March 16/Gold up $26.40/Silver up 41 cents/China sells more USA treasuries/Foreign central banks sell 45 billion USA treasuries/Puerto Rico bonds are plunging again/Trump releases his “skinny” budget proposal whereby fellow Republicans state that it is “dead in the water”/Huge squabble between Republican McCann and Republican Rand Paul: how on earth can these guys pass anything???/

 

Gold: $1226.50  UP $26.40

Silver: $17.29  UP 41 cents

 

Closing access prices:

Gold $1227.12

silver: $17.33

SHANGHAI GOLD FIX:  FIRST FIX  10 15 PM EST  (2:15 SHANGHAI LOCAL TIME)

SECOND FIX:  2:15 AM EST  (6:15 SHANGHAI LOCAL TIME)

SHANGHAI FIRST GOLD FIX: 1239.35 DOLLARS PER OZ

NY PRICE OF GOLD AT EXACT SAME TIME:  1225.50

PREMIUM FIRST FIX:  $13.85

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SECOND SHANGHAI GOLD FIX: 1241.99

NY GOLD PRICE AT THE EXACT SAME TIME: 1226.75

Premium of Shanghai 2nd fix/NY:$15.24

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

LONDON FIRST GOLD FIX:  5:30 am est  1225.60

NY PRICING AT THE EXACT SAME TIME: 1224.50

LONDON SECOND GOLD FIX  10 AM: 1229.35

NY PRICING AT THE EXACT SAME TIME. 1228.10

For comex gold:

MARCH/

NOTICES FILINGS TODAY FOR MARCH CONTRACT MONTH:  0 NOTICE(S) FOR nil OZ.  TOTAL NOTICES SO FAR: 59 FOR 5900 OZ    (0.1835 TONNES)

For silver:

For silver: MARCH

154 NOTICES FILED TODAY FOR 770,000 OZ/

Total number of notices filed so far this month: 3224 for 16,120,000 oz

 

Let us have a look at the data for today

.

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

In silver, the total open interest ROSE by 2,620 contracts UP to 189,556 with respect to YESTERDAY’S TRADING.    In ounces, the OI is still represented by just less THAN 1 BILLION oz i.e.  0.948 BILLION TO BE EXACT or 135% of annual global silver production (ex Russia & ex China).

FOR THE NEW FRONT MARCH MONTH: THEY FILED: 154 NOTICE(S) FOR 770,000 OZ OF SILVER

In gold, the total comex gold ROSE BY 4677  contracts EVEN WITH  THE FALL IN THE PRICE OF GOLD ($1.80 with YESTERDAY’S TRADING). REMEMBER THAT THE OPEN INTEREST READINGS ARE AT THE CLOSE OF COMEX TRADING YESTERDAY. THE HUGE RISE IN THE PRICE OF THE METALS OCCURRED AT 2 PM AFTER THE COMEX CLOSED. The total gold OI stands at 430,847 contracts.

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

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

GLD:

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

Inventory rests tonight: 839.43 tonnes

.

SLV

We had no changes in inventory at the SLV/

THE SLV Inventory rests at: 331.272 million oz

end

.

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

1. Today, we had the open interest in silver ROSE by 2620 contracts UP to 189,556 AS SILVER WAS DOWN 1 CENT(S) with YESTERDAY’S trading. The gold open interest ROSE BY 4677 contracts UP to 430,847 DESPITE THE  FALL IN THE PRICE OF GOLD OF $1.80  (YESTERDAY’S TRADING).

(report Harvey

.

2.a) The Shanghai and London gold fix report

(Harvey)

 

2 b) Gold/silver trading overnight Europe, Goldcore

(Mark O’Byrne/zerohedge

and in NY:  Bloomberg

3. ASIAN AFFAIRS

i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed UP 22.17 POINTS OR .84%/ /Hang Sang CLOSED UP 495.43 POINTS OR 2.08% . The Nikkei closed UP 12.76 POINTS OR 0.07% /Australia’s all ordinaires  CLOSED UP 0.24%/Chinese yuan (ONSHORE) closed UP at 6.9019/Oil ROSE to 49.25 dollars per barrel for WTI and 52.22 for Brent. Stocks in Europe ALL IN THE GREEN  GERMAN   ..Offshore yuan trades  6.8715 yuan to the dollar vs 6.9019  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  NARROWS CONSIDERABLY AGAIN/ ONSHORE YUAN STRONGER AS IS  THE OFFSHORE YUAN AND THIS IS  COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA TIGHTENS (SEE BELOW)

3a)THAILAND/SOUTH KOREA/NORTH KOREA

b) REPORT ON JAPAN

The Bank of Japan leaves policy and economic outlook unchanged: the yen weakens slightly and the 10 yr Japanese bond yield falls a bit

( zerohedge)

c) REPORT ON CHINA

i)China resumes selling uSA treasuries.  Foreign central banks continue to also liquidate treasuries to the tune of 45 billion dollars worth of bonds

( zero hedge)

ii)China unexpectedly raises its interest rates with its open market operations.  Both on shore and off shore yuan rise but the 10 yr bond prices fall (yields rise)

( zero hedge)

4. EUROPEAN AFFAIRS

i)Victory of the ruling Mark Rutte and a disappointing showing for the Euroskeptic Gerrt Wilders: Wilders wins 20 seats and Rutte 33. A coalition government now needs to be formed:

( zerohedge)

ii)Bill Blain explains the Dutch election:

( Bill Blain/MintPartners)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

6.GLOBAL ISSUES

Why austerity fails!!  An excellent commentary from Meijer as he states why Greece cannot never get out of its depression as long as the EU overlords continue to demand austerity and rob Greece of its prized assets

( Raul Meijer/Automatic Earth Blog))

7. OIL ISSUES

The shale boys can still be profitable at 40 dollars.  OPEC again has completely underestimated them

( Paraskova/OilPrice.com)

8. EMERGING MARKETS

It is getting far worse in Venezuela.  Now Maduro has ordered bakers to produce cheaper loaves of bread using scarce flour as bread lines circle the block on every bakery

( Bloomberg)

9.   PHYSICAL MARKETS

( Reuters/GATA)

ii)A must read…

Stewart Dougherty comments that gold and silver manipulation is the biggest financial crime in USA history:

( GATA/Stewart Dougherty)

iii)This is fascinating:  Nobel prize winner Fraser Stoddard hopes to turn the mining of gold green with a new method to extract gold doing away with the poisonous cyanide.

( Yeomans/London’s telegraph)

iv)ICE is ready to launch a London gold clearing ahead of its competitors

( Reuters/GATA)

10.USA STORIES

i)Strange! Yesterday we saw home builders the most optimistic and yet building permits plunge the most in 11 months and reducing multifamily dwelling starts.

( zero hedge)

ii)Strange:  now soft data Philly Fed drops from a  42 down to 32.80, the biggest tumble from its 33 yr highs

( Philly Fed/zero hedge)

iii)Bloomberg Economist Kathleen Hays, I guess had enough as she decided to ask Yellen pointed questions on the economy.  Basically Hays did not understand what changed from December to now to cause the data dependent Fed to hike in a rapidly deteriorating economy.  Yellen was startled as she eyeballing someone off camera. She did not like the question and we feel very sorry for Kathleen as this would probably be her last session to question the Fed as she joins Da Costa and us as outlaws.

( zero hedge)

iv)Last night,  Trump’s budget plan was leaked in which he proposes a 31% cut for EPA and a 28% cut for the state dept with a huge 54 billion rise in the military

( zero hedge/3 commentaries)

v)Utter nonsense has Bharara explains why he did not charge any Wall Street banker executives:

(courtesy Mike Krieger/Liberty BlitzkriegBlog)

vi)Puerto Rico bonds are plunging again

( zero hedge)

vii a)This is why there will be zero agreement on the debt ceiling.  Republican McCain blasts Rand Paul for not supporting NATO’s entry for the corrupt Montenegro.

( zerohedge)

vii b)Rand Paul’s response to the crazy and ‘unhinged” McCain:

( zero hedge)

Let us head over to the comex:

The total gold comex open interest ROSE BY 4677 CONTRACTS UP to an OI level of 430,847 WITH THE FALL IN THE  PRICE OF GOLD ( $1.80 with YESTERDAY’S trading).  We are probably only 40,000 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 2 contract(s) DOWN to 24. We had 0 contact(s) served YESTERDAY, so we LOST 2 CONTRACT(S) or  AN ADDITIONAL 200  ounces will NOT  stand for delivery.  The next active contract month is April and here we saw it’s OI LOSE  401 contracts DOWN TO 190,540 contracts.

For comparison purposes, the April 2016 contract at this time had an OI of 244,484 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 GAIN 53 contract(s) and thus its OI is 927 contracts. The next big active month is June and here the OI ROSE by 3852 contracts up to 147,956.

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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
 And now for the wild silver comex results.  Total silver OI ROSE BY 2,620 contracts FROM 186,936 UP TO 189,556 WITH YESTERDAY’S TRADING.We are moving CLOSER TO the all time record high for silver open interest set on Wednesday August 3/2016:  (224,540). The closing price of silver that day: $20.44

We are in the active delivery month is March and here the OI decreased by 79 contracts down to 797 contracts. We had 78 notices served upon yesterday so we neither lost 1 CONTRACT OR 5,000 OZ WILL NOT STAND in this active delivery month of March.

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 0 contract(s) to 994 contracts. The next active contract month is May and here the open interest GAINED 1275 contracts UP to 146,309 contracts.

FOR COMPARISON

Initially for the April 2016 contract1,180,000 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 154 notice(s) filed for 770,000 oz for the MARCH 2017 contract.

VOLUMES: for the gold comex

Today the estimated volume was 161,415  contracts which is fair.

Yesterday’s confirmed volume was 290,131 contracts  which is very  good

volumes on gold are getting higher!

INITIAL standings for MARCH
 March 16/2017.
Gold Ounces
Withdrawals from Dealers Inventory in oz   nil
Withdrawals from Customer Inventory in oz  
6121.827 OZ
Scotia
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)
24 contracts
2400 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     57,961.1 oz
Today we HAD 0 kilobar transaction(s)/
Today we had 0 deposit(s) into the dealer:
total dealer deposits:  nil oz
We had nil dealer withdrawals:
total dealer withdrawals:  nil oz
we had 0  customer deposit(s):
total customer deposits; nil  oz
We had 1 customer withdrawal(s)
 i) Out of Scotia 6121.827 oz
total customer withdrawal: 6121.827  oz
We had 0  adjustment(s)
For MARCH:

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

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To calculate the initial total number of gold ounces standing for the MARCH. contract month, we take the total number of notices filed so far for the month (59) x 100 oz or 5900 oz, to which we add the difference between the open interest for the front month of MARCH (24 contracts) minus the number of notices served upon today (0) x 100 oz per contract equals 8300 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 + {(24)OI for the front month  minus the number of  notices served upon today (0) x 100 oz which equals 8300 oz standing in this non active delivery month of MARCH  (.2581 tonnes)
 
 
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On first day notice for MARCH 2016, we had 2.146 tonnes of gold standing. At the conclusion of the month we had 2.311 tonnes standing.
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
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: 0.2581 tonnes
total for the 15 months;  244.493 tonnes
average 16.299 tonnes per month vs last yr  61.82 tonnes total for 15 months or 4.12 tonnes average per month (last yr).
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Total dealer inventory 1,379,264.072 or 42.900 tonnes DEALER RAPIDLY LOSING GOLD
Total gold inventory (dealer and customer) = 8,935,490.29 or 277.93 tonnes 
 
Over a year ago the comex had 303 tonnes of total gold. Today the total inventory rests at 277.93 tonnes for a  loss of 25  tonnes over that period.  Since August 8/2016 we have lost 76 tonnes leaving the comex. However I am including kilobar transactions and they are very suspect at best
I have a sneaky feeling that these withdrawals of gold in kilobars are being used in the hypothecating process  and are being used in the raiding of gold!

The gold comex is an absolute fraud.  The use of kilobars and exact weights makes the data totally absurd and fraudulent! To me, the only thing that makes sense is the fact that “kilobars: are entries of hypothecated gold sent to other jurisdictions so that they will not be short with their underwritten derivatives in that jurisdiction.  This would be similar to the rehypothecated gold used by Jon Corzine at MF Global.
 
IN THE LAST 7 MONTHS  76 NET TONNES HAS LEFT THE COMEX.
end
And now for silver
AND NOW THE MARCH DELIVERY MONTH
MARCH INITIAL standings
 March 16. 2017
Silver Ounces
Withdrawals from Dealers Inventory  nil
Withdrawals from Customer Inventory
nil  oz
Deposits to the Dealer Inventory
nil oz
Deposits to the Customer Inventory 
 nil oz
No of oz served today (contracts)
154 CONTRACT(S)
(770,000 OZ)
No of oz to be served (notices)
643 contracts
(3,215,000  oz)
Total monthly oz silver served (contracts) 3224 contracts (16,120,000 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  3,388,168.1 oz
today, we had  0 deposit(s) into the dealer account:
total dealer deposit: nil oz
we had nil dealer withdrawals:
total dealer withdrawals: nil oz
we had 0 customer withdrawal(s):
TOTAL CUSTOMER WITHDRAWALS: nil oz
 we had 0 customer deposit(s):
***deposits into JPMorgan have now stopped.
total customer deposits;  nil   oz
 
 we had 1  adjustment(s)
i) Out of CNT: 226,778.620 oz was adjusted out of the customer account and this landed into the dealer account of CNT
The total number of notices filed today for the MARCH. contract month is represented by 154 contract(s) for 770,000 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 3224 x 5,000 oz  = 16,120,000 oz to which we add the difference between the open interest for the front month of MAR (797) and the number of notices served upon today (154) x 5000 oz equals the number of ounces standing 
 
Thus the initial standings for silver for the March contract month:  3224(notices served so far)x 5000 oz  + OI for front month of Mar.( 797 ) -number of notices served upon today (154)x 5000 oz  equals  19,335,000 oz  of silver standing for the Mar contract month. This is  now average for an active delivery month in silver.  We lost one contract or 5,000 oz will not stand for delivery.
 
