expectations markedly now.

Meanwhile over in Europe, data is not the main driver of short-end rates at the moment. The big move in European rates yesterday was in the front end of the bund curve with 2 and 5 year yields rallying 4.2bps and 3.7bps respectively and out-performing the equivalent maturities by 2-4bps across Europe. In turn this led to swap spreads widening around 3-4bps out to 5 years as the swap curve didn’t move much. The reason for the move was the latest PSPP news on Monday showing that the average life of ECB bund purchases fell dramatically in February to 4.3 yrs from 9.4 in January and a peak of 12.1 in December. February was the first full month of the new purchasing rules but the scale of the dramatically shorter duration was a surprise and helps explain more why short dated bunds were squeezed so much in recent weeks. This squeeze was renewed yesterday. In the last hour we’ve published a credit bites entitled “Has the ECB just put pressure on credit spreads?” where we look at what impact this development might have on credit spreads. See the report for more details or email sukanto.chanda@db.com if you haven’t received it.

Elsewhere in government bonds and in contrast to those moves for Bunds, following another bumper day for corporate issuance Treasury yields climbed higher yet again yesterday. 10y yields closed up for the seventh consecutive session, finishing 1.8bps higher at 2.519% which is the highest closing yield since December 27th (the peak intraday print this year is 2.553%). 2y yields also finished up 2.2bps at 1.328% and are now up over 19bps from the lows of last month. Yesterday’s moves mean that the 2y spread of Treasuries over Bunds has now reached 221bps which is in fact the largest since February 2000. The biggest spread since 1995 is 289bps which was reached in 1997.

It’s probably not unfair to say that equity markets are a lot less exciting at the moment. The S&P 500 (-0.29%) closed lower for the second day in a row yesterday, the first time since January that that has happened. Energy stocks led losses which probably also helps to explain the underperformance of US credit (CDX IG +1.9bps versus iTraxx Main +0.5bps) after WTI Oil retreated a fairly modest -0.77% to just below $53/bbl. Comments from Saudi Arabia’s Oil minister suggesting that the OPEC production cuts were helping to sow “green shoots in the US” shale industry probably explained the weakness though. Healthcare stocks also struggled after President Trump said that his administration is working on a new system to boost competition in the drug industry. Elsewhere metals struggled once again with Copper (-1.45%), Zinc (-1.64%) and Nickel (-4.06%) all down sharply which also weighed on markets in Europe. The Stoxx 600 (-0.27%) in fact closed down for the fourth time in a row and eighth time in the last ten sessions.

Meanwhile, in FX much of the focus was on Sterling which ended the day down -0.29% versus the Greenback and broke below $1.220 intraday for the first time since January 17th. Some softer than expected data didn’t help. The BRC’s retail monitor revealed a -0.4% yoy decline in same-store sales in February which compared to the consensus estimate of -0.1%. The Halifax house price index also revealed a smaller than expected rise in house prices in February (+0.1% mom vs. +0.4% expected) which as a result has seen the annual rate fall to +5.1% yoy from +5.7%. On top of that PM May was dealt another blow by the House of Lords after the upper house lawmakers voted in favour (by 366 to 268) of requiring the government to come back with the final Brexit terms to parliament for a “meaningful vote”. Brexit secretary David Davis called the defeat disappointing and confirmed that the government will seek to overturn the amendments in the House of Commons.

Switching the focus now. This morning in Asia the most notable news is that concerning the latest trade numbers released in China where, in renminbi terms, exports were reported as rising just +4.2% yoy in  February which is down from +15.9% in January and well below consensus of +14.6%. Imports were also revealed as surging +44.7% yoy (vs. +23.1% expected) from +25.2% resulting in the first trade deficit in local currency terms since February 2014. However it is worth noting that it’s more than likely that the timing of the Lunar New Year holiday this year relative to last year has made for a big distortion of  year-over-year comparisons. The equivalent USD data is expected shortly.

Bourses in China are currently flat for the day as we go to print but it’s been a fairly choppy session. Meanwhile in Japan the final Q4 GDP print was revised up one-tenth to +0.3% qoq on higher private capital investment, although that was actually a slight miss relative to consensus expectations for a rise to +0.4%. Annualized, growth in Q4 was +1.2%. The Nikkei (-0.53%) is weaker following the data and the Yen (+0.27%) slightly firmer. Elsewhere the Kospi is little changed and the ASX -0.15%. US equity index futures are also modestly in the red.

In terms of the remaining data yesterday, in the US the trade deficit of $48.5bn in January was in line with where the consensus was and so confirming the largest deficit in real terms since March 2015. Imports came in at 8.3% yoy compared to exports of 7.5% yoy. Meanwhile consumer credit rose at a slightly less than expected $8.8bn in January. It’s worth noting that the Atlanta Fed has further cut their Q1 GDP growth forecast. They now estimate 1.3% growth according to their GDP tracker, and so furthering the gap versus the NY Fed’s estimate of 3.1%. Over in Europe yesterday Q4 GDP growth for the Euro area was confirmed at +0.4% qoq which was no change versus the initial flash estimate.

