March 13/Huge 6.78 tonnes of gold added to the GLD inventories/no changes in silver/gold and silver positive for today/Silver open interest hardly budges with Friday’s price drop/Managed money account (hedge funds) show only a tiny drop in their COT report from Friday/Japan contemplates cutting 18% of bond purchases namely because they are running out of bonds to buy/:The CBO scores Trumpcare and it is not pretty/

Gold: $1202.40  up $1.70

Silver: $16.93  up 5 cents

Closing access prices:

Gold $1204.50

silver: $17.00

For comex gold:



For silver:

For silver: MARCH


Total number of notices filed so far this month: 2751 for 13,755,000


Let us have a look at the data for today



In silver, the total open interest FELL by 1158 contracts DOWN to 188,390 with respect to FRIDAY’S TRADING.    In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e.  0.9420 BILLION TO BE EXACT or 134% of annual global silver production (ex Russia & ex China).


In gold, the total comex gold FELL BY CONSIDERABLE 7,410  contracts WITH ANOTHER FALL IN THE PRICE GOLD ($1.70 with FRIDAY’S TRADING) The total gold OI stands at 418,427 contracts. Note the difference between gold and silver.

we had 0 notice(s) filed upon for NIL oz of gold.


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



We had a big change in tonnes of gold at the GLD: this time  a huge deposit of 6.78 tonnes

Inventory rests tonight: 832.03 tonnes



We had no changes in inventory at the SLV/

THE SLV Inventory rests at: 330.136 million oz



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

1. Today, we had the open interest in silver FELL by ONLY 1158 contracts DOWN to 188,390 AS SILVER WAS DOWN ANOTHER 11 CENTS with FRIDAY’S trading. The gold open interest FELL BY A CONSIDERABLE 7,410 contracts DOWN to 418,427 WITH ANOTHER FALL IN THE PRICE OF GOLD OF $1.70  (FRIDAY’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. TODAY THE SILVER OPEN INTEREST REFUSED TO BUCKLE UNDER THE WEIGHT OF BANKER CARTEL SELLING, HOWEVER GOLD CONTINUES TO BUCKLE.

(report Harvey


2.a) The Shanghai and London gold fix report



2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg


 i)Late  SUNDAY night/MONDAY morning: Shanghai closed UP 24.26 POINTS OR .76%/ /Hang Sang CLOSED UP 261.00POINTS OR 1.11% . The Nikkei closed UP 29,14 POINTS OR 0.15% /Australia’s all ordinaires  CLOSED DOWN 0.29%/Chinese yuan (ONSHORE) closed UP at 6.9197/Oil FELL to 48.23 dollars per barrel for WTI and 51.27 for Brent. Stocks in Europe ALL IN THE GREEN EXCEPT SPAIN ..Offshore yuan trades  6.8947 yuan to the dollar vs 6.9107  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  NARROWS CONSIDERABLY/ ONSHORE YUAN STRONGER AS IS THE OFFSHORE YUAN  COUPLED WITH THE SLIGHTLY WEAKER DOLLAR. CHINA SENDS A MESSAGE TO THE USA NOT TO RAISE RATES


What a novel idea:  let’s go tell Kim that the USA Delta Force, Navy Seal Team 6 is preparing to take him out:

(courtesy zero hedge)


As we have warned, Japan hints that it will be purchasing 18% less bonds than planned basically because they have run out of bonds to buy.  This will cause rates to rise in Japan.  This is the now the 3rd central bank to tighten following the uSA’s Federal Reserve and the ECB which is cutting its bond purchases from 80 billion euros worth of bonds down to 60 billion.

( zero hedge)




Scotland’s Sturgeon has now given the UK an ultimatum as May prepares for the critical vote ahead of Article 50:

( zero hedge)

ii)Now Sturgeon is to seek a second independence referendum and she expects the vote after the fall fo 2018:

( zero hedge)



The Dutch just barred the Turkish foreign minister from entering Holland. Erdogan is not a happy camper.  This is not good especially if Turkey faces towards Moscow instead of the west.

( zerohedge)

ii)Turkey vows harsh retaliation after the Dutch Prime Minister Rutte failed to apologize and stating that  Erdogan is nuts. Erdogan wants support from ex pats living in Europe for far sweeping new powers to the President.

(courtesy zero hedge)

iii)And Turkey retaliates by banning diplomatic flights into their country.  Who benefits: Geert Wilders and his Europhobic party ahead of March 15 elections:

( zero hedge)



i)An excellent commentary on the oil industry.  Does OPEC increase production and cause oil to fall to around 30 dollars per barrel which will crush the USA shale boys but also crush many OPEC countries finance or allow oil to stay in the 50 to 60 range and keep the shale boys in business.


ii)Oil tumbles to toe 48 dollar column on spec liquidations

( zero hedge)

iii)Repsol (Spain) discovers the largest onshore oil discovery in the USA in 3 decades at 1.2 billion barrels on Alaska’s North slope. This should save Alaska as they have been witnessing declining production

( Nick Cunningham/


Amazing:  million of Venezuelans are trying to flee their country and they are running into a major problem:  a shortage of passports as demand for these are escalating

( zero hedge)


i)Silver: a graphic look at “peoples money:

( zero hedge)

ii)A must listen to interview between Egon Von Greyerz and Grant Williams on gold:

( Real Vision TV)

iii)The crazy paper scheme to monetize gold as only mobilized 6.4 tonnes
( Times of India/GATA)

iv)I feel sorry for Mexico;  all of its earmarked gold bars are inside the Bank of England’s vaults and no doubt these bars are hypothecated:

( Ronan Manly/Bullionstar/GATA)

v)Reuters comments on the total flop of India’s gold paperization scheme mentioned above

( Reuters/GATA)


i)In the month of February, the entire restaurant industry reported traffic tumbling as well as sales. It sure looks like discretionary spending is well down

( Wolf Richter/WolfStreet)

ii)The new healthcare bill is presenting a no win situation for the Republicans. Ryan warns of a “bloodbath’ if the GOP fails to pass the healthcare bill.  Tom Cotton , a Republican claims that they will lose their position in the House if they do pass it

( zero hedge)

iii)Peter Shiff of Euro Pacific explains why Trumpcare will fail and increase the uSA debt dramatically:

( Peter Schiff/Euro Pacific Capital)

iv)Zero hedge weighs in on Obamacare and how it will be impossible to pass:

( zerohedge)

iv b)The CBO has now scored the new Trumpcare:  First the good news: the deficit after 10 years will be reduced by 337 billion or 34 billion USA per year.  The bad news: 24 million citizens would lose their coverage.

(courtesy zero hedge)

v)Michael Snyder comments on the 15th of March and how the debt ceiling may never be raised causing huge problems for the USA

( Michael Snyder/EconomicCollapseBlog)

vi)The world’s most bearish hedge fund:  Horseman  (and these guys are one of the most clever in the world) has capitulated and has changed strategies after a surge in redemptions.

( zero hedge/Horseman Capital/Russell Clark)

vii)Popular Michael Snyder weighs in on a chance for a world war:

( Michael Snyder/Economic Collapse Blog)

viii)Wow!! this is a good one. I have been highlighting to you the troubles with brick and mortar outlets.  Now Michael Snyder comments that close to 1/3 of all shopping malls in the uSA is projected to close.

( Michael Snyder)

Let us head over to the comex:

The total gold comex open interest FELL  CONSIDERABLY BY 7,410 CONTRACTS DOWN to an OI level of 418,427 WITH THE  FALL IN THE  PRICE OF GOLD ( $1.70 with FRIDAY’S trading).  We are probably only 25,000 contracts away from rock bottom  (393,000). We are now in the contract month of MARCH and it is one of the poorer delivery months  of the year. In this MARCH delivery month  we had a LOSS of 3 contract(s) DOWN to 28. We had 2 contact(s) served on FRIDAY, so we LOST 1 CONTRACT(S) or  AN ADDITIONAL 100  ounces will NOT  stand for delivery.  The next active contract month is April and here we saw it’s OI FALL by 11,871 contracts DOWN TO 204,831 contracts.

For comparison purposes, the April 2016 contract at this time had an OI of 269,016 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 13 contract(s) and thus its OI is 763 contracts. The next big active month is June and here the OI ROSE by 3360 contracts up to 126,823.

We had 0 notice(s) filed upon today for NIL oz

 And now for the wild silver comex results.  Total silver OI FELL BY 1158 contracts FROM 189,548 DOWN TO 188,390 WITH FRIDAY’S TRADING. In the COT report on Friday, only 1546 contracts from the managed money  (hedge funds) vacated the silver arena. It sure seems that the hedge funds are now longer playing the game as they refuse to liquidate their silver longs.We are moving FURTHER 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 132 contracts down to 1148 contracts. We had 135 notices served upon yesterday so we GAINED 3 contract(s) or an additional 15,000 oz  will  stand for delivery.

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


The April/2017 contract month GAINED 4 contracts to 991 contracts. The next active contract month is May and here the open interest LOST 969 contracts DOWN to 147,435 contracts.


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 3 notice(s) filed for 15,000 oz for the MARCH 2017 contract.

VOLUMES: for the gold comex

Today the estimated volume was 102,933  contracts which is poor.

Yesterday’s confirmed volume was 285,872 contracts  which is very good

volumes on gold are getting higher!

INITIAL standings for MARCH
 March 13/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
nil OZ
Deposits to the Dealer Inventory in oz nil oz
Deposits to the Customer Inventory, in oz 
 nil oz
No of oz served (contracts) today
0 notice(s)
NIL oz
No of oz to be served (notices)
28 contracts
2800 oz
Total monthly oz gold served (contracts) so far this month
59 notices
5900 oz
0.1835 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     51,678.5 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 0 kilobar transaction(s)/
Today we had 0 deposit(s) into the dealer:
total dealer deposits:  nil oz
We had nil dealer withdrawals:
total dealer withdrawals:  nil oz
we had 0  customer deposit(s):
total customer deposits; nil  oz
We had 0 customer withdrawal(s)
total customer withdrawal: nil oz
We had 1  adjustment(s)
i) Out of Brinks:  12,442.437 oz leaves the customer and enters the dealer account of Brinks

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

To calculate the initial total number of gold ounces standing for the MARCH. contract month, we take the total number of notices filed so far for the month (59) x 100 oz or 5900 oz, to which we add the difference between the open interest for the front month of MARCH (28 contracts) minus the number of notices served upon today (0) x 100 oz per contract equals 8600 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 (59) x 100 oz  or ounces + {(28)OI for the front month  minus the number of  notices served upon today (0) x 100 oz which equals 8700 oz standing in this non active delivery month of MARCH  (.2706 tonnes)
On first day notice for MARCH 2016, we had 2.146 tonnes of gold standing. At the conclusion of the month we had 2.311 tonnes standing.
I have now gone over all of the final deliveries for this year and it is startling.
First of all:  in 2015 for the 13 months: 51 tonnes delivered upon for an average of 4.25 tonnes per month.
Here are the final deliveries for all of 2016 and the first month of January 2017
Jan 2016:  .5349 tonnes  (Jan is a non delivery month)
Feb 2016:  7.9876 tonnes (Feb is a delivery month/deliveries this month very low)
March 2016: 2.311 tonnes (March is a non delivery month)
April:  12.3917 tonnes (April is a delivery month/levels on the low side
And then something happens and from May forward deliveries boom!
May; 6.889 tonnes (May is a non delivery month)
June; 48.552 tonnes ( June is a very big delivery month and in the end deliveries were huge)
July: 21.452 tonnes (July is a non delivery month and generally a poor one/not this time!)
August: 44.358 tonnes (August is a good delivery month and it came to fruition)
Sept:  8.4167 tonnes (Sept is a non delivery month)
Oct; 30.407 tonnes complete.
Nov.    8.3950 tonnes.
DEC.   29.931 tonnes
JAN/     3.9004 tonnes
FEB/ 18.734 tonnes
March: 0.2706 tonnes
total for the 15 months;  244.526 tonnes
average 16.301 tonnes per month vs last yr  61.82 tonnes total for 15 months or 4.12 tonnes average per month (last yr).
Total dealer inventory 1,379,264.072 or 42.900 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,893,365.207 or 276.622 tonnes 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 276.622 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.
And now for silver
 March 13. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
1,998.900 oz
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
 nil oz
No of oz served today (contracts)
(15,000 OZ)
No of oz to be served (notices)
1145 contracts
(5,725,000  oz)
Total monthly oz silver served (contracts) 2751 contracts (13,755,000 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  3,286,722.4 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 1 customer withdrawal(s):
i) Out of Delaware: 1998.900 oz
 we had 0 customer deposit(s):
***deposits into JPMorgan have now stopped.
total customer deposits;  nil  oz
 we had 0  adjustment(s)
The total number of notices filed today for the MARCH. contract month is represented by 2 contract(s) for 15,000 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 2751 x 5,000 oz  = 13,755,000 oz to which we add the difference between the open interest for the front month of MAR (1148) and the number of notices served upon today (3) x 5000 oz equals the number of ounces standing 
Thus the initial standings for silver for the March contract month:  2751(notices served so far)x 5000 oz  + OI for front month of Mar.( 1148 ) -number of notices served upon today (3)x 5000 oz  equals  19,480,000 oz  of silver standing for the Mar contract month. This is  now average for an active delivery month in silver.  We GAINED 3 contracts or an additional 15,000 oz will  stand.  
Volumes: for silver comex
Today the estimated volume was 27,858 which is fair!!!
Yesterday’s  confirmed volume was 82,260 contracts  which is huge.
Let’s take today’s estimated volume of 75,491 contracts:  that represents:411.3 million oz of silver or approx. 58.7% of annual global supply (ex Russia ex China)
Total dealer silver:  37.579 million (close to record low inventory  
Total number of dealer and customer silver:   186.738 million oz
The total open interest on silver is now further from   its all time high with the record of 224,540 being set AUGUST 3.2016.


And now the Gold inventory at the GLD

March 13/a deposit of 6.78 tonnes of gold into the GLD/Inventory rests at 832.03 tonnes

March 10/ a withdrawal of 4.886 tonnes from the GLD/Inventory rests at 830.25

this tonnage no doubt is off to Shanghai

March 9/a withdrawal of 2.67 tonnes from the GLD/Inventory rests at 834.10

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.

March 13 /2017/ Inventory rests tonight at 832.03 tonnes
*FROM FEB 1/2017: a net    36.82 TONNES HAVE BEEN ADDED.


Now the SLV Inventory
March 13/no change in silver inventory at the SLV/Inventory rests at 330.136 million oz.
March 10/no change in silver inventory at the SLV/Inventory rests at 330.136 million oz/
March 9/another big withdrawal of 1.137 million oz from the SLV/Inventory rests at 330.136 million oz/
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 13.2017: Inventory 330.136  million oz

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 5.1 percent to NAV usa funds and Negative 5.1% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.9%
Percentage of fund in silver:38.9%
cash .+0.2%( Mar 13/2017) 
2. Sprott silver fund (PSLV): Premium FALLS  to -.42%!!!! NAV (Mar 13/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to  – 0.09% to NAV  ( Mar 13/2017)
Note: Sprott silver trust back  into NEGATIVE territory at -0.42% /Sprott physical gold trust is back into NEGATIVE territory at -0.09%/Central fund of Canada’s is still in jail  but being rescued by Sprott.

Sprott’s hostile 3.1 billion bid to take over Central Fund of Canada

(courtesy Sprott/GATA)

Sprott makes hostile $3.1 billion bid for Central Fund of Canada


From the Canadian Press
via Canadian Broadcasting Corp. News, Toronto
Wednesday, March 8, 2017…

Toronto-based Sprott Inc. said Wednesday it’s making an all-share hostile takeover bid worth $3.1 billion US for rival bullion holder Central Fund of Canada Ltd.

The money-management firm has filed an application with the Court of Queen’s Bench of Alberta seeking to allow shareholders of Calgary-based Central Fund to swap their shares for ones in a newly-formed trust that would be substantially similar to Sprott’s existing precious metal holding entities.

The company is going through the courts after its efforts to strike a friendly deal were rebuffed by the Spicer family that controls Central Fund, said Sprott spokesman Glen Williams.

“They weren’t interested in having those discussions,” Williams said.

 Sprott is using the courts to try to give holders of the 252 million non-voting class A shares a say in takeover bids, which Central Fund explicitly states they have no right to participate in. That voting right is reserved for the 40,000 common shares outstanding, which the family of J.C. Stefan Spicer, chairman and CEO of Central Fund, control.

If successful through the courts, Sprott would then need the support of two-thirds of shareholder votes to close the takeover deal, but there’s no guarantee they will make it that far.

“It is unusual to go this route,” said Williams. “There’s no specific precedent where this has worked.”

Sprott did have success last year in taking over Central GoldTrust, a similar fund that was controlled by the Spicer family, after securing support from more than 96 percent of shareholder votes cast.

The firm says Central Fund’s shares are trading at a discount to net asset value and a takeover by Sprott could unlock US$304 million in shareholder value.

Central Fund did not have any immediate comment on the unsolicited offer. Williams said Sprott had not yet heard from Central Fund on the proposal but that some shareholders had already contacted them to voice their support.

Sprott’s existing precious metal holding companies are designed to allow investors to own gold and other metals without having to worry about taking care of the physical bullion.



Major gold/silver trading/commentaries for MONDAY


Digital Gold On Blockchain – For Now Caveat Emptor

By janskoyles March 13, 2017

Digital Gold On The Blockchain – For Now Caveat Emptor

– Bitcoin surpasses gold price – a psychological and arbitrary headline 

– Royal Mint blockchain gold asks you to trust in the UK government

– Royal Canadian Mint and GoldMoney blockchain product asks you to trust in government and the technology, servers, websites etc of the providers

– Invest in a gold mine using cryptocurrency – but wait until 2022 for your gold and trust the miners that it is there

– Blockchain and gold will likely make a “good team”, but they’re not ready yet

Are we nearly there yet? Gold on the blockchain.

In the last few weeks there have been significant developments in the world of gold, digital gold, blockchain and bitcoin. Those who have expressed an interest in gold investment, may have received articles from friends and family about how bitcoin prices reached parity with the yellow metal.

We have long argued that bitcoin and gold should be seen as complementary assets. But not everyone agrees and it doesn’t make a good story. Given bitcoin was first touted, and still is by some, as ‘digital gold’ or ‘as good as gold, but better’ then it has been inevitable that each time there is a significant movement in the bitcoin price then the media starts once again to pitch them against one another in a simplistic ‘cash of the currency titans’ narrative.

Below, we ask if there should be all this hype when a digital currency reaches parity with gold, and what this means for blockchain products such as the Royal Mint’s RMG or OzcoinGold which is purporting to be the first gold-backed cryptocurrency – fyi – there have been many attempts.

Ultimately it comes down to investing in and legally own a piece of gold that will serve your portfolio in the same way it has served millions of people in years gone by – as an asset that is a form of financial insurance, that cannot be devalued by central banks and will not be confiscated whether through bail-ins or more forceful means.

If using gold, blockchain and bitcoin together means that investors’ portfolios can meet the above criteria then we are on the dawn of something very exciting, but as you will see from the below, we don’t believe that we are quite there yet.

One bitcoin or an ounce of gold?

Let’s first address why bitcoin exceeding the gold price is or isn’t a big deal.

Lots of things cost more than an ounce of gold, the handbag I am pining for, a night at the seven-star Burj Al Arab or a gold MacBook Pro. So what? You might ask. Exactly, if lots of things cost more than a lump of gold, then why all the fuss about a bitcoin?

Especially when most of the people making a fuss couldn’t really tell you what a bitcoin is, and no one really knows how to trade using this information.

Whilst we can argue that the bitcoin price superseding the gold price is arbitrary, we can’t deny that this it is significant psychologically.

As noted above, bitcoin is often hailed as a form of digital gold, one that is perhaps more convenient and up-to-date with this technological world. Whether you agree or not, many people do hold this opinion and it is one that is widely reported on, hence the psychological importance of this price move.

There are many naysayers in the world of bitcoin and gold. Some would class them as two separate asset class, to them gold is a commodity and bitcoin is a technology. It still takes a lot of persuasion to the mainstream that both are currencies and that both manage to be so without the control of central banks, monetary policy and borders to restrict them.

This is why it is exciting when they reach parity or bitcoin exceeds gold. It means that more of the world is waking up to the issues with fiat money. It does not mean that bitcoin is better than gold nor does it mean that the world has flipped on its head and more people would rather own a bitcoin than hold a piece of gold.

The gold market is still worth more than 300 times that of the 16.2 million bitcoins in circulation. And if you consider the size of the $20 billion bitcoin market next to the Facebook, Amazon, Netflix and Google (FANGs) of the world then you’re not looking at something that is about to turn the world upside down.

Bitcoin is also incredibly volatile, despite calming down in recent years, and can still react like a hormonal teenager to an government announcement or ruling.

Just this weekend, bitcoin collapsed 18% after the U.S. regulator, the Securities and Exchange Commission (SEC), rejected a proposal by the Winklevoss twins for a publicly traded fund based on the digital currency. As Bloomberg put it, this dashed “hopes that a government-approved investment vehicle would lead to wider interest in virtual money.”

This volatility is likely to be the biggest barrier to it gaining the widespread adoption that gold already has – especially in the Asian world.