Volumes: for silver comex
 
Today the estimated volume was 52,798 which is very good!!!
Yesterday’s  confirmed volume was 78,244 contracts  which is huge.
Let’s take today’s estimated volume of 78,244 contracts:  that represents:391 million oz of silver or approx. 56% of annual global supply (ex Russia ex China)
 
Total dealer silver:  38.801 million (close to record low inventory  
Total number of dealer and customer silver:   188.465 million oz
The total open interest on silver is now further from   its all time high with the record of 224,540 being set AUGUST 3.2016.

end

And now the Gold inventory at the GLD

March 16/no changes in gold inventory at the GLD/Inventory rests at 839.43 tonnes

March 15/ANOTHER HUGE DEPOSIT OF 4.44 TONNES/inventory rests at 839.43 tonnes

March 14/strange they whack gold and yet the GLD adds 2.93 tonnes of gold./inventory rests at 834.99 tonnes

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

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
March 16 /2017/ Inventory rests tonight at 839.43 tonnes
*IN LAST 111 TRADING DAYS: 106.45 NET TONNES HAVE BEEN REMOVED FROM THE GLD
*LAST 56 TRADING DAYS: A NET  18.76 TONNES HAVE NOW BEEN ADDED INTO GLD INVENTORY.
*FROM FEB 1/2017: a net    44.19 TONNES HAVE BEEN ADDED.

end

Now the SLV Inventory
March 16/no changes in silver inventory/SLV inventory rests at 331.272 million oz
March 15/no change in silver inventory/SLV inventory rests at 331.272 million oz
March 14/ a deposit of 1.136 million oz of inventory into the SLV/Inventory rests at 331.272 million oz
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
March 16.2017: Inventory 331.272  million oz
 end

NPV for Sprott and Central Fund of Canada

will update later tonight the central fund of Canada figures

1. Central Fund of Canada: traded at Negative 6.6 percent to NAV usa funds and Negative 6.5% to NAV for Cdn funds!!!! 
Percentage of fund in gold 60.8%
Percentage of fund in silver:39.0%
cash .+0.2%( Mar 16/2017) 
 Sprott funds will be updated later tonight
2. Sprott silver fund (PSLV): Premium RISES  to -.20%!!!! NAV (Mar 15/2017) 
3. Sprott gold fund (PHYS): premium to NAV RISES to  + 0.33% to NAV  ( Mar 15/2017)
Note: Sprott silver trust back  into NEGATIVE territory at -0.20% /Sprott physical gold trust is back into POSITIVE territory at +0.33%/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

 Section: 

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

http://www.cbc.ca/news/canada/calgary/sprott-takeover-bid-central-fund-c…

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.

end

Major gold/silver trading/commentaries for THURSDAY

GOLDCORE/BLOG/MARK O’BYRNEet.

Gold Up 1.8%, Silver Up 2.6% After Dovish Fed Signals Slow Rate Rises

By Mark O’Byrne March 16, 2017

– Gold up 1.8%, silver up 2.6% – Fed signals slow rate rises
– Dollar sells off as Fed raises 0.25% to target range of 0.75 percent to 1 percent on inflation outlook and “ebullient” stocks
– Gold’s biggest 1 day percentage gain since September 2016
– Fed raises rates for only the third time since crisis
– Fade out Fed “jibber jabber” and focus on still ultra low rates (see chart)

– Rising rates bullish for gold as seen in 1970s and 2003 to 2007 (see table)
– Silver rose 26% in 2003, 14% in 2004, 29% in 2005 and 46.6% in 2006
– Raise is too little, too late … Dovish Fed creating asset bubbles

– Dutch pro EU government have marginal win and populist Wilders does not see gains expected
– Pro-EU Dijsselbloem PvdA party likely biggest losers – risking his position as head of  Eurogroup of Euro zone’s finance ministers
– Europeans will continue to reject increasingly undemocratic federal EU super state and risk of contagion remains high

– Geopolitical risk in form of Brexit talks and French elections seeing safe haven demand in UK, France and other EU countries


Gold in USD – 24 Hours

Gold rallied 1.8 percent yesterday as the U.S. Federal Reserve raised interest rates by an expected 25 basis points for the second time in three months.

Spot gold maintained those gains and moved as high as $1,228/oz overnight in Asia and gold has consolidated on those gains in European trading.

Gold had its biggest one-day jump since September. The Fed said in its policy statement that further hikes would only be “gradual,” with officials sticking to their outlook for two more rate hikes this year and three more in 2018.


Fed raises rates for the third time since crisis

Source: Newsreportonline.com

Silver rose 2.6 percent to $17.31 an ounce and traded another 1% in trading this morning to $17.50 an ounce. Platinum was up 2.8 percent at $965 per ounce while palladium was up 2.5 percent at $771 an ounce.

The Fed remains ‘dovish’ and signaled just three more rate hikes in 2017 as expected. They attempted to appear hawkish and suggested they would increase interest rates three times in 2017.

It is worth remembering that they promised three rate hikes for 2016 and yet only one rate hike materialised. We expect given the fragile nature of the so called economic recovery that this will be the case again.

It is prudent to focus on what the Fed does rather than what it says.

The Fed has been promising higher interest rates most years since 2008 and yet there have only been three interest rate rises since 2008. Yesterday’s rate rise was only the third rate rise since the 2008 financial crisis.

Source: New York Federal Reserve for Fed Funds Rate, LBMA.org.uk for Gold (PM fix)

Rising interest rates are likely to be bullish for gold as was the case in the 1970s and again in the 2003 to 2007 period (see table above and research note 5 Key Charts Show Rising Interest Rates Good For Gold here.

Silver saw similar gains – rising 26% in 2003, 14% in 2004, 29% in 2005 and 46.6% in 2006.

It is also worth noting that gold has risen from below $1,100 per ounce since the Fed first increased interest rates after the crisis at the end of 2015.

We believe the Federal Reserve is still well “behind the curve” and this latest small interest rate rise is too little, too late. The Dovish Fed is creating asset bubbles with U.S. stocks looking very overvalued indeed.

Many share this view including former senior Fed officials. U.S. interest rates should be on course to more normal levels of around 3% by now given that the Federal Reserve has achieved all of its targets, former Fed governor Heller said yesterday.

Investors were also focusing on Wednesday’s elections in the
Netherlands and concerns about contagion in the EU, which is also aiding gold’s safe-haven appeal.

The centre right, pro EU government in Holland had a marginal win and populist Wilders did not see the gains that were expected. However it was not all rosy for the EU and Dijsselbloem’s PvdA party appeared to be the biggest losers in the election. This means that his position as head of Eurogroup of Euro zone’s finance ministers is at risk.

Anti EC and EU super state sentiment remains high and senior EU and EC bureaucrats remain very unpopular. Another example of this is with EU President Donald Tusk who faces a criminal probe in Poland and even his own country will not back him for a second term as EU Council president.

Most European citizens are pro-EU and pro-Europe but are concerned about the increasingly undemocratic, corporate and militaristic Federal super state that certain EU elites are attempting to foist on the citizens of Europe. This important nuance is frequently missed in the simplistic and binary, pro EU, anti EU, “you are either with us or against us” narrative.

Despite the Dutch election, geopolitical risk globally remains high, especially in the EU. This will be seen in the coming ‘Hard Brexit’ negotiations and the French elections (April 23 and May 7) which will support gold and see continuing safe haven demand for gold in the UK, France and other EU countries.

END

 

Gold trading early this morning:

Gold Surges Most Since Brexit After ‘Dovish’ Fed Hike

With the focus overnight on the Rutte ‘win’ despite the surge in populist angst, and headlines from The Fed, PBOC, BoJ, and BoE sending global stocks to record highs, one might be forgiven for not noticing that Gold is surging (most since Brexit) following Janet’s decision to raise rates for the 3rd time in 11 years – far outperforming other assets classes.

The Dollar continued to get pounded overnight as China unexpectedly tightened policy…

 

Gold the big winner (thogh WTI is rallying also on the heels of the tumbling dollar)

 

This is gold’s biggest day since Brexit…

 

Gold is above its 50- and 100-day moving averages and $1225, and Silver is above $17…

 

Helped by the dollar and the news of the split vote (the first in 8 months) at the BoE, cable is surging too…

 

(courtesy Reuters/GATA)

Trump’s CFTC chairman pledges to cut regulation

Section:

… But for gold and silver trading, there’s nothing to cut.

* * *

Trump’s Pick to Lead CFTC Unveils Major New Policy Agenda

By Sarah N. Lynch
Reuters
Wednesday, March 15, 2017

WASHINGTON — The top U.S. derivatives regulator laid out plans today for a sweeping overhaul of the agency that will include everything from cutting regulation to restructuring the unit that conducts surveillance for market abuses.

In a wide-ranging policy speech, Acting Commodity Futures Trading Commission Chairman J. Christopher Giancarlo, who was nominated by President Donald Trump as permanent chairman late Tuesday, said it was time for the CFTC to “reinterpret its regulatory mission” by focusing on fostering economic growth, enhancing U.S. markets, and “right-sizing” its regulatory footprint. …

… For the remainder of the report:

http://www.reuters.com/article/us-usa-cftc-idUSKBN16M1W3

END

A must read…

Stewart Dougherty comments that gold and silver manipulation is the biggest financial crime in USA history:

(courtesy GATA/Stewart Dougherty)

 

Stewart Dougherty: Gold and silver manipulation is biggest financial crime in history

Section:

7:10p ET Wednesday, March 15, 2017

Dear Friend of GATA and Gold:

Financial consultant and market analyst Stewart Dougherty today calls gold and silver price manipulation “the biggest financial crime in history” and credits GATA for proving it with “many years of tireless work.” Dougherty’s commentary is headlined “Gold and Silver Price Manipulation: The Biggest Financial Crime in History” and it’s posted at GoldSeek here:

http://news.goldseek.com/GoldSeek/1489601367.php

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

END

This is fascinating:  Nobel prize winner Fraser Stoddard hopes to turn the mining of gold green with a new method to extract gold doing away with the poisonous cyanide.

(courtesy Yeomans/London’s telegraph)

Nobel Prize winner Sir Fraser Stoddart hopes to turn gold mines green

Section:

By Jon Yeomans
The Telegraph, London
Wednesday, March 15, 2017

A British Nobel Prize winner is hoping to revolutionise the mining industry with a new technique for extracting gold that does away with poisonous cyanide.

Sir Fraser Stoddart, the Scottish-born scientist who won the Nobel Prize for Chemistry in 2016, is behind a new start-up that is testing a starch-based method of separating gold from ore.

The “serendipitous discovery” by Sir Fraser’s research team at Northwestern University in Chicago is being developed by his company Cycladex in Nevada. …

… For the remainder of the report:

http://www.telegraph.co.uk/business/2017/03/15/nobel-prize-winner-sir-fr…

END

ICE is ready to launch a London gold clearing ahead of its competitors

(courtesy Reuters)

ICE to launch London gold clearing before banks are ready

Section:

By Peter Hobson and Jan Harvey
Reuters
Wednesday, March 15, 2017

LONDON — Intercontinental Exchange (ICE) is set to launch clearing for London’s benchmark gold price auction before participants are ready as it races to prevent rivals muscling in on the city’s $5 trillion-a-year bullion market, market and banking sources said.

Clearing — where an exchange acts as an intermediary to guarantee and settle trades — is regarded as a necessary progression for the gold trade as tighter regulatory capital requirements increase the cost of trading off-exchange. ICE, the London Metal Exchange, and CME Group are competing to offer services through futures contracts and grab the biggest slice of the new business.

U.S.-based exchange operator ICE has already pushed back the launch of its service by several weeks to allow the banks and brokers who participate in the auction to adapt their IT systems, four sources with direct knowledge of the matter told Reuters. Two of the sources said ICE now planned to introduce clearing from Apr. 3, the first Monday of the month.

However, at least four of the 14 banks and brokers who participate in the LBMA Gold Price auction — which sets the benchmark for bullion traders around the world — will still not be ready to use the new system, three separate sources said. …

… For the remainder of the report:

http://www.reuters.com/article/us-gold-auction-ice-idUSKBN16M1X3

END


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

 
 

1 Chinese yuan vs USA dollar/yuan STRONGER AT  6.9019( REVALUATION NORTHBOUND   /OFFSHORE YUAN NARROWS HUGELY  TO 6.8715/ Shanghai bourse UP 22.17 POINTS OR .84%   / HANG SANG CLOSED UP 495.43 POINTS OR 2.08% 

2. Nikkei closed UP 12.86 POINTS OR 0.07%   /USA: YEN RISES TO 113.46

3. Europe stocks opened ALL IN THE GREEN E    ( /USA dollar index RISES TO  100.63/Euro DOWN to 1.0728

3b Japan 10 year bond yield: LOWERS   +.075%/     !!!!(Japan buying 100% of bond issuance)/Japanese yen vs usa cross now at 113.46/ THIS IS TROUBLESOME AS BANK OF JAPAN IS RUNNING OUT OF BONDS TO BUY./JAPAN 10 YR YIELD FINALLY IN THE POSITIVE/BANK OF JAPAN LOSING CONTROL OF THEIR YIELD CURVE AS THEY PURCHASE ALL BONDS TO GET TO ZERO RATE!!

3c Nikkei now JUST BELOW 17,000

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

3e WTI::  49.25  and Brent: 52.22

3f Gold UP/Yen DOWN

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

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

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

3i European bond buying continues to push yields lower on all fronts in the EMU. German 10yr bund RISES TO  +.461%/Italian 10 yr bond yield UP  to 2.340%    

3j Greek 10 year bond yield RISES to  : 7.36%   

3k Gold at $1225.55/silver $17.45(8:15 am est)   SILVER  RESISTANCE AT $18.50 

3l USA vs Russian rouble; (Russian rouble UP 41/100 in  roubles/dollar) 58.04-

3m oil into the 49 dollar handle for WTI and 52 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 HUGE REVALUATION NORTHBOUND   from POBC.