Looking at the day ahead, this morning in Europe we will be kicking off in Germany where the January industrial production data is released, before we then get the latest trade numbers out of France. The 2017 Budget in the UK will then be released just after midday. This afternoon in the US we’ve got the aforementioned ADP employment report as well as Q4 nonfarm productivity and unit labor costs, and finally the January wholesale inventories and trade sales report.

3. ASIAN AFFAIRS

i)Late  TUESDAY night/WEDNESDAY morning: Shanghai closed DOWN 1.74 POINTS OR .05%/ /Hang Sang CLOSED UP 101.20 POINTS OR 0.43% . The Nikkei closed DOWN  90.12 POINTS OR 0.47% /Australia’s all ordinaires  CLOSED DOWN 0.04%/Chinese yuan (ONSHORE) closed DOWN at 6.9103/Oil FELL to 52.60 dollars per barrel for WTI and 55.33 for Brent. Stocks in Europe ALL MOSTLY IN THE RED ..Offshore yuan trades  6.9162 yuan to the dollar vs 6.9103  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  WIDENS CONSIDERABLY/ ONSHORE YUAN WEAKER AS IS THE OFFSHORE YUAN  COUPLED WITH THE STRONGER DOLLAR. CHINA SENDS A MESSAGE TO THE USA NOT TO RAISE RATES

3a)THAILAND/SOUTH KOREA/NORTH KOREA

b) REPORT ON JAPAN

none today

c) REPORT ON CHINA

China suffers her first trade deficit in 3 years as imports rise by 44% and exports up only 4%

(courtesy zero hedge)

China Imports Spike As Lunar New Year Skew Creates Biggest Trade Deficit In 3 Years

When the headline prints hit tonight on China’s trade data, offshore Yuan dipped and ripped…

As China faced its first trade deficit in 3 years (-$60bn vs +172.5bn exp)…

Obviously there is some major seaonality…

With imports exploding 44.7% YoY (and exports missing expectations dramatically +4.2% vs +14.6% exp). But it appears the economists forgot about this year’s lunar new year holiday falling in January (vs Feb last year).

As Bloomberg points out, the results were skewed because the week-long Lunar New Year holidays that shutter factories and ports across the nation occurred in February 2016 versus late January in 2017, distorting base year comparisons.

Even though the specific data point is entirely worthless, we note that Imports from U.S. rose 41% to 163.5b yuan in Jan.-Feb., General Administration of Customs says in statement.

For now it appears Bitcoin is suffering the most post-data (but this could be renewed selling pressure from this morning ahead of this weekend’s ETF decision)

end

4. EUROPEAN AFFAIRS

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

6.GLOBAL ISSUES

SWEDEN

Sweden is in a mess: in the town of Hallsberg, Sweden a brawl broke out between two migrant groups at a school of which none of the migrants attend:

(courtesy zero hedge)

11 Arrested In Sweden As Migrants Riot, Hurl Rocks At Police

As the European Union continues to threaten member states with fines for “falling short” of fulfilling their duties to help international refugees (see “EU Threatens Member States With Fines Over Failure To Accept Refugees“), the daily reminders of why a wave of nationalism is sweeping over Europe in defiance of Merkel’s open border policies continue to mount.

The latest example comes from Hallsberg, Sweden where police were called in to stop a brawl at the Alléskolan school that erupted between some 30 people and ultimately resulted in 11 migrants being arrested as they hurled stones at police.  Per RT:

A total of 30 people took part in the brawl, which occurred on Monday, Sveriges Radio reported, citing police. They were all wearing hoods and threw stones at the officers, who were called to the scene of the Alléskolan school after reports of a disturbance.

“We have sent a number of police patrols there, and I believe we have dispelled the large gang into smaller groups. [The rioters] disguised themselves, armed themselves with stones they threw at the police. It has been described as a riot-like situation,” the news outlet said, citing Hallsberg Police spokesman Stefan Dangardt.

Meanwhile, local media in Hallsberg reported that the brawl was the result of a dispute between two immigrant groups that are new to the area and most of whom are not even students at the school.

According to police and school authorities, most of the rioters were not pupils of the school.

“There are many speculations and rumors, but what we know is that most of those who came here last Friday do not belong to the school. They are not the school’s pupils, nor are those who were here [on Monday],” Marie Kilk, director of education at Alléskolan, said.

Media reports claim the rioters were migrants. Swedish SVT reported that the brawl initially broke out between two different immigrant groups, who then started attacking police after they arrived at the scene, as well as reporters from SVT.

“Something must have happened on Friday that became the basis for what was going on [on Monday],” Dangardt told the press.