However, as I often tell people, bitcoin is incredibly young. Bitcoin fans (myself included) are getting excited about this as, given the short history of the cryptocurrency compared to the likes of gold and the masters of the online universe, its future price movements seem heavily weighted to the upside. Just like gold, it cannot be printed at will, devalued, confiscated (whether legitimately or by bail-in).

We cannot know the future of bitcoin when consortiums such as R3 are backing away from blockchain, or companies such as Microsoft, Intel and JPMorgan are embracing Ethereum.

The high bitcoin price tells us more about what we don’t know that what we do – we know it is likely to go higher but we have no idea how high, we know that it is being taken seriously but we do not know what this means for its role as an investment or monetary option.

The main lesson to learn from this price hike is that bitcoin is here to stay and that more people are looking for alternatives outside of the fiat monetary system. This is good for the gold market and those who already own a diversified portfolio including gold.

The downside to the hike in the bitcoin price is that whilst a price climb suggests more trust in the currency, the mainstream still like to play on the falsehood that it is anonymous and ‘unbacked’ by a central bank or authority, and so digital gold providers can take advantage of this. And this is where the likes of the government-owned mints or cryptocurrency builders are stepping in.

Royal Mint expects a gold rush

The government would like you to give them some money. It’s a great deal, honestly. You give them some money and they won’t charge you for keeping it. CME group are helping them to take your money and blockchain is also involved somehow. What do you think? Fancy handing over some of your life savings? No?

Funny that. The above is exactly what is going on. Except there are a couple of steps I didn’t mention. The government would like your money but would prefer that you bought gold from them first and they kept a hold of it. It seems to make the process of handing over funds a lot more gentlemanly, or British if you like.

Under the guise of investing in gold, the Royal Mint claims that they are ‘bringing to market a new way to invest in and digitally trade physical gold bullion.’

When the government-owned Royal Mint announced a new digital gold investment service entitled RMG, in December, they did so with much fanfare and excitement.

Despite a lack of mention of it in their recent literature, RMG uses blockchain technology. As we explained in December

“As one would expect from a trading solution using blockchain, it will ‘log each transaction’. The two parties [Royal Mint and CME Group] will collaborate on a digital gold asset called Royal Mint Gold (RMG) and will ‘transform the way traders and investors trade, execute and settle gold.”

We also quoted the economist Ashe Whitener, back in December, who echoed our thoughts:

“In my opinion, this is only news because the Royal Mint is basically a government-owned entity experimenting with blockchain. Just because something tangible like gold has a serial number on a blockchain, doesn’t mean that it is any more secure, safe or less risky.

Since the underlying asset is still physical, we still must place our trust with the Mint in terms of vaulting the gold. So nothing here really changes.”

More information has been released in recent weeks, but it hasn’t added much meat to the bone of this latest digital gold product.

The fact remains that the Royal Mint have released a digital gold platform, following in the footsteps of and that allows you to buy and sell one gram at a time. Once again, we have to draw and attention to (and ask why) the fact that the government-run Royal Mint is getting the press and naive gold investors excited about RMG, when really very little has changed.

We recently wrote about unallocated gold. We mentioned that whilst new gold investors might think that owning gold without having to pay storage fees seems highly attractive, it also comes with risks and, arguably hidden costs. Unallocated gold is free to store because the bank or institution that you have chosen to buy it through, is using it for it’s own purposes.

The Royal Mint’s RMG is not unallocated, however it does come without storage fees. We have long pointed out the risks in owning unallocated gold and one has to be extremely confident of the solvency of the provider.

We’re all familiar with the expression ‘if it sounds too good to be true then that’s because it usually is. The Royal Mint is owned by HM Treasury, it pays an annual dividend their way every year. It goes without saying that the United Kingdom is pretty broke at the moment

and with the fallout of Brexit still playing out, against a backdrop of geopolitical uncertainty who knows how much worse it will become.

And when it does, how is the government planning on paying to keep the country going? Who knows, but it’s all happening at the same time that the government is trying to encourage you to hold gold in their vaults.

One other odd thing that they are offering is to ‘buy back’ any RMG should the price of RMG fall below the spot price of gold, “The Royal Mint will buy back any RMG if the trading price of RMG falls below the spot price of gold for longer than 24 hours it will be bought back.”

This surely goes against the idea of owning gold? The beauty of holding gold is that there is a global market for it and it is one of the most liquid markets in the world which protects against price risk. If the gold you own comes with a sticker on it that says it can only be sold as RMG then what was the point in buying it in the first place?

Of course, the Royal Mint are also hoping that the reverse might happen: that RMG will begin to trade at a premium to the gold price. But when this happens, why would people look to buy this when the gold market is one of the most global and liquid ones in existence.

The beauty of gold is that it is gold. We discourage buying gold jewellery as an investment as it receives a huge mark-up quite simply because it is jewellery. We also discourage buying collector coins as they too receive a huge mark-up which does not reflect the gold or silver content.

The Royal Mint is hoping RMG will trade higher than the market-price of a gold-gram because of its association with the 1,000 year old Mint. But, surely then, on the flip side an association with a government- owned institution is not always going to be a positive thing.

Is the Loonie about to get touch of gold?

Let’s look to the Royal Canadian Mint to get more of an idea about where this might go. Last year digital gold provider GoldMoney and the RCM announced that they would be joining forces.

Customers of GoldMoney are able to buy Canadian Mint gold via the company’s permissioned  blockchain. We could go into the tech of all of this and ask why a permissioned blockchain is even necessary (in brief – you can just use a secure ledger system, there’s no need for a private blockchain to overcomplicate things. It just sounds good) but instead we note the same issue we do with RMG. The Royal Canadian Mint is owned by the Canadian Government.

While we are big fans of tech and technology solutions in the gold market, it must be acknowledged that there are risks in investing in gold through the intermediary of digital gold platforms.

Royal Canadian Mint and GoldMoney blockchain product asks you to trust in government and the technology, servers, IT, websites etc of the digital gold platforms and their portals.

As we warned recently

Buying gold through an electronic platform can be very convenient and very fast. You can buy significant sums and pay low spreads and low fees, your storage costs for such investments can be extremely cheap too.

These electronic platforms spend a lot of money advertising, and some even claim to give you allocated gold. We do not consider a part ownership of a large 400 oz bar of gold as being allocated. You are in fact a pooled gold investor and one who has no idea of what particular part of a gold bar you own. You can not, unlike GoldCore Secure Storage, drive to a vault in Zurich, Singapore, Hong Kong, Dubai or London and take delivery of your gold, without entering into a sale transaction.

In addition many such platforms force you to only buy and sell through their market board and their online platform and website. Digital gold platforms are “closed loop systems” where liquidity and pricing are dependent on a single platform, website and company. A buyer can only buy and sell through that one online platform. An investor is in effect “captive”.

Besides the dual technological and liquidity risk, there is also the sovereign risk, An investigation by CBC News found that, just two years ago the Mint lost money and continues to struggle, “Revenue is down sharply, jobs have been chopped, morale is in the tank, and formerly successful lines of business are being shut down — even as the mint spends millions of dollars on new executive offices.”

In the third-quarter of 2016 revenues were down by 27% and profits by 61%. All of this is despite efforts to raise funds such as minting collectible coins.

Similar to the RMG, storage is free (for purchases up to 1kg). We don’t need to repeat the above, save asking if this is a trend that will start to appear in other sovereign mints within countries that are part of the huge, growing debt-bubble that will inevitably pop.

To buy and store gold with a government institution is to go against the reasons to buy gold. Investors should not be fooled that the implementation of a blockchain, or the offering of free storage, suddenly means one can disregard centuries of logical gold investment as a store of value and a form of insurance against these very entities.


We’re perhaps being unfair to the Royal Mint and Royal Canadian Mint. They aren’t the only ones using the distrust in the monetary system, distrust of bitcoin, its increased profile and blockchain to their advantage.

One of the similarities drawn between gold and bitcoin is that they are finite. Gold is finite because it is natural, it has to be mined from the earth (let’s ignore the mad notion of space mining for now!) and alchemy still eludes us.

One gold mining company has taken advantage of this and decided that the best way to raise money (usually a very expensive process full of regulatory and legal costs) is by issuing its own cryptocurrency which is 2/3 backed by gold from its mine. The other third is backed by gold in the Perth Mint.

The company proudly state that the coin is backed by 24k gold. 24k is an odd way for gold bullion dealers to describe the product, we usually refer to gold’s millesimal fineness i.e. in three or more digits, rather than karats, most selling 999.99 or 999.999 (if you’re Chinese). 24k is just 999 and therefore not quite as pure, however this is the highest gold content for jewellery.

Unsurprisingly, as the majority of it is still in ground, there are no storage fees to pay on the gold and lucky investors can come back in March 2022 and redeem their currency for physical 24k coins.

When investors choose to invest in physical gold, they often do with the intention of holding it for the long-term but they are also doing it as a form of insurance. The joy of buying gold is that when done properly (as allocated and segregated gold coins and bars) is that you can take delivery of it at any time. In the above scheme, this is not possible. There is no possible way that the gold can be allocated or segregated from others’ holdings. The ability to do this, is the attraction of investing in gold.

Gold investment is also done to reduce counterparty risk. This way to invest in gold relies hugely on counter parties, the main one being the ability of the mining company to actually efficiently run their gold mine so as to extract the gold. Where are the guarantees that this will happen? What happens if the company goes bust? There will be no gold for those investors who thought they were buying a safe haven and form of financial insurance.

We support the gold mining company, this is an innovative way to raise funds. However, it must not be presented under the guise of innovative gold investment and as a quite high risk speculation.

What does it all really mean?

Whatever you think of bitcoin, gold and the various digital offerings, one can’t ignore what their existence and growing interest in them means: there are several serious risks both today and on the horizon that will see investors favour those assets that cannot be manipulated, devalued or confiscated.

And this all boils down to why we invest in and more importantly legally own physical gold, or even bitcoin – because we want to diversify and own a store of value.

So why would you choose to buy gold that is being ‘protected’ by the very government that is at least in part responsible for driving you to own physical bullion precious metals in the first place? Or why would you choose to buy gold that you are unable to retrieve in your preferred coin or bar format at short notice?

We shouldn’t, however, dismiss government-backed institutions offering gold products and gold-backed blockchain products, with the same brush. The way people have chosen to invest in physical gold has evolved over hundreds of years, thanks to technology. Our clients from over fifty countries around the world would not be able to be invest in allocated, segregated gold through us, if it were not for technology.

Blockchain really can contribute in this space, but we do not believe that those examples mentioned above are the right ones. Digital gold is digital gold and physical gold is physical gold.

There is a huge opportunity for digital gold and blockchain to come together, but it is probably best if the combination does not involve government institutions seeking to profit from investors and store of value gold buyers seeking the hedging qualities and safe haven qualities of actual gold bullion.



Silver: a graphic look at “peoples money:

(courtesy zero hedge)

Putting Global Debt Into Perspective – 13 Stunning Silver Stats

Although gold has a bigger reputation today as a monetary metal, it was often deemed too valuable for everyday transactions throughout history.

But, as Visual Capitalist’s Jeff Desjardins notes, for the most part, common people in places like Ancient Rome used silver to buy daily staples like grain or wine. As a result, silver has a strong reputation through monetary history as the “people’s money”.

Even today, silver is still much more widely accessible. With one ounce of gold being 70x more expensive than an ounce of silver, it’s difficult for someone who is just starting to accumulate wealth to own gold.

Visualizing Silver

What do savings and debt look like, using the “people’s money”?

Below is everything from the average paycheck to global sovereign debt visualized as silver cubes.

1. A median U.S. family brings in $2,355 per pay period (semi-monthly) pre-tax.

Average U.S. Paycheck as a Silver Cube

2. However, the median American family only has about $5,000 of savings.

Median U.S. Savings as a Silver Cube

3. The standard silver delivery bar holds 1,000 oz of silver.

Silver bar

4. Average household debt is $98,312, with mortgage debt being the primary component.

Average household debt as a silver cube

5. A Lamborghini worth over $400,000 needs a silver cube with 16-inch (0.4m) sides.

A Lamborghini's value as a silver cube

6. Using a silver price of about $18/oz, here’s what $1 million looks like.

$1 million as a silver cube

7. Every day, the world’s mines produce about 75 tonnes of silver, worth over $44 million.

Daily Silver Production as a silver cube

8. Silver Eagle sales have jumped considerably since the Financial Crisis.

Silver Eagle Sales as a Silver Cube

9. When the Hunt Brothers tried to corner the silver market, they hoarded 200 million oz.

Hunt Brothers Stockpile as a Silver Cube

10. Today, almost 900 million oz of silver is mined each year.

All Silver Mined Each Year as a Silver Cube

11. JP Morgan’s market capitalization, in comparison to previous cubes.

JPMorgan's market capitalization as a silver cube

12. All silver ever mined would not compare to the Fed’s balance sheet, which is now $4.5 trillion.

All Global Debt Visualized as a Gold Cube

13. Global sovereign debt is 13X bigger than all previous cubes combined.

All Sovereign Debt Visualized as a Gold Cube

Liked our visualizations of silver cubes?

Don’t forget to check out 11 stunning visualizations of gold.


A must listen to interview between Egon Von Greyerz and Grant Williams on gold:

(courtesy Real Vision TV)


Gold In Uncertain Times: “The West Doesn’t Get It… They’ve Been Indoctrinated By Paper Money”


In this fascinating interview on RealVision TV, Grant Williams and Egon von Greyerz cover a very broad range of subjects from gold, wealth preservation to debt, interest rates, Brexit, the EU and much more.

The interview was recorded in London at the end of 2016 but the discussion is timeless and extremely relevant in regard to future events and risks.

The biggest risks ahead according to Egon is the global bond markets. He predicts rates going to very much higher levels like in the 1970s. That will lead to more money printing, faster currency debasement and the demise of the bond market.

Grant and Egon also discuss that in every period of panic and crisis combined with economic mismanagement, which we are seeing today, gold has always acted as insurance. The setup is now perfect for gold to act to protect wealth against the coming problems in financial markets and the world economy…”the Indians know this, the Chinese know this but the West doesn’t understand because they have been indoctrinated by paper money…”

As inflation rises institutions will be obliged to hold gold as a hedge. Since gold production is coming down substantially over the next 8 years there will be less gold available. No one will trust paper gold. This will lead to major upward pressure in the price of physical gold. Future increases in demand can only be satisfied at much higher prices.

*  *  *

Full interview below: One of the most respected names in the gold market, Egon von Greyerz illuminates the discussion on the long term trend for the precious metal, against the current climate.


*  *  *

The crazy paper scheme to monetize gold as only mobilized 6.4 tonnes
(courtesy Times of India/GATA)

Indian government mobilizes 6.4 tonnes of gold under paperization scheme


From the Press Trust of India
via The Times of India, Mumbai
Friday, March 10, 2017

NEW DELHI — The government has collected 6.4 tonnes of gold under the scheme for monetising the metal, Parliament was informed today.

Launched in November 2015, the scheme intends to mobilise idle gold held by households and institutions so that the wealth can be put to productive use.

The scheme also intends to reduce the current account deficit by lowering country’s reliance on gold imports to meet the domestic demand, Minister of State for Finance Arun Ram Meghwal said in a written reply in the Lok Sabha. …

… For the remainder of the report:…


I feel sorry for Mexico;  all of its earmarked gold bars are inside the Bank of England’s vaults and no doubt these bars are hypothecated:

(courtesy Ronan Manly/Bullionstar/GATA)

Ronan Manly: Mexico’s earmarked gold bars at the Bank of England’s vaults


12:15p ET Saturday, March 11, 2017

Dear Friend of GATA and Gold:

Gold researcher Ronan Manly writes today that financial journalist Guillermo Barba’s recent extraction of details about the Bank of Mexico’s gold reserves —…

— shows that the Bank of England remains in the gold leasing business on behalf of other central banks. Manly’s analysis is headlined “Mexico’s Earmarked Gold Bars at the Bank of England Vaults” and it’s posted at Bullion Star here:…

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.



Reuters comments on the total flop of India’s gold paperization scheme mentioned above

(courtesy Reuters)



India’s gold paperization scheme is a total flop


India Gold Recycling Plan Fails to Tempt Households

By Rajendra Jadhav
Saturday, March 11, 2017

MUMBAI — India’s ambitious plan to recycle thousands of tonnes of gold lying idle in temples and households looks to have foundered on concerns over high costs and slight returns, in a blow to government hopes of cutting imports of the metal.

After 16 months temples and households have turned over just 7 tonnes of gold out of the 24,000 tonnes believed to be in private hands, two industry sources and a government official said, with almost all the gold coming from temples.

Families that hold about 80 percent of the idle gold have largely shunned the scheme, with some four dozen government-approved centers that opened to test purity still to process a single gram of household gold, said Harshad Ajmera, president of the Indian Association of Hallmarking Centres.

“You hardly earn anything but you have to do so many things to deposit gold under the scheme. Why should I take all this pain?” said 54-year-old clerk Ganpat Shelke, who considered depositing 50 grams of gold. …

… For the remainder of the report:


For your information:  an accurate account of the Klondike Gold rush in 1898 in Canada’s Yukon

(courtesy James/AlaskaNews/Anchorage)

Accurate account of Klondike Gold Rush turns mythology on its head


By David A. James
Alaska Dispatch News, Anchorage
Sunday, March 12, 2017

“All for the Greed of Gold: Will Woodin’s Klondike Adventure.” Edited by Catherine Holder Spude; Washington State University Press; 2016; 294 pages; $27.95

Nothing in northern history is as heavily romanticized as the Klondike Gold Rush. The era has been mythologized as the last great leap in westward expansion, when thousands flooded north and a culture of greed, gambling, and gunplay swept over the Last Frontier.

The popular narrative makes for good novels and movies, but apart from the exploits of Soapy Smith, it didn’t happen that way. As we learn from “All for the Greed of Gold,” a recently published firsthand account of life on the trail to Dawson City in 1898, what mostly transpired was a lot of hard work. It’s not the stuff of Hollywood productions, but it’s actually fascinating for what it tells us about the people who went and what their experiences required of them. …

… For the remainder of the report:…


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


1 Chinese yuan vs USA dollar/yuan WEAKER AT  6.9197( DEVALUATION SOUTHBOUND   /OFFSHORE YUAN NARROWS  TO 6.8947/ Shanghai bourse UP 24.26 POINTS OR .76%   / HANG SANG CLOSED UP 261.00 POINTS OR 1.11% 

2. Nikkei closed UP 29.14 POINTS OR 0.15%   /USA: YEN FALLS TO 114.60

3. Europe stocks opened ALL IN THE GREEN EXCEPT SPAIN      ( /USA dollar index FALLS TO  101.23/Euro UP to 1.0675


3c Nikkei now JUST BELOW 17,000

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

3e WTI::  48.23  and Brent: 51.27

3f Gold UP/Yen UP

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO  +.454%/Italian 10 yr bond yield UP  to 2.333%    

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

3k Gold at $1204.50/silver $17.04(8:15 am est)   SILVER  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble DOWN 5/100 in  roubles/dollar) 59.04-

3m oil into the 48 dollar handle for WTI and 51 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.


30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  1.0075 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0756 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.


3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.454%

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 2.573% early this morning. Thirty year rate  at 3.158% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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


Global Stocks Rise, S&P Futs Flat As Dollar Rebounds Ahead Of Critical Week For Markets


European bourses advance and Asian share rose led by a surge in Hong Kong stocks which rose the most in three months as Japan hit 15 month highs. U.S. futures are little changed along while the dollar rebounded from session lows after Friday’s selloff. Crude oil has continued its retreat, down 0.2% and sliding for a 6th straight day after breifly dropping below $48 in overnight trading.

The Hang Seng China Enterprises Index jumped the most since November amid easing concern that U.S.-China political tensions will weigh on the yuan after BlackStone’s Steve Schwarzman, one of Trump’s top economic advisers, said Sunday on CNN that Trump will likely temper his criticisms of China, including his campaign claim that the country manipulates its currency. South Korean equities rose to the highest since May 2015 following last Friday’s impeachment of president Kim, while European shares headed for a fourth straight gain. The dollar fell against most major currencies, with the euro climbing for a third day. Oil kept sliding below $50 as U.S. drillers continued to boost activity, countering OPEC’s efforts to drain a global glut. Industrial metals advanced for a second day.

Traders are tentative out of the gate ahead of a pivotal week for global markets with the focus falling on Wednesday when there is a trifecta of catalysts between the Fed’s upcoming rate hike, the debt ceiling expiration and the Dutch general elections which comes amid a growing diplomatic spat with Turkey. In addition to the Fed, we will also get announcements by the BoJ, BoE and SNB all of which are expected to keep rates on hold. It’s also possible that the UK could invoke Article 50 this week so another story to watch. President Trump may also dish out his first budget outline for fiscal year 2018 on Thursday while G-20 finance ministers gather in Germany for a series of meetings so there’s plenty to keep markets busy.

Following last week’s impressive payrolls reports, global equities are trading near a record high as indications of firming growth in the U.S. and Europe coincide with China’s economy showing signs of improvement. U.S. jobs data at the end of last week cleared the way for the Fed to raise interest rates without forcing it to accelerate the pace for future tightening. The euro built on gains from Friday, when European Central Bank policy makers were said to have considered their ability to raise rates before a bond-buying program comes to an end, although the common currency has erased all losses after the European open, and was back near session lows at publication time.