JAPAN ON JAN 29.2016 INITIATES NIRP. THIS MORNING THEY SIGNAL THEY MAY END NIRP. TODAY THE USA/YEN TRADES TO 113.46 DESTROYING JAPANESE CITIZENS WITH HIGHER FOOD INFLATION

30 SNB (Swiss National Bank) still intervening again in the markets driving down the SF. It is not working: USA/SF this morning  0.9979 as the Swiss Franc is still rising against most currencies. Euro vs SF is 1.0704 well above the floor set by the Swiss Finance Minister. Thomas Jordan, chief of the Swiss National Bank continues to purchase euros trying to lower value of the Swiss Franc.

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

3r the 10 Year German bund now POSITIVE territory with the 10 year RISES to  +.461%

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 2.529% early this morning. Thirty year rate  at 3.138% /POLICY ERROR)GETTING DANGEROUSLY HIGH

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

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

HELICOPTER MONEY STILL ON THE TABLE FOR THE FUTURE

Global Stocks Soar To Record Highs On “Dovish” Fed, Dutch Vote

 

World stock indexes soared to record highs on Thursday while the dollar traded close to a one-month low after the Federal Reserve hiked U.S. interest rates but signaled no pick-up in the pace of tightening. European and Asian were broadly higher this morning, with S&P tagging along, driven by two main events: the latest “dovish” Fed rate hike, and the Dutch election results, in which Geert Wilders performed worse than some expected, reducing concerns of Eurozone political risk, and broadly seen as a sign of support for Europe’s establishment.

As a result, the MSCI world equity index which tracks shares in 46 countries, jumped 0.7% on the day to reach an all-time high, as yields on 10-year U.S. Treasuries tumbled the most since last August.

“It was a well-prepared hike, and when you consider the fact that Yellen and Co kept the outlook for growth and inflation largely unchanged, I would call this a dovish hike,” said DZ Bank analyst Rene Albrecht, in Frankfurt.

A quick recap of the Fed’s announcement, starting with the dots, where the median 2017 and 2018 dots were left unchanged at 1.375% and 2.125% respectively. The longer term dot was also left unchanged at 3% while the only shift was the small increase in the median 2019 dot to 3% from 2.875%. However it is worth highlighting some of the finer details of the moves in the dots. Four of the seven below-median dots for 2018 have now moved up to the median. For 2017, previously six members expected less than 3 hikes and now only three members expect such. Five members still expect more than 3 hikes which means that the number of members expecting 3 hikes has increased from six to nine. So this suggests a stronger consensus view this year.

With regards to Yellen’s press conference one of the first things the Fed Chair said was that by tightening this month, the move does not reflect a reassessment of the economic or policy outlook, while noting the minor changes in the economic projections. At the same time she also sought to highlight that the “simple message is the economy’s doing well” and that “we have confidence in the robustness of the economy and its resilience to shocks”. There was little new on the potential impact of fiscal policy with Yellen reiterating that there is still plenty of uncertainty and that no decisions can be based on that for now. The addition of the “symmetric” comment was also brought up in Q&A with Yellen acknowledging that inflation could shoot above 2% temporarily but that the Fed is not targeting such. Indeed she made mention to the fact that 2% is a target rather than a ceiling. Finally on the balance sheet there was little new, rather reiterating that it is an issue still under discussion.

Switching over to Europe, it was all about the Dutch election, where after having counted 93.5% of votes in the Netherlands election, PM Rutte’s VVD party is to win 33 seats, Wilders’ PVV is at 20 seats, while CDA and D66 parties are to win 19 seats each. Subsequently, this shows a strong win for PM Rutte’s VVD party while the far-right, pro-Nexit PVV failed to meet projections. However, the PvdA (Labour Party and potential VVD coalition partner) underperformed with seats falling from 38 in 2012 to around 9 this time round. The read through from the Netherlands to France has been negative for the anti-establishment Marine Le Pen, whose overall odds of winning the French election are back under 30% for the first time in over a month.

The Dutch vote helped Amsterdam’s AEX stock index climb to its highest level in more than nine years, while both Germany’s DAX and France’s CAC 40 hit their highest levels since mid-2015 as fears eased that the euro zone was heading inexorably towards a break-up.

“Some of that fear around Brexit, Trump, and then Wilders and Le Pen, may now be seeping out of the markets – you see some of that fear dissipating,” said Arne Petimezas, analyst at AFS Group in Amsterdam, referring to far-right French presidential Marine Le Pen.

In addition to the Dutch elections, which were generally favorable for the European status quo, it was central banks that once again ruled over financial markets, as the Fed’s move to raise interest rates without accelerating the timeline for future tightening sent global stocks jumping as Bloomberg notes. The dollar steadied after Wednesday’s losses while Treasuries slipped back after a two-day surge.

Rallies from Seoul to Jakarta pushed the MSCI Asia Pacific Index to the highest since mid-2015, while European shares rose a second day. Hong Kong stocks jumped the most since May as China followed the Fed in raising rates. The yen edged higher after the Bank of Japan kept monetary policy unchanged and Governor Haruhiko Kuroda failed to offer forward guidance on what would trigger a rate hike. The yield on 10-year Treasuries returned above 2.50 percent after plunging Wednesday, while gold and oil extended gains.

Yesterday’s key event was the Fed which raised its benchmark lending rate a quarter point and continued to project two more increases this year. U.S. equities extended gains as Chair Janet Yellen said in a press conference that the “simple message is the economy is doing well.” Investors anticipated the tightening and Treasury yields had climbed with the dollar on speculation the central bank might signal a faster pace of tightening. Those trades unwound late Wednesday in the U.S. as the Fed indicated it hasn’t fallen behind with its efforts to keep inflation in check.

“The Fed did a good thing as they signaled they will raise rates without destroying global equity markets,” said Norihiro Fujito, a Tokyo-based senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “The Fed’s outlook hasn’t changed much from where they were in December, but the markets had gone overboard with rate hike expectations.”

In addition to the Fed, overnight there were decision from the BOJ, SNB and Norway’s central bank:

BoJ kept monetary policy unchanged as expected with NIRP held at -0.10%. The BoJ voted 7-2 to maintain yield curve control with Sato and Kiuchi the dissenters. Kiuchi proposed BoJ state that inflation to be extremely slow which was defeated by 8-1 vote. BoJ maintained 10yr JGB yield target at around 0% and kept pledge to buy JGBs around current pace so that holdings rise JPY 80TN annually. BoJ also maintained its assessment that economy continues to recover moderately as a trend. Swiss SNB Interest Rate Decision -0.75% vs. Exp. -0.75% (Prey. -0.75%)

The SNB stated CHF remains significantly overvalued, outlook for Swiss economy is cautiously optimistic and the central bank will continue to remain active in FX markets as necessary. The Norges Bank likewise kepd its interest rate at 0.5% in line with expectations.

Meanwhile, China’s central bank raised borrowing costs as a stable economy and factory reflation give it scope to follow the Fed. The People’s Bank of China increased the rates it charges in open-market operations and on its medium-term lending facility.

The biggest recipient of the overnight risk on sentiment has been Europe, where initially, both the Euro and European bonds followed equities higher, with the spread between French and German 10Y bonds collapsing to the lowest since January…

… however as the European trading session progressed, the Euro faded some of its gains, which French bonds erased the strong open and German bonds slid as the Dutch election prompted an improvement in risk appetite, while the overall move was supported by yesterday’s dovish Fed outlook shift.  No material follow through buying seen in France, with some investors still apprehensive over election risks, said a trader quoted by Bloomberg. In Germany, Bund futures fell, with the 10-year yield rising 4bps from the open, before bouncing from support at 159.66-60; swap spreads tighten acorss the curve, credit spreads tighter by 7bps and EuroStoxx 50 rises 1%

In equities the story was diferent, with the German DAX powering higher, up 1%, and fast approaching its lifetime high of 12,156 on what can be best described as euphoric sentiment from yesterday’s events.

The Stoxx Europe 600 Index climbed 0.7 percent as of 10:25 a.m. in London. The gauge is trading at the highest level since December 2015.

In Asia, the MSCI Asia Pacific Index climbed to the highest since mid-2015. Hong Kong’s Hang Seng and the Hang Seng China Enterprises Index jumped more than 2 percent, the most since May, as China followed the Fed in raising rates. Japan’s Topix reversed an early loss after the Bank of Japan kept monetary policy unchanged. The MSCI Emerging Markets Index jumped the most since July, with benchmarks in Indonesia and Malaysia soaring more than 1.2 percent. The Australian dollar and kiwi slipped amid disappointing reports on unemployment and gross domestic product.

Futures on the S&P 500 were up 0.3% after the benchmark gauge rose 0.8% to 2,386.75 on Wednesday, the highest level since reaching a record on March 1.

Market Snapshot

  • S&P 500 futures up 0.3% to 2,386.75
  • Brent Futures up 1.4% to $52.53/bbl
  • Gold spot up 0.4% to $1,225.30
  • U.S. Dollar Index down 0.1% to 100.64
  • U.S. 10Y yield 2.5257%, up 1.31%
  • STOXX Europe 600 up 0.4% to 376.73
  • MXAP up 1.5% to 147.86
  • MXAPJ up 1.6% to 477.54
  • Nikkei up 0.07% to 19,590.14
  • Topix up 0.09% to 1,572.69
  • Hang Seng Index up 2.1% to 24,288.28
  • Shanghai Composite up 0.8% to 3,268.94
  • Sensex up 0.5% to 29,542.85
  • Australia S&P/ASX 200 up 0.2% to 5,785.79
  • Kospi up 0.8% to 2,150.08
  • German 10Y yield rose 1.7 bps to 0.432%
  • Euro down 0.2% to 1.0718 per US$
  • Brent Futures up 1.4% to $52.53/bbl
  • Italian 10Y yield fell 3.9 bps to 2.302%
  • Spanish 10Y yield fell 3.0 bps to 1.809%

Top Overnight News

  • Dutch Liberals Defeat Wilders’s Party in Blow to Populist Surge
  • Oil Extends Advance as U.S. Stockpiles Drop First Time This Year
  • China’s Central Bank Raises Borrowing Costs in Step With Fed
  • GoPro Camera Maker Cuts Jobs Again in Search of Profit
  • Costco’s Private-Label Booze Helps Warm Spirits During Dry Spell
  • Blackstone Said to Put Sime Darby Singapore Property on Sale
  • Chevron CEO Sells $13.8 Million in Personal Company Shares
  • Japan Carmakers Will Consider U.S. Policies Seriously: Saikawa
  • Lufthansa Says Fare Slide to Slow as CEO Seeks Further Cost Cuts
  • Swatch Sees Rebound in U.S., Europe as Watch Sales Improve

In Asian markets, stocks traded mostly higher as the region reacted to the dovish-perceived FOMC where the Fed hiked rates as expected, but kept projections mostly unchanged and Fed chair Yellen commented that the economic outlook is highly uncertain. This initially supported the ASX 200 (+0.2%) with mining names outperforming following a rally in commodities, although weakness in financials slightly clouded sentiment. Upside in Nikkei 225 (+0.1%) was limited by a firmer currency, while Shanghai Comp. (+0.4%) and Hang Seng (+1.5%) benefitted after the PBoC upped its liquidity injection to CNY 80bIn and announced a CNY 303BN Medium-term Lending Facility. 10yr JGBs tracked gains in T-notes as global yields decline post-FOMC dovish FOMC, while the curve flattened amid underperformance in the short-end. As noted last night, the PBoC conducted a CNY 303BN 1yr Medium-term Lending Facility at 3.2% and injected CNY 20bIn 7-day reverse repos, CNY 20bIn in 14-day reverse repos and CNY 40bIn in 28-day reverse repos, with the 7-day, 14-day and 28-day offer yield raised by 10bps each to 2.45%, 2.60% and 2.75% respectively. PBoC stated that the change in rates on reverse repos does not equate to a change in monetary policy and reflects market changes, while it added that there is no need to over interpret monetary tools actions.

Top Asian News

  • Samsung’s New S8 Said to Adopt Facial Recognition for Payments
  • Hong Kong Stocks Jump to 2015 High as Fed, China Energize Bulls
  • Chow Tai Fook Adds Australia Power Firm to Property, Jewelry
  • BOJ Stays the Course With Policy Unchanged After U.S. Rate Hike
  • Top Indonesia Nickel Miner Seeks to Export 6 Mln Tons of Ore
  • Hedge Funds’ Lost Alpha Sends $750 Million Fund as Far as Seoul
  • Japan Government Denies Claim Abe Donated to Scandal-Hit School

European bourses trade higher after the FOMC rate decision and Dutch election result. Materials outperform after yesterday’s aftermarket reports that an Indian business tycoon is looking to invest GBP 2bIn in Anglo American, this led shares to trade higher by 11% at the open. Elsewhere, Sainsbury’s shares fell after a disappointing trading update in which like-for-like sales, which strip out new stores, fell by 0.5% in the period to 11 March. Bund weakness was put down to supply this morning, with several dealers stating they have not seen too much in the way of selling despite a 1/2 point fall at the open. Also of note today, OAT’s saw some relief in early trade after some analysts noted following the Dutch elections it makes sense to sell German bonds to hedge non German supply.

Top European News

  • Volkswagen Is Proving More Reliable in Court Than on the Road
  • European Car Sales Growth Cools as VW, PSA Lose Market Share
  • Bunds Slide as Election Premium Unwinds; Investors Fade UST Move
  • Hexagon Says Rollen to Remain CEO Even as Norway Indicts Him
  • Behind Trump’s Russia Romance, There’s a Tower Full of Oligarchs

In currencies, the MSCI Asia Pacific Index climbed to the highest since mid-2015. Hong Kong’s Hang Seng and the Hang Seng China Enterprises Index jumped more than 2 percent, the most since May, as China followed the Fed in raising rates.  Japan’s Topix reversed an early loss after the Bank of Japan kept monetary policy unchanged. The MSCI Emerging Markets Index jumped the most since July, with benchmarks in Indonesia and Malaysia soaring more than 1.2 percent. The Australian dollar and kiwi slipped amid disappointing reports on unemployment and gross domestic product. Much of today’s FX price action has been a continuation of yesterday’s post FOMC sell off, where USD bulls were clearly looking for a little more hawkishness from the Fed. That Kashari dissented and voted for no change compounded the unchanged dot plot reaction, but given prospective yield differential widening ahead. USD dip buyers have not been put off. USD/JPY has tested below 113.00 and has run into fresh demand, but looking to the 2 weeks ahead, traders best be wary of sporadic JPY buying/repatriation into Japanese year end (31 March). 111.50-115.50 looks to be the near term range ahead, with the unchanged BoJ policy stance also supportive of the pair. Gains in EUR/USD saw 1.0700 taken out last night, but 1.0750 has been rejected so far despite some modest relief from the Dutch election outcome. Nevertheless, range limits likely to be test on the upside should we negotiate the French elections in the same way, with a more neutral stance at the ECB underpinning the spot rate well ahead of 1.0500 it seems.