Fria Tider news outlet also reported that the rioters were migrants, citing 54-year-old Hallsberg resident Claes Marten, who was an eyewitness to Monday’s brawl.

“What lies behind the incident is a brawl between different immigrant groups that have emerged here in Hallsberg. They came [to Hallsberg] relatively recently. Some of them go to Alléskolan school,” he told the press.

“Normally, nothing happens in Hallsberg, it is a very quiet community. We are not accustomed to this kind of problem, this is all new to us. Sweden is about to be rented, it is a very sad development,” he said.

If you don’t like your open borders…too bad, you have to keep your open borders.

END

MEXICO

 

It is Mexico that fires first as they cancel the huge sugar export permit to the USA:

(courtesy zero hedge)

 

7. OIL ISSUES

API reports that we had a surge in gasoline draws despite a record crude glut. Up goes crude prices.  This is getting ridiculous as the banker boys are manipulating oil/

(courtesy zerohedge)

 

WTI/RBOB Surge After Massive Gasoline Draw (Despite Record Crude Glut)

Following API’s reported massive build in crude (and draw in gasoline), DOE confirmed the extreme moves with a major 8.2mm crude build and a massive 6.56mm draw in gasoline (the biggest since April 2011). US Crude production rose once again – to 13-month-highs.

 

API

  • Crude +11.6mm (+1.4mm exp)
  • Cushing +788k
  • Gasoline -5.00mm
  • Distillates -2.9mm

DOE

  • Crude +8.21mm (+2mm exp)
  • Cushing +867k (+406k exp)
  • Gasoline -6.56mm (-1.99mm exp)
  • Distillates -925k (-1mm exp)

This is the 9th weekly rise in crude inventories (some chatter on API data including SPR barrels but that was marginal at best compared to the headline print)…The gasoline draw is the biggest since April 2011

 

Notably West Coast (PADD 5) CRUDE STOCKS INCREASE 4.65M BBL, MOST SINCE OCT. 1999 ..

This is a new record high for US crude inventories…“Inventory drawdown slower than I thought after cuts,” Saudi Arabia’s Khalid Al-Falih admits.

 

And US crude production continues to trend higher with lagged rig counts…Saudi oil minister Khalid Al-Falih had complained that “the green shoots in the U.S. are growing too fast,”

And as a reminder, the EIA published another bullish outlook for U.S. oil production in yesterday’s Short-Term Energy Outlook. It raised the 2017 year-on-year increase in crude and condensate production to 330,000 b/d from its previous assessment of just 100,000 b/d and now sees output above 10 million barrels a day by the end of 2018. Rebalancing the market is getting more difficult.

 

Notably the RBOB bounce (on API inventory draw) had been largely erased before the DOE data (and WTI had extended losses)…but the better than API crude build and huge gasoline draw triggered panic buying…

end

 

Then oil; tanks into the 51 dollar handle

(courtesy zero hedge)

Oil Tanks To $51 Handle – One-Month Lows

It seems ever-exuberant energy traders are finally waking up to the reality that the global rebalance is not happening. A record glut of crude and surging production has sent WTI back to a $51 handle this morning (one-month lows) and has weighed on gasoline prices…

WTI has broken below its 100-day moving average as the machines ran overnight stops and then plunged after the DOE data…

 

“Inventory drawdown slower than I thought after cuts,” Saudi Arabia’s Khalid Al-Falih admits.

Bloomberg’s Vince Piazza warns U.S. inventories across the product value chain remain elevated, with crude oil 39% above the five- year average and distillates, jet fuel and gasoline between 5.5% and 22% higher. This, along with the 51% rebound in rig count since last year, and the robust level of more than 5,300 DUCs (drilled yet uncompleted wells) implies the near-term return of U.S. hydrocarbon volume with an environment of lower range-bound prices.

 

 

end

 

Then crude crashed into the 50 column;

(courtesy zerohedge)

 

Crude Is Crashing

WTI Crude is suffering its biggest down day since September 2015 – crashing over 5% to a $50 handle and the lowest levels since 2016…

WTI and RBOB are plunging after an initial post-DOE bounce… April WTI just tested to $50.05…

As Bloomberg notes, net long commitment of traders shows WTI and Brent positioning is “well over-extended” and could spark liquidation of long positions as prices have remained range-bound for a couple months now, Scotia’s energy commodity strategist Michael Loewen writes in note, citing CFTC data.

Market could get worse before improving as traders reduce holdings by selling WTI and Brent contracts into front-end of the curve.

WTI has ripped through the 50-, 100-, and 200-day moving averages…

 

Additionally, this is the worst day for USO (Oil ETF) since October, with about 220k puts on the U.S. Oil Fund (USO) changed hands, compared with a 20-day average of 47k and 57k calls traded today.