By now it is no secret that traders view a quarter-point Fed hike this week as a virtual certainty after Friday’s data showed U.S. employers added more jobs than forecast in February. They’ll be watching the central bank’s policy decision for signals on what will come next. Futures indicate the market is moving toward policy makers’ December projection of three rate increases in 2017. It would be the first year with multiple Fed hikes since 2006. Fed fund futures prices showed investors pricing in more than a 90 percent chance of an increase in U.S. overnight interest rates and the market’s attention is now firmly on the scale of tightening further out.

“Improved growth and inflation prospects are allowing developed market central banks to sketch their exits from extreme accommodation at varying speeds,” David Folkerts-Landau, group chief economist at Deutsche Bank wrote in a note to clients.

Overnight Goldman flip-flopped on its long-standing bearish position over Chinese stocks, and joined the rush on Chinese shares, becoming the latest major brokerage to upgrade the market. China’s macroeconomy stabilized in the beginning of 2017, Ning Jizhe, head of the National Bureau of Statistics, said at the sidelines of the annual legislature meeting in Beijing on Sunday.

Sterling rose 0.4% against the dollar ahead of a vote in Britain’s lower house of parliament on legislation that will give the government permission to trigger Britain’s exit from the European Union. “The push and pull between solid growth momentum and political risks look set to continue in the near-term,” Folkerts-Landau said.

The world’s most powerful finance ministers and central bankers convene in the German spa town of Baden-Baden on March 17-18, their first meeting since Donald Trump’s U.S. election victory in November where his protectionist stance on international trade is likely to be a key issue.

The MSCI Asia Pacific Index advanced 0.7 percent as of 8:17 a.m. in London. The Hang Seng China Enterprises Index surged 1.9 percent, the biggest jump since Nov. 22. Japan’s Topix rose 0.2 percent, after the gauge rallied 1.2 percent on Friday to the highest level since December 2015.  The Kospi index jumped 1 percent, led by a 1.1 percent gain in Samsung Electronics Co. Korean shares extended gains from last week, climbing as President Park Geun-hye’s ouster removes some uncertainty from politics in the nation. The Stoxx Europe 600 added less than 0.1 percent, after similar gains in each of the previous three sessions.

Gains in mining stocks and continued corporate deal-making activity helped European shares offset weakness in oil-related shares, with the benchmark STOXX 600 up 0.2 percent in early trades. The FTSE 100 was up slightly where along with mining blue chips a 1 percent gain for shares of HSBC supported the index. HSBC shares rose after Europe’s biggest bank tapped an outsider, Mark Tucker, for its top job.

In bond markets, euro zone government bond yields pulled back from multi-week highs, as nervous investors turned their focus to this week’s Dutch parliamentary elections, the next key gauge of populism in Europe.  Although the risk of a eurosceptic party coming to power in the Netherlands is small, a strong election performance could renew concerns about the popularity of the far-right in French presidential elections in April and May, said Erin Browne, head of macro investments at UBS O’Connor, a hedge fund manager within UBS Asset Management.

“If you see a eurosceptic party gains a significantly larger share of the vote than current polls suggest that could spill over into concern about the French elections and the National Front doing better in the second round of voting than is currently being predicted,” she said. “That’s the risk for markets with a view to the Dutch elections.”

The yield on 10-year Treasuries fell one basis point to 2.56 percent, after falling three basis points in the previous session. The yield on 10-year Australian government bonds slid four basis points to 2.94 percent, tracking Friday’s Treasury rally.

A sharp pullback in oil prices which fell to their lowest in three months and are on track for a fifth day of losses also kept investor confidence in check.  The slump in prices has occurred as more rigs are deployed to look for oil in the United States and as crude inventories in the United States, the world’s biggest oil consumer, have surged to a record.

Market Snapshot

  • S&P 500 futures down 0.01% to 2,371.50
  • STOXX Europe 600 up 0.1% to 373.59
  • MXAP up 0.7% to 145.41
  • MXAPJ up 0.9% to 467.01
  • Nikkei up 0.2% to 19,633.75
  • Topix up 0.2% to 1,577.40
  • Hang Seng Index up 1.1% to 23,829.67
  • Shanghai Composite up 0.8% to 3,237.02
  • Sensex up 0.06% to 28,946.23
  • Australia S&P/ASX 200 down 0.3% to 5,757.35
  • Kospi up 1% to 2,117.59
  • German 10Y yield fell 2.4 bps to 0.461%
  • Euro up 0.05% to 1.0678 per US$
  • Brent Futures up 0.08% to $51.41/bbl
  • Italian 10Y yield rose 5.5 bps to 2.367%
  • Spanish 10Y yield fell 0.4 bps to 1.885%
  • Brent Futures up 0.08% to $51.41/bbl
  • Gold spot up 0.3% to $1,208.62
  • U.S. Dollar Index up 0.02% to 101.27

Top Overnight News via BBG

  • ECB Said to Have Discussed Whether Rates Can Rise Before QE Ends
  • Oil Extends Decline as U.S. Drilling Accelerates Amid OPEC Cuts
  • Libya Crude Oil Output Said to Fall 11% on Field, Port Closings
  • Schwarzman Sees Donald Trump Dialing Back Criticisms of China
  • BlackRock May Bid for U.K. Student-Loan Portfolio: Sunday Times
  • Johnson Controls Said to Explore Sale of Scott Safety: Reuters
  • Boeing Wins 5-Year Contract to Sustain South Korea’s F-15k Fleet
  • Shuaa Capital to Buy Integrated Capital, Integrated Securities
  • AES Plans $750m Solar Power Project in Vietnam
  • EPAM Systems, Innophos Postpone Investor Days Due to Weather

Asia equity markets trade mostly higher after the positive US close last Friday, although gains have been modest ahead of the looming FOMC. Conversely, ASX 200 (-0.3%) was weighed by a struggling energy sector after WTI crude futures extended on last week’s 9.0% losses to briefly slip below USD 48/bbl, while Nikkei 225 (+0.2%) was initially subdued after poor Machine Orders data, but then recovered amid upside in JPY-crosses. Shanghai Comp. (+0.8%) and Hang Seng (+1.1%) traded higher after the PBoC resumed liquidity injections, while the KOSPI (+1.0%) continued the strength seen from last week’s impeachment ruling as participants welcomed a fresh start. 10yr JGBs were uneventful with prices flat after the mildly positive sentiment in Japan was counterbalanced by the BoJ’s presence in the market for JPY 520b1n of government debt. PBoC injected CNY 10bIn 7-day reverse repos, CNY 10bIn in 14-day reverse repos and CNY 10bIn in 28-day reverse repos.

Top Asian News

  • China H-Shares Advance the Most in Three Months; ChiNext Climbs
  • Gulf Central Banks Want to Lower Visa, Mastercard Fees: Alrai
  • Posco CEO Meets GE CEO Immelt to Discuss Ways to Strengthen Ties
  • Indonesia Human Rights Agency to Review Freeport’s Record: Post
  • China Moves to Make $9 Trillion Domestic Bond Market Global
  • China Huarong’s Lai Expects Annual Profit Growth of 20%-30%
  • Rupee Climbs on Modi’s Victory in State Election: Asia NDFs
  • Singapore Bans Ex-Goldman Banker Leissner, Seeks Bar on Others
  • Yingde Off-Exchange Trade of 79.67m Shares Crosses at HK$6 Each
  • Hong Kong Regulator Said to Probe CCB International’s IPO Work

European equities are modestly higher although with no clear direction in a quiet start to the week. Materials lead the way higher this morning while financials kicked off on the back foot, although have pared some of the early softness by mid-morning. The initial downside came in the wake of Friday’s ECB source reports suggesting the central bank discussed hiking rates before the end of the QE program. Amec Foster Wheeler and John Wood Group are the two best performers in the Stoxx 600 after pre market reports of their tie up for GBP 2.23Nn. Away from equities, fixed income markets continue to rise across the board, with Bunds and Gilts both higher by almost 50 ticks this morning after some of the significant downside seen last week. Focus will continue to fall on central banks with ECB’s Draghi Lautenschlaeger, Praet and Constancio all scheduled to speak today, ahead of several rate decisions later this week, including the FOMC, BoE, SNB and BoJ.

Top European News

  • Bayer CEO Sees EU6b Sales From 6 Pipeline Drugs: Welt am Sonntag
  • HSBC Shares Gain After Bank Names AIA’s Tucker as Chairman
  • Bovis Shares Jump After Amid Takeover Talks With Galliford Try
  • Wood Group Acquires Amec in 2.2 Billion-Pound All-Share Deal
  • Europe ‘Political Circus’ Has SNB Bracing for Stronger Franc
  • U.K. House Prices Rise Fastest in a Year as London Rebounds
  • Bund Futures Erasing Loss After ECB Report as Smets Pushes Back
  • Le Pen Says Falling Currency Would Help More Than It Hurts
  • Aryzta Sweeps Management Out Early After First-Half Loss
  • Scotland Braced for ‘Important’ Speech as Brexit Process Looms

In currencies, the Bloomberg Dollar Spot Index fell 0.1 percent, after dropping 0.6
percent on Friday. The yen rose 0.2 percent to 114.63 per dollar. The euro was unchanged 0.1 percent to $1.0685, extending its 0.9 percent surge on Friday. The British pound climbed 0.4 percent to $1.2221. The South Korean won jumped 1.1 percent. The Australian dollar advanced 0.5 percent, following Friday’s 0.5 percent gain. Monday morning action in the FX markets are largely a function of some repositioning ahead of the multitude of event risk this week. The FOMC meeting takes centre stage, as the Fed is expected to hike rates by 25bps, but the market is looking past this now and considering the impact on the future rate path from the accompanying statement. The USD has been reined in a little since, losing ground across the board, but less so against the JPY. The EUR has also been pulled back a touch, with the 1.0700+ push in EUR/USD running into offers to pull the lead rate back into the mid 1.0600’s. The retracement has followed through in the crosses also, and perhaps more notably so against GBP, where exposure remains significantly skewed to the downside as we head closer to triggering Article 50. The amendments to the Brexit bill voted on by the House of Lords continue to cause headwinds for PM May and her government, who remain adamant that A50 will be triggered by the end of the month. Even so, EUR/GBP has found some resistance ahead of 0.8800, while Cable buyers from the mid 1.2100’s stood resolute through last week’s USD advance.

In commodities, WTI crude dropped 0.2 percent to $48.39 a barrel. Crude has lost almost 10 percent over the past six days, breaking below the $50 a barrel level it had held above since OPEC and 11 other nations started trimming supply on Jan. 1. Gold climbed 0.5 percent to $1,210.18, adding to Friday’s 0.3 percent gain. Some say that the pull-back in Oil prices was to be anticipated, but with OPEC signalling near full compliance with the output agreement, the lack of upside may have inspired some profit taking given some of the heavy long positioning among the Hedge Fund community. Concerns over shale production has reared its head also, along with timing issues having a marginal impact in current inventory. WTI dipped below USD48.00 today, but remains heavy alongside Brent, which dipped below USD51.00. Fresh upside pressure for Copper as the striker union at Escondida rejects BHP Billiton. Peru’s top copper mine Cerro Verde is also ground to a halt on strikes initiated on Friday so the combination of the above has seen prices recover through USD2.60. Gold has recovered through USD1200 on broad based USD trimming, with Silver reclaiming USD17.00.

It’s a fairly quiet start to the week data wise, with little of interest in Europe this morning and just the labour market conditions index in the US this afternoon.

US Event Calendar

  • 10am: Labor Market Conditions Index Change, est. 2.5

DB’s Jim Reid concludes the overnight wrap

Maybe someone forgetting the keys to the padlock at the Fed Reserve building in DC might be the only thing stopping the Fed from hiking rates this Wednesday evening in what is a busy week ahead of data, BoJ/BoE meetings and the Dutch elections which comes amid a growing diplomatic spat with Turkey. It’s also possible that the UK could invoke Article 50 this week so another story to watch. President Trump may also dish out his first budget outline for fiscal year 2018 on Thursday so there’s plenty to keep markets busy.

Over the weekend it’s actually been relatively quiet for newsflow aside from a few smaller stories that are doing the rounds. In Japan there’s been some focus on a Bloomberg article suggesting that the BoJ’s bond-purchase plan for March is putting the Bank on track to miss the annual target (by about 18% if sustained) which in turn is throwing up questions about whether or not the BoJ is starting a ‘stealth tapering’. Meanwhile, in India PM Narendra Modi’s BJP has registered a sweeping victory in the state elections in Uttar Pradesh – the largest and most populous state of India. The victory should cement Modi’s stature within the BJP and may also be seen as a vote of support of Modi’s demonetisation exercise and his anti-corruption credentials which in turn should give a boost to pushing through domestic reforms. Finally there is one interesting piece of news to report in Europe and that comes from Iceland where, almost 9 years on from being imposed in 2008 following the collapse of its banks, the government has announced that all capital controls on its citizens, businesses and pension funds will be lifted from this Tuesday.

In terms of markets for the most part it’s been a fairly positive start to the week in Asia. The Nikkei (+0.23%), Hang Seng (+0.92%) and Shanghai Comp (+0.42%) are all higher while South Korea’s Kospi (+1.15%) and the Won (+0.92%) are both stronger post the news that Park Geun-hye has officially left the presidential palace after judges backed the impeachment. This morning’s gains are also coming despite WTI Oil trading down another -0.85% to around $48/bbl. That’s after Oil tumbled over 9% last week for the biggest decline since November. That appears to be weighing more on the ASX (-0.41%) while US equity index futures are also slightly in the red.

Before we look at the week ahead, a quick recap now of how markets ended on Friday. Unsurprisingly the big focus was the release of the February employment report in the US which, for those who missed it, saw nonfarm payrolls come in at a slightly stronger than expected 235k gain (vs. 200k expected) with 9k of cumulative upward revisions to prior months. We’d argue though that given the strong ADP reading earlier in the week, the print was probably in and around where the whisper number was sitting. Private payrolls also came in a little better than expected (227k vs. 215k expected) while the unemployment rate dipped one-tenth to 4.7% and the U-6 rate dipped two tenths to 9.2% and equalling the cyclical low made in December. The participation rate ticked up from 62.9% to 63.0% However if there was one soft element of the report it was the slight miss on wages growth with average hourly earnings reported as rising +0.2% mom versus expectations for +0.3%. Still, at +2.8% yoy the annual rate was up two-tenths from the prior month and only a shade below the recent +2.9% high of December.

Taken together the data all but confirmed a more than likely Fed hike this week barring any unexpected surprises. Treasuries actually ended up a little firmer on Friday with 2y and 10y yields down 1.9bps and 3.1bps respectively – the latter bringing to an end 9 consecutive days of higher yields. That said we still saw 2y yields end the week 4.8bps higher and 10y yields 9.7bps higher. Meanwhile the Greenback also eased back a little on Friday with the Dollar index -0.59% while US equities nudged a little higher. The S&P 500 was +0.33% but still suffered the first negative week (-0.44%) since January.

In Europe equity markets were for the most part higher again, albeit very modestly, with the Stoxx 600 finishing +0.09%. The more interesting price action however came in bonds where selling pressure was evident once again. Indeed 10y Bund yields finished another 5.8bps higher on Friday and so putting them 12.9bps higher over the course of the week while yields in France and the periphery were also 3bps to 5bps higher on Friday. That largely seemed to reflect some of the ECB reports which emerged suggesting that the Bank could look to lift rates while still in the process of tapering QE, or before the QE programme ends. A Bloomberg report on Friday quoting ‘people familiar with the matter’ said that Governing Council members were said to have considered the matter at last week’s meeting although as we know Draghi did confirm last week that the forward guidance remains such that the ECB expects rates to remain at present or lower levels for an extended period of time and also past the horizon of net asset purchases. These sorts of articles always throw up the usual credibility questions but generally speaking there is no smoke without fire so worth keeping an eye on.

In terms of the remaining data in Europe, the latest trade numbers in Germany showed a narrowing of the surplus in January led by a bigger than expected rise in imports (+3.0% mom vs. +0.5% expected) which overshadowed a +2.7% mom rise in exports. In France industrial production was soft in January (-0.3% mom vs. +0.5% expected) while the same could also be said for the UK (-0.4% mom vs. +0.5% expected). The other data in the US was the February monthly budget statement which revealed a budget deficit about the same size as 12 months earlier.

With regards to the week ahead, it’s a fairly quiet start to proceedings this week with little of interest in Europe this morning and just the labour market conditions index in the US this afternoon. Tuesday kicks off in China where we’ll get the February retail sales, fixed asset investment and industrial production data. In Europe we’ll get the final February CPI revisions in Germany as well as the March ZEW  survey and January IP for the Euro area. Over in the US tomorrow we’ve got February PPI and the NFIB small business optimism reading. Wednesday starts in Japan where the final January IP revisions are due. Over in Europe we’ll get the final CPI revisions for France in February along with the January/February employment numbers in the UK. Wednesday is a huge day in the US with February CPI, March empire manufacturing, February retail sales, January business inventories and the March NAHB housing market index all coming before the FOMC meeting outcome in the evening. Thursday’s early focus will then be on the BoJ policy meeting outcome before the BoE outcome is then due around lunchtime. Data on Thursday includes Euro area CPI and US housing starts, building permits, initial jobless claims, JOLTS job openings and Philly Fed manufacturing index. We end the week on Friday with Euro area trade data, US IP and the University of Michigan consumer sentiment index for March.

Away from the data the only notable central bank speak this week comes from Draghi this afternoon when he delivers the opening remarks at a conference. The draft Brexit law also returns to the House of Commons today following the House of Lords amendments so that is worth watching. President Trump is also due to meet German Chancellor Merkel at the White House on Tuesday. The other notable event is of course the Dutch election this Wednesday. China’s NPC also concludes on Wednesday while the US debt ceiling limit expires on Wednesday and is due to be reinstated on Thursday. The G20 finance  ministers meeting also kicks off on Friday. So plenty to keep us busy.


i)Late  SUNDAY night/MONDAY morning: Shanghai closed UP 24.26 POINTS OR .76%/ /Hang Sang CLOSED UP 261.00POINTS OR 1.11% . The Nikkei closed UP 29,14 POINTS OR 0.15% /Australia’s all ordinaires  CLOSED DOWN 0.29%/Chinese yuan (ONSHORE) closed UP at 6.9197/Oil FELL to 48.23 dollars per barrel for WTI and 51.27 for Brent. Stocks in Europe ALL IN THE GREEN EXCEPT SPAIN ..Offshore yuan trades  6.8947 yuan to the dollar vs 6.9107  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  NARROWS CONSIDERABLY/ ONSHORE YUAN STRONGER AS IS THE OFFSHORE YUAN  COUPLED WITH THE SLIGHTLY WEAKER DOLLAR. CHINA SENDS A MESSAGE TO THE USA NOT TO RAISE RATES


What a novel idea:  let’s go tell Kim that the USA Delta Force, Navy Seal Team 6 is preparing to take him out:

(courtesy zero hedge)

US Delta Force, SEAL Team 6 Prepare To Take Out Kim Jong-Un, Practice Tactical North Korea “Infiltration”

On March 1, the WSJ reported that the options contemplated by the White House in response to recent North Korean acts, include “the possibility of both military force and regime change to counter the country’s nuclear-weapons threat.” The review came es amid recent events have strained regional stability including last month’s launch by North Korea of a ballistic missile into the Sea of Japan, and the assassination of the estranged half brother of North Korean leader Kim Jong Un in Malaysia.

And, according to a report in Yonhap, said “regime change” may come far sooner than expected: the South Korean website writes that U.S. special operations forces, including the unit that killed Osama Bin Laden, will take part in joint military drills in South Korea “to practice incapacitating North Korean leadership in the case of conflict”, a military official said Monday.

The U.S. Navy’s Special Warfare Development Group, better known as the SEAL Team 6, will arrive in South Korea for joint military drills and take part in an exercise simulating a precision North Korean incurion and “the removal of North Korean leader Kim Jong-un”, according to the Ministry of National Defense Monday.

The U.S. Navy SEAL Team Six will join the annual Foal Eagle and Key Resolve exercises between the two allies for the first time, along with the Army’s Rangers, Delta Force and Green Berets.

The counterterrorism unit is best known for its removal of Al-Qaeda leader Osama bin Laden in May 2011, known as Operation Neptune Spear. It will be the team’s first time participating in the annual Foal Eagle and Key Resolve exercises, which will run through late April.

The ministry did not say when the SEAL Team 6 will arrive. The Japan Times reported that the American unit boarded the USS Carl Vinson, a Nimitz-class aircraft carrier, last Friday and are currently training in South Korean waters. The carrier will arrive in Busan Port Wednesday, according to the Japanese newspaper. The ministry did not say when the SEAL Team 6 will arrive, however according to The Japan Times, the American unit will arrive in Busan Port Wednesday, according to the Japanese newspaper.

As Korea JoongAng Daily adds, also set to touch down in South Korea is Delta Force, a special mission unit of the U.S. Army whose main tasks include hostage rescue and counterterrorism, said the Defense Ministry. Together with SEAL Team 6, they will practice removing Kim Jong-un and destruction of North Korea’s weapons of mass destruction.

“It will send a very strong message to North Korea, which is constantly carrying out military provocations,” a ministry official said.