In commodities, in the wake of the FOMC last night, where some describe the outcome as a ‘dovish hike’, the USD has pulled back across the board, and this has had natural consequences for commodities across the board. Gold and Silver have clearly been revived on the tight correlation with Treasuries, as risk sentiment is having less of a factor, and would be negative in any case under the current circumstances. Gains in base metals have been led by copper as the strikes in Chile look to have taken a turn for the worse, pushing prices further towards USD2.70 — trading session highs at present just shy of USD2.68. Oil prices have moved higher with WTI eyeing a move on USD50.00 again, with this week’s EIA drawdown adding to the near term positive backdrop perpetuated by last night’s USD weakness.

 

DB’s Jim Reid concludes the overnight event-heavy wrap

You might want to make sure you’ve got your morning coffee within reach as there is no shortage of things to get through in today’s EMR with a highlight reel that includes the Fed, BoJ, China and Dutch election and a final comment about how Governments are ever going to see balanced budgets again after the UK’s tax raising U-turn yesterday.

There is only one place to start though and that is with the Fed. As expected a 25bp hike was delivered on the back of a 9-1 majority vote with Minneapolis Fed President Neel Kashkari the lone dissenter in favour of keeping rates on hold.

There were much more interesting snippets to come out of the summary of economic projections, statement and Yellen’s press conference however. Starting with the dots, the median 2017 and 2018 dots were left unchanged at 1.375% and 2.125% respectively. The longer term dot was also left unchanged at 3% while the only shift was the small increase in the median 2019 dot to 3% from 2.875%. However it is worth highlighting some of the finer details of the moves in the dots. Four of the seven below-median dots for 2018 have now moved up to the median. For 2017, previously six members expected less than 3 hikes and now only three members expect such. Five members still expect more than 3 hikes which means that the number of members expecting 3 hikes has increased from six to nine. So this suggests a stronger consensus view this year.

Next up is the press statement and there were a few interesting subtle changes in wording. The biggest takeaway for us is the addition of “symmetric” in the passage concerning “the committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal”. That seemed to prompt plenty of debate and added some contention that the Fed is happy letting inflation run past its 2% target for a while or in other words letting the economy run a little hot. Another important addition was that of the “sustained” reference in the mention of the “the stance of monetary policy remains accommodative, thereby supporting some further strengthening in labour market conditions and a sustained return to 2% inflation”. This had previously been “a return to 2% inflation”. The other thing to highlight from the statement was the dropping of the reference to improvements in consumer and business sentiment.

With regards to Yellen’s press conference one of the first things the Fed Chair said was that by tightening this month, the move does not reflect a reassessment of the economic or policy outlook, while noting the minor changes in the economic projections. At the same time she also sought to highlight that the “simple message is the economy’s doing well” and that “we have confidence in the robustness of the economy and its resilience to shocks”. There was little new on the potential impact of fiscal policy with Yellen reiterating that there is still plenty of uncertainty and that no decisions can be based on that for now. The addition of the “symmetric” comment was also brought up in Q&A with Yellen acknowledging that inflation could shoot above 2% temporarily but that the Fed is not targeting such. Indeed she made mention to the fact that 2% is a target rather than a ceiling. Finally on the balance sheet there was little new, rather reiterating that it is an issue still under discussion.

Leading into the Fed, on balance it felt like expectations were tilted more for a more slightly hawkish hike than anything and instead we ultimately had Yellen reaffirm that there is no change in the Fed’s thinking of the economic or policy outlook. Indeed DB’s Peter Hooper made the point that it felt like the Fed was seemingly striving not to heighten market expectations of any additional rate hikes.

Over in markets the most eye catching moves post the Fed came in rates. 10y Treasury yields rallied 10.7bps to close at 2.494% and had their strongest day since June last year. 2y yields were also 7.7bps lower at 1.299% and back to the lowest level since March 1st. Given that the Fed acknowledged that they are happy letting the economy run hot and let inflation go above 2% for a while, the sharp re-pricing lower in rates suggests that there was a lot of emphasis on the fact that the dots didn’t move and expectations were clearly high. EM bond yields were also sharply lower with hard currency yields in Brazil, Argentina and Mexico between 15bps and 22bps lower. The Dollar index tumbled -0.94% and weakened by the most since January 5th. EM FX was the biggest beneficiary with currencies in the likes of South Africa (+2.89%), Mexico (+2.34%) and Brazil (+2.11%) leading the way. The Aussie (+1.99%) and Kiwi (+1.83%) Dollar led the way for the G10. US credit had a bumper session with CDX IG 4bps tighter while in equities the S&P 500 (+0.84%) had its third strongest session this year. Again EM was the big outperformer though with the likes of the Brazilian Bovespa up +2.37%. The biggest takeaway from the moves in commodities was Gold (+1.73%) which rallied by the most since the UK Brexit referendum.

So with the Fed out of the way the focus has temporarily deviated over to the BoJ where the latest monetary policy meeting outcome was out this morning. Like the Fed there was no surprise on the policy front with the BoJ keeping rates at current levels and maintaining the current pace of asset purchases. It also made no change to targeting the 10y JGB yield at around 0%. The Yen has barely blinked following the move and is hovering around 113.40 while 10y JGB yields are at 0.065% and about 1.5bps lower. The Nikkei is currently +0.15%.

That’s not all to report in Asia this morning however with the other significant news coming from the PBoC with the announcement that the Bank has increased borrowing costs on 7, 14 and 28 day reverse repo agreements by 10bps each. This follows a similar mini hike back in February. The PBoC were quick to mention that the mini hikes reflect market conditions rather than a change in policy. The Shanghai Comp (+0.66%), CSI 300 (+0.41%) and Hang Seng (+1.17%) were already higher prior to the news and have generally consolidated gains.

Finally, it’s taken us a while to get there but the current situation in the Dutch election is that, after 93% of votes counted, the Liberal Party is on track to take 33 seats in the 150-seat lower house. The Freedom Party is on track to take 20 seats with the Christian Democrats and D66 parties on 19 seats each. That outcome for Wilders’ Freedom Party is slightly worse than what opinion polls had suggested and it’s expected that the Liberals will start the process of putting together a coalition today. One would expect the European session to see some relief that populism doesn’t always out-perform and expectations of a Le Pen shock fade further for now.

Moving on. Yesterday was also a busy day for important US data releases. Indeed the most important of all was the February inflation data where we learned that headline CPI rose +0.1% mom and a little ahead of the 0.0% expected by the market. That puts the YoY rate at +2.7% now and up two-tenths from January. Meanwhile the core rose +0.2% mom, matching the consensus however due to base effects the annual rate slipped one-tenth to +2.2% yoy. Elsewhere, headline retail sales were reported as rising +0.1% mom in February and the core ex auto and gas print was reported as rising +0.2% mom. Both prints were in line with the market while we also got some upward revisions to the already strong January sales data. Away from that empire manufacturing printed at 16.4 for March which is a little ahead of expectations (15.0 expected) but down from 18.7 last month. Finally the NAHB housing market index jumped 6pts to 71 and the highest since June 2005. All told the Atlanta Fed is now forecasting GDP growth of 0.9% in Q1 which is down from the 1.2% estimate on Friday. That forecast continues to fly in the face of that from the NY Fed which as of Friday, was pegged at 3.2%. So a huge divergence still between the two GDP trackers.

Closer to home yesterday and ahead of the BoE meeting this afternoon, the UK’s latest employment indicators painted a slightly mixed picture. In the three months to January the ILO unemployment rate fell one-tenth to a new low of 4.7% while the claimant count also continued to fall in February. Wages growth was softer than expected however with average weekly earnings only climbing +2.2% yoy in January versus +2.6% in December. Expectations was for +2.4%. Meanwhile in France headline CPI in February was revised up one-tenth to +0.2% mom.

Staying with the UK, the Chancellor yesterday made a remarkable U-turn over a policy in last week’s budget to increase taxes on self-employed people. On a macro angle one wonders how on earth you’re ever going to balance the books when any tax rise is reversed a week later. As we said last week the UK still forecasts an annual budget deficit out to 2021 (at least) which will make it 20 in a row. The graph from last Thursday’s EMR showed that the UK is by no means alone on this. Government deficits are now so ingrained in our way of life it’s hard to remember that through most of peace time history before the last 40 years budgets were pretty much always balanced.

Looking at the day ahead, there’s another reasonably full diary ahead of us. In Europe this morning the early data will be the final February CPI revisions for the Euro area. After that all eyes turn to the BoE meeting around midday. As a short preview, DB’s Mark Wall is expecting the BoE to maintain its neutral bias. At the margin, global growth and fiscal policy may be more supportive of the UK economic recovery than expected in February. However, evidence of the real income shock on household consumption is beginning to appear and there is no need for the BoE to front run the triggering of Article 50. As such the MPC can afford to leave the monetary policy stance unchanged until it updates forecasts again in the May inflation report.

Over in the US this afternoon data due out includes February housing starts and building permits, the latest weekly initial jobless claims print, the Philadelphia Fed manufacturing survey for March and the BLS JOLTS report for February. Away from the data the ECB’s Praet is due to speak again, the SNB are due to also make their latest policy decision and finally President Trump is scheduled to outline his  (skinny?) fiscal 2018 budget.

END

3. ASIAN AFFAIRS

i)Late  WEDNESDAY night/THURSDAY morning: Shanghai closed UP 22.17 POINTS OR .84%/ /Hang Sang CLOSED UP 495.43 POINTS OR 2.08% . The Nikkei closed UP 12.76 POINTS OR 0.07% /Australia’s all ordinaires  CLOSED UP 0.24%/Chinese yuan (ONSHORE) closed UP at 6.9019/Oil ROSE to 49.25 dollars per barrel for WTI and 52.22 for Brent. Stocks in Europe ALL IN THE GREEN  GERMAN   ..Offshore yuan trades  6.8715 yuan to the dollar vs 6.9019  for onshore yuan.THE SPREAD BETWEEN ONSHORE AND OFFSHORE  NARROWS CONSIDERABLY AGAIN/ ONSHORE YUAN STRONGER AS IS  THE OFFSHORE YUAN AND THIS IS  COUPLED WITH THE SLIGHTLY STRONGER DOLLAR. CHINA TIGHTENS (SEE BELOW)

3a)THAILAND/SOUTH KOREA/NORTH KOREA

b) REPORT ON JAPAN

The Bank of Japan leaves policy and economic outlook unchanged: the yen weakens slightly and the 10 yr Japanese bond yield falls a bit

(courtesy zerohedge)

Bank Of Japan Leaves Policy, Economic Outlook Unchanged

Confirming the expectations of all 41 economists, The Bank of Japan changed absolutely nothing about its monetary policy tonight following The Fed’s 3rd rate hike in 11 years. The BOJ said in a statement that it would keep the two key rates at current levels, maintain the pace of its asset purchases, and did not change its economic outlook.

  • The BOJ maintained its short-term policy rate on some bank reserves at -0.1 percent and…
  • left its target for 10-year government bond yields at around 0 percent.
  • It kept the pace of its asset purchases unchanged at about 80 trillion yen ($700 billion) annually.

As Bloomberg reports, with the economy slowly improving and bond yields under control, the BOJ is in position to hold steady for now. But with the Fed rate hike putting upward pressure on yields globally, some economists are looking for signs the BOJ may have to raise its rate targets, particularly if inflation begins to take hold in Japan. “There’s no reason for the BOJ to act now,” Hiroshi Ugai, a former BOJ official and chief Japan economist at JPMorgan Chase & Co., said before Thursday’s decision. “The bank will take the U.S. rate hike as good news. What I’m looking for now is any hint of its willingness to raise rates in the future.”

For now the reaction is muted and confused (with USDJPY rising – weaker Yen – and stocks up marginally)…

“The BOJ can enjoy smooth sailing for now,” said Mari Iwashita, chief market economist at SMBC Friend Securities.

But the policy divergence will make it more challenging for the BOJ to maintain its target for 10-year government bond yields, and some investors are already speculating that it will have little choice but to raise that target as global yields rise and inflation inches up at home. Kuroda’s comments on this and possible tapering of asset purchases will be scrutinized.

Eleven of 41 economists surveyed by Bloomberg said they expected the BOJ to raise its target rate this year, while 25 predicted the BOJ would cut the pace of its debt buying or stop stating its target for annual purchases.

Kuroda and Deputy Governor Hiroshi Nakaso said last month that it is too early to consider raising rates because inflation remains far from the BOJ’s 2 percent target, underscoring a determination not to repeat the mistake of prematurely tightening seen in 2000 and 2006.

Some BOJ officials are considering whether to give the market further guidance on interest rates once inflation begins picking up, according to people familiar with matter.

“It’s way too early for the BOJ to consider any move,” said Daisuke Karakama, chief market economist at Mizuho Bank Ltd. “They must be hoping this favorable conditions to continue but I don’t think the road to the price target will be all that smooth.”

However, it is notable that there are some risks that The BoJ point out that The Fed seems happy to ignore (as Bloomberg’s Colin Simpson notes):

The BOJ doesn’t seem to be buying the global reflation story. Perhaps they can see a scenario where the base effect of higher oil prices washes through and the yen starts to creep higher again. Either way, they seem subdued.