 

And the Loonie is plunging too…

8. EMERGING MARKETS

end

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

Euro/USA   1.0559 DOWN .0010/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP WINS THE ELECTION/USA READY TO GO ON A SPENDING BINGE WITH THE TRUMP VICTORY/ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/USA RAISING INTEREST RATE/EUROPE BOURSES ALL IN THE RED EXCEPT SPAIN  

USA/JAPAN YEN 114.00 UP 0.089(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA:  HELICOPTER MONEY  ON THE TABLE AND DECISION ON SEPT 21 DISAPPOINTS WITH STIMULUS/OPERATION REVERSE TWIST

GBP/USA 1.2157 DOWN .0046 (Brexit by March 201/UK government loses case/parliament must vote/PRIME MINISTER MAY  DECIDES ON A HARD BREXIT/LOWER HOUSE PASSES BILL TO BEGIN THE BREXIT PROCESS/AND NOW A NEW SCOTLAND REFERENDUM IS ON THE TABLE)

USA/CAN 1.3438 UP .0027 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU)

Early THIS WEDNESDAY morning in Europe, the Euro FELL by 10 basis points, trading now WELL BELOW the important 1.08 level FALLNG to 1.0559; 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 1.74 POINTS OR 0.05%     / Hang Sang  CLOSED UP 101.20 POINTS OR 0.43% /AUSTRALIA  CLOSED DOWN 0.04%  / EUROPEAN BOURSES MOSTLY IN THE RED (EXCEPT SPAIN)

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

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

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

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

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

The NIKKEI: this WEDNESDAY morning CLOSED DOWN 90.12 POINTS OR 0.47% 

Trading from Europe and Asia:
1. Europe stocks  MOSTLY IN THE RED

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 101.20 POINTS OR 0.43%       / SHANGHAI CLOSED DOWN 1.74  OR 0 .05%/Australia BOURSE CLOSED DOWN 0.04%/Nikkei (Japan)CLOSED DOWN 90.12 POINTS OR 0.47%  /  INDIA’S SENSEX IN THE RED

Gold very early morning trading: $1214.30

silver:$17.42

Early WEDNESDAY morning USA 10 year bond yield: 2.540% !!! UP 2 IN POINTS from TUESDAY 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  3.132, UP 1 IN BASIS POINTS  from MONDAY night.

USA dollar index early WEDNESDAY morning: 101.94 UP 12 CENT(S) from TUESDAY’s close.

This ends early morning numbers WEDNESDAY MORNING

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

And now your closing WEDNESDAY NUMBERS

Portuguese 10 year bond yield: 3.986% UP 1  in basis point yield from TUESDAY 

JAPANESE BOND YIELD: +.080%  UP 2/5  in   basis point yield from TUESDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.811%  UP 7 IN basis point yield from  TUESDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.255 UP 6 POINTS  in basis point yield from TUESDAY 

the Italian 10 yr bond yield is trading 46 points HIGHER than Spain.

GERMAN 10 YR BOND YIELD: +.370% UP 6 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR TUESDAY

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

Euro/USA 1.0540 DOWN .0029 (Euro DOWN 29 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 114.54 UP: 0.632(Yen DOWN 63 basis points/ 

Great Britain/USA 1.2152 DOWN 0.0050( POUND DOWN 50 basis points)

USA/Canada 1.3487 UP 0.0076(Canadian dollar DOWN 76 basis points AS OIL FELL TO $51.35

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

This afternoon, the Euro was DOWN by 29 basis points to trade at 1.0540

The Yen FELL to 114.54 for a LOSS of 63 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND FELL 50  basis points, trading at 1.2152/

The Canadian dollar FELL  by 76 basis points to 1.3487,  WITH WTI OIL FALLING TO :  $51.35

The USA/Yuan closed at 6.9112/
the 10 yr Japanese bond yield closed at +.080% UP 2/5 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 6 IN basis points from TUESDAY at 2.563% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.152 UP 6  in basis points on the day /

Your closing USA dollar index, 102.12 UP 30  CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED DOWN 4.38 OR 0.06% 
German Dax :CLOSED UP 1.17 POINTS OR 0.01%
Paris Cac  CLOSED UP 5.48 OR 0.36%
Spain IBEX CLOSED UP 48.80 POINTS OR 0.50%
Italian MIB: CLOSED UP 27.34 POINTS OR 0.14%

The Dow closed DOWN 69.03 OR 0.33%

NASDAQ WAS closed up 3.82 POINTS OR 0.06%  4.00 PM EST
WTI Oil price;  51.35 at 1:00 pm; 

Brent Oil: 54.07  1:00 EST

USA /RUSSIAN ROUBLE CROSS:  58.58 UP 40/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD RISES TO +0.370%  FOR THE 10 YR BOND  1:30 EST

END

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

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

WTI CRUDE OIL PRICE 5 PM:$50.8

BRENT: $53.10

USA 10 YR BOND YIELD: 2.56%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 3.151%

EURO/USA DOLLAR CROSS:  1.0539 down .0031

USA/JAPANESE YEN:114.36   up 0.448

USA DOLLAR INDEX: 102.11  up 29  cents ( HUGE resistance at 101.80 broken)

The British pound at 5 pm: Great Britain Pound/USA: 1.2162 : down 39 BASIS POINTS.