A bigger number of and more diverse U.S. special operation forces will take part in this year’s Foal Eagle and Key Resolve exercises to practice missions to infiltrate into the North, remove the North’s war command and demolition of its key military facilities,” a ministry official told Yonhap News Agency asking not to be named.

F-35 stealth fighters will also fly from U.S. Navy bases in Japan this month and carry out strike simulations on key North Korean facilities. A joint amphibious landing operation, which will kick off next month, will see the deployment of support ships the USS Bonhomme Richard, USS Green Bay and USS Ashland.

The beefing up of U.S. special operation forces in the drills comes after North Korean leader Kim said in a New Year’s speech that the country was in the “final stage” of test-firing an intercontinental ballistic missile, the first of its kind, and pushed through two separate missile tests earlier this year, the latest on March 6. North Korea claimed through its state-run media that the most recent drill was aimed at striking “the bases of the U.S. imperialist aggressor forces in Japan.”

Washington and Seoul stress that the annual military drills are purely defensive, although Pyongyang sees them as a rehearsal for an invasion. South Korea’s military said around 290,000 domestic soldiers and 10,000 U.S. soldiers will participate in this year’s drills, which by scale would be approximately the same as last year, the largest to date.

While the US may have decided to remove the element of surprise from a potential tactical strike inside North Korea in order to spook Kim Jong-Un, it is just as likely that by exposing their intentions, the US may have precipitated a response from the Korean leader which will make such a military operation inevitable, even as the geopolitical fallout for the region from such an action could be dire. As a reminder, last week an analysis by the Predata-Beyond Parallel strategic consultancy predicted that there is a 43% chance of North Korean WMD activity taking place in the next 14 days, rising to 62% in the next 30 days. Beyond Parallel defines WMD activity as nuclear tests and ballistic missile launches.


As we have warned, Japan hints that it will be purchasing 18% less bonds than planned basically because they have run out of bonds to buy.  This will cause rates to rise in Japan.  This is the now the 3rd central bank to tighten following the uSA’s Federal Reserve and the ECB which is cutting its bond purchases from 80 billion euros worth of bonds down to 60 billion.

(courtesy zero hedge)

Japan Begins QE Tapering: BOJ Hints It May Purchase 18% Less Bonds Than Planned

With the Fed expected to further tighten financial conditions following its now guaranteed March 15 rate hike, and the ECB recently announcing the tapering of its QE program from €80 to €60 billion monthly having run into a substantial scarcity of eligible collateral, the third big central bank – the BOJ – appears to have also quietly commenced its own monteary tightening because, as Bloomberg calculates looking at the BOJ’s latest bond-purchase plan, the central bank is on track to miss an annual target, by a substantial margin, prompting investor concerns that the BOJ has commenced its own “stealth tapering.”

While in recent weeks cross-asset traders had been focusing on the details and breakdown of the BOJ’s “rinban” operation, or outright buying of Japan’s debt equivalent to the NY Fed’s POMO, for hints about tighter monetary conditions and how the BOJ plans to maintain “yield curve control”, a far less subtle tightening hint from the BOJ emerged in the central bank’s plan released Feb. 28, which suggests a net 66 trillion yen ($572 billion) of purchases if the March pace were to be sustained over the following 11 months. As Bloomberg notes, that’s 18 percent less than the official target of expanding holdings by 80 trillion yen a year.

Some more details: the central bank forecast purchases of 8.9 trillion yen in bonds in March, based on the midpoint of ranges supplied in the operation plan. Maintaining that pace for 12 months will see it accumulate about 107 trillion yen of debt. At the same time, 41 trillion yen of existing holdings will mature, leaving it with a net increase of 66 trillion yen, well below the stated goal of 80 trillion yen.

And in another potential major shift to the status quo, one which would imply a sharp steepening in the JGB yield curve, the March plan indicates the BOJ may acquire 1.5 trillion yen of bonds due in more than 10 years, down 32 percent from the level in January 2016 when it introduced its negative rate policy. Other parts of the curve are also changed: for one-to-five-year notes, the projection is for an 8.6 percent decline, whereas the central bank will be buying roughly the same amount of five-to-10-year notes.

The BOJ appears to be joining other banks that are seeking to jumpstart the “carry trade” for local banks and pension institutions, by steepening the yield curve. The step-back from buying super-long bonds, those with more than 10 years to maturity, comes after Governor Kuroda and his colleagues said in September that an “excessive” decline in the yields has placed a heavier burden on companies seeking to meet pension obligations.

To be sure, the BOJ could and probably will vary its buying as it attempts to anchor borrowing costs for 10-year bonds at around zero percent, however holding onto both the targets for quantitative easing and yield-curve control has left investors scouring the central bank’s daily purchases to see whether the balancing act is achievable Bloomberg adds.

“If the BOJ was simply to reduce its annual target, it would probably have to do so over and over again, which would clearly look like tapering,” said Naomi Muguruma, a senior market economist at Mitsubishi UFJ Morgan Stanley Securities Co. in Tokyo. If the appearance of tapering isn’t what the Japanese central bank wants, it could replace its 80 trillion yen annual target with one for monthly purchases at its July 19-20 meeting, she said. So far it has not suggested it would do that.

As Bloomberg further adds, “while the BOJ board is projected to keep policy unchanged at its March 15-16 meeting, some central bankers are now considering giving cues on what they’d do with rate policy once inflation starts picking up — a shift that could end the focus on JGB purchase plans.”

With oil prices higher than a year ago and a relatively weak yen, the central bank officials expect the benchmark inflation gauge to be around 1 percent later this year, according to people familiar with the discussions.


The expected pick-up in inflation and rising U.S. Treasury yields have put pressure on the BOJ’s yield-curve control policy. The Japanese central bank offered to buy an unlimited amount of five-to-10-year bonds at a fixed rate on Feb. 3 after borrowing costs surged to the highest in 12 months.

Of course, the BOJ may be simply launching its latest – in the past two decades – attempt at renormalizing the yield curve (all the previous ones have failed). “Given the BOJ is committed to managing the yield curve, any upward pressure on yields could lead to an increase in bond purchases in the future,” said Yusuke Ikawa, Japan strategist at BNP Paribas SA in Tokyo. “If it maintains its zero percent target, the BOJ faces the risk of one day having to buy more than 80 trillion yen of bonds a year.”

Perhaps not surprisingly, local banks are refusing to wait and see what the outcome will be: according to FT parent company, Nikkei Asian Review, Japanese banks are shedding government bonds at an accelerating pace, slashing their total holdings at the end of January to a 14-year low. The value of Japanese government bonds held by domestic banks was 79.59 trillion yen ($693 billion) as of Jan. 31, the Bank of Japan said, falling below 80 trillion yen for the first time since 2003.

Over the past year, Japanese banks were purchasing large amounts of higher-yielding U.S. government bonds, but expectations that President Donald Trump will engage in aggressive fiscal stimulus have produced a spike in U.S. interest rates and sent bond prices plummeting. In response, domestic banks “sold Japanese government bonds to cover the losses,” said Kazuhiko Sano of Tokai Tokyo Securities.

Regional banks, relatively weaker in portfolio management, have been prominent in this trend. They amassed net JGB sales of 246.7 billion yen in November and 277.6 billion yen in December, according to the Japan Securities Dealers Association.

As the Nikkei reported last week, this is a concern for the Financial Services Agency, which plans to examine foreign bond investments by regional banks. “It will become tougher for regional banks to invest in overseas bonds,” said Katsutoshi Inadome of Mitsubishi UFJ Morgan Stanley Securities.

And so, with both the ECB and BOJ gradually phasing out their support of ultra low interest rates, the unpleasant scenario envisioned last week by SocGen’s Albert Edwards may soon come to pass as investors, worried about the removal in central bank backstops, proceed to liquidate holdings en masse, leading to a sharp spike in global yields higher, catalyzing the next leg lower in global risk assets as Goldman warned over the weekend.




Scotland’s Sturgeon has now given the UK an ultimatum as May prepares for the critical vote ahead of Article 50:

(courtesy zero hedge)

Sturgeon To Give May An “Ultimatum” As UK Prepares For Critical Vote Ahead Of Article 50

Britain’s minister for leaving the European Union, David Davis, urged lawmakers not to hold back PM Theresa May’s ability to negotiate a Brexit deal in talks she could trigger as early as this week. Davis on Sunday called on lawmakers to vote to drop two amendments that were added to a bill authorizing the talks with the bloc’s other member states, saying May should be able to enter with no strings attached the WSJ reported.

On Monday the Brexit bill returns to the House of Commons, the U.K.’s lower house, for debate after the House of Lords said it wanted guarantees that EU citizens living in the U.K. could stay after Brexit and that Parliament could vote on the final terms. The final bill must be approved by both houses. Should the bill pass Monday, the government could invoke Article 50 as early as Tuesday according to weekend press reports, but negotiations in Parliament could last several days. The Brexit spokesman for the main opposition Labour Party, Keir Starmer, told Sky News he expects the government to trigger it on Wednesday or Thursday.

Even if the House of Commons votes in favor of the amendments, May is expected to keep her timetable of triggering by the end of the month. But it would underline how small her majority is in the lower house. Complicating matters is a tweet moments ago by BBG political editor Laura Kuenssberg, who reported that Scotland’s Nicola Sturgeon will give May an ultimatum: give Scotland a different Brexit deal or she’ll call for section 30, the indyref process.

Hearing Sturgeon will give PM an ultimatum – give Scotland a different Brexit deal or she’ll call for section 30, the indyref process

On the topic of Brexit, Reuters reported on Sunday that David Davis is also drawing up “contingency plans” for Britain in the unlikely event it has to walk away from divorce talks with the European Union without a deal. Ahead of the start of Article 50 negotiations, which could be triggered as early as Tuesday, a committee of lawmakers warned it would be a serious dereliction of duty if the government failed to plan for the possibility of not reaching an exit deal. “I don’t think, firstly, that is remotely likely,” Davis told the BBC’s Andrew Marr Show, responding to the report. “It’s in absolutely everybody’s interest that we get a good outcome.”

Parliament’s Foreign Affairs committee warned that a breakdown in negotiations would be a “very destructive outcome,” causing economic harm to both sides as well as creating uncertainty and legal confusion for individuals and businesses.

“The simple truth is we have been planning for the contingency – all the various outcomes, all the possible outcomes of the negotiations,” Davis said. “One of the reasons we don’t talk about the contingency plan too much is that we don’t want people to think ‘Oh, this is what we’re trying to do.'”

Asked when May would trigger talks, Davis declined to name a specific date. “Each date has different implications in terms of when it could be responded to by the (European) council … I’m not going to get into the details why, but there’s politics in terms of achieving success.”

Finally, for a frank, “on the ground” take on the current state of Brexit, here is an excerpt from Bill Blain’s latest Morning Porridge edition:

The UK is going to get interesting. Apparently it’s going to be Article 50 week here in the UK. The risks of complacency are balanced against sterling jitters. As the UK becomes a prime target for global M&A, how much cheaper will Sterling get?


I suspect the rebellious Scots to figure big in the looking uncertainty. As the prime minister gives formal notice we’re divorcing Europe, expect all kinds of unpleasantness from Wee Nicola Sturgeon across the border in Scotland. Although the last referendum was a once-in-a-generation event, the UK’s democratic decision to exit Europe apparently means the question has to be asked again.


Hang on…


Scotland made a democratic decision to remain part of the UK on Sept 14th 2014. By remaining part of the single indivisible United Kingdom Scotland accepted the democratic will of the whole polity. Yet wee Nicola Krankie makes the convoluted argument that since Scotland incidently voted to stay in Europe in last year’s Brexit referendum, then the whole nation of the UK’s democratic choice is subordinated to the democratic choice of a small part of the polity.




By the same argument, I could argue the democratic decision of the Blain household is not to pay any more tax to the discredited Tory government. Does my personal democratic decision outweighs any decision the rest of you agree? Nope.


In Sept 2014 Scotland took the democratic decision to remain part of the democratic UK. End of argument. Nicola.. STFU.…


This morning the camera crews were up in Edinburgh where some eejits were saying Brexit means independence. C’mon… As a Scotsman I can assure them as much as they dislike the English, they will dislike the Germans even more..


Meanwhile, a well-spoken concerned housewife was asking why England can’t have Brexit while Scotland remains in. Stop. There is absolutely no way, ever, that Europe will allow Scotland to join – to do so would legitimise independence for Catalonia, could trigger the de-Risorgimento of Italy into a separate North and South, and even trigger a partial breakup of France.


And, just in case the SNP haven’t spotted it – the move in Oil Prices since 2014 means the economic rationale for an independent Scotland has become darker than the deepest depths of the North Sea. Will the US shale industry adjusting to long-term prices below $50 and becoming a net energy exporter, while the Saudi’s are forced to desperately sell whatever oil they can at whatever price they can get, there is simply no way in the medium term that oil prices justify the reinvigoration of the defunct Scottish Oil base.


Sure, Scotland has the brightest and best people in Europe… but most of us head down to London or elsewhere.



Now Sturgeon is to seek a second independence referendum and she expects the vote after the fall fo 2018:

(courtesy zero hedge)

Scotland’s Sturgeon To Seek Second Independence Referendum, Expects Vote After Fall 2018

As discussed earlier, moments ago Scotland’s First Minister Nicola Sturgeon announced she would seek steps to set out a new independence referendum. Sturgeon, speaking from Bute House, the first minister’s official residence in Edinburgh, Ms Sturgeon said “it is important that Scotland is able to choose our own future at a time when the options are clearer than they are now, but before it is too late to decide our own path.”


Of the headline above, perhaps the most important is that Sturgeon sees the next Scottish independence vote to take place between fall 2018 and spring 2019, thus providing a substantial time buffer from when the UK is expected to submit Article 50, which could come as soon as this week.

Sturgeon said “What Scotland deserves is the chance to decide our future in a fair, free and democratic way” and added that “I will now take the steps necessary to make sure that Scotland will have a choice at the end of this process.”

She also said the Scottish National Party’s mandate for a second referendum “is beyond doubt” after the result of last June’s Brexit vote, in which 62 per cent of Scottish voters backed remain.

Sturgeon added that “this is all about choice” and “having the ability to make that choice.” Responding to a question, she said she wants to avoid a hard Brexit being imposed on people of Scotland.

Also during the news conference, Sturgeon said “yes, I do” when asked if she thought that she could win a second referendum for independence.




The Dutch just barred the Turkish foreign minister from entering Holland. Erdogan is not a happy camper.  This is not good especially if Turkey faces towards Moscow instead of the west.

(courtesy zerohedge)

Erdogan Calls Dutch “Fascists” After Turkish Foreign Minister Barred Entry

One week after Turkey president, and wannabe tyrant, Tayyip Erdogan launched a new diplomatic scandal when he accused Germany of “fascist actions” reminiscent of “Nazi practices” after various rallies organized by Turkish minister in Germany were cancelled ahead of an April referendum on granting Erdogan sweeping new presidential powers, he doubled down on Saturday after the Netherlands barred Turkey’s Foreign Minister from flying to Rotterdam, to which Erdogan responded by calling the Dutch “fascists” and his NATO partner a Nazi remnant” as the scandal over Ankara campaigning among emigre Turkish voters intensified.

Listen Netherlands, you’ll jump once, you’ll jump twice, but my people will thwart your game,” Erdogan said. “You can cancel our foreign minister’s flight as much as you want, but let’s see how your flights come to Turkey now. They don’t know diplomacy or politics. They are Nazi remnants. They are fascists.”

Erdoğan says “Netherlands should now think about how their planes will land in Turkey, they are Nazi remnants, fascists”

Shortly after Erdogan’s comments, Dutch Prime Minister Mark Rutte said Turkish President Tayyip Erdogan’s remark comparing the Dutch to the Nazis was “way out of line.”

“It’s a crazy remark of course,” Rutte told journalists during campaigning for the March 15 election. “I understand they’re angry, but this of course was way out of line.”

Rotterdam banned Foreign Minister Mevlut Cavusoglu from attending a Turkish rally in support of Erdogan’s drive for sweeping new powers, to be put to a referendum next month, Reuters reported.

Landing rights for the flight of Cavusoglu were withdrawn, the Dutch Foreign Ministry said Saturday in a statement. The government acted after an invitation to Turks to “participate in a public meeting” with Cavusoglu in Rotterdam put “public order and safety in jeopardy.”

With Netherlands itself set to hold a national election on March 15, in which anti-immigration sentiment has played a prominent role with nationalist candidate Geert Wilders calling Erdogan a dictator, the Dutch have been especially careful how they tread vis-a-vis Turkey. However, today’s ban has prompted a lashing out which may well boost the recently deflated Wilders’ anti-immigration campaign.

After being grounded, Cavusoglu said on Saturday morning he would fly to Rotterdam anyway and accused the Dutch of treating Turkish citizens in the country like “hostages”.

“I sent them so they could contribute to your economy … They’re not your captives,” he told CNN Turk television.

“If my going will increase tensions, let it be. What damage will my going have on them? I am a foreign minister and I can go wherever I want,” he said before the Dutch barred his flight.

Cavusoglu had threatened harsh economic and political sanctions if the Dutch refused him entry, a threat that proved decisive for the Netherlands government. According to Reuters, the Dutch cited public order and security concerns in withdrawing landing rights for Cavusoglu’s flight. But it said the sanctions threat made the search for a reasonable solution impossible.

Dutch prime minister Mark Rutte said that while the Netherlands and Turkey could search for “an acceptable solution”, Turkey was not respecting the rules relating to public gatherings. “Many Dutch people with a Turkish background are authorized to vote in the referendum over the Turkish constitution. The Dutch government does not have any protest against gatherings in our country to inform them about it,” he said on Facebook. “But these gatherings may not contribute to tensions in our society and everyone who wants to hold a gathering is obliged to follow instructions of those in authority so that public order and safety can be guaranteed,” Rutte added.

In addition to Germany and the Netherlands, four other planned Turkish rallies in Austria and one in Switzerland have also been cancelled in the dispute. Chancellor Merkel, whose country Erdogan also compared last week with Nazi Germany, has said she will do everything possible to prevent any spillover of Turkish political tensions onto German soil.

Meanwhile, Cavusoglu said Turks in Germany were under systematic pressure from police and intelligence services.

The reason for the ongoing rallies which are alienating the already scandal-plagued Turkey from its (former) European allies is that Erdogan is looking to the large number of emigre Turks living in Europe, especially Germany and the Netherlands, to help clinch victory in next month’s referendum which will shape the future of a country whose location on the edge of the Middle East makes it of crucial strategic importance to NATO and explains why despite the ongoing diplomatic fallout, Western “leaders” have engaged in little more than polite diplomatic rebuttals.

Erdogan cited domestic threats from Kurdish and Islamist militants and a July coup bid as cause to vote “yes” to his new powers. But he has also drawn on the emotionally charged row with Europe to portray Turkey as betrayed by allies, facing wars on its southern borders and in need of strong leadership.

More importantly, Cavusoglu has made a veiled threat of possible realignment of Turkey in the world in a reference to Russia. “The Netherlands should stop this faulty understanding and approach…If they think Turkey will take whatever they do, that Turkey is gone. I told them this, stop this boss-like attitude. If Europe keeps this up, they will lose many places, including Russia and us.”

The scandal comes one day after Erdogan flew to Moscow for his latest summit with Vladimir Putin during which he said that “we can say with certainty that our countries have returned to the path of authentic multi-faceted partnership,” Putin said at a news conference following expanded talks with Turkish President Recep Tayyip Erdogan in Moscow, to which Putin responded “I’d like to emphasize that we view Turkey as our key partner. We are ready to maintain active political dialogue at the highest level.




Turkey vows harsh retaliation after the Dutch Prime Minister Rutte failed to apologize and stating that  Erdogan is nuts. Erdogan wants support from ex pats living in Europe for far sweeping new powers to the President.

(courtesy zero hedge)

Turkey Vows “Harsh Retaliation” After Dutch PM Says “Not Apologizing, Are You Nuts”

The diplomatic scandal between Turkey and the Netherlands deteriorated overnight, when Prime Minister Binali Yildirim warned on Sunday that Turkey would retaliate in the “harshest ways” after Turkish ministers were barred from speaking in Rotterdam, leading to a major protest in front of the Turkish consulate in Rotterdam, while the Dutch embassy in Istanbul was closed off due to “safety concerns.”

“This situation has been protested in the strongest manner by our side, and it has been conveyed to Dutch authorities that there will be retaliation in the harshest ways … We will respond in kind to this unacceptable behavior,” Yildirim said in a statement.

Turkey’s Prime Minister Binali Yildirim

At the same time, continuing his ongoing tirade in which he has compared virtually all of his political foes to Hitler or Nazis, president Tayyip Erdogan said “Nazism is still widespread in the West” after the Netherlands joined other European countries worried about political tensions inside Turkey spilling beyond its borders that have prevented Turkish politicians from holding rallies.

As reported on Saturday, the Dutch government first barred Turkish Foreign Minister Mevlut Cavusoglu from flying to Rotterdam and later stopped Family Minister Fatma Betul Sayan Kaya from entering the Turkish consulate in the port city, before escorting her out of the country to Germany.

Dutch police used dogs and water cannon early on Sunday to disperse hundreds of protesters waving Turkish flags outside the consulate in Rotterdam. Some threw bottles and stones and several demonstrators were beaten by police with batons, a Reuters witness said. Meanwhile, Dutch officers carried out charges on horseback.