 

Timely warning from the BOJ statement following the Fed’s rate hike: “Risks to the outlook include the following: developments in the U.S. economy and the impact of its monetary policy on global markets.”

end

c) REPORT ON CHINA

China resumes selling uSA treasuries.  Foreign central banks continue to also liquidate treasuries to the tune of 45 billion dollars worth of bonds

(courtesy zero hedge)

China Is Again Selling US Treasuries As Foreign Central Banks Liquidate $45BN

After December’s brief dead cat bounce, in which foreign central banks bought $18.6 billion in US Treasuries, breaking a streak of 12 consecutive months of selling, in January they resumed their liquidation. According to the just released TIC data, foreign official institutions, which includes mostly central banks, but also sovereign wealth funds and various other official entities, sold another $44.9 billion in Treasuries, in line with the aggressive selling seen for most of 2016.

Curiously, the sales by foreign central banks were largely offset by purchases by private holders, mostly corporate institutions and foreign retail investors, who bought $37.9 billion in the month, the most since last March when they acquired $41 billion. Combining the two, foreigners sold a total of $7 billion in TSYs in January.

Additionally, on an LTM basis, due to greater sales last January when they sold $57.2 billion or $12.3 billion than in the most recent period, the 12 month total rose from $338 billion in liquidations to $325.7 billion, the highest since last May.

Across all US securities, foreigners ended up purchasing a total of $15.1 billion in US assets, consisting of equity and agency purchases of $15.1 billion and $12.5 billion, offset by sales of TSYs and Corporate bonds of $7 billion and $5.9 billion respectively.

Next, looking at two distinct holders of US paper, in January the Chinese selling resumed, and after Beijing bought $9 billion in US paper in December, in January it proceeded to sell most of that total, reducing its holdings of Treasurys from $1.058 trillion to $1.051 trillion, which brought it to $51 billion below the largest US foreign creditor Japan, who in January held $1.103 trillion.

Finally, in a surprising twist, while Saudi Arabia one year ago threatened to liquidate its US Treasury holdings, it has been doing just the opposite, and as shown in the chart below, in January it bought another $10 billion, taking its total to $112.3 billion, the highest total since April 2016. It appears that, if only for the time being, Petrodollar recycling is back on line.

END

China unexpectedly raises its interest rates with its open market operations.  Both on shore and off shore yuan rise but the 10 yr bond prices fall (yields rise)

(courtesy zero hedge)

China Unexpectedly Tightens Monetary Policy

Following The Fed’s 3rd rate hike in 11 years, the PBOC decided, unexpectedly, to follow in the Fed’s footsteps, and tighten conditions by raising the interest rates on its open-market operations, the 7-, 14-, and 28-day reverse-repos, by 10bps each, to 2.45%, 2.6% and 2.75% respectively.

That followed an increase of 10 basis points at the beginning of February, which in turn was the first increase in the 28-day contracts since 2015 and since 2013 for the other two tenors.

One month ago, the PBOC also – for the first time ever – increased the rate on the PBOC’s Medium-Term Lending Facility, or MLF. It did it again on Thursday, when the PBOC conducted CNY303 billion in 6-month and 1-year MLF, where the interest rose by 10bps, from 2.95% to 3.05%, and from 3.1% to 3.2%, respectively.

What to make of this tightening? According to the PBOC nothing: the Central bank said there was “no need to over-interpret monetary tools action” and added that higher open market operation interest rates don’t mean benchmark interest rates are increasing.

Except they are, of course, especially since like in western nations, increasingly it is narrowly confined liquidity conduits that matter instead of broad, shotgun market rates.

Naturally, this was not exactly great news for those hoping for a renewed credit impulse to lift the tumbling GDP expectations of the world in Q2. For now the reaction is minimal with Yuan leaking lower, erasing the gains against a weaker post-Fed dollar.

China bond futures took a hit.

As Bloomberg’s Kyoungwha Kim reports, the PBOC is swift enough to raise the repo rates but will stop short of raising the key interest rate, following the Fed. The huge wall of debt set to mature over the next two years will likely keep the PBOC from raising the key rate even as the Fed hikes away. It will probably continue to use higher money-market rates to discourage leverage. While Chinese money market rates and sovereign yields are still showing declines due to delayed prices, traders say they are seeing reaction in the interbank market already.

4. EUROPEAN AFFAIRS

Victory of the ruling Mark Rutte and a disappointing showing for the Euroskeptic Gerrt Wilders: Wilders wins 20 seats and Rutte 33. A coalition government now needs to be formed:

(courtesy zerohedge)

“Relief For Europe”: Wall Street Analysts React To The Dutch Election

While some were worried about an “unexpected outcome” from yesterday’s Dutch general election, in the end the country’s center-right Prime Minister Mark Rutte managed to fight off the challenge of anti-Islam, anti-EU rival Geert Wilders to score an election victory that was hailed across Europe on Thursday by governments facing a rising wave of nationalism.

Rutte received congratulations from European leaders including German Chancellor Angela Merkel, who faces a strong Social Democrat challenge in a September election and has shed some support to an anti-immigration party, Alternative for Germany, which is set to enter the federal parliament for the first time. Merkel told Rutte: “I look forward to continuing our good cooperation as friends, neighbors, Europeans,” her spokesman said. While Rutte won fewer seats than in the last parliament, he still declared it an “evening in which the Netherlands, after Brexit, after the American elections, said ‘stop’ to the wrong kind of populism.”

The vote result was a disappointment for Wilders, who had led in opinion polls until late in the campaign and had hoped to pull off an anti-establishment triumph in the first of three key elections in the European Union this year.

The market reaction reflected that accordingly, with the euro climbing to highest in more than a month, the Euro Stoxx 600 index up 0.7% at 377.6, DAX just shy of all time highs, and the France-Germany 10-year bond yield spread sliding as low as 59 bps.  Furthermore, as noted earlier, the Le Pen win probability implied from betting odds fell to 29% following the election outcome:

 

The result was also a major relief to Wall Street analyst, as demonstrated by the following excerpts

Olaf Van Den Heuvel, chief investment strategist at Aegon Asset Management, in an interview on Bloomberg TV

  • “It’s a good outcome for the Netherlands, it’s a good outcome for Europe. It’s a victory for the economy. I think in the end that shifted the election result.”
  • Says French elections “may still haunt” due to higher unemployment, weaker economy; Aegon likely to remain “relatively cautious” in positioning across Europe

Bruno Colmant, head of macro research at Degroof Petercam, by phone

  • “This is very good news for the euro zone. The level of market stress just dropped, and it sends a pretty strong message to foreign investors: you can now focus on the macro-economic indicators.”
  • Says should pave the way for the ECB to slowly start to unwind quantitative easing and normalize policy, without having to cope with disruptive political events

Stephane Barbier de la Serre, strategist at Makor Capital Markets in Geneva, by phone

  • Election results are supportive for European assets
  • Shows that crucially, there is just no way Geert Wilder’s Freedom Party could enter some kind of coalition; however, Dutch political landscape more fragmented, possibly more than ever in its history which may complicate formation of a new coalition
  • In terms of impact on French election: we could say results may sap Le Pen’s ambitions, but difficult to extrapolate trends between two very different countries: French GDP growth is currently more or less half the Dutch one while unemployment is twice as high
  • Maintains conviction that Le Pen currently has no chance whatsoever to become the next French president

Stephane Ekolo, chief European strategist at Market Securities, by phone

  • “It’s a big relief for markets, and this will prompt U.S. and U.K. investors to review their forecasts about the French presidential election. It’s positive for European assets, but without euphoria. It’s ‘back to business’ and we can focus on fundamentals and central banks again.”

Simon Wells, chief European economist, at HSBC, in note

  • “We always viewed the Dutch election as sending a signal about a bigger European political event –- the French presidential election”
  • Markets may interpret the Dutch result as an indication that the wave of populism sweeping across Europe is no longer rising
  • “In this case, we also think it would restore some faith in political punditry and polling, since there would have been no big upset relative to the latest opinion polls”

Source: Bloomberg

end

Bill Blain explains the Dutch election:

(courtesy Bill Blain/MintPartners)

Bill Blain On This Morning’s European Euphoria

From today’s “Morning Porridge” by Bill Blain of Mint Partners

Mint – Blain’s Morning Porridge – March 16th 2017

What a fascinating world of possibilities opened up y’day, but let’s start with a simple game. Without thinking about it too much; name 5 famous European politicians of the last 30 years.

I bet none of them were Dutch.

Why? It’s a great country with a functional consensual political system biased towards compromise and coalition. Generally it works. The country works.

Yet this morning the European markets are Risk-ON in frothy celebration because Right-Wing demagogue Gert Wilders “apparently” lost the election and won’t dominate the coalition process. All the anti-pollsters who predicted a higher Wilders vote due to polling bias were proved wrong. The Populist bogeyman was overcome by Dutch common-sense. We can relax as the same-old, same-old Dutch right-of-centre social democracy sits in the comfy chair.

Nothing for Europe to worry about….

Except for the fact that Holland – one of the most successful Euro member economies with a growth rate faster than Germany and less than 7% unemployement – still gave the Extreme populist Right Wing 25% more seats while the ruling VVD (a most unpleasant sounding name for a party) lost about the same amount!

Mark Rutte, (the Dutch Premier – you were probably wondering), says the Dutch said “No to wrong sort of populism”. Yet, Wilders extreme Islamophobia still got him a massively increased share of seats.

Let’s extend that thinking to the looming French, Italian and German votes: France not only suffers from a version of anti-immigrant racism populism, but has a large minority blaming Europe and the Euro for its economic woes. Holland: single Immigration Whammy. France: Double Whammy. Italy: Triple Whammy.

I don’t for one moment expect Le Pen to win the Presidency, and the likelihood is we get the least worst alternative. It will be a Le Pan vs Macron’s En Marche! In the second round Macron will win, and whatever anyone says about French recovery… it will be same as, same as..

All of which probably means the Winter of Europe’s Political Discontent is only just beginning… One vote in a backwater like Holland doesn’t mean populism is buried. Don’t be fooled by better market sentiment.

* * *
To lighten the mood, let’s head across Le Manche to Westminster – where the declining quality of UK parliamentary democracy becomes more acute by the day.

Phil the Spreadsheet Hammond was pimp-slapped and left flollopping like a naughty schoolboy caught doing something unspeakable behind the bike sheds. Hi enforced smile was cringeworthy. He was forced to U-Turn on his plans to hike taxes (NI) on the Self-Employed, his political career is, apparently, in the balance. Therese May might be for turning, but she didn’t spare him a thought as she sacrificed him. Was that courageous or pragmatic?

The only thing saving him is the lack of any alternative. Jeremy Corbyn missed the chance to deliver a killer blow and fluffed his lines.

The only winners were the women. The BBC’s Laura Kuenssberg gets my vote for spotting the gap between manifesto pledges and Hammond’s budget speech.

The other is Yvette Cooper: Labour’s most effective parliamentarian, and wife of Twinkletoes Ed Balls. Cooper’s brilliant put down of May for her £4bln U-turn hints the Labour party might be seeing the long awaited emergence of a potential leader – except for the fact the Labour party structures outlaw common sense and ever winning another election….

* * *

And, back to the real world..

The Fed’s expected quarter point rise in US rates caught no one by surprise. Fed hikes and the stock market rallies…. Er? Really.. Yes.. because it was so well headlined.. Yellen says she will remain accommodative and inflation can “temporarily overshoot”. Nothing to worry bout then..?

But, folk are always looking for negativity, and must have been reading my comments about the return of cyclicality earlier this week based on the number of notes worrying about the consequences of the hike.

There are notes worrying about the Fed having to play catch up by hiking more aggressively later this year. I read on one blog that Morgan Stanley is calling for 6 hikes this year! Yet, there are others wondering if global stock markets look overvalued and a due an October Reset – triggering an early end to the upside.

I love Bill Gross’s thoughts (quoted widely this morning): “Our Highly Leveraged financial system is like a truckload of nitroglycerin on a bumpy road. Don’t be allured by the Trump mirage of 3-4% growth and the magical benefits of tax cuts and deregulation…. This is a year to hold onto your money, not to seek returns..”

On that happy note, out of time.

end

Late in the uSA session the Euro/USA jumps on two factors:

  1. the ECB hints of a rate hike
  2. Weidmann may replace Draghi

if Weidmann replaces Draghi, you will see an attempt at bringing sound money to the EU

(courtesy zerohedge)

5. RUSSIAN AND MIDDLE EASTERN AFFAIRS

6.GLOBAL ISSUES

Why austerity fails!!  An excellent commentary from Meijer as he states why Greece cannot never get out of its depression as long as the EU overlords continue to demand austerity and rob Greece of its prized assets

(courtesy Raul Meijer/Automatic Earth Blog))

 

Austerity Kills… And Then Some

Authored by Raul Ilargi Meijer via The Automatic Earth blog,

Yes, austerity really kills real people, and it kills the societies they live in. Let’s try and explain this in simple terms. It’s a simple topic after all. Austerity is a mere left-over from faith-based policies derived from shoddy economics, and economics is a shoddy field to begin with. The austerity imposed on and in several countries and their economies after 2008, and the consequences it has had in these economies, cannot fail to make you wonder what level of intelligence the politicians have who did the imposing, as well as the economists who advised them in the process.

We should certainly not forget that the people who make these decisions are never the ones affected by them. Austerity hurts the poor. For those who are living comfortably -which includes politicians and economists that “matter”-, austerity at worst means eating and living somewhat less luxuriously. For the poor, taken far enough, it will mean not eating at all, not being able to afford clothing, medical care, even housing. Doing without 10% of very little hits much harder than missing out on 10% of an abundance.

And even then there are differences, for instance between countries. The damage done to British housing, education and health care by successive headless chicken governments is very real, and it will require a huge effort to restore these systems, if that is possible at all. Still, if the British have any complaints about the austerity unleashed upon them, they should really take a look at Greece. As this graph of households having a hard time making ends meet makes painfully clear:

 

Britain ‘only’ suffers from economically illiterate politicians and economists. Greece, on top of that, has to cope with a currency it has no control over, and with the foreign -dare we say ‘occupying’?- powers that do. A currency that is geared exclusively to the benefit of the richer Eurozone nations. The biggest mistake in building the EU, and the Eurozone in particular, is that the possibility has been left open for the larger and richer nations to reign over the smaller and poorer almost limitlessly. These things only become clear when things get worse, but then they really do.