Canadian dollar: 1.3490  up .0077

German 10 yr bond yield at 5 pm: +.370%

END

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

TRADING IN GRAPH FORM

Stocks Give Up Trump-Speech Gains As Crude Crashes

Two clips for the price of one today…

Official Trailer Release: The Bursting.
Coming to a market near you. Rated R.
Release date: TBD.

So let’s count the breaks – first macro data, then VIX, then Emerging Markets, then Copper, then High Yield Credit, and now Crude – all snapped in the last month as stocks kept rising.

The last few days have seen everything sold as it seems a major tightening/derisking is occurring…

 

The post-Trump-Speech panic-bid in stocks, smashing The Dow through 21,000 (and 21,100) and proving how awesome the world is.. is almost gone.

Small Caps and Trannies gave up their gains on Monday, and now the S&P has erased the exuberance (thanks to oil’s plunge)… 3 day losing streak in S&P and Dow and weakness into the close – not ‘normal’

 

This 5-day decline – as small as it is – is the largest since right before the election.

 

Notably this decline is not being accompanied a major surge in shorts – i.e. its not building ammo for a squeeze

 

Energy stocks tanked today and along with Utes remain the biggest losers post-Trump-Speech…

 

CAT stumbled hard after being accused of cheating to maintain its stock price… what gave regulators that idea?

 

Risk Parity funds continue to delever (4th day in a row) – the worst drop of the year…

 

Which is driving bonds and stocks lower in price…

 

REITs are down for the 7th day in a row…

 

Notably something is snapping in the VIX complex…

VIX has been decoupled from equity exuberance for a month…

 

VIX Call (bearish stocks) volume has soared…

 

VIX Futures Open Interest reached a new record high…

 

And while hegies have swung back to near record short VIX (bullish stocks) positioning, Asset Managers have torn up their record short VIX positions…

 

Overnight weakness lifted 10Y yields to 2.58% and 30Y 3.17% (before a solid 10Y auction sent yields lower into the close) – but still higher on the day…

 

The USD surged on the day back to the seemingly Maginot Line of where the USD was when the Fed hiked in December…

 

And the Loonie was crushed…to its weakest since 2016

 

March has been a bloodbath for commodities…

 

Gold continues to outperform Silver…

 

WTI and RBOB plunged today after a quick algo ramp after the DOE inventory/production data…April WTI just tested to $50.05…

 

Gartman did it again…

 

This is the worst day for USO (Oil ETF) since October. About 220k puts on the U.S. Oil Fund (USO) changed hands, compared with a 20-day average of 47k and 57k calls traded today.

 

Finally we note that Bitcoin tumbled back below Gold overnight on China trade and Bitcoin ETF anxiety…

 

end

 

I would not read anything in this phony ADP report:

(courtesy zero hedge/ADP)

Trump Effect: ADP Employment Surges Near Most In 6 Years On Record Goods-Producing Job Gains

Following January’s surge in employment (biggest gain in 7 months), February’s ADP print exploded higher to 298k (5 sigma above all expectations). This is the third biggest monthly employment gain of the expansion. It appears the ‘Trump Effect’ is the biggest driver as the ADP payroll surge was mostly due to a record surge in employment for goods-producing industries.

Private sector employment surged by 298,000 for the month, with goods producers adding 106,000. Construction jobs swelled by 66,000 and manufacturing added 32,000.

3rd best month of the recovery:

 

This is 5 standard deviations above the 187k expectation….

 

Led by a record surge in goods-producing jobs…

 

The details:

 

“Confidence is playing a large role,” Mark Zandi, chief economist of Moody’s Analytics, told CNBC. “Businesses are anticipating a lot of good stuff — tax cuts, less regulation. They are hiring more aggressively.”

March rate-hike odds were 98% going into ADP and we suspect it will uptick from here.

“February proved to be an incredibly strong month for employment with increases we have not seen in years,” said Ahu Yildirmaz, vice president and co-head of the ADP Research Institute. “Gains were driven by a surge in the goods sector, while we also saw the information industry experience a notable increase.”

Mark Zandi, chief economist of Moody’s Analytics said, “February was a very good month for workers. Powering job growth were the construction, mining and manufacturing industries. Unseasonably mild winter weather undoubtedly played a role. But near record high job openings and record low layoffs underpin the entire job market.”