Protesters also gathered outside the Dutch embassy in Ankara and consulate in Istanbul, throwing eggs and stones at the buildings.

The Dutch government, which is set to lose about half its seats in elections this week as the anti-Islam party of Geert Wilders makes strong gains, said the ministers’ visits were undesirable and it would not cooperate in their political campaigning in the Netherlands.

Erdogan warned the Netherlands that “if you can sacrifice Turkish-Dutch relations for an election on Wednesday, you will pay the price,” during an awards ceremony in Istanbul. “I thought Nazism was dead, but I was wrong. Nazism is still widespread in the West,” he said. “The West has shown its true face.” Speaking to reporters before a public appearance in the northeastern French city of Metz, Cavusoglu said Turkey would continue to act against the Netherlands until it apologizes.

Meanwhile, Dutch Prime Minister Mark Rutte said he would do everything to “de-escalate” the confrontation, which he described as the worst the Netherlands had experienced in years. But he said the idea of apologizing was “bizarre”.

“This is a man who yesterday made us out for fascists and a country of Nazis. I’m going to de-escalate, but not by offering apologies. Are you nuts?” he told a morning talk show.

Supporting Rutte’s decision to ban the visits, the Dutch government said there was a risk of Turkish political divisions flowing over into its own Turkish minority, which has both pro- and anti-Erdogan camps. It cited public order and security worries in withdrawing landing rights for Cavusoglu’s flight.

Turkey fired back saying the Dutch ambassador to Ankara should not return from leave “for some time”. Erdogan is looking to the large number of Turks living in Europe, especially in Germany and the Netherlands, to help secure victory next month in a referendum that would give the presidency sweeping new powers.

Concerns about Turkey’s erratic diplomacy spread to Germany where Chancellor Angela Merkel said she will do all she can to prevent Turkey’s domestic tensions spreading onto German territory. Austria and Switzerland have also canceled Turkish rallies due to the escalating dispute. A senior member of her conservative bloc in parliament, Hans Michelbach, demanded on Sunday that the EU stop aid to Turkey and ruled out any hopes that it would join the EU. “There is no prospect of entry in the long run. Turkey is getting further and further away from the European Union. Support programs (that it gets as an EU candidate) are therefore a waste of taxpayers’ money,” he said in a statement.

In what may have been the harshest recent diplomatic takedown of Turkey, Michelbach said that “it is time that the EU stops performing like a diplomatic paper tiger towards Ankara. Europe must not be led by the nose round the Turkish election arena.” Needless to say, such a move would delight Putin as the Kremlin has been aggressively courting Erdogan and Turkey as Russia seeks to make headway with its new middle-eastern Axis which also includes Syria and hopes to add Iran.

In the near-term, however, the outstanding question is how will Saturday’s events impact Wednesday’s Dutch general election, and whether the diplomatic clash will boost votes for Geert Wilders. As Reuters notes, “the diplomatic row comes in the run-up to the coming week’s Dutch election in which the mainstream parties are under strong pressure from the far-right party of Geert Wilders.”

After Kaya, the Turkish family minister, was escorted out of the country, Wilders told her on Twitter “go away and never come back”.


Erdogan’s spokesman responded by saying the Netherlands had bowed to anti-Islam sentiment.


“Shame on the Dutch government for succumbing to anti-Islam racists and fascists, and damaging long-standing Turkey-NL relations,” presidential spokesman Ibrahim Kalin wrote on Twitter.

In a sign the row could spread further, the owner of a venue in Sweden where a senior official from Turkey’s ruling party had been due to hold a rally on Sunday canceled the rental contract, Turkey’s private Dogan news agency reported. The news agency said the owner had not given a reason for their decision. Cavusoglu also decided against traveling to Zurich, Switzerland, for an event on Sunday after failing to find a suitable venue. Zurich’s security authorities had unsuccessfully lobbied the federal government in Bern to ban Cavusoglu’s appearance.




And Turkey retaliates by banning diplomatic flights into their country.  Who benefits: Geert Wilders and his Europhobic party ahead of March 15 elections:

(courtesy zero hedge)

Turkey ‘Retaliates’: Bans “Fascist, Neo-Nazi-Influenced” Dutch Diplomatic Flights, May “Abolish Friendship”

The tit-for-tat aggression continues to escalate between Turkey and Holland with Turkish Deputy Prime Minister Numan Kurtulmus exclaiming from Ankara that “Europe’s politicians are under fascist, neo-nazi influence” and in response, Turkey will suspend all high-level diplomatic meetings and cancels all flight permissions for Dutch politicians.

Bloomberg details the highlights from his statement:


So with the blame-mongering over, he unveils the retaliation: (via AP)

Turkey says it is halting all high-level political discussions with the Netherlands in the wake of the Dutch government’s decision to bar two cabinet ministers from campaigning in the country. Deputy Prime Minister Numan Kurtulmus said during a news conference following a weekly cabinet meeting that Ankara also is closing its air space to Dutch diplomats until the Netherlands meets Turkish requests.


Kurtulmus also says the Dutch ambassador to Turkey, who was traveling when the diplomatic row started, won’t be allowed to return.


He says Turkey’s government plans to advise parliament to withdraw from a Dutch-Turkish friendship group.


Kurtulmus says the political sanctions will apply until the Netherlands takes steps to “redress” its actions.


He said: “There is a crisis and a very deep one. We didn’t create this crisis or bring to this stage.”

And then the old fall-back…


Here are some facts on international law and historic norms.

We are not sure if Holland will lose too much sleep, but we do suspect
that for every outburst of this nature, Geert Wilders support is

However, perhaps in a final power play aimed towards Merkel, Kurtulmus exclaimed:


It would appear Turkey is about to flood Europe with immigrants… which, judging from the American media, would be celebrated by anyone wearing a vagina costume.




An excellent commentary on the oil industry.  Does OPEC increase production and cause oil to fall to around 30 dollars per barrel which will crush the USA shale boys but also crush many OPEC countries finance or allow oil to stay in the 50 to 60 range and keep the shale boys in business.


What Does OPEC Do Next?

Authored by Salmon Ghouri via,

Time is of the essence. If you fail to comprehend future market conditions and fail to steer the ship in the right direction, it can lead to disaster. This is what we have learned during the past few years. OPEC’s failure to understand the future market conditions and speed of technological advancements has resulted in economic setbacks.

A 2012 paper about the role of U.S. shale oil in global oil markets suggested that “It could be in the interest of OPEC to already increase its production now and allow oil prices to decline to below $60 to discourage further development of shale oil”. The industry, and more particularly OPEC, continued with their “business as usual” strategy, unaware of the dramatic impact U.S. shale would have on oil prices.

$100+ oil prices allowed companies to master the fracturing technology. As a result, the shale industry was able to increase average productivity per well by employing advanced horizontal drilling techniques, multi-stage fracturing and concentrating towards the most productive areas of the basin. For example, oil productivity per rig for the Bakken increased from 112 b/d in January 2007 to 746 b/d in March 2016 – over 6.6 fold increase. Improvements were also made in terms of Estimated Ultimate Recovery (EURs) which in some of the basins reached 50 to 60 percent in 2015/16.

The higher U.S. shale oil production started to take its toll on oil prices in the second half of 2014. To counter the new enemy (shale oil), OPEC, contrary to its traditional tool of curbing its own production, flooded the market for an extended period of time, explaining that it was merely defending its own market share and assuming that such policy would incur permanent damage to the U.S. shale industry.

Having executed this strategy for over 2 years, OPEC realized that the continuation of such a policy was quite detrimental to the economies of its members. Most OPEC members had to take some unpopular decisions to curb government expenses, including downsizing, drastic cost cutting measures, removing subsidies and cancelling megaprojects. All these efforts provided them with some breathing space and also avoided complete economic collapse.

Eventually, OPEC reverted back to their old wisdom of cutting oil production, which saw oil prices creep up to the mid-fifties. The oil bust taught them a good lesson and made them realize how dependent their economies are on oil revenues. A good example of this is the Saudi Vision 2030 diversification plan, which is aimed at reducing reliance on oil income.

Oil prices around $50 might provide some relief for OPEC countries, U.S. shale producers directly responded and the number of drilling rigs substantially increased in the last couple of months. And now the U.S. shale patch has brought break-even costs per barrel down even further, Shale oil production could even increase as oil prices fall below $50 per barrel again.

Offering some clues on how the cartel could defend its market share, an article by the author, published last year on forecasts the responsiveness of U.S. shale oil production against various oil price scenarios.

In the base scenario, if oil prices gradually increase to $78/bbl, than by December 2020, total U.S. shale oil production from the given seven basins would increase to 6.79 MMBPD – an increase of 37 percent compared to March 2016. In contrast, under low oil price scenarios (range of mid thirties and mid twenties), shale oil production would decline in all the basins and by December 2020 would fall to 3.03 MMBPD, a decline of 67 percent compared to March 2016.

(Click to enlarge)

The hard lesson learned during the past few years is that due to technological advancements, U.S. shale oil producers can lower their breakeven prices and challenge OPEC’s market dominance.

One strategy, if OPEC aims to harm U.S. shale oil producers, is to stop intervening in oil markets, provoking a drastic fall in oil prices – possibly back to $30 per barrel. Such a drop in crude prices could crash shale oil production in almost all the seven U.S. basins. By the end of 2020, their cumulative production could fall down to 3.03 mmbpd. This could potentially evaporate excess global supply, however, this strategy will once again have a devastating impact on the economies of individual OPEC members. As such, OPEC are unlikely to initiate such a self-defeating strategy.

Higher oil prices of over $60/bbl on the other hand, will allow most of the seven shale oil producers to increase production, keeping oil prices in a narrow range. In such a scenario, oil prices within the range of $50 to $60/bbls will balance the global demand/supply and will not be detrimental to either producers or consumers.



Oil tumbles to toe 48 dollar column on spec liquidations

(courtesy zero hedge)

Oil Tumbles Below $48 As JPM Warns Of Possible Commodity Liquidations

Any hopes for an early rebound in oil following last week’s torrid plunge in WTI and Brent appear to be dashed, at least at the open, when WTI promptly tumbled below $48/barrel.

While there have been no materal adverse catalysts over the weekend, three factors are being mentioned by Sunday night trading desks as drivers behind the latest seloff.

First: price momentum has simply persisted from the Friday US selloff, as Asian funds catch up to the US action.

Second, some have pointed to a report by JPM’s Nikolaos Panigirtzoglou from Friday evening, which warns of “commodity downside” as a result of persistent near-record net long futures positioning, and warns that “a pending normalization/mean-reversion of spec positions in commodity futures has begun.” Here are some of the reports highlights:

  • Spec positions stood at pretty elevated levels as of last Tuesday March 7th, the latest available snapshot, suggesting that this normalization is at its beginning rather than its end phase.

  • Even if we assume that the change in the open interest since last Tuesday reflects entirely a build up of short spec positions or a reduction of long spec positions, the commodity position overhang would remain.
  • This pending mean reversion in commodity spec positions is unlikely to be prevented by the growth of commodity index products.
  • In our opinion, the demand for long positions in commodity futures contracts created by passive commodity index products acts merely as a background force.
  • Mean reversion is primarily driven by active investors such as hedge funds and in particular CTAs.
  • Simple return momentum trading models suggest that CTAs are turning incrementally more negative across most commodities.
  • We get a similar overbought picture in commodity equities, by looking at the short interest of the biggest commodity stocks in world equity markets.
  • Therefore any further unwinding of commodity futures positions is likely to be accompanied by an increase in the short interest of commodity stocks.

A third possible catalyst for the drop is the yet another prominent voice in the oil industry has slammed the OPEC gambit, this time Leonardo Maugeri, a “Senior Fellow with the Geopolitics of Energy Project and the Environment and Natural Resources Program at the Harvard Kennedy School’s Belfer Center”, though better known as the former head of strategy at Italian energy giant, Eni. His reported is titled simply “OPEC’s Misleading Narrative About World Oil Supplyand as the title suggests, Maugeri is the latest to point out that the OPEC emperor is naked and that OPEC’s actions have, at best, served as psychological support to oil prices:

At a time when energy market headlines focus mainly on OPEC cuts, observers may be forgiven for concluding that a supply crunch and higher prices are imminent. On the contrary, there is still too much oil in global markets. In this context, OPEC production cuts (which notably fall short of the original target envisaged by the organization) appear to serve mainly as a psychological support to oil prices.


… the global oil market remains highly vulnerable to the actual status of oil supplies. There’s a paradox: so far, OPEC’s effort to convey the message of an exceptional level of compliance with cuts has helped sustain oil prices—but in so doing it has also incentivized oil output increases in many countries. The United States is by far the main beneficiary of such price support. In early February, almost all US shale oil producers have presented plans to strongly increase their shale oil output in the course of 2017.


To make matters worse, a heavy global refinery maintenance of around 3 mbd—concentrated in March and April—would lower crude demand and could add to temporary crude builds. When it starts to ease, the OPEC and non-OPEC cuts will be close to expiration—June 30, 2017.

Whatever the reason, for now the selling has continued, and if JPM is correct and momentum and trend chasing CTAs are now in charge, the next level may be far – and sharply – lower from current prices.


Repsol (Spain) discovers the largest onshore oil discovery in the USA in 3 decades at 1.2 billion barrels on Alaska’s North slope. This should save Alaska as they have been witnessing declining production


(courtesy Nick Cunningham/


Amazing:  million of Venezuelans are trying to flee their country and they are running into a major problem:  a shortage of passports as demand for these are escalating

(courtesy zero hedge)

As Millions Of Venezuelans Try To Flee The Country They Run Into A Problem

While shortages of basic foods, medicines, and toilet paper may be a major societal problem, the people of Venezuela face an even more existential problem: the nation now lacks the materials to meet the soaring demand for new passports – making it almost impossible to leave the socialist utopia.

“People used to move to Venezuela from all over the Americas, Europe and Asia and now they are all trying to leave,” Sonia Schott, the former Washington, D.C., correspondent for Venezuelan news network Globovisión, told Fox News.

While estimates of how many passport requests the socialist government received last year vary from between 1.8 million to 3 million, only 300,000 of the elusive documents were doled out.


Everyday, hundreds of people line up outside the passport agency, known as Saime, in the capital of Caracas in the hopes of obtaining one.


It’s an ironic, and yet sad situation, for a country that used to be one of Latin America’s wealthiest and one that was used to seeing people flock to, not away from.

Tomás Páez – author of “The Voice of the Venezuelan Diaspora” – told Bloomberg that since Chávez took power in 1999 nearly 2 million Venezuelans have fled the country and hundreds of thousands are marking their time until they obtains the funds and the passport that will allow them to leave.

Maduro has acknowledged the issue of the chronic shortages in passports and last week launched a new “online” option that will rush a passport to customers within 72 hours for about double the price of waiting in line. The website, however, has crashed numerous times and it is unclear how many passports have been expedited through this process. Saime has stated that the backup in processing passport applications is because the agency lacks enough “materials,” but did not specify what that means. Observers say that while the government may not be able to afford the paper to make the passport. Paper products in the country, including toilet paper, are in short supply in Venezuela. But skeptics think the Maduro government may also be trying to keep people from leaving the beleaguered nation.

“People with the means to get out want to, but the problem is you need a passport and you can’t get it,” Cynthia Arnson, the director of the Latin American Program at the Woodrow Wilson Center told Fox News.


“It’s kind of an excuse by the Venezuelan government that they don’t have materials, because they know the real reason people want a passport is to leave the country.”

Most of Venezuela’s 30 million resident, however, don’t have that kind of money as the monthly minimum wage in the country comes to less than $30 a month on the black market.

special thanks to Robert H who has co-ordinated this with me:
“For many years, I have been following the theft of funds from a company called Tropos of funds send to them by the USA, from Taiwan  Here is an outline of events from the year 2004 until today. Here  is an update of events.”.

In November of 2004, Tropos Capital Corporation of America was the designated recipient of $700 Billion of funds transferred to the Tropos Wachovia Bank (Now Wells Fargo) but unlawfully intercepted and sequestrated by the usual high ranking members of the Federal Reserve Bank. These funds were highjacked in transit and never arrived in the designated Tropos account, but were intercepted and plundered, being used for nefarious purposes by this Federal Reserve Mafia and their Deep State cronies.  Trillions of dollars have since been accrued in compound trading and none assigned to benefit the American or Chinese people as intended.

This battle has been raging for 12 years, with no lawful Regulators able or willing to enforce Justice! Letters and demands have gone out to all parties including Obama, the Fed, Treasury, IMF, Regulators and Prime Ministers and Presidents of many nations exposing how deeply untrustworthy and treacherous Washington and the Fed are. It has deepened Chinese and Russian distrust of America. All G20 Members have the files.  The BIS disclosed they were part owned by the Fed then tried to take it back realising they had let the cat out of the bag.  Yes, the Fed does own 37% of BIS as the game is a fixed odds casino. 

Lawful money was intercepted, which has now compound traded into tens of Trillions, bypassing benefits to people and Countries, and for feckless Self Interest.  This ACAT transfer, was unlawfully STOLEN in transit by the Fed. Racketeering! RICO! Proceeds of Crime! Why will no one Sequestrate these funds back, Including all profits accrued?

It is now being put to Washington to have Yellen explain to a Congressional Committee of Inquiry how and why this was intercepted and sequestrated by the Fed? Where are the Trillions it has made now? The taxes alone will do amazing things to bring the deficit under control. And what does this say about Fed credibility about rate increases or so called debt ceilings?

Yes, this ACAT  redeemed alone with its now accrued vast compound interests, can largely clear America’s Budget Deficit and help underpin the RVs, should that be desired. 

This $700B was immediately cross traded. Profits alone Compound into vast Trillions. Who took it, and what have they done with it? It can, and must all be traced and accounted for to help America, and other nations. 

It  is time for America to show to it’s people and the world that America stands for justice and people as the founding fathers envisioned and not the thievery that has hollowed out companies and people’s lives. If Trump works for the people and is serious about rebuilding America, he and his team should find out what happened to the funds and the ill gotten gains and seize it all, collect the taxes and let the money go to work to fund rebuilding America and it’s allies as was envisioned. And in so doing restore the goodwill of nations and American hegemony by demonstrating renewed faith in the currency and the settlement mechanism that goes with. Nations respect and admire countries that will deal with thievery over those who do not. Obama failed to address this matter will Trump find a way to address before or after he meets with Xi Jinping in Florida?

Even on arrival, $200B of those Tropos funds were routed to the Bank of Scotland, and $500B also routed via the Fed to Wells Fargo by Yellen. Why? 

Why is no one asking why RBS needed to be backstopped by on balance sheet funds and why is the Fed involved in the first place backing other country resident banks with federal Reserve Dollars, especially dollars highjacked from a American Company receiving funds from the Bank of Taiwan? 

Is the whole system so wobbly as to require money to backstop banks? If so then gold and silver are priced at a level that comes once in lifetime, because it is clear the system is a house of cards held together by deceit and outright theft, with no transparency worth considering. It is why faith and confidence is quickly disappearing in the dollar as a reserve currency and along with it American hegemony. Imagine what the Chinese must think behind the veil and why trust is hard to find when words are not believed over actions taken that speak so much louder.


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





Early THIS MONDAY morning in Europe, the Euro ROSE by 8 basis points, trading now WELL BELOW the important 1.08 level RISING to 1.0675; Europe is still reacting to Gr Britain HARD BREXIT,deflation, announcements of massive stimulation (QE), a proxy middle east war, and the ramifications of a default at the Austrian Hypo bank, an imminent default of Greece, Glencore, Nysmark and the Ukraine, along with rising peripheral bond yield further stimulation as the EU is moving more into NIRP, and now the Italian referendum defeat AND NOW THE ECB TAPERING OF ITS PURCHASES/ THE USA’S NON tightening by FAILING TO RAISE THEIR INTEREST RATE AND NOW THE HUGE PROBLEMS FACING TOO BIG TO FAIL DEUTSCHE BANK + THE ELECTION OF TRUMP IN THE USA+ AND MONTE DEI PASCHI NATIONALIZATION / Last night the Shanghai composite CLOSED UP 24.26 POINTS OR 0.76%     / Hang Sang  CLOSED UP261.00 POINTS OR 1.11% /AUSTRALIA  CLOSED DOWN 0.29%  / EUROPEAN BOURSES ALL IN THE GREEN (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 MONDAY morning CLOSED UP 29.14 POINTS OR 0.15% 

Trading from Europe and Asia:

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 261.00 POINTS OR 1.11%       / SHANGHAI CLOSED UP 24.26  OR 0 .76%/Australia BOURSE CLOSED DOWN 0.29%/Nikkei (Japan)CLOSED UP 29.14 POINTS OR 0.15%  /  INDIA’S SENSEX IN THE  GREEN

Gold very early morning trading: $1206.20


Early MONDAY morning USA 10 year bond yield: 2.573% !!! DOWN 1/2 IN POINTS from FRIDAY 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  3.158, DOWN 1/2 IN BASIS POINTS  from FRIDAY night.

USA dollar index early MONDAY morning: 101.23 DOWN 10 CENT(S) from FRIDAY’s close.