This ‘biggest mistake’ predicted the end of the ‘union’ from the very moment it was established; all it will take is time, and comprehension. Eurozone rules say a country’s public debt cannot exceed 60% and its deficit must remain less than 3%. Rules that have been broken left right and center, including by the rich, Germany, France, who were never punished for doing so. The poor are.

These limits are completely arbitrary. They come from the text books of the same clueless cabal of economists that the entire Euro façade is based on. The same cabal also who now demand a 3.5% Greek budget surplus into infinity, the worst thing that can happen to an already impoverished economy, because it means even more money must flow out of an entity that already has none.

But let’s narrow our focus to austerity itself, and what makes it such a disaster. And then after that, we’ll take it a step further. We can blame economists for this mess, and hapless politicians, but that’s not the whole story; in the end they’re just messenger boys and girls. First though, here’s what austerity does. Let’s start with Ed Harrison talking about some revealing data that Matt Klein posted on FT Alphaville about comparing post-2008 Greece to emerging economies:

Europe’s Delusional Economic Policies

Here’s how Matt put it: “Greece had a very different post-crisis experience: it never recovered. By contrast, all the other countries were well past their pre-crisis peak after this much time had elapsed. On average, Argentina, Brazil, Indonesia, Thailand, and Turkey have outperformed Greece by more than 40 percentage points after nine years.”

 

.. unlike those countries, Greece lacked the ability to use the exchange rate as a shock absorber. So while Brazil and Greece faced the same type of downturn in dollar terms – about 45% in GDP per person – Brazilian living standards only deteriorated about 2%, compared to 26% in Greece. The net effect is that Greece had a relatively typical crisis in dollars but an unprecedently painful one in the terms that matter most”.

 

[..] Greece doesn’t have its own currency so the currency can’t depreciate. Greece must use the internal devaluation route, which makes its labor, goods and services cheaper through a deflationary path – and that is very destructive to demand, to growth, and to credit.

 

[..] it’s not about reforms, people. It’s about growth. And the euro – and the policies tied to membership – is anti-growth, particularly for a country like Greece that is forced to hit an unrealistic 3.5% primary surplus indefinitely.

 

Another good report came from the WaPo at about the same time Ed wrote his piece, some 4 weeks ago. After Matt Klein showing how hard austerity hit Greece compared to emerging economies, Matt O’Brien shows us how austerity hit multiple Eurozone countries, compared to what would have happened if they had not cut spending (or introduced the euro). It is damning.

Austerity Was A Bigger Disaster Than We Thought

Cutting spending, you see, shouldn’t be a problem as long as you can cut interest rates too. That’s because lower borrowing costs can stimulate the economy just as much as lower government spending slows it down. What happens, though, if interest rates are already zero, or, even worse, you’re part of a currency union that means you can’t devalue your way out of trouble? Well, nothing good.

 

House, Tesar and Proebsting calculated how much each European economy grew — or, more to the point, shrank — between the time they started cutting their budgets in 2010 and the end of 2014, and then compared it with what actually realistic models say would have happened if they hadn’t done austerity or adopted the euro.

 

According to this, the hardest-hit countries of Greece, Ireland, Italy, Portugal and Spain would have contracted by only 1% instead of the 18% they did if they hadn’t slashed spending; by only 7% if they’d kept their drachmas, pounds, liras, escudos, pesetas and the ability to devalue that went along with them if they hadn’t become a part of the common currency and outsourced those decisions to Frankfurt; and only would have seen their debt-to-GDP ratios rise by eight percentage points instead of the 16 they did if they hadn’t tried to get their budgets closer to being balanced.

 

In short, austerity hurt what it was supposed to help, and helped hurt the economy even more than a once-in-three-generations crisis already had.

 

[..] the euro really has been a doomsday device for turning recessions into depressions. It’s not just that it caused the crisis by keeping money too loose for Greece and the rest of them during the boom and too tight for them during the bust. It’s also that it forced a lot of this austerity on them. Think about it like this. Countries that can print their own money never have to default on their debts – they can always inflate them away instead – but ones that can’t, because, say, they share a common currency, might have to.

 

Just the possibility of that, though, can be enough to make it a reality. If markets are worried that you might not be able to pay back your debts, they’ll make you pay a higher interest rate on them – which might make it so that you really can’t.

 

In other words, the euro can cause a self-fulfilling prophecy where countries can’t afford to spend any more even though spending any less will only make everything worse.

 

That’s actually a pretty good description of what happened until the ECB belatedly announced that it would do “whatever it takes” to put an end to this in 2012. Which was enough to get investors to stop pushing austerity, but, alas, not politicians. It’s a good reminder that you should never doubt that a small group of committed ideologues can destroy the economy.

 

Indeed, it’s the only thing that ever has.

 

 

So those are the outcomes, But what’s the theory, where does the “small group of committed ideologues” go so wrong? Let’s go really basic and simple. Last week, Britsh economist Ann Pettifor, promoting her new book “The Production of Money: How to Break the Power of Bankers”, said this to Vogue:

Politicians who advocate for austerity measures—cutting spending—like to say that the government ought to run its budget the way women manage our households, but unlike us, the government issues currency and sets interest rates and so on, and the government collects taxes. And if the government is managing the economy well, it ought to be expanding the numbers of people who are employed and therefore paying income tax and tax on purchases—purchases that turn a profit for businesses which then hire more employees, and on and on it goes. That’s called the multiplier effect, and for 100 years or so, it’s been well understood. And it’s why governments should invest not in tax breaks for wealthy people, but in initiatives like building infrastructure.

Around the same time, Ann wrote in the Guardian:

[..] the public are told that cuts in spending and in some benefits, combined with rises in income from taxes will – just as with a household – balance the budget. Even though a single household’s budget is a) minuscule compared to that of a government; b) does not, like the government’s, impact on the wider economy; c) does not benefit from tax revenues (now, or in the foreseeable future); and d) is not backed by a powerful central bank. Despite all these obvious differences, government budgets are deemed analogous (by economists and politicians) to a household budget.

 

[..] If the economy slumps (as in 2008-9) and the private sector weakens, then like a see-saw the public sector deficit, and then the debt, rises. When private economic activity revives (thanks to increased investment, employment, sales etc) tax revenues rise, unemployment benefits fall, and the government deficit and debt follow the same downward trajectory. So, to balance the government’s budget, efforts must be made to revive Britain’s economy, including the indebted private sector.

In other words, when faced with economic hard times, a government should not cut spending, it should increase it -and it can-. Because cutting spending is sure to make things worse. At the same time of course, this is not an option available to Greece, because it has ceded control of its currency, and therefore its economy, to a largely unaccountable and faceless cabal that couldn’t care less what happens in the country.

All they care about is that the debts the banks in the rich part of the eurozone incurred can be moved onto someone else’s shoulders. Which is where -most of- Greece’s crisis came from to begin with. And so, yes, Germany and Holland and France are sitting sort of pretty, because they prevented a banking crisis from happening at home; they transferred it to Greece’s pensioners and unemployed youth. The ‘model’ of the Eurozone allows them to do this. Coincidence? Bug or feature?

 

Oh, and it’s not only Greece, though it’s by far the hardest hit. Read Roberto Centeno in the Express below. Reminds me of Greeks friends saying: “In 2010, we were told we had €160 billion or so in debt, and we needed a bailout. Now we have over €600 billion in debt, they say. How is that possible? What happened? What was that bailout for?”

‘Spain Is Ruined For 50 Years’

A leading Spanish economist has hit out at the ECB saying “crazy” loans will ruin the lives of the population for the next 50 years. And it is only a matter of time before the Government is forced to default as a debt bubble and low wages effectively forge the worst declines in “living memory”. Leading economist Roberto Centeno, who was an advisor to US president Donald Trump’s election team on hispanic issues, says the country has borrowed €603 billion that it cannot conceivably pay back. And he says Spanish politicians including Minister of Economy Luis de Guindos are “insulting their intelligence” after doing back door deals with the ECB. In a blog post Mr Centeno says there needs to be audits so the country can understand the magnitude of its debt mountain.

 

He said Spain was “moving steadily towards the suspension of payments which is the result of out of control public waste, financed with the largest debt bubble in our history, supported by the ECB with its crazy policy of zero interest rate expansion and without any supervision.” The expert added the doomed situation will “lead to the ruin of several generations of Spaniards over the next 50 years”. [..] He said the country is currently suffering from a “third world production model”. He added: “We have a third world production model of speculators and waiters, with a labour market where the majority of jobs created are temporary and with remunerations of €600, the largest wage decline in living memory. “And all this was completed with a broken pension system and an insolvent financial system.”

 

Forecasting an unprecedented shock to the European financial model, Mr Centento is calling for an immediate audit despite a recent revelation that the ECB is failing in its supervisory role over Europe’s banks. He also claimed the Spanish government and European Union leaders have been manipulating figures since 2008. Mr Centento said: “We will require the European Commission and Eurostat to audit and audit the Spanish accounting system for serious accounting discrepancies that may jeopardise stability. “The gigantic debt bubble accumulated by irresponsible governments, and that never ceases to grow, will be the ruin of several generations of Spaniards. “The Bank of Spain’s debt to the Eurosystem is the largest in Europe. “The day that the ECB minimally closes the tap of this type of financing or markets increase their risk aversion, the situation will be unsustainable.”

 

 

But then it’s time to move on, courtesy of Michael Hudson, prominent economist, who should be a guest of honor, at the very least, at every Eurogroup meeting. You know, to give Dijsselbloem and Schäuble a reality check. Michael shines a whole different additional light on European austerity policies. This is from an interview with Sharmini Peries:

Finance as Warfare: IMF Lent to Greece Knowing It Could Never Pay Back Debt

MICHAEL HUDSON: You said the lenders expect Greece to grow. That is not so. There is no way in which the lenders expected Greece to grow. In fact, the IMF was the main lender. It said that Greece cannot grow, under the circumstances that it has now. What do you do in a case where you make a loan to a country, and the entire staff says that there is no way this country can repay the loan? That is what the IMF staff said in 2015.

 

It made the loan anyway – not to Greece, but to pay French banks, German banks and a few other bondholders – not a penny actually went to Greece. The junk economics they used claimed to have a program to make sure the IMF would help manage the Greek economy to enable it to repay. Unfortunately, their secret ingredient was austerity.

 

[..] for the last 50 years, every austerity program that the IMF has made has shrunk the victim economy. No austerity program has ever helped an economy grow. No budget surplus has ever helped an economy grow, because a budget surplus sucks money out of the economy.

 

As for the conditionalities, the so-called reforms, they are an Orwellian term for anti-reform, for cutting back pensions and rolling back the progress that the labor movement has made in the last half century. So, the lenders knew very well that Greece would not grow, and that it would shrink.

 

So, the question is, why does this junk economics continue, decade after decade? The reason is that the loans are made to Greece precisely because Greece couldn’t pay. When a country can’t pay, the rules at the IMF and EU and the German bankers behind it say, don’t worry, we will simply insist that you sell off your public domain. Sell off your land, your transportation, your ports, your electric utilities.

 

[..] If Greece continues to repay the loan, if it does not withdraw from the euro, then it is going to be in a permanent depression, as far as the eye can see. Greece is suffering the result of these bad loans. It is already in a longer depression today, a deeper depression, than it was in the 1930s.

 

[..] when Greece fails, that’s a success for the foreign investors that want to buy the Greek railroads. They want to take over the ports. They want to take over the land. They want the tourist sites. But most of all, they want to set an example of Greece, to show that France, the Netherlands or other countries that may think of withdrawing from the euro – withdraw and decide they would rather grow than be impoverished – that the IMF and EU will do to them just what they’re doing to Greece.

 

So they’re making an example of Greece. They’re going to show that finance rules, and in fact that is why both Trump and Ted Malloch have come up in support of the separatist movement in France. They’re supporting Marine Le Pen, just as Putin is supporting Marine Le Pen. There’s a perception throughout the world that finance really is a mode of warfare.

Sharmini Peries: Greece has now said, no more austerity measures. We’re not going to agree to them. So, this is going to amount to an impasse that is not going to be resolvable. Should Greece exit the euro?

MICHAEL HUDSON: Yes, it should, but the question is how should it do it, and on what terms? The problem is not only leaving the euro. The problem really is the foreign debt that was bad debt that it was loaded onto by the Eurozone. If you leave the euro and still pay the foreign debt, then you’re still in a permanent depression from which you can never exit. There’s a broad moral principle here: If you lend money to a country that your statistics show cannot pay the debt, is there really a moral obligation to pay the debt? Greece did have a commission two years ago saying that this debt is odious. But it’s not enough just to say there’s an odious debt. You have to have something more positive.

 

[..] what is needed is a Declaration of Rights. Just as the Westphalia rules in 1648, a Universal Declaration that countries should not be attacked in war, that countries should not be overthrown by other countries. I think, the Declaration of International Law has to realize that no country should be obliged to impose poverty on its population, and sell off the public domain in order to pay its foreign creditors.

 

[..] the looming problem is that you have to pay debts that are so far beyond your ability to pay that you’ll end up like Haiti did after it rebelled after the French Revolution.

 

[..] A few years after that, in 1824, Greece had a revolution and found the same problem. It borrowed from the Ricardo brothers, the brothers of David Ricardo, the economist and lobbyist for the bankers in London. Just like the IMF, he said that any country can afford to repay its debts, because of automatic stabilization. Ricardo came out with a junk economics theory that is still held by the IMF and the European Union today, saying that indebted countries can automatically pay.

 

Well, Greece ended up taking on an enormous debt, paying interest but still defaulting again and again. Each time it had to give up more sovereignty. The result was basically a constant depression. Slow growth is what retarded Greece and much of the rest of southern Europe. So unless they tackle the debt problem, membership in the Eurozone or the European Union is really secondary.