Some more visual details:

Change in Nonfarm Private Employment

 

Change in Total Nonfarm Private Employment

 

Change in Total Nonfarm Private Employment by Company Size

Full Breakdown:

<br />      ADP National Employment Report: Private Sector Employment Increased by 298,000 Jobs in February<br />

http://www.adpemploymentreport.com/2017/February/NER/images/infographic/…&#8221; width=”598″ />

 

end

 

This will be troublesome to Janet:  USA 4th quarter productivity slumped to only 1.3% instead of 1.5% expected.

(courtesy zerohedge)

US Productivity Growth Slowed Dramatically In Q4

Following Q3’s 3.3% surge in US worker productivity – the best in 2 years – Q4 was a disappointment as growth slowed to just 1.3% (below the 1.5% expectation).

Productvity growth slowed to just 1.3% in Q4 – the exact average growth rate of President Obama’s 8 year reign.

 

Unit labor costs rose very slightly more than expected but remain subdued at just 1.7% QoQ (notably non-financial corporations saw notable drops in unit labor costs) and Real Compensation fell 0.4% QoQ in Q4 and Manufacturing employee hours dropped the most since 2015

 

end

 

This will be a huge negative to first quarter GDP figures:  Wholesale inventories tumble at a huge .2% decline.  Not only that but wholesale sales also tumble:

(courtesy zero hedge)

Q1 GDP At Risk As Wholesale Inventories Tumble Most In A Year

After surging in November and December, January’s final wholesale inventories print showed a 0.2% decline – worse than expected and the weakest since Feb 2016. This negative ‘hard’ data point just piles on the weakness being forecast for Q1 GDP (but don’t let that stop The Fed hiking).

Nov/Dec saw the “if we build it, they will come” economy surge in inventories on Trump hope…

 

But they didn’t – Wholesale sales tumbled 0.3% in January… (though we note YoY, sales rose significantly thanks to that spike in December)

 

The ‘field of dreams’ economy is stumbling in Q1. We expect Atlanta Fed to slash its GDP forecast further…

 

On the semi-silver-lining front, the ‘gap’ between sales and inventories has shrunk

end

 

That did not take long:  The Atlanta Fed lowers first quarter GDP estimates to only 1.2% due to the poor business inventories reading/and sales

(courtesy zero hedge)

 

Q1 GDP Now Just 1.2% According To Atlanta Fed; Rate Hike Imminent

Another day, another downgrade to US GDP: after yesterday the Atlanta Fed slashed its Q1 GDPNow estimate from 1.8% to 1.3% – with the forecast as high as 3% at the start of the year, and 2.5% as recently as the end of February – moments ago the Atlanta Fed has once again cut its US growth forecast, and now sees Q1 GDP of just 1.2%, on par with the disappointing 0.9% and 0.8% prints in Q4 2015 and Q1 2016.

The reason, according to the model’s author, “the GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2017 is 1.2 percent on March 8, down from 1.3 percent on March 7. The forecast of the contribution of inventory investment to first-quarter growth fell from -0.72 percentage points to -0.79 percentage points after this morning’s wholesale trade report from the U.S. Census Bureau.”

What the above really means is that what started off with a quarter full of optimistic forecasts population the model’s fields, as more and more actual data had to be plugged in, the underlying growth rate continued to get dragged lower and lower, until it barely top 1%. This is taking place one week before Janet Yellen is expected to hike the interest rates by another 25 bps.

Incidentally, the Atlanta Fed is now roughly 50% below the Wall Street consensus estimate for Q1 GDP.

Finally, in the most bizarre chart to have emerged in recent weeks, it appears that the Fed’s GDP estimate is now closely following the inverse of the March rate hike odd probability. The good news: at 100% rate hike odds, it is unlikely that the Atlanta Fed will cut its GDP estimate further in the foreseeable future.

 

end

 

Professor Leslie Robinson an accounting professor at Tuck School of Bussiness at Dartmouth has accused Caterpillar of carrying of tax and accounting fraud

(courtesy zero hedge)

Caterpillar Accused Of Tax, Accounting Fraud In Report; Stock Slides

The mystery of last week’s Caterpillar office raid by various US government agencies may have been resolved, after the NYT reported overnight that a report commissioned by the government, written by an accounting professor at the Tuck School of Business at Dartmouth, has accused the heavy-equipment maker of carrying out tax and accounting fraud.

“Caterpillar did not comply with either U.S. tax law or U.S. financial reporting rules,” wrote Leslie A. Robinson, an accounting professor at the Tuck School of Business at Dartmouth College and the author of the report. “I believe that the company’s noncompliance with these rules was deliberate and primarily with the intention of maintaining a higher share price. These actions were fraudulent rather than negligent.