This ends early morning numbers MONDAY MORNING


And now your closing MONDAY NUMBERS

Portuguese 10 year bond yield: 4.03% DOWN 2  in basis point yield from FRIDAY 

JAPANESE BOND YIELD: +.09%  UP 1/10  in   basis point yield from FRIDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.93%  UP 4 IN basis point yield from  FRIDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.373 UP 1 POINTS  in basis point yield from FRIDAY 

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





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

Euro/USA 1.0664 DOWN .004 (Euro DOWN 4 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 114.69 DOWN: 0.08(Yen UP 8 basis points/ 

Great Britain/USA 1.2226 UP 0.0074( POUND UP 74 basis points)

USA/Canada 1.3440 DOWN 0.0027(Canadian dollar UP 27 basis points AS OIL FELL TO $48.38


This afternoon, the Euro was DOWN by 4 basis points to trade at 1.0664


The POUND ROSE 74  basis points, trading at 1.2226/

The Canadian dollar ROSE  by 27 basis points to 1.3440,  WITH WTI OIL FALLING TO :  $48.38

The USA/Yuan closed at 6.9114/
the 10 yr Japanese bond yield closed at +.09% UP 1/10 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield UP 2  IN basis points from FRIDAY at 2.605% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.180 UP 2  in basis points on the day /

Your closing USA dollar index, 101.30 DOWN 3  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 MONDAY: 1:00 PM EST

London:  CLOSED UP 24.00 OR 0.33% 
German Dax :CLOSED UP 26.85 POINTS OR 0.22%
Paris Cac  CLOSED UP 6.28 OR 0.13%
Italian MIB: CLOSED UP 48.58 POINTS OR 0.25%

The Dow closed DOWN 21.50 OR 0.10%

NASDAQ WAS closed UP 14.06 POINTS OR 0.24%  4.00 PM EST
WTI Oil price;  48.38 at 1:00 pm; 

Brent Oil: 51.44  1:00 EST




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

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


BRENT: $51.39


USA 30 YR BOND YIELD: 3.2111%


USA/JAPANESE YEN:114.87   UP .261

USA DOLLAR INDEX: 101.37  UP 4  cents ( HUGE resistance at 101.80 broken)

The British pound at 5 pm: Great Britain Pound/USA: 1.2219 : up 66 BASIS POINTS.

Canadian dollar: 1.3448  down .0022

German 10 yr bond yield at 5 pm: +.473%


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


Risk Parity Plunge Continues: Stocks Down, Bonds Down, VIX Down, Fed Up


There’s a lot of risk assets falling apart behind the scenes…


The ongoing plunge in Risk Parity fund deleveraging…


Is now weighing on more asset classes as Stocks, Bonds, and VIX all drop (ahead of The Fed on Wednesday)


And EM stocks, crude, high yield bonds are all tumbling…


The S&P desperately pushed into the green towards the close; Dow red; Nasdaq and Small Caps were best (helped by the INTC M&A)


VIX was a one-way trip from the US Open – non-stop driuft lower which also saw stocks falling with it into the European close…


Breadth remains very weak…


Of course the big news in equity-land was the acquisition of MBLY by INTC… (which smashed MBLY shorts and sent the stock up to Aug 2015 highs)


The credit canary in the coalmine is starting to die…


Bonds and Stocks continue to be sold together…


Treasury yields inched higher once again to the post-Fed rate hike highs (lots of chatter of pre-Blizzard, pre-Fed corporate issuance weighing on TSYs)


The 10Y Yield seems fully loaded for this hike…


And 30Y closed just shy of 3.20%


The Dollar Index traded very sideways today with overnight weakness giving way to come buying during the EU session…EUR weakness offset Cable and AUD strength


Notably the USD index is hovering back at the levels pre-December rate hike…


Gold scrambled above $1200 but Silver couldn’t hold $17…


WTI and RBOB drifted lower


But NatGas (NY) soared amid the blizzard…


Finally, Bitcoin managed to recover its ETF-Denial losses very quickly and surged back above gold…


In the month of February, the entire restaurant industry reported traffic tumbling as well as sales. It sure looks like discetonary spending is well down

(courtesy Wolf Richter/WolfStreet)

Restaurant Sales And Traffic Tumble In February

There appeared to be a glimmer of hope for the restaurant industry last month, when BlackBox Intelligence’s TDn2K titled its most recent Restaurant Industry Snapshot: “Flat Sales, Welcome Change for Restaurant Industry in January.” In the report, it said that “while same-store sales growth was flat (zero percent) in January, it represented a welcome break from the ten consecutive months of negative sales growth experienced by the industry through the end of last year.” That finding, however, was refuted by a recent Reuters/Ipsos opinion poll which found that one-third of the 4,200 adult respondents said they were eating in restaurants less often than three months ago. The poll was conducted in the second half of January. Of them, 62% cited cost as the primary reason.

The modest recovery was also denied by the most recent Restaurant Performance Index report by the National Restaurant Association, which lamented that “same-store sales and customer traffic levels remained soft” in January, which kept the Current Situation Index (tracking same-store sales, traffic, labor and capital expenditures) at 98.6 in January, the fourth consecutive month of contraction, and tied for the worst print in four years.

More concerning was the disclosure by restaurant operators, 50% of whom said same-store sales declined year-over-year, the second highest reading in recent history and second only to the 53% reported last August.

Quite unlike the rosy picture of consumer spending painted by various other macroeconomic data points such as consumer spending, or even alleged wage growth, looking at one of America’s favorite pastimes – eating out – the situation has rarly been more gloomy.

While the silver lining to the latest RPI report was a surge of hope in the near-term futures as a result of the “animal spirits” unleashed by Trump, which have impacted everything from the stock market to the jobs report (recall the January-February plunge in people out of the labor force was the biggest on record), the latest, just released report by TDn2Kquickly doused those hopes in its latest, February, Restaurant Industry Snapshot which found that “Restaurant Sales and Traffic Tumble in February.”

Same-store sales fell -3.7 percent in February, with traffic declining -5.0 percent. Unfortunately, January’s improved results were not a turning point in declining industry performance. Trends are hard to discern since weather, holiday shifts in Valentine’s Day and President’s Day and winter breaks distorted weekly results.

A macro view leaves little room for optimism. Same-store sales averaged -2.7 percent for the last three months. February’s results were among the weakest in the last four years.

Restaurant Sales and Traffic Tumble in February

Same-store sales fell -3.7 percent in February, with traffic declining -5.0 percent. Unfortunately, January’s improved results were not a turning point in declining industry performance.

A macro view leaves little room for optimism. Same-store sales averaged -2.7 percent for the last three months. February’s results were among the weakest in the last four years. This insight comes from data by TDn2K through The Restaurant Industry Snapshot, based on weekly sales from over 26,000+ restaurant units and 145+ brands, representing $66 billion dollars in annual revenue.

Guest Checks Plummet

Guest checks grew by a modest 1.2 percent in February, the lowest rate in four years. By contrast, checks had grown roughly 2.3 percent in the previous six months. This is a function of more conservative pricing, customer trade downs or discount promotions. All segments experienced a decline in the rate of check growth last month. Casual dining and quick service were virtually flat compared with the prior year. The bar and grill sub-segment actually experienced a drop in average checks versus 2016.

The Macroeconomic Environment

“While the stock market soars and confidence jumps, the economy continues on its steady but unspectacular upward path,” reported Joel Naroff, President of Naroff Economic Advisors and TDn2K economist. “Growth in the first quarter should exceed the tepid pace at the end of last year and with Europe finally starting to recover, the economy should pick up steam as we move through the year.”

Consumers are spending, but they are being battered by rising inflation. The rebound in energy costs may be helping that sector but it is not doing much for households. Indeed, spending power has flatlined as wage gains are barely offsetting price increases. That is putting additional pressure on the restaurant industry.

Still, the labor market is as tight as it has been in decades. Rising wages should lead to better spending in the months ahead. One note of caution: “The higher inflation has given the green light to the Fed to raise rates and if Trump spending and tax policies are implemented, rates are likely to rise faster than most currently expect.”

Income Tax Refund Delay

The IRS delayed roughly 40 million tax refunds associated with families claiming the “Earned Income Tax Credit” or the “Additional Child Tax Credit” this year. These delays undoubtedly depressed sales in the early weeks of February. In 2014, almost 30 million families received more than $70 billion in Earned Income Tax credits. Even a small delay in refunds had the potential to greatly impact consumer spending. Looking forward, the release of refunds provides some upside for the industry in the coming weeks. Curiously, none of this alleged weakness was observed in the recent retail sales data, which quite the contrary came in stronger than expected.

Upcoming: The Easter Effect

Easter is in April this year instead of March. The potential impact varies by segment. Brands where diners tend to celebrate special family occasions, such as upscale casual and fine dining, typically see an increase in sales during these periods. For these segments, same-store sales growth will likely be hurt in March but aided in April. For the dining segments where the holiday shift is less likely to impact consumer behavior, the sales impact will be less pronounced.

The Restaurant Workforce

According to the Q1 2017 Workforce Index published by TDn2K’s People Report restaurant operators predict staffing challenges to continue in 2017. However they are increasing at a slightly slower pace. One factor in this relative easing of labor woes is the slowdown in restaurant job growth reported in recent months. At the hourly employee level, 48 percent of restaurant companies reported that they planned to add staff during the first quarter, compared with 66 percent in the fourth quarter of 2016, hardly a glowing endorsement of the bright future for the sector.

Meanwhile, as job growth is slowing, but both hourly and management turnover continue to rise. As a consequence, recruiting and retaining qualified employees is the top people-related challenge for restaurant operators.

* * *

Finally as discussed last month, while a sense of renewed gloom has fallen over the restaurant space, one wouldn’t know this by walking around San Francisco. Yelp lists nearly 8,000 eating establishments in the City, many of them recent creations, including 500 cafés and 3,000 delis. A lot of the places are packed. Some can be impossible to get into on a Friday or Saturday night without a reservation days or weeks in advance. Others are nearly impossible to get into no matter when or what.

But, as Wolf Richter pointed out, other restaurants are nearly empty. There has been a slew of recent restaurant closures, amid talk of a big shakeout, including something called the “Mid-Market Massacre” in an area around Market St., where restaurant after restaurant closes, done in by exorbitant rents, not enough traffic, too much competition, a finicky public that might have lost interest, and insufficient sales. So yes, it’s tough out there, even in San Francisco, in what must be one of the toughest businesses on earth.

Yet while San Francisco – one of the few prosperous US hubs, generously funded with startup VC funding – is still holding on, the restaurant industry across the rest of the US continues to sink as consumer demand declines with every passing month, denying even the most rudimentary “recovery” narratives.



The new healthcare bill is presenting a no win situation for the Republicans. Ryan warns of a “bloodbath’ if the GOP fails to pass the healthcare bill.  Tom Cotton , a Republican claims that they will lose their position in the House if they do pass it

(courtesy zero hedge)

Trump, Ryan Warn Of “Bloodbath” If GOP Fails To Pass Healthcare Bill

Speaker Paul Ryan on Sunday said he agrees with President Trump that 2018 will be a “bloodbath” for Republicans if Congress does not pass legislation repealing and replacing ObamaCare.

“I do believe that if we don’t keep our word to the people who sent us here, yeah,” Ryan told CBS News’s “Face the Nation,” when asked if he agreed with Trump’s reported comments about the 2018 midterm elections.


According to a CNN report last week, Trump told Republican House members in a meeting that 2018 would be a “bloodbath” if they fail to pass healthcare legislation.


As The Hill reports, Ryan, who used a PowerPoint presentation to defend the House proposals last week, said during the CBS interview that members of Congress are “breaking your word” if they don’t keep campaign promises.

“Look. The most important thing for a person like myself who runs for office and tells the people we’re asking to hire us, ‘This is what I’ll do if I get elected.’ And then if you don’t do that, you’re breaking your word,” he said.

So it appears simple – GOP needs to pass the bill (whether they have seen it or not) to save the party from problems in next year’s elections.

Not so fast!

As Axios reports, Tom Cotton warned House Republicans on Sunday that the House Republican Obamacare replacement bill can’t pass the Senate as written – and that they could lose the House in next year’s elections if they vote for it.

“I’m afraid that if they vote for this bill, they’re going to put the House majority at risk next year,” Cotton said on ABC’s “This Week.”


He warned that it would have “adverse consequences for millions of Americans” and wouldn’t lower costs: “Do not walk the plank and vote for a bill that cannot pass the Senate and then have to face the consequences of that vote.”

The bottom line then is that on the one hand, there’ll be a bloodbath if they do NOT pass the bill according to Ryan’s Trumpcare plan; but on the other hand, senators like Cotton warn GOP will lose the majority if they DO pass it.



Peter Shiff of Euro Pacific explains why Trumpcare will fail and increase the uSA debt dramatically:

(courtesy Peter Schiff/Euro Pacific Capital)

Peter Schiff Talks Trumpcare: Different Plan, Same Problems

Authored by Peter Schiff via Euro Pacific Capital,

With his widely followed, and positively reviewed, address to Congress last week, President Trump showed how easy it could be to unite Washington around a big-budget centrist agenda on health care, immigration, taxes, infrastructure and the military. But the continued accusations surrounding his campaign’s alleged Russian connections, and the President’s conspiratorial responses, have insured that the battle lines have only hardened. However, anyone with even a casual concern with ballooning government debt should take notice just how easily both parties in Washington would agree to vastly expand the gushing red ink if a political truce can be brokered. Those fears should galvanize around the newly-issued Republican replacement for Obamacare.  If such a monstrous bill could successfully navigate Congress, we would find ourselves stuck deeper in a deficit deluge than we can possibly imagine. 

Obamacare attempted to rewrite the laws of economics by preventing insurance companies from charging high-risk customers more than low-risk customers. But to make this work without bankrupting the companies, all agreed that the young and healthy would need to be forced to buy insurance.  The flaw that doomed the law was that the penalties for not buying were too low to actually motivate healthy people to buy.  Consumers were charged just a few hundred dollars per year to forego insurance that would have cost many thousands. Given that they could always decide to get insurance in the future, at no added cost, the choice was a no-brainer. Without these healthy people keeping costs down, insurance premiums have risen alarmingly.

Ironically, the Supreme Court noticed this flaw as well. In sustaining the Law’s constitutionality, Justice Roberts argued that the relative lightness of the penalties was insufficient to compel anyone to buy insurance and, as a result, he considered them to be a “tax” that could be voluntarily avoided rather than a coercive penalty to force commercial activity. (Presumably had the tax been high enough to actually work, it would have rendered Obamacare unconstitutional – see my 2012 commentary).

However, the Republican replacement plan, which removes all taxes on individuals who don’t buy insurance, and all penalties on employers who do not provide insurance to their employees, will actually make the problem far worse.

The only reason healthy people buy health insurance is that they know that if they wait until they get really sick no insurance company will sell them a policy.  The same principal holds true for all insurance products.  You can’t buy auto insurance after you get into an accident. You can’t buy life insurance at a reasonable cost after your doctor has given you six months to live. The fact that your car is already wrecked, or your arteries already clogged, are pre-existing conditions that no insurance company would be expected to ignore.

Allowing voters the low-cost option to buy health insurance after they actually need it is very popular. It’s like promising motorists they can stop paying their monthly auto insurance premium and just buy a policy after they have an accident.  If the government were to require this, all auto insurance companies would quickly go out of business (unless they were bailed out by the government).

Obama’s solution was to use the penalties to force healthy people to buy insurance before they actually needed it.  As the years wore on, the relatively low cost of the subsidized exchange plans and the availability of those plans to anyone proved popular.  However, the mandates and penalties, as well as skyrocketing premiums for non-subsidized policies, were clearly unpopular.

The Republicans have taken the “brave” political approach of keeping the parts that are popular (subsidized access, pre-existing conditions waivers, expansion of children’s coverage until age 26) and jettisoning those that are not (the mandates and the penalties).  The new plan pretends to offer a replacement to the Obamacare penalties by allowing insurance companies to charge a 30% increase to the premium for those who come back into the system after having previously allowed their coverage to lapse. But the problem here is that the premium increase is far too small to force anyone healthy to buy insurance. In fact, it is so low that any healthy person currently insured may decide to drop coverage.

The effect of this law, were it actually enacted, would be the death of the health insurance industry.  As the law removes the requirement that larger employers provide insurance, I believe that big companies would look to self-insure employees for routine care.  For example, employer and employees could pay into a common risk pool that would set their own deductibles and co-pays. For employees who incur medical charges in excess of the cost of an actual policy, the pool could provide funds to pay for outside insurance at the increased 30% premium. As a result insurance costs would be encountered only if there is a need.

Self-employed individuals would only buy insurance if the total cost was less than the tax credit provided by the new plan.  If they can’t find such coverage, they would likely buy a new form of insurance that this law may create: A policy that would pay for health insurance premiums if the user ever got sick enough to need them.  Such insurance would be very cheap, as the maximum exposure to the insurance company is only 130% of the premium for a standard health insurance policy.

In the end, the only people buying health insurance would be those who can buy it for free using their tax credits and really sick people for whom insurance premiums are cheaper than their medical bills.   But as insurance companies lose money on the latter group, they will be forced to raise their premiums on the former.  This puts us right back in the box we are stuck in with Obamacare.

As premiums soar well above the amount of the tax credits, more people will drop out.  Unless the amount of the tax credits rises substantially, which will cost a fortune, all health insurance companies will eventually go out of business.  The end result will be socialized medicine, only it will be Trump not Obama that gets the blame.  It seems to me that this would be a political loser for the conservative cause. I would rather we go down in flames with Obamacare as then, at least, we will have a chance at a free market solution that could actually work.

The government has a very poor track record with containing the cost of a service when it gives consumers money to buy it. Think student aid and college tuition.   Plus the plan is constructed in a way that makes it ripe for potential abuse.  Whenever the government is giving away money, people always game the system to get it.  Think about the wide-spread fraud in welfare, food stamps, disability, and even cell phone credits. Trumpcare will be no different. Many people will buy catastrophic plans with extremely high deductibles just so they can pocket the difference between the tax credits and the costs of the plans.  If they actually incur a medical condition that results in a high out-of-pocket expense, they can just switch their coverage to one with a much lower deductible.  Such a switch may even be possible without the 30% premium for lapsed coverage.

If Trump and the Republican leadership can push this monstrosity through, despite the obvious mathematical shortcomings, look for them to make similar efforts on infrastructure and defense spending. All this adds up to uncounted trillions in new debt, and a giant step closer to the utter bankruptcy of the nation. But the real danger lies in the possibility that the law is voted down by conservative Republicans and Trump turns instead to Democrats.

In contrast to the former mission statement of the Republican Party, Trump believes that government solutions can work as long as they are “smart.”  The opening weeks of the Trump presidency were dominated by combative rhetoric, conservative and pro-business appointments, and nationalistic executive orders. And while this approach sent Democrats and the media into convulsions, it solidified the loyalty of Trump’s political base, and allows him to pivot toward the center if he wants. If he could peel off some “Red State” Democrats, he would be in a position to enact some of the biggest spending increases that the country has ever seen, even if fiscally conservative Republicans bolt.

If those conservatives defeat the new health care bill, Trump could look to partner with Democrats in a heartbeat. Of course, to get that support, he would have to make the current bill even more generous. Let’s hope that his self-inflicted wounds continue to prevent such an unholy alliance.



Zero hedge weighs in on Obamacare and how it will be impossible to pass:

(courtesy zerohedge)

“Hanging In The Balance” – A Look Inside The War To Repeal Obamacare

A few weeks ago we noted that none other than John Boehner, the former Republican Speaker of the House, scoffed at the idea of repealing and replacing Obamacare as he essentially predicted that Republicans would become their own worst enemy (see “Boehner: Full Repeal And Replace Of Obamacare ‘Is Not Going To Happen’“):

“[Congressional Republicans are] going to fix Obamacare – I shouldn’t call it repeal-and-replace, because it’s not going to happen,” he said.


“I started laughing,” he said. “Republicans never ever agree on health care.”


“So this is not all that hard to figure out.  Except this, in the 25 years I served in the United States Congress, Republicans never, ever, not one time agreed on what a healthcare proposal should look like.  Not once.”


“And all this happy talk that went on in November and December and January about repeal, repeal, repeal…if you pass repeal without replace, you’ll never pass replace because they will never agree on what the bill should be.  The perfect always becomes the enemy of the good.”

Now, it’s looking increasingly like Boehner may have been right as the so-called “TrumpCare” attempt to repeal and replace Obamacare will face a number of challenges, starting this week, in its journey to Trump’s desk.  The first challenge comes from the Congressional Budget Office (CBO) which is expected this week to release its score of the legislation.  The CBO is widely expected, even among Republicans, to estimate that millions of people would no longer have health insurance under the plan.  Per The Hill:

With that in mind, Republicans are already looking to discredit the office and downplay the importance of the score.


“If you’re looking at the CBO for accuracy, you’re looking in the wrong place,” White House press secretary Sean Spicer said earlier this week.


Ryan, meanwhile, compared CBO scores to a “beauty contest.”


“Our goal is not to show a pretty piece of paper that says we’re mandating great things for Americans. Our goal is to get a vibrant health care system that’s patient-centered, that brings down costs, that increases choices, that has a marketplace so that we lower the costs and increase, and therefore increase the access to affordable care,” he said.

Paul Ryan


Then there are the Republican governors from states that took ObamaCare’s Medicaid expansion who are also wary of the healthcare legislation.