There is no such question as “why did austerity fail ‘in a particular case’”?. Austerity always fails. You could perhaps come up with a theoretical example in which a society greatly overspends and toning down spending might balance some things, but other than that, and nothing in what we see today resembles such an example, austerity can only work out badly. And that’s before, as Michael Hudson suggests, austerity is used as a means to conquer people and countries in a financial warfare setting.

This is because our economies (as measured in GDP) are 60-70% dependent on consumer spending. Ergo, when you force consumer spending down through austerity measures, GDP must and will of necessity come down with it. And if you cut spending, stores will close, and then their suppliers will, and they will fire their workers, which will further cut consumer spending etc. It doesn’t get simpler than that.

There is a lot of talk about boosting exports etc., but exports make up only a relatively small part of most economies, even in the US, compared to domestic consumption. As still is the case in virtually every economy, more exports will never make up for what you lose by severely cutting wages and pensions while at the same time raising taxes across the board (Greek reality). The only possible result from this is misery and lower government revenues, in a vicious circle, dragging an economy ever further down.

Since this is so obvious a 5-year old can figure it out in 5 minutes, the reason for imposing the kind of austerity measures that the Eurogroup has unleashed upon Greece must inevitably be questioned in the way professor Hudson does. If someone owes you a substantial amount of money, the last thing you want to do is make sure they cannot pay it back. You want such a person to have a -good- job, a source of income, that pays enough so that they can pay you back. Unless you have your eyes on their home, their car, their daughters, their assets.

What the EU and IMF do with Greece is the exact opposite of that. They’re making sure that Greece gets poorer every day, and the Greeks get poorer, ensuring that the debt, whether it’s odious or not -and that is a very valid question-, will never be paid back. And then they can move in and snap up all of the country’s -rich- resources on the cheap. But in the process, they create a very unstable country, something that may seem to be to their benefit but will blow up in their faces.

It’s not the first time that I say the EU and the US would be well advised to ensure Greece is a stable society, but they all continue to forcibly lead the cradle of democracy in the exact opposite direction.

The best metaphor I can think of is: Austerity is like bloodletting in the Middle Ages, only with a lower success rate.

end

7. OIL ISSUES

The shale boys can still be profitable at 40 dollars.  OPEC again has completely underestimated them

(courtesy Paraskova/OilPrice.com)

Has OPEC Underestimated US Shale Once Again?

Authored by Tsvetana Paraskova via OilPrice.com,

The U.S. shale cowboys are back on their horses and leading a strong recovery in the oil patch that is not expected to falter even as WTI prices dropped last week below $50 per barrel for the first time in more than two months.

With lessons learned from the oil price crash and budgets streamlined and focused on the most prolific shale plays, U.S. drillers are giving OPEC a hard time by raising output and hedging future production. Meanwhile, the cartel members are trying to cut supply and fix the price of oil at such a range that would allow them to reap higher oil revenues, but not allow the shale patch to recover too much too fast.

Two and a half months into the supply-cut deal, it looks like OPEC is losing the campaign to prop up oil prices. The drop in prices that began last week saw them retreating to almost exactly the same level as on November 30 – just below $52/barrel for Brent – when the OPEC deal was announced, the International Energy Agency said in its monthly report on Wednesday.

At the same time, reduced breakeven prices in many shale plays and forward locking-in of production is allowing the companies currently drilling in the U.S. to turn in profits even at a price of oil at $40 a barrel.

The U.S. shale patch has not only emerged leaner and more resilient from the downturn, it has also hedged future production with contracts guaranteeing the price of the crude they will be pumping a year or two from now, Bloomberg reports, citing industry executives and analysts.

According to Katherine Richard, chief executive at Warwick Energy Investment Group that holds stakes in more than 5,000 oil and gas wells, many of the U.S. drillers would not see their profits reduced unless the price of oil drops to the $30s or lower.

So the drillers that have locked in their future production—and those include Parsley Energy, RSP Permian, Diamondback Energy, and Harold Hamm’s Continental Resources—probably didn’t worry much when the price of WTI dropped below $50 last week.

This is a sign that OPEC may have underestimated—yet again—the resilience of the U.S. shale patch when the cartel decided to collectively curtail oil supply.

Last week Saudi officials told American oil producers that there would be “no free rides” and that they should not expect OPEC to extend or deepen the output cuts to make up for the jump in shale production in the U.S.

And U.S. shale output has been steadily growing in the past few months, thanks to, and quite ironically so, OPEC’s cuts that have been supporting WTI prices at above $50 (or at least above $48 this past week). The U.S. shale patch is expected to lift its April oil output by 109,000 bpd, the EIA said earlier this week.

According to Michael Webber, deputy director of the University of Texas’ Energy Institute in Austin, who spoke to Bloomberg:

“The cowboy spirit is back. Hedging is playing a big role.”

The drilling spirit is indeed back, and the break even prices in the best shale areas are now below $40. According to Bloomberg Intelligence analyst William Foiles, in the Eagle Ford, for example, drillers in LaSalle County break even at $36 oil price, and at $39 per barrel oil in Gonzales County.

In the Permian (and what’s a shale recovery without the Permian), wellhead breakeven prices in the Permian Midland have dropped from $71/barrel in 2014 to $36/barrel in 2016–a 49-percent decrease–the steepest among the main U.S. shale plays, Rystad Energy said in its Permian Midland review. The average wellhead breakeven price decrease in the main shale plays has been around 46 percent since 2014, Rystad Energy noted.

So, in order for the U.S. shale to start thinking of idling rigs en masse again, oil prices would have to drop and stay at even lower for longer, at below $40. The leaner, meaner and more resilient U.S. shale is basically wiping out OPEC’s efforts to achieve higher oil prices with the output deal. The cartel seems to be caught between a rock and a hard place — extending and/or deepening cuts and losing precious market share to U.S. shale, or ditching the price-fixing policy and letting the next oil price war begin.

end

8. EMERGING MARKETS

It is getting far worse in Venezuela.  Now Maduro has ordered bakers to produce cheaper loaves of bread using scarce flour as bread lines circle the block on every bakery

(courtesy Bloomberg)

Venezuelan Bakers in Government Cross-Hairs as Bread Lines Grow

March 16, 2017, 12:13 PM EDT
  • Government orders bakers to produce cheaper, regulated loaves
  • Wheat imports falling on poor economic conditions, slow trade
People stand in line to enter a bakery in Caracas.Photographer: Ronaldo Schemidt/AFP via Getty Images

Venezuelan bakeries are the latest industry to find themselves in the cross-hairs of President Nicolas Maduro’s administration as bread lines grow in the capital Caracas.

The government has ordered bakers to use scarce supplies of flour to produce price-controlled loaves and said that only 10 percent can be used to make the unregulated, pricey treats loved by Venezuelans including cachitos — a sort of croissant that can be stuffed with ham or cheese. The government dispatched price regulators to hundreds of bakeries in Caracas this week to make sure the order was being followed.

“There will be a political team for each bakery so that we have vigilance and permanent control over the 709 bakeries in Caracas,” Vice President Tareck El Aissami said on Sunday. “We’ve identified part of the conspiracies and sabotage” that had prevented bread reaching the people.

Venezuela price regulator Sundee said in a statement on Wednesday that several bakery managers had been brought before the public prosecutor for using flour supplies to only produce sweets, cachitos and other higher-end items. Two other bakers were arrested for making brownies with flour that had past its expiration date, Sundee said.

Bread Lines

Bread lines have been a common sight in the capital Caracas for the past several months as people wait for the chance to purchase a regulated loaf that can cost as little as 650 bolivars (about 92 U.S. cents at the weakest legal exchange rate and far less at the illegal black market rate). With the world’s fastest inflation well into triple-digit territory, bakeries typically survived by selling pricier, unregulated items to middle- and upper-class clients who can afford the 2,000 bolivars a chachito can cost now.

About 80 percent of bakeries have seen their stocks of flour reduced to zero, with the remaining 20 percent only receiving about 10 percent of their regular monthly supply, bakery union Fevipan said Tuesday in a post on its Twitter account.

So far this year, Venezuela’s wheat imports are down 200,000 tons to 1.3 million tons as poor economic conditions crimp demand, the Foreign Agricultural Service of the U.S. Department of Agriculture said in its March report.

Since Maduro took office in 2013, he’s presided over an economic collapse that is almost unprecedented outside of wartime, with shortages of everything from food to medicine increasingly common. The government has slashed imports as it tries to stay current on its foreign debt obligations with international reserves hovering near a 15-year low of $10.4 billion.

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

Euro/USA   1.0728 DOWN .0010/REACTING TO  + huge Deutsche bank problems + USA election:/TRUMP WINS THE ELECTION/USA READY TO GO ON A SPENDING BINGE WITH THE TRUMP VICTORY/ITALIAN REFERENDUM DEFEAT/AND NOW ECB TAPERING BOND PURCHASES/USA RAISING INTEREST RATE/EUROPE BOURSES all in the GREEN 

USA/JAPAN YEN 113.46 UP 0.0744(Abe’s new negative interest rate (NIRP), a total DISASTER/SIGNALS U TURN WITH INCREASED NEGATIVITY IN NIRP/JAPAN OUT OF WEAPONS TO FIGHT ECONOMIC DISASTER/KURODA:  HELICOPTER MONEY  ON THE TABLE AND DECISION ON SEPT 21 DISAPPOINTS WITH STIMULUS/OPERATION REVERSE TWIST

GBP/USA 1.2254 DOWN .0027 (Brexit by March 201/UK government loses case/parliament must vote/PRIME MINISTER MAY  DECIDES ON A HARD BREXIT/PARLIAMENT PASSES BILL TO BEGIN THE ARTICLE 50 PROCESS AND  THE BREXIT/AND NOW A NEW SCOTLAND REFERENDUM IS ON THE TABLE)

USA/CAN 1.3319 UP .0023 (CANADA WORRIED ABOUT TRADE WITH THE USA WITH TRUMP ELECTION/ITALIAN EXIT AND GREXIT FROM EU)

Early THIS THURSDAY morning in Europe, the Euro FELL by 10 basis points, trading now WELL BELOW the important 1.08 level FALLING to 1.0623; 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 22.17 POINTS OR 0.84%     / Hang Sang  CLOSED UP495.43 POINTS OR 2.08% /AUSTRALIA  CLOSED UP 0.24%  / EUROPEAN BOURSES ALL IN THE GREEN 

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

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

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

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

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

The NIKKEI: this THURSDAY morning CLOSED UP 12.76 POINTS OR 0.07% 

Trading from Europe and Asia:
1. Europe stocks  ALL IN THE GREEN 

2/ CHINESE BOURSES / : Hang Sang CLOSED UP 495.43 POINTS OR 2.08%       / SHANGHAI CLOSED UP 22.17 OR .84%/Australia BOURSE CLOSED UP 0.24%/Nikkei (Japan)CLOSED UP 12.76 POINTS OR 0.07%  /  INDIA’S SENSEX IN THE  GREEN

Gold very early morning trading: $1225.05

silver:$17.43

Early THURSDAY morning USA 10 year bond yield: 2.529% !!! UP 3 IN POINTS from TUESDAY night in basis points and it is trading JUST BELOW resistance at 2.27-2.32%. THE RISE IN YIELD WITH THIS SPEED IS FRIGHTENING

 The 30 yr bond yield  3.138, UP 3 IN BASIS POINTS  from WEDNESDAY night.

USA dollar index early THURSDAY morning: 101.63 UP 9 CENT(S) from WEDNESDAY’s close.

This ends early morning numbers THURSDAY MORNING

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And now your closing THURSDAY NUMBERS

Portuguese 10 year bond yield: 4.275%  UP 29  in basis point yield from WEDNESDAY 

JAPANESE BOND YIELD: +.075%  DOWN 2  in   basis point yield from WEDNESDAY/JAPAN losing control of its yield curve

SPANISH 10 YR BOND YIELD: 1.885%  UP 7 IN basis point yield from WEDNESDAY (this is totally nuts!!/

ITALIAN 10 YR BOND YIELD: 2.346 UP 7 POINTS  in basis point yield from WEEDNESDAY 

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

GERMAN 10 YR BOND YIELD: +.446% DOWN 4 IN  BASIS POINTS ON THE DAY

END

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IMPORTANT CURRENCY CLOSES FOR THURSDAY

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

Euro/USA 1.0736 DOWN .0007 (Euro DOWN 7 basis points/ represents to DRAGHI A COMPLETE POLICY FAILURE/

USA/Japan: 113.06 DOWN: 0.329(Yen UP 33 basis points/ 

Great Britain/USA 1.2362 UP 0.0082( POUND up 82 basis points)

USA/Canada 1.3328 UP 0.0031(Canadian dollar DOWN  31 basis points AS OIL FELL TO $48.57

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This afternoon, the Euro was DOWN by 7 basis points to trade at 1.0736

The Yen ROSE to 113.06 for a GAIN of 33 Basis points as NIRP is STILL a big failure for the Japanese central bank/HELICOPTER MONEY IS NOW DELAYED/BANK OF JAPAN NOW WORRIED AS AS THEY ARE RUNNING OUT OF BONDS TO BUY AS BOND YIELDS RISE  /OPERATION REVERSE TWIST ANNOUNCED SEPT 21.2016

The POUND ROSE BY 82  basis points, trading at 1.2362/

The Canadian dollar FELL by 31 basis points to 1.3328,  WITH WTI OIL FALLING TO :  $48.57

The USA/Yuan closed at 6.8949/
the 10 yr Japanese bond yield closed at +.075% DOWN 2 IN  BASIS POINTS / yield/ 

Your closing 10 yr USA bond yield DOWN 6  IN basis points from WEDNESDAY at 2.518% //trading well ABOVE the resistance level of 2.27-2.32%) very problematic  USA 30 yr bond yield: 3.142 DOWN 1/ 3  in basis points on the day /

Your closing USA dollar index, 101.50 DOWN 24  CENT(S)  ON THE DAY/1.00 PM 

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

London:  CLOSED UP 47.31 OR 0.64% 
German Dax :CLOSED UP 73.31 POINTS OR 0.61%
Paris Cac  CLOSED UP 27.90 OR 0.56%
Spain IBEX CLOSED UP 184.20 POINTS OR 1.85%
Italian MIB: CLOSED UP 335.74 POINTS OR 1.70%

The Dow closed DOWN 15.55 OR 0.07%

NASDAQ WAS closed UP 0.72 POINTS OR 0.01%  4.00 PM EST
WTI Oil price;  48.57 at 1:00 pm; 

Brent Oil: 51.53  1:00 EST

USA /RUSSIAN ROUBLE CROSS:  57.82 DOWN 64/100 ROUBLES/DOLLAR 

TODAY THE GERMAN YIELD RISES TO +0.446%  FOR THE 10 YR BOND  1:30 EST

END

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

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

WTI CRUDE OIL PRICE 5 PM:$48.80

BRENT: $51.74

USA 10 YR BOND YIELD: 2.532%  (ANYTHING HIGHER THAN 2.70% BLOWS UP THE GLOBE)

USA 30 YR BOND YIELD: 3.147%

EURO/USA DOLLAR CROSS:  1.0769 UP .0032

USA/JAPANESE YEN:113.25   DOWN .135

USA DOLLAR INDEX: 100.25  DOWN 29  cents ( HUGE resistance at 101.80 broken TO THE DOWNSIDE)

The British pound at 5 pm: Great Britain Pound/USA: 1.2288 : UP .01323  OR 132BASIS POINTS.