CAT spokeswoman Corrie Heck Scott said that the company had not been provided with a copy of the report and declined to comment further. The company has defended its tax strategies in previous years by calling the arrangements prudent and lawful among large United States companies, despite repeatedly falling in hot water with the government over its tax practices which have been a focus of government investigators since a 2014 Senate hearing found that the company cut its tax bill by $2.4 billion over 13 years, moving earnings out of the United States and into a Swiss subsidiary, despite internal company warnings that the strategy lacked a business purpose, other than tax avoidance. Less than a year later, Caterpillar disclosed it received a subpoena from federal investigators seeking documents and information relating to the movement of cash among domestic and overseas subsidiaries, as well as other matters involving its foreign units, including the Swiss entity.

The company has since disclosed in securities filings that the Internal Revenue Service is seeking more than $2 billion in income taxes and penalties on profits earned by the Swiss unit. Caterpillar has said it is “vigorously contesting” the I.R.S.’s proposed increases.

Robinson’s 85-page analysis is based on publicly available and internal financial data of the company, she wrote in the report, as well as bank data tracking wire transfers from Switzerland into the United States. In the report, Robinson estimated that Caterpillar has brought back $7.9 billion into the States, structured as loans, over and beyond the income that had already been taxed overseas. She concluded that the company failed to report those loans for tax or accounting purposes, and she wrote that those profits should be subject to federal taxes.

Robinson’s report focused on one specific part of Caterpillar’s offshore tax arrangement. It concluded that the company failed to pay taxes on billions of dollars brought home primarily from its Swiss unit and its affiliates, and thus failed to comply with United States tax law and financial reporting rules. Robinson wrote that she was asked to provide a written opinion of Caterpillar’s financial reporting related to various tax accounting standards, “as pertaining to” the investigation of Caterpillar by the Federal Deposit Insurance Corporation Office of Inspector General.

“I was provided with all documents available to the case agents assigned to the investigation,” Ms. Robinson wrote. She also wrote that she spent approximately 200 hours reviewing the evidence and performing calculations.

In one example, she cited correspondence between the company and the Securities and Exchange Commission in which Caterpillar said it had $2.5 billion of income eligible to be brought to the United States tax-free. Ms. Robinson wrote that her research showed that the company did not have “anywhere near” that sum still available to be brought in tax-free.

Caterpillar failed to report those loans as taxable distributions of cash, thus avoiding the tax on earnings brought home from Switzerland, while “enjoying the use of those earnings to meet U.S. cash needs,” she wrote.

The report does not explain whether Caterpillar used the type of creative, and often legal, transactions that United States multinationals use to avoid tax on earnings brought home from offshore.

The NYT adds that while no charges have been filed, and it is not clear whether investigators agree with the findings or intend to act on them, last week’s bust at three CAT offices, including its Peoria HQ may be validation that the government is indeed probing the allegations. The report, which has not been made public or made available to Caterpillar, outlines a company strategy for bringing home billions of dollars from offshore affiliates while avoiding federal income taxes on those earnings.

In 2012, the same Senate committee that examined Caterpillar’s taxes found that Hewlett-Packard stitched together a series of such loans to bring home billions of dollars tax-free. The 2014 Senate report on Caterpillar said the company worked with the accounting firm PricewaterhouseCoopers, to set up its Swiss tax-cutting strategy. PwC was also the company’s auditor, which raised “significant conflict of interest concerns,” according to Senate investigators.

The report by Ms. Robinson makes a passing reference to PwC but does not address what role, if any, it had in these transactions.

CAT stock was down 3.5% premarket on the news, after plunging last week after news of the office raid broke.

 

END

 

This is interesting:  The Republican House Intelligence Committee is asking Comey and others for a hearing of the supposed Russian hacking of the uSA election:

(courtesy zero hedge)

Comey To Testify In Russia “Election Hacking” Hearing On March 20

The Republican chairman of the House Intelligence Committee said he planned to hold a series of public hearings as part of its probe on Russian interference in the US election, beginning with a session on March 20. According to Reuters, among those invited to attend are listed below:

  • FBI Director James Comey
  • NSA Director Mike Rogers
  • Former Director of National Intelligence James Clapper,
  • Former CIA Director John Brennan
  • Former acting Attorney General Sally Yates
  • Two executives from CrowdStrike, the cybersecurity company originally investigating the DNC hacks and which first “found” Russian involvement.

“At this time, we are not going to subpoena anyone for that March 20th hearing,” Nunes said. “But if we have to, we will subpoena all information that is pertinent to this investigation if people either … don’t want to appear or if the appropriate agencies do not provide the information we ask for.”


Devin Nunes speaks to the media about President Donald Trump’s allegation

that his campaign was the target of wiretaps, March 7, 2017. REUTERS

Nunes also said that he had not seen any evidence to support Trump’s accusation that he was wiretapped by Barack Obama during the 2016 presidential campaign. He told reporters that if Trump’s assertion were true, the leaders of Congress and the chairman of its two intelligence committees, known collectively as the “Gang of Eight,” should have been briefed.