“Phasing out Medicaid coverage without a viable alternative is counterproductive and unnecessarily puts at risk our ability to treat the drug addicted, mentally ill, and working poor who now have access to a stable source of care,” Ohio Gov. John Kasich (R) said in a statement Wednesday.


The governors met with the White House and GOP leadership about ObamaCare and Medicaid during their annual conference earlier this month, but Nevada Gov. Brian Sandoval said this week the resulting plan “doesn’t include anything that the governors have talked about.”


“We’ve said all along, ‘work with the governors,’ that it should be a governor-led effort and for the Congress to rely on their governors,” Sandoval said.

And then there are the conservative elements of the splintered Republican party that would prefer to simply repeal Obamacare altogether, without a replacement plan, and start from ground zero.  While Paul Ryan has guaranteed that his bill can pass the House, assuming all Democrats vote no, it would only take 21 House GOP defections to kill the bill.  That said, Republican control of the Senate is much more narrow and several Senators, including Tom Cotton (Ark) and Rand Paul (KY), don’t seem all that eager to support the current iteration of the bill.

Sen. Tom Cotton (R-Ark.) said the House GOP should “start over” on its replacement plan.


“House health-care bill can’t pass Senate without major changes,” Cotton Tweeted Thursday.


“To my friends in House: pause, start over. Get it right, don’t get it fast.”


The legislation has been criticized by at least 11 senators, including some from Medicaid expansion states who don’t want to see the expansion rolled back.


Conservatives like Sen. Rand Paul (R-Ky.), meanwhile, are backing the Freedom Caucus’s push for repealing more of ObamaCare. Paul has introduced his own legislation to repeal ObamaCare.

All political rhetoric or is Trump about to get bogged down in the swamp?





The CBO has now scored the new Trumpcare:  First the good news: the deficit after 10 years will be reduced by 337 billion or 34 billion USA per year.  The bad news: 24 million citizens would lose their coverage.

(courtesy zero hedge)

CBO: 24 Million Would Lose Coverage Under GOP Healthcare Plan By 2026, Deficit Reduced By $337 Billion

The much anticipated CBO scoring of the American Health Care Act, aka “Trumpcare” is out, and it has concluded that millions of Americans would lose medical insurance under the republican proposal to dismantle Obamacare, dealing a potential setback to President Donald Trump’s first major legislative initiative. In total, the CBO found that 52 million people would be uninsured by 2026 if the bill became law, compared to 28 million who would not have coverage that year if Obamacare remained unchanged.

Among the key highlights are the following:

  • 14 million would lose insurance by 2018, with the number risin to 24 million by 2026.
  • The budget deficit would be reduced by $337 billion over 10 years.
  • Premiums would rise by 15-20% in 2018-2019, however they would then decline by 10% than under current law by 2026.

Two House committees have already approved the legislation to dismantle Obamacare, but as reported earlier, the proposal faces opposition from not only Democrats but also medical providers including doctors and hospitals and many conservatives. The CBO report’s findings could make the Republican plan a harder sell in Congress.

As Reuters adds, some Republicans worry a misfire on the Republican healthcare legislation could hobble Trump’s presidency and set the stage for losses for the party in the 2018 congressional elections. Ahead of the report’s release, Trump tried to rally support for the bill on Monday:  “The House bill to repeal and replace Obamacare will provide you and your fellow citizens with more choices – far more choices – at lower cost,” the Republican president said at a White House meeting with people opposed to Obamacare.

The key sections from the report:

  • CBO and JCT estimate that, in 2018, 14 million more people would be uninsured under the legislation than under current law. Most of that increase would stem from repealing the penalties associated with the individual mandate. Some of those people would choose not to have insurance because they chose to be covered by insurance under current law only to avoid paying the penalties, and some people would forgo insurance in response to higher premiums.
    • Later, following additional changes to subsidies for insurance purchased in the nongroup market and to the Medicaid program, the increase in the number of uninsured people relative to the number under current law would rise to 21 million in 2020 and then to 24 million in 2026. The reductions in insurance coverage between 2018 and 2026 would stem in large part from changes in Medicaid enrollment—because some states would discontinue their expansion of eligibility, some states that would have expanded eligibility in the future would choose not to do so, and per-enrollee spending in the program would be capped. In 2026, an estimated 52 million people would be uninsured, compared with 28 million who would lack insurance that year under current law.
  • CBO and JCT estimate that enacting the legislation would reduce federal deficits by $337 billion over the 2017-2026 period. That total consists of $323 billion in on-budget savings and $13 billion in off-budget savings. Outlays would be reduced by $1.2 trillion over the period, and revenues would be reduced by $0.9 trillion.
  • The legislation would tend to increase average premiums in the nongroup market prior to 2020 and lower average premiums thereafter, relative to projections under current law. In 2018 and 2019, according to CBO and JCT’s estimates, average premiums for single policyholders in the nongroup market would be 15 percent to 20 percent higher than under current law, mainly because the individual mandate penalties would be eliminated, inducing fewer comparatively healthy people to sign up.

But today’s estimates are somehwat worse than expected, as the Brookings Institution predicted the number losing coverage would be at most 15 million over 10 years.

As the Hill notes, the long-awaited analysis from the agency is sure to shake up the debate over the measure, which is already facing sharp criticism from conservatives and many centrist Republicans.   The GOP bill repeals ObamaCare’s subsidies to buy coverage, replacing them with smaller tax credits, as well as the law’s Medicaid expansion after 2019. Both moves were expected to lead to coverage losses.

Republicans had largely expected that the CBO would show Americans losing coverage, and preemptively went on the offensive against the agency, whose director, Keith Hall, who was appointed by the GOP.  White House press secretary Sean Spicer last week argued CBO was “way off” in its ObamaCare projections.  “If you’re looking to the CBO for accuracy, you’re looking in the wrong place,” he said. White House budget director Mick Mulvaney, meanwhile, argued Sunday on ABC’s “This Week” that the CBO shouldn’t even try to analyze the bill. “Sometimes we ask them to do stuff they’re not capable of doing, and estimating the impact of a bill of this size probably isn’t the best use of their time,” he said.

That said, as we have shown on numerous occasions in the past, the CBO’s predictive track record is simply abysmal. For an indication of that recall our post from 2013: “CBO Forecasts: Then And Now

A few hours ago, the CBO published its most recent 10 year revised outlook for US revenue and spending: The Budget and Economic Outlook for fiscal years 2013-2023. Not surprisingly it was, as anything to ever come out of the CBO, overly optimistic. Promptly, the media latched on to the revised deficit expectations according to which the CBO now sees a budget deficit declining from 845 billion to “only” $642 billion in 2013, and dropping to $560 billion the year after. This looks at the short end: the near-term revenue benefits of recent tax increase policy which take from long-term growth (just ask Europe). The fact that the CBO also forecast the deficit proceeding to once again balloon to $895 billion by 2023 at which point the deficit difference between total spending and revenues goes asymptotic once the demographic crunch truly hits, was ignored by all.


We will ignore the underlying drivers to the CBO revision: we let readers peruse these at leisure. Instead, we will simply muse at the ridiculousness of anything called a “forecast” coming out of the CBO, and present how the “independent” economic forecasts from this office change in time.


On the chart below, the dotted lines are the CBO forecasts as a % of GDP from January 2008 for the period 2008-2018. The solid lines are the just released revised forecasts for 2013-2023.

Perhaps the most notable difference is that in 2008, the CBO was predicting that the US budget deficit would turn into a surplus in 2011. Instead ended up being an $1+ trillion deficit for that year alone. Also, in the period between 2008 and 2013, the CBO then forecast a cumulative deficit of just a few hundred billion. Instead, we ended up with deficits of over $5 trillion and, sadly, still rising.


So take anything coming out of the CBO with a very big grain of salt.


But for now, with the market hitting new highs every single day just because, the CBO is surely allowed to come up with any goalseeked numbers: it’s not like anyone cares when stocks are soaring in a trance that is now completely disconnected from anything and only reliant on central bank balance sheets. And of course, we can’t wait to look back in five years and laugh at this specific revised “forecast.”

The CBO’s full scaling of Trumpcare is below (link)


Michael Snyder comments on the 15th of March and how the debt ceiling may never be raised causing huge problems for the USA

(courtesy Michael Snyder/EconomicCollapseBlog)

$21,714 For Every Man, Woman And Child In The World – This Global Debt Bomb Is Ready To Explode

Authored by Michael Snyder via The Economic Collapse blog,

According to the International Monetary Fund, global debt has grown to a staggering grand total of 152 trillion dollars.  Other estimates put that figure closer to 200 trillion dollars, but for the purposes of this article let’s use the more conservative number.  If you take 152 trillion dollars and divide it by the seven billion people living on the planet, you get $21,714, which would be the share of that debt for every man, woman and child in the world if it was divided up equally.

So if you have a family of four, your family’s share of the global debt load would be $86,856.

Very few families could write a check for that amount today, and we also must remember that we live in some of the wealthiest areas on the globe.  Considering the fact that more than 3 billion people around the world live on two dollars a day or less, the truth is that about half the planet would not be capable of contributing toward the repayment of our 152 trillion dollar debt at all.  So they should probably be excluded from these calculations entirely, and that would mean that your family’s share of the debt would ultimately be far, far higher.

Of course global debt repayment will never actually be apportioned by family.  The reason why I am sharing this example is to show you that it is literally impossible for all of this debt to ever be repaid.

We are living during the greatest debt bubble in the history of the world, and our financial engineers have got to keep figuring out ways to keep it growing much faster than global GDP because if it ever stops growing it will burst and destroy the entire global financial system.

Bill Gross, one of the most highly respected financial minds on the entire planet, recently observed that “our highly levered financial system is like a truckload of nitro glycerin on a bumpy road”.

And he is precisely correct.  Everything might seem fine for a while, but one day we are going to hit the wrong bump at the wrong time and the whole thing is going to go KA-BOOM.

The financial crisis of 2008 represented an opportunity to learn from our mistakes, but instead we just papered over our errors and cranked up the global debt creation machine to levels never seen before.  Here is more from Bill Gross

My lesson continued but the crux of it was that in 2017, the global economy has created more credit relative to GDP than that at the beginning of 2008’s disaster. In the U.S., credit of $65 trillion is roughly 350% of annual GDP and the ratio is rising. In China, the ratio has more than doubled in the past decade to nearly 300%. Since 2007, China has added $24 trillion worth of debt to its collective balance sheet. Over the same period, the U.S. and Europe only added $12 trillion each. Capitalism, with its adopted fractional reserve banking system, depends on credit expansion and the printing of additional reserves by central banks, which in turn are re-lent by private banks to create pizza stores, cell phones and a myriad of other products and business enterprises. But the credit creation has limits and the cost of credit (interest rates) must be carefully monitored so that borrowers (think subprime) can pay back the monthly servicing costs. If rates are too high (and credit as a % of GDP too high as well), then potential Lehman black swans can occur. On the other hand, if rates are too low (and credit as a % of GDP declines), then the system breaks down, as savers, pension funds and insurance companies become unable to earn a rate of return high enough to match and service their liabilities.

There is always a price to be paid for going into debt.  It mystifies me that so many Americans seem to not understand this very basic principle.

On an individual level, you could live like a Trump (at least for a while) by getting a whole bunch of credit cards and maxing all of them out.

But eventually a day of reckoning would come.

The same thing happens on a national level.  In recent years we have seen examples in Greece, Cyprus, Zimbabwe, Venezuela and various other European nations.

Here in the United States, more than 9 trillion dollars was added to the national debt during the Obama years.  If we had not taken more than 9 trillion dollars of consumption and brought it into the present, we would most assuredly be in the midst of an epic economic depression right now.

Instead of taking our pain in the short-term, we have sold future generations of Americans as debt slaves, and if they get the chance someday they will look back and curse us for what we have done to them.

Many believe that Donald Trump can make short-term economic conditions even better than Obama did, but how in the world is he going to do that?

Is he going to borrow another 9 trillion dollars?

A big test is coming up.  A while back, Barack Obama and the Republican Congress colluded to suspend the debt ceiling until March 15th, 2017, and this week we are going to hit that deadline.

The U.S. Treasury will be able to implement “emergency measures” for a while, but if the debt ceiling is not raised the U.S. government will not be able to borrow more money and will run out of cash very quickly.  The following comes from David Stockman

The Treasury will likely be out of cash shortly after Memorial Day. That is, the White House will be in the mother of all debt ceiling battles before the Donald and his team even see it coming.


With just $66 billion on hand it is now going to run out of cash before even the bloody battle over Obamacare Lite now underway in the House has been completed. That means that there will not be even a glimmer of hope for the vaunted Trump tax cut stimulus and economic rebound on the horizon.

Trump is going to find it quite challenging to find the votes to raise the debt ceiling.  After everything that has happened, very few Democrats are willing to help Trump with anything, and many Republicans are absolutely against raising the debt ceiling without major spending cut concessions.

So we shall see what happens.

If the debt ceiling is not raised, it will almost certainly mean that a major political crisis and a severe economic downturn are imminent.

But if the debt ceiling is raised, it will mean that Donald Trump and the Republicans in Congress are willingly complicit in the destruction of this country’s long-term economic future.

When you go into debt there are consequences.

And when the greatest debt bubble in human history finally bursts, the consequences will be exceedingly severe.

The best that our leaders can do for now is to keep the bubble alive for as long as possible, because what comes after the bubble is gone will be absolutely unthinkable.


The world’s most bearish hedge fund:  Horseman  (and these guys are one of the most clever in the world) has capitulated and has changed strategies after a surge in redemptions.

(courtesy zero hedge/Horseman Capital/Russell Clark)

The “World’s Most Bearish Hedge Fund” Capitulates After Surge In Redemptions

“At some point in my life, and I can’t remember exactly when, I learnt two things that define my approach on how to deal with problems. The first is simply to tell the truth, while it may be unpleasant, at least it is then out in the open and you can begin to work towards a solution. The second is that if something is unavoidable, then just accept the fact it will happen and deal with it.”

–  Russell Clark, CIO of Horseman Global

At the end of 2016, we reported that having successfully avoided a calamity for most of 2016 despite being massively net short, somewhere to the tune of around -90%, at times rising as high as -105%, Horseman Global, finally had a bad month. In fact, losing -12.80% in November the hedge fund which we previously dubbed “the world’s most bearish hedge fund” due to its staggering net bearish bias, had just suffered its worst month in history as “the short book, the bond book and the forex book lost money.” We also wondered if Horseman would also have it worst year ever, outpacing the -24.7% return in 2009.  The answer was no, but just barely. After a 7.81% drop in December, Horseman Global has closed the books on 2016 with a 24.03% net loss, its second worst in history.

Unfortunately, 2017 did not start well for Horseman Global’s CIO Russell Clark; in fact, while two months ago we noted that the fund had started to close parts of its short book and was actively reducing “gross” exposure (perhaps Clark here meant net), it was “still long bonds and short equities.” As a result, as the next table shows, Horseman has started off the year with the worst two-month stint on record, losing 6.55% YTD. Never before in its history has the famously bearish hedge fund had such a dour start to a calendar year.

Just as importantly, as previewed two months ago, as part of the fund’s net exposure drop, what was as recently as December a net -100% short, has since collapsed to only -12%, effectively a neutral , following a short covering rampage by Clark.

At the start of the year, Clark told his LPs that after losing 24% in 2016 on what ultimately ended up being a failed bearish bet, he would start covering his net short:

Despite what I think, we are beginning to close parts of our short book. We have largely exited airline related shorts. We have also closed staple shorts, as they were largely there to protect against a fall in yields, which they did to a degree. We have also closed many developed financial shorts to make some space for Chinese financial shorts. We have also reduced the bond position and moved much of in to German bunds. The majority of the bund position is in 5 year bunds, the buy case I made a few months ago.

In retrospect that Bund long may not have been the best bet, and the LPs appear to agree. The result: a redemption spike amounting to 10% of AUMs.

Currently we have redemption requests for about 10% of AUM. Changing strategies means saying goodbye to old investors who bought into the old strategy, and welcoming new investors who buy into the new strategy. That’s just the nature of the way I manage money, where once I change my mind I move quickly to where I want to be. The upshot is that we are reopening the fund to new investors April 1.

This in turn forced even more liquidations in the Horseman Fund, and prompted the CIO to change his startegy from an outright bearish, to a far more netural – and outright bullish on Emerging markets – one, a move some may say could have top-ticked the market.  How did Clark explain away his 2016 error, and the shift in strategy? To his credit, quite directly:

The truth is that in 2016, I was finding many short themes in developed markets, while not seeing any resolution in China. To square these observations up, I had assumed we would get some sort of financial crisis in China, which would take down all markets. However, in the end it looks like China has managed to enact capacity cuts that have reduced the risk of a major financial crisis.


What I find interesting, is that US markets have moved up on the promise of reform, even though they look fully valued in my view. China and India we have already had reform take place, and the stocks are not priced for these benefits. Plainly the choice is obvious for me. Long emerging markets, short developed markets is the strategy for the fund.

Finally, for those who are leaving their funds with the hedge funds in hopes that Clark will turn things around in 2017, here are his parting words:

While the drawdown is disappointing, what I find really exciting about markets, is that I am going long assets that used to own all the way back in 2007. These assets have been in close to a ten-year bear market. Typically, they have fallen 90% or more over that time, and have become forgotten by the market. They also incredibly cheap. Even more exciting is that all the other fund managers that used to own these assets back in 2007 and were my competitors, have essentially left the industry. This is a typical result in the fund management industry where most managers are unwilling to short sell. Most people only know Russell Clark the short seller, but some older investors still remember Russell Clark emerging market bull of 2006/7. And now we have a synthesis. We are now long emerging markets and short developed markets.

* * *

Below is the full letter

You fund lost 3.23% net this month. Losses came from the short book and the currency book.


At some point in my life, and I can’t remember exactly when, I learnt two things that define my approach on how to deal with problems. The first is simply to tell the truth, while it may be unpleasant, at least it is then out in the open and you can begin to work towards a solution. The second is that if something is unavoidable, then just accept the fact it will happen and deal with it.


The truth is that in 2016, I was finding many short themes in developed markets, while not seeing any resolution in China. To square these observations up, I had assumed we would get some sort of financial crisis in China, which would take down all markets. However, in the end it looks like China has managed to enact capacity cuts that have reduced the risk of a major financial crisis.


In India, we have had three huge reforms over the last few years. Digital ID system, the reform of the tax system, and now demonetisation. These reforms will make doing business far easier in India. The nexus of a China cutting commodity production, and an India with a strong growth outlook, is to be bullish commodities, and this is where most the long book is now focused. The flip side of this is that higher commodity prices will impact spending and margins for western consumers. So we have spent the last two months, expunging bearish positions on EM and replacing them with long positions. At the same time we have been adding developed markets shorts.


What I find interesting, is that US markets have moved up on the promise of reform, even though they look fully valued in my view. China and India we have already had reform take place, and the stocks are not priced for these benefits. Plainly the choice is obvious for me. Long emerging markets, short developed markets is the strategy for the fund.


The second thing about changing strategy is that there are various unavoidable things that will happen, about which much there is little we can do. First, with a change of strategy, there will be people that will wish to redeem. Currently we have redemption requests for about 10% of AUM. Changing strategies means saying goodbye to old investors who bought into the old strategy, and welcoming new investors who buy into the new strategy. That’s just the nature of the way I manage money, where once I change my mind I move quickly to where I want to be. The upshot is that we are reopening the fund to new investors April 1.


The other negative with changing strategies, which is why I don’t do it very often, is that it costs money to do, somewhere between two to three percent. This is a rule of thumb, and comes from recently closed shorts falling after you close, and recently purchased stocks tending to have a give back after being bought. It also because it normally takes a while to get the balance between different parts of the portfolio right. I have tried different ways in the past to minimise this, but the outcome is always the same. This cost of changing is a large part of the performance this month.


While the drawdown is disappointing, what I find really exciting about markets, is that I am going long assets that used to own all the way back in 2007. These assets have been in close to a ten-year bear market. Typically, they have fallen 90% or more over that time, and have become forgotten by the market. They also incredibly cheap. Even more exciting is that all the other fund managers that used to own these assets back in 2007 and were my competitors, have essentially left the industry. This is a typical result in the fund management industry where most managers are unwilling to short sell. Most people only know Russell Clark the short seller, but some older investors still remember Russell Clark emerging market bull of 2006/7. And now we have a synthesis. We are now long emerging markets and short developed markets.




Popular Michael Snyder weighs in on a chance for a world war:

(courtesy Michael Snyder/Economic Collapse Blog)

Global Leaders Rattle Their Sabers As The World Marches Toward War

Authored by Michael Snyder via The Economic Collapse blog,

Iran just conducted another provocative missile test, more U.S. troops are being sent to the Middle East, it was just announced that the U.S. military will be sending B-1 and B-52 bombers to South Korea in response to North Korea firing four missiles into the seas near Japan, and China is absolutely livid that a U.S. carrier group just sailed through contested waters in the South China Sea.  We have entered a season where leaders all over the globe feel a need to rattle their sabers, and many fear that this could be leading us to war.  In particular, Donald Trump is going to be under the microscope in the days ahead as other world leaders test his resolve.  Will Trump be able to show that he is tough without going over the edge and starting an actual conflict?