Trump has pressed the House and Senate intelligence committees to expand already planned probes into allegations that Russia meddled in the U.S. election to look into his charge. Nunes previously said his panel would examine the evidence. “We are supposed to be kept up to speed on any pertinent counterintelligence investigation,” Nunes said of the Gang of Eight.

“If Trump or any other political campaign, or anybody associated with Trump, was under some type of investigation, that clearly should have risen to the Gang of Eight level.” Unless someone made an “oversight” of course, and Congress was not briefed on what in retrospect would have been seen as a major political interference scandal, if it had leaked to the press.

For now, however, Nunes simply said that he had “not seen that evidence.”

He did say, however, that “the bigger question that needs to be answered is whether or not Mr. Trump or any of his associates were in fact targeted by any of the intelligence agencies or law enforcement authorities.” Here, too, he said that “at this point, we don’t have any evidence of that.”

 

end

 

The bond king, Jeff Gundlach states that the US will continue to hike rates until the markets break.  He thinks it is a far better move to short German bunds:

(courtesy zero hedge)

Gundlach Says Fed Will Hike “Until Something Breaks”, Dumps Bank Shares

Last week, in an abrupt shift to his bullish posture, Bank of America strategist Michael Hartnett laid out how he envisioned the transition from the current “Icarus” rally to what he dubbed the market’s “Great Fall” – or “Humpty Dumpty” trade – which he expected to take place in the second half of the year, and which he said would be precipitated by another downward inflection in EPS, but more importantly, a more hawkish Fed. Specifically, he showed a chart which revealed that historically, once the Fed starts tightening, it keeps tightening until there is a “financial event.”

Overnight, in his latest webcast to DoubleLine investors, Jeffrey Gundlach echoed Hartnett, when he said that he expects the Federal Reserve to begin a campaign of “old school” sequential interest rate hikes until “something breaks,” such as a U.S. recession. As we noted yesterday, Gundlach – who does not believe a recession is imminent – said that U.S. economic data support a rate increase as soon as the next Fed policy meeting next Wednesday, and further rises this year after a series of false starts in 2015 and 2016, .

“Confidence in the Fed has really changed a lot,” Gundlach said on an investor webcast quoted by Reuters. “The Fed has gotten a lot of respect with the bond market listening to the Fed” now that economic data support the tough rhetoric from Fed officials.

As Reuters notes, it was not so much Yellen but Dudley who gave markets an initial jolt last week when in a television interview he said that “animal spirits had been unleashed.” Dudley also said the case for tightening monetary policy “has become a lot more compelling” since the election of President Donald Trump and a Republican-controlled Congress.

To validate the Fed’s upcoming decision, which faces just one hurdle this week in the face of the February payrolls report on Friday, Gundlach said on the webcast that inflationary pressures are increasing as well as business confidence, which will translate into a stock market that will “grind higher.” But Gundlach, who previously was far more skeptical on stocks, repeated his warning Tuesday that U.S. stocks are not cheap, and added that he holds Treasury inflation-protected securities and gold against this economic backdrop.

The bond king also said that a short position on German 10-year bunds was “a hell of a lot smarter than going long” the securities , joining several fellow hedge fund managers who are likewise bearish on German paper. As for financial stocks, Gundlach told Reuters in an interview that he sold his stake in bank and financial shares because “the easy money has been made.”

Finally, for those who missed the highlights from his latest webcast, here are some of the key charts:

While Gundlach notes this is one of the most synchronized upturns in
the global economy in years, he is still expecting the 10Y will first
dip to 2.25% before moving to 3.0%.

German vs French unemployment: “watch out for Le Pen”

Gundlach on soaring Business Confidence: “unlike the Byrds, it is not aloof and detached.”

Optimism is surging, but it is mostly “the republicans who are really feeling it.”

Curious how unemployment does under republican presidents: this should answer it.

The Leading indicator has moved up again – Gundlach does not see a recession in the near term.

The market vs the Fed’s balance sheet; Gundlach quotes Jim Bianco who
correctly observes that while the Fed may not be buying assets, all the
other central banks are.

On Trump making reflation great again, Trump shows a fun chart on reflation vs deflation chart from BofA:

Real time prices, via PriceStats, are about to overtake their previous 2011 highs:

An curious divergence in the trend of actual average hourly earnings vs stated expectations to raise worker compensation via the NFIB. Maybe it is time to lower those expectations again.

On S&P growth expectations: maybe this time will be different

Market is very richly valued as the Shiller CAPE chart shows:

… and as the Price/Sales ratio confirms:

Margin Debt predictably at record highs:

… As Libor continues to rise:

Meanwhile, the copper/gold ratio vs the 10Y suggests that more downside in 10Y yields:

end

 

Well that about does it for tonight

I will see you tomorrow night

H

 

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