The Iranians made global headlines on Thursday when they conducted yet another ballistic missile test despite being warned by Trump on numerous occasions…

As tensions between the U.S. and Iran continue to mount, the semi-official news agency Tasnim is reporting that Iran’s Revolutionary Guard has successfully conducted yet another ballistic missile test, this time from a navy vessel.  Called the Hormuz 2, these latest missiles are designed to destroy moving targets at sea at ranges up to 300 km (180 miles).


Reports on the latest test quotes Amir Ali Hajizadeh, commander of the IRGC’s Aerospace Force, who confirmed that “the naval ballistic missile called Hormuz 2 successfully destroyed a target which was 250 km away.”


The missile test is the latest event in a long-running rivalry between Iran and the United States in and around the Strait of Hormuz, which guards the entrance to the Gulf. About 20% of the world’s oil passes through the waterway, which is less than 40 km wide at its narrowest point.

So how will Trump respond to this provocation?

Will he escalate the situation?  If he does nothing he will look weak, but if he goes too far he could risk open conflict.

Elsewhere in the Middle East, things are already escalating.  It is being reported that “several hundred Marines” are on the ground in Syria to support an assault on the city of Raqqa, and another 1,000 troops could be sent to Kuwait to join the fight against ISIS any day now.  The following comes from Zero Hedge

While the Trump administration waits to decide if it will send 1,000 troops to Kuwait to fight ISIS, overnight the Washington Post reported that the US has sent several hundred Marines to Syria to support an allied local force aiming to capture the Islamic State stronghold of Raqqa. Defence officials said they would establish an outpost from which they could fire artillery at IS positions some 32km (20 miles) away. US special forces are already on the ground, “advising” the Kurdish-led Syrian Democratic Forces (SDF) alliance according to the BBC.


The defence officials told the Washington Post that the Marines were from the San Diego-based 11th Marine Expeditionary Unit, and that they had flown to northern Syria via Djibouti and Kuwait. They are to set up an artillery battery that could fire powerful 155mm shells from M777 howitzers, the officials said. Another marine expeditionary unit carried out a similar mission at the start of the Iraqi government’s operation to recapture the city of Mosul from IS last year.

Meanwhile, China is spitting mad for several reasons.  For one, the Chinese are absolutely furious that South Korea has allowed the U.S. to deploy the THAAD missile defense system on their soil…

China is lashing out at South Korea and Washington for the deployment of a powerful missile defense system known as the Terminal High Altitude Area Defense system, or THAAD, deposited at the Osan Air Base in South Korea on Monday evening.


The deployment of THAAD follows several ballistic missile tests by North Korea in recent months, including the launch of four missiles on Monday, three of which landed in the sea off the coast of Japan. Though THAAD would help South Korea protect itself from a North Korean missile attack, China is vocally protesting the deployment of the system, claiming it upsets the “strategic equilibrium” in the region because its radar will allow the United States to detect and track missiles launched from China.

Of course the U.S. needed to do something, because the North Koreans keep rattling their sabers by firing off more ballistic missiles toward Japan.

But it is one thing to deploy a missile defense system, and it is another thing entirely to fly strategic nuclear bombers into the region.

So if the Chinese were upset when THAAD was deployed, how will they feel when B-1 and B-52 bombers start showing up in South Korea?

Earlier this week, trigger-happy Kim pushed his luck once more when he fired off four ballistic missiles into the seas near Japan.


Now US military chiefs are reportedly planning to fly in B-1 and B-52 bombers – built to carry nuclear bombs – to show America has had enough.


South Korea and the US have also started their annual Foal Eagle military exercise sending a strong warning to North Korea over its actions.


A military official said 300,000 South Korean troops and 15,000 US personnel are taking part in the operation.

The Trump administration has openly stated that all options “are on the table” when it comes to North Korea, and that includes a military strike.

It has been more than 60 years since the Korean War ended, but many are concerned that we may be closer to a new Korean War than we have been at any point since that time.

And of course our relationship with China is tumbling precariously downhill as well.  Another reason why the Chinese are extremely upset with the Trump administration is because a U.S. Navy carrier battle group led by the USS Carl Vinson sailed past islands that China claims in the South China Sea just a few weeks ago.

In China, the media openly talks about the possibility of war with the United States over the South China Sea.  Most Americans are not even aware that the South China Sea is a very serious international issue, but over in China this is a major focus.

And the U.S. military has recently made several other moves in the region that have angered the Chinese

Also in February, the U.S. sent a dozen F-22 Raptor stealth fighters to Tindal AB in northern Australia, the closest Australian military airbase to China, for coalition training and exercises. It’s the first deployment of that many F-22s in the Pacific.


And if that didn’t get the attention of the Chinese government, the U.S. just tested four Trident II submarine-launched ballistic missiles during a nuclear war exercise, sending the simulated weapons 4,200 miles from the coast of California into the mid-Pacific. It’s the first time in three years the U.S. has conducted tests in the Pacific, and the first four-missile salvo since the end of the Cold War.

I can understand the need to look tough, but eventually somebody is going to go too far.

If you are familiar with my work, then you know that I believe that war is coming.  Things in the Middle East continue to escalate, and it is only a matter of time before a great war erupts between Israel and her neighbors.  Meanwhile, U.S. relations with both Russia and China continue to deteriorate, and this is something that I have been warning about for a very long time.

We should hope for peace, but we should also not be blind to the signs of war that are starting to emerge all over the planet.  Relatively few people anticipated the outbreak of World War I and World War II in advance, and I have a feeling that the same thing will be true for World War III.



Wow!! this is a good one. I have been highlighting to you the troubles with brick and mortar outlets.  Now Michael Snyder comments that close to 1/3 of all shopping malls in the uSA is projected to close.

(courtesy Michael Snyder)

A Third Of All U.S. Shopping Malls Are Projected To Close As ‘Space Available’ Signs Go Up All Over America

A Third Of All U.S. Shopping Malls Are Projected To Close As ‘Space Available’ Signs Go Up All Over America | retail-stores | Economy & Business Special Interests

If you didn’t know better, you might be tempted to think that “Space Available” was the hottest new retail chain in the entire country.  As you will see below, it is being projected that about a third of all shopping malls in the United States will soon close, and we just recently learned that the number of “distressed retailers” is the highest that it has been since the last recession.  Honestly, I don’t know how anyone can possibly believe that the U.S. economy is in “good shape” after looking at the retail industry.  In my recent article about the ongoing “retail apocalypse“, I discussed the fact that Sears, J.C. Penney and Macy’s have all announced that they are closing dozens of stores in 2017, and you can find a pretty comprehensive list of 19 U.S. retailers that are “on the brink of bankruptcy” right here.  Needless to say, quite a bloodbath is going on out there right now.

But I didn’t realize how truly horrific things were for the retail industry until I came across an article about mall closings on Time Magazine’s website

About one-third of malls in the U.S. will shut their doors in the coming years, retail analyst Jan Kniffen told CNBC Thursday. His prediction comes in the wake of Macy’s reporting its worst consecutive same-store sales decline since the financial crisis.

Macy’s and its fellow retailers in American malls are challenged by an oversupply of retail space as customers migrate toward online shopping, as well as fast fashion retailers like H&M and off-price stores such as T.J. Maxx. As a result, about 400 of the country’s 1,100 enclosed malls will fail in the upcoming years. Of those that remain, he predicts that about 250 will thrive and the rest will continue to struggle.

Can you imagine what this country is going to look like if that actually happens?

Shopping malls all over the United States are literally becoming “ghost towns”, and many that have already closed have stayed empty for years and years.

The process usually starts when a shopping mall starts losing anchor stores.  That is why it is so alarming that Sears, J.C. Penney and Macy’s are planning to shut down so many locations in 2017.  According to one recent report, 310 shopping malls in America are in imminent danger of losing an anchor store

Dozens of malls have closed in the last 10 years, and many more are at risk of shutting down as retailers like Macy’s, JCPenney, and Sears — also known as anchor stores — shutter hundreds of stores to staunch the bleeding from falling sales.

The commercial-real-estate firm CoStar estimates that nearly a quarter of malls in the US, or roughly 310 of the nation’s 1,300 shopping malls, are at high risk of losing an anchor store.

Once the anchor stores start going, traffic falls off dramatically for the other stores and they start leaving too.

Four years ago in “The Beginning Of The End” I warned that empty storefronts would soon litter the national landscape, and now that is precisely what is happening.

Now that the Christmas season is over, some retailers that have been around for decades have suddenly decided that it is time to file for bankruptcy.  Sadly, one of those retailers is HHGregg

HHGregg Inc., the 61-year-old seller of appliances and electronics, is moving closer to Chapter 11 after announcing a store-closing plan, according to people with knowledge of the matter.

The filing may come as soon as next week, said the people, who asked not to be identified because the matter isn’t public. Bloomberg previously reported that HHGregg might file for bankruptcy in March if it couldn’t reach an out-of-court solution.

Another retailer that was once riding high but is now dealing with bankruptcy is BCBG

BCBG, the California-based fashion retailer that had acquired fashion design firm Herve Leger in 1998, and that once had more than 570 boutiques globally, including 175 in the US, and whose cocktail dresses and handbags were shown off by celebrities, filed for bankruptcy on Wednesday.

It is buckling under $459 million of debt. It has 4,800 employees. Layoffs have already started. More layoffs and other cost cuts are planned, according to court documents, cited by Bloomberg. It started closing 120 of its stores in January. It wants to sell itself at a court-supervised auction. If that fails, it wants to negotiate a debt-for-equity swap with junior lenders owed $289 million.

If the U.S. economy was actually doing as well as the stock market says that it should be doing, all of these retail chains would not be closing stores and going bankrupt.

But of course the truth is that the stock market has become completely disconnected from economic reality.

We live at a time when middle class consumers are tapped out.  According to one recent survey, 57 percent of all Americans do not even have enough money in the bank to write a $500 check for an unexpected expense.

And people are falling out of the middle class at a staggering pace.  The number of homeless people in New York City recently set a brand new record high, and city authorities plan to construct 90 new homeless shelters within the next five years.

On the west coast we are also seeing a dramatic rise in homelessness.  The following comes from an article by Dan Lyman

Citizen journalists have captured stunning images and video of homeless encampments that are spiraling out of control in the shadows of Disneyland and Anaheim Stadium in California.

The tent city has recently sprung up along the Santa Ana riverbed, near a busy convergence of three major California highways known as the “Orange Crush,” at the border of Anaheim and Santa Ana, the latter a “sanctuary city.”

Homeless activists estimate that as many as 1,000 people are camped in the region.

You can see some video footage of this homeless encampment on YouTube right here

Incredibly, the Federal Reserve is almost certainly going to raise interest rates at their next meeting even though the U.S. economy is faltering so badly.  That only makes sense if they are trying to make Donald Trump look as bad as possible.Even though this giant bubble of false economic stability that we are currently enjoying has lasted far longer than it should have, the truth is that nothing has changed about the long-term economic outlook at all.

America is still heading for “economic Armageddon”, and the retail industry is a huge red flag that is warning us that our day of reckoning is approaching more rapidly than many had anticipated.



And now zerohedge weighs in on the same story as above:

(courtesy zero hedge)

“2017 Will Be A Tipping Point” – Why Some Think This Is The Next “Big Short”

One week ago we reported that “Mega-Bears Smell Blood As Mall REITs Tumble” in which we wrote that “just like 10 years ago, when the “big short” was putting on the RMBX trade, and to a smaller extent, its cousin the CMBX, so now too some are starting to short CMBS through the CMBX. They are betting against securities backed by malls in weaker locations where stores could close in quick succession, triggering debt defaults.”

This morning Bloomberg has followed up our post with a not-so-subtly-titled “Wall Street Has Found Its Next Big Short” in which it writes that “Wall Street speculators are zeroing in on the next U.S. credit crisis: the mall…. It’s no secret many mall complexes have been struggling for years as Americans do more of their shopping online. But now, they’re catching the eye of hedge-fund types who think some may soon buckle under their debts, much the way many homeowners did nearly a decade ago.”

The trade, as we discussed before, is not so much shorting the equities where a persistent threat of a short squeeze has burned the bears on more than one occasion, but going long default risk via CMBX or otherwise shorting the CMBS complex.

Like the run-up to the housing debacle, a small but growing group of firms are positioning to profit from a collapse that could spur a wave of defaults. Their target: securities backed not by subprime mortgages, but by loans taken out by beleaguered mall and shopping center operators. With bad news piling up for anchor chains like Macy’s and J.C. Penney, bearish bets against commercial mortgage-backed securities are growing.

To be sure, as we first noted last week and as Bloomberg confirms, the activity surrounding CMBS shorting has soared:

In recent weeks, firms such as Alder Hill Management — an outfit started by protégés of hedge-fund billionaire David Tepper — have ramped up wagers against the bonds, which have held up far better than the shares of beaten-down retailers. By one measure, short positions on two of the riskiest slices of CMBS surged to $5.3 billion last month — a 50 percent jump from a year ago.


The trade itself is similar to those that Michael Burry and Steve Eisman made against the housing market before the financial crisis, made famous by the book and movie “The Big Short.” Often called credit protection, buyers of the contracts are paid for CMBS losses that occur when malls and shopping centers fall behind on their loans. In return, they pay monthly premiums to the seller (usually a bank) as long as they hold the position.


This year, traders bought a net $985 million contracts that target the two riskiest types of CMBS, according to the Depository Trust & Clearing Corp. That’s more than five times the purchases in the prior three months.

Further, based on fundamentals, the trade indeed appears justified: “Sold in 2012, the mortgage bonds have a higher concentration of loans to regional malls and shopping centers than similar securities issued since the financial crisis. And because of the way CMBS are structured, the BBB- and BB rated notes are the first to suffer losses when underlying loans go belly up.”

“These malls are dying, and we see very limited prospect of a turnaround in performance,” according to a January report from Alder Hill, which began shorting the securities. “We expect 2017 to be a tipping point.”


Cracks have started to appear. Prices on the BBB- pool of CMBS have slumped from roughly 96 cents on the dollar in late January to 87.08 cents last week, index data compiled by Markit show.

For now, there is little hope of a recovery on the horizon as more and more retailers continue to fail, leaving even more vacant, and thus non-rent collecting, mall space.

Just this morning, Gordmans Stores, the century-old discount department store chain, filed for bankruptcy with plans to liquidate its inventory and assets. According to Bloomberg, the company, which posted losses in five of the past six quarters, listed total debt of $131 million in Chapter 11 papers filed Monday in Nebraska federal court. Gordmans said in a statement that it has an agreement with Tiger Capital Group and Great American Group “for the sale in liquidation of the inventory and other assets of Gordmans’ retail stores and distribution centers,” subject to court approval or a better offer.

Omaha, Nebraska-based Gordmans, which operates over 100 stores in 22 states and employs about 5,100 people, is the latest victim in a retail industry suffering from sluggish mall traffic and a move by shoppers to the internet.


The shift has been especially rough on department stores, including regional chains like Gordmans that once enjoyed strong customer loyalty, but even national concerns like Sears Holdings Corp. and Macy’s Inc. have had to close hundreds of locations to cope with the slump

Gordmans, founded in 1915 by Russian immigrant Sam Richman, was acquired by PE firm Sun Capital in 2008 which took it public two years later. Funds managed by Sun Capital hold about 49.6% of Gordmans’ equity, according to a court filing. Growth slowed in 2014, and losses began to mount. Same-store sales fell more than 9 percent in the most recently reported quarter. The company announced job cuts in January, citing the “sluggish retail environment.”

“Like many other apparel and retail companies, the debtors have fallen victim in recent months to adverse macro-economic trends, especially a general shift away from brick-and-mortar to online retail channels, a shift in consumer demographics, and expensive leases,” Chief Financial Officer James B. Brown said in court papers.

While Gordman’s decline was long in the making, its financial conditions deteriorated rapidly in March, when vendors began to refuse to ship new inventory, Brown said. After entertaining various offers, the company concluded that its best recourse was the liquidation deal with Tiger and Great American.

To be sure, Gordman’s is hardly the last retailer to shutter and while many of its comps have yet to default, the pain is tangible: retailers had one of the worst Christmas-shopping seasons in memory, J.C. Penney said in February it plans to shutter up to 140 stores. That echoed Macy’s decision last year to close some 100 outlets and Sears’s move to shut about 150 locations.

Meanwhile, delinquencies on retail loans have risen to 6.5%, one percent higher than CMBS as a whole, according to Wells Fargo.

* * *

So does that mean that shorting malls is now accepted as the next big short? Some are not convinced.

Take for example Credit Suisse who said last month non-CMBS specialists – perhaps an apt name is “CMBS tourists” – are helping drive the recent run-up in demand for credit protection. That raises concern too many people are chasing the same trade. Of course, it may simply be that Credit Suisse analysts are being paid in CMBS

The short feels crowded to us,” said Matthew Weinstein, principal at Axonic Capital, a hedge fund that specializes in structured products. “If these defaults start happening soon, the short will work, but if the defaults do not occur quickly, the first guy out could drive the market meaningfully higher.”

Others, such as TCW, say CMBS sold in 2012 and 2013 might fall as low as 20 cents on the dollar, however the firm isn’t betting against them because it’s hard to know when the wagers might pay off. ”

Plus, the contracts aren’t cheap. It costs about 3 percent a year to short BBB- rated securities and 5 percent to bet against BB notes, plus an upfront fee to put on the trade.


Consequently, it’s “more speculative than it is the next big short,” according to Sorin Capital Management’s Tom Digan.

Whatever the case, here’s what the endgame might look like. About two hours north of Manhattan, in Kingston, New York, stands the Hudson Valley Mall. It used to house J.C. Penney and Macy’s. But both then left, gutting the complex. In January, the mall was sold for less than 20 percent of the original $50 million loan. Mortgage-bond holders exposed to the loan were partly wiped out.

“When a mall starts to falter, the end result is typically binary in nature,” said Matt Tortorello, a senior analyst at Kroll Bond Rating Agency. “It’s either the mall is going to survive or it’s going take a substantial loss.”

* * *

Ultimately, whether or not this is indeed that next big short as we first hinted one week ago, or the skeptics will be proven right, will depend on one thing: access to capital. Ironically, it was that variable that ended up crushing OPEC’s plans to wipe out shale, which despite a dramatic downturn in oil prices managed to obtain enough funding and capital from generous, yield-starved creditors, to survive the past year while technological advances caught up and pushe the breakeven point to $50, or in many cases lower.

For now, banks and hedge funds have proven far less willing to be “last resort” sources of distressed funding to retailers, and malls, (perhaps with the notable exception of Sears where Eddie Lampert has expressed a desire to go down with the sinking ship) both of which continue to deteriorate as the US consumer is either tapped out, or simply resorts to online retailers like Amazon. Should that not change any time soon, and should the cash flow profile of retailers continue to deteriorate, it is virtually assured that those who are now rushing into the next “big short” will be rewarded.

Finally, as we noted last week, here is a brief note from Horseman Capital’s Russell Clark laying out the latest dangers inherent in the mall space:


Shopping mall REITS have been a fantastic investment over the years. Not only have they provided investors with large capital gains, they have also typically offered above market dividend yields. My interpretation of the REIT model is that the operator collects rents from a diverse number of retailers. This is then passed on to the end investors after costs and financing. The REIT manager reduces risk by diversifying the retailers paying rent, and by also spreading the risk geographically. If the REIT manager can acquire more real estate assets at a yield higher than what it needs to pay out as dividend yield, then the REIT can issue more shares and grow indefinitely. Mall REITs have generally done well, except during the financial crisis.

However, it seems to me that North America could well have too many shopping malls. On a per capita basis, the US has twice the space of Australia and 5 times that in the UK.

One source of REITs revenue growth comes from acquiring more malls. Intriguingly we have started to see volumes of real estate transactions for shopping malls fall. This means that the number of transactions to buy or sell properties is beginning to decline. Last time this happened, rents began to fall a year later. Perhaps it’s a sign that buyers believe rents have some downside risk?

Many people in the market are aware of the problems that the large department stores in the US are currently facing, and their resultant plans to retrench. This affects two of the largest shopping mall REITs that have the department stores as tenants. The reality is that the shopping mall REITs charge extremely low rents to the department stores. The large shopping malls use the department stores to lure traffic, and then make their money from higher rents charged to speciality retailers. Often the per square foot rent of the specialty retailer can be 30 times or higher that paid by the anchor tenant. Looking at the top 2 shopping mall operators, they disclose their top rent payers. Recent share prices performance of 8 shared tenants has been poor, and management commentary has seeming implied that they may also be looking to reduce store count.

It should also be pointed out that many tenants have a clause in their lease to reduce rents should an anchor close a store. Thus, even though the loss of rent due to an anchor closing is minimal, the knock-on effect of reduced rents from the remaining tenants is a serious concern for the REITs.

One of the other problems that shopping mall REITs face is that the size that the large department stores take up is more than 400 million square feet. The largest and most successfully specialty retailer is TJ Maxx which currently has 100 million square feet. It is difficult to see any single retailer quickly being able to fill the space made vacant by department store closures.

Back in the lead up to the financial crisis we found that the share prices of REITs and their tenants were very closely related. Recently we have seen tenants share price weaken again, but REITS remain relatively strong.

Investors are advised to exercise caution with the shopping mall REITs


Well that is all for today

I will see you tomorrow night


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