Canadian dollar: 1.3318  UP .0022

German 10 yr bond yield at 5 pm: +.446%

END

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

TRADING IN GRAPH FORM

Stocks Give Up Post-Fed Gains As Gold Soars Most Since Brexit

 

It seems Yellen’s desperate attempt to tell the world that the US economy is doing fantastic BUT not well enough to raise rate more than 3 times appears to have let stocks hope down. Combine that with ECB comments and uncertainty over Trump’s budget and the political ‘put’ rallied as stocks sank…

 

We’re gonna need some more hawkish jawboning – as economic growth expectations collapse – to rescue this one…

 

Early gains from the Dutch election exuberance faded for US stocks…

 

Trannies are red post-Fed

 

Nasdaq was panic-bid by the machines to end the day barely green…

 

US VIX was slammed to yesterday’s lows into the close to try desperately to get The Dow green to prove how awesome The Fed is…

 

But Europe’s VIX collapsed to record lows…

 

Crashing to match US VIX…

 

High yield bonds slipped lower as the bounce off the 200DMA fades…

 

Treasury yields rose on the day – seemingly driven by PBOC and BOJ actions more than anything specific…

 

Bonds and Stocks recoupled today after converging yesterday – once they converged – both began to sell off again…

 

Late headlines from ECB’s Nowotny sparked weakness in Bunds and compressed the Bund-UST (Futures price) spread to 5 week lows…

 

And EURUSD blew out…

 

The Dollar Index dumped post-Fed to 6-week lows

 

EUR strength offset AUD weakness today to drag the USD lower…

 

Despite USD weakness crude ended unchanged – notably weaker post-PBOC hike…

 

USD weakness and political uncertainty sparked the biggest gains for gold since Brexit. Silver and Gold both broke above key technical levels…

END

Strange! Yesterday we saw home builders the most optimistic and yet building permits plunge the most in 11 months and reducing multifamily dwelling starts.

(courtesy zero hedge)

Building Permits Plunge Most In 11 Months Amid Multi-Family Slump

Following January’s ‘Trump-bump’, building permits in February plunged 6.2% MoM, the biggest drop since March 2016 (amid global recession fears), driven by a tumble in multi-family units. While housing starts rose 3% MoM, the annual growth slipped back to 6.2%, again fading Trump exuberance, despite a 12 year high in builder confidence.

Permits tumbled…

 

Led by a plunge in multi-family units…

 

Multi-family starts also dropped in February…

 

It appears for now that homebuilders are more willing to talk about how great things are then actually putting money to work,,,

 

So to summarize, Homebuilders are the most optimistic since the peak of the housing bubble in 2005 but are slashing permits (forward-looking) and reducing multi-family starts.

end

Strange:  now soft data Philly Fed drops from a  42 down to 32.80, the biggest tumble from its 33 yr highs

(courtesy Philly Fed/zero hedge)

Bloomberg Economist Kathleen Hays, I guess had enough as she decided to ask Yellen pointed questions on the economy.  Basically Hays did not understand what changed from December to now to cause the data dependent Fed to hike in a rapidly deteriorating economy.  Yellen was startled as she eyeballing someone off camera. She did not like the question and we feel very sorry for Kathleen as this would probably be her last session to question the Fed as she joins Da Costa and us as outlaws.

(courtesy zero hedge)

Startled Reporter Asks Why Yellen Hiked With GDP And Real Wages Sliding: Here Is The Response

Today’s FOMC press conference was the standard affair. Reporters ask broad questions, Yellen responds with even broader comments that amble aimlessly leaving no one any wiser as to The Fed’s true intent. That is, until Bloomberg TV’s Kathleen Hays decided enough was enough, and wanted to get to the bottom of just why a “data-dependent” Fed is hiking in a world in which economic data is rapidly deteriorating.

The bespectacled Hays dared to suggest some ‘facts’ and real news – as opposed to Yellen’s ‘forecasts’ – in an effort to comprehend what changed in March to turn a ubiquitously dovish Fed into a seemingly panic-stricken pack of hawks…

I’m going to try to take the opposite side of this, because — and this question about market expectations, and how the market’s got things wrong, and then how you say the Fed suddenly clarified what it already said. But for example, if the — if you look at the Atlanta Fed’s latest GDP tracker for the first quarter, it’s down to 0.9 percent. We had a retail sales report that was mixed. We had the, you know, the upper divisions of previous months make it look better. But the consumer does not appear to be roaring in the first quarter, kind of underscoring the wait-and-see attitude you just mentioned.

 

 

If you look at measured of labor compensation, you note in the statement that they’re not moving up. And in fact, they are — and if you look at average out, there are so many things you can look at. And you yourself have said in the past that the fact that that is happening is perhaps an indication there’s still slack in the labor market.

 

 

I guess my question is this: In another sense, what happened between December and March?

 

 

 

GDP is tracking very low. Measures of labor compensation are not threatening to boost inflation any time fast. The consumer is not picking up very much. Fiscal policy, we don’t know what’s going to happen with Donald Trump. And yet, you have to raise rates now. So what is the — what is the motivation here? The economy is so far from your forecast in terms of GDP, why does the Fed have to move now? What does this signal, then, about the rest of the year?

Yellen frowned awkwardly and began…

So GDP is a pretty noisy indicator.

… And then she added.

If one averages through several quarters, I would describe our economy as one that has been growing around two percent per year. And as you can see from our projections, we — that’s something we expect to continue over the next couple of years.

 

Now, that pace of growth has been consistent with a pace of job creation that is more rapid than what is sustainable if labor force participation begins to move down, in line with what we see as its longer-run trend with an aging population.

 

Now, unemployment hasn’t moved that much, in part because people have been drawn into the labor force. Labor force participation, as I mentioned in my remarks, has been about flat over the last three years. So in that sense, the economy has shown over the last several years that it may have had more room to run than some people might have estimated, and that’s been — that’s been good. It’s meant we’ve had a great deal of job — job creation over these years.

 

And there could be — there could be room left for that to play out further. In fact, look, policy remains accommodative. We expect further improvement in the labor market. We expect the unemployment rate to move down further and to stay down for the next several years. So we do expect that the path of policy we think is appropriate is one that is going to lead to some further strengthening in the labor market.

So not one comment on the actual data points that Hays refers to. Merely the standard – resort to ‘something about employment’ comment – and end on a reassuring tone of accomodation remains. But Hays was not done and unlike the rest of the room would not take Yellen’s wishy-washy bullshit response as writ…

Just quickly then, I just want to underscore — I want to ask you, so following on that, you expect it to move. But what if it doesn’t? What if GDP doesn’t pick up? What if you don’t see wage measures rising? What if you don’t — what if the (inaudible) gets stuck at 1.7 percent?

 

Would you — is it your view perhaps that if there’s a risk right now in the median forecast for dots (ph), that it’s fewer hikes this year rather than the consensus or more?

To which an anxious Yellen replied – notably eyeballing off camera to someone – clearly upset at being cornered on some facts…

Well, look, our policy is not set in stone. It is data- dependent and we’re — we’re not locked into any particular policy path. Our — you know, as you said, the data have not notably strengthened. I — there’s noise always in the data from quarter to quarter. But we haven’t changed our view of the outlook. We think we’re on the same path, not — we haven’t boosted the outlook, projected faster growth. We think we’re moving along the same course we’ve been on, but it is one that involves gradual tightening in the labor market.

 

I would describe some measures of wage growth as having moved up some. Some measures haven’t moved up, but there’s  is also suggestive of a strengthening labor market. And we expect policy to remain accommodative now for some time. So we’re talking about a gradual path of removing policy accommodation as the economy makes progress moving toward neutral. But we’re continuing to provide accommodation to the economy that’s allowing it to grow at an above-trend pace that’s consistent with further improvement in the labor market.

So when faced with factual data points such as real wage declines, collapsing GDP growth expectations, disappointing retail sales, and uncertain fiscal policy, the chair of The Federal Reserve defends the decision to hike rates for the 3rd time in 11 years by saying that “data is noisy”, that The Fed’s forecast for growth remains positive, and that The Fed remains accomodative.

For now it appears what matters to The Fed is not ‘hard’ real economic data but ‘soft’ survey and confidence data…

 

As a reminder this may be the weakest quarter of economic growth for a rate hike since 1980!!

 

Sadly, we suspect Ms. Hays future question-asking privileges may well go the way of The Wall Street Journal’s Pedro Da Costa.

 

Last night,  Trump’s budget plan was leaked in which he proposes a 31% cut for EPA and a 28% cut for the state dept with a huge 54 billion rise in the military

(courtesy zero hedge)

Trump “Dead On Arrival” Budget Plan Proposes 31% Cuts For EPA, 28% For State Department

In the widely anticipated budget proposal to be released by President Trump on Thursday, the White House will call for spending cuts of 28% for the State Department and 31% for the Environmental Protection Agency, the New York Times reported on Wednesday, citing congressional staff who are familiar with the plan. The budget plan for fiscal 2018 will also propose a big reduction in the State Department’s Food for Peace program and elimination of a Transportation Department program that subsidizes flights to rural U.S. airports.

In addition to the above cuts, Trump’s team is expected to propose a wide array of cuts to public education, to transportation programs like Amtrak and to the Department of Housing and Urban Development, including the complete elimination of the $3 billion Community Development Block Grant program, which funds popular programs like Meals on Wheels, housing assistance and other community assistance efforts.

The E.P.A. is, arguably, the hardest-hit agency under Mr. Trump’s budget proposal: He wants to cut spending by nearly a third — $2.6 billion from its current level of $8.2 billion, according to a person who had been briefed on the proposal but was not authorized to speak publicly about it. That would take the budget down to about $5.7 billion, its lowest level in 40 years, adjusted for inflation. In an initial draft, the White House had proposed cutting about $2 billion from the agency’s budget, taking it down to just over $6 billion, according to an aide familiar with the plan.

Offsetting these cuts, the budget outline would funnel $54 billion in additional funding into defense programs, boost immigration enforcement and significantly reduce the nondefense federal work force to further the “deconstruction of the administrative state,” in the words of Mr. Trump’s chief strategist, Stephen K. Bannon.

According to the NYT, “the budget outline, to be unveiled on Thursday, is more of a broad political statement than a detailed plan for spending and taxation. It represents Mr. Trump’s first real effort to translate his bold but vague campaign themes into the minutiae of governance.” The plan to be released at 7 a.m. tomorrow is a “skinny budget,” a pared-down first draft of the line-by-line appropriations request submitted by first-term administrations during their first few months. A broader budget will be released later in the spring that will include Mr. Trump’s proposals for taxation as well as the bulk of government spending — Social Security, Medicare, Medicaid and other entitlement programs.

Still, as with many of Trump’s other bold proposals, major elements of the plan have already been declared dead on arrival by the Republican leadership in Congress, and much of the fiscal fine print will be filled in by Capitol Hill lawmakers and their aides over the next month.

House appropriations subcommittees began reviewing the plan late Wednesday. Among the cuts: drastic reductions in the 60-year-old State Department Food for Peace Program, which sends food to poor countries hit by war or natural disasters, and the elimination of the Department of Transportation’s Essential Air Service program, which subsidizes flights to rural airports.

 

The proposed State Department cuts, which leaked this month, have already created a backlash among some Capitol Hill Republicans. Senator Mitch McConnell of Kentucky, the majority leader, has already said Senate Republicans will not agree to deep cuts to the $50 billion budget for the State Department and United States Agency for International Development initially proposed by the Trump administration’s Office of Management and Budget.

This is definitely dead on arrival,” Senator Lindsey Graham, a South Carolina Republican who serves on the Senate Foreign Relations Committee, told reporters at the Capitol late last month of the proposed cuts to the diplomatic corps and foreign aid.

And since it looks improbable that Trump will get most – or even a material amount – of his proposed spending cuts, it will only make Trump’s proposed tax cuts that much more problematic, unless Congressional conservatives suddenly become believes in debt-funded everything, in which case it may all boil down to Janet Yellen again, and the Fed’s monetization of what suddenly appears to be a gaping budget deficit, which however at a time of rising rates and economic “animal spirits”, looks very unlikely absent a dramatic deterioration in the US economy.

 

end

And the skinny budget:  the winners and losers and this budget is dead on arrival

(courtesy zero hedge)

 

 

Trump Releases His First Budget Blueprint: Here Are The Winners And Losers

Update: echoing comments made by Senator Lindsey Graham, a South Carolina Republican who serves on the Senate Foreign Relations Committee, the top House Democrat said that the Trump budget proposal isdead on arrival.

* * *

Today at 7am, Trump released his “skinny budget”, his administration’s first federal budget blueprint revealing the President’s plan to dramatically reduce the size of the government. As previewed last night, the document calls for deep cuts at departments and agencies that would eliminate entire programs and slash the size of the federal workforce. It also proposes a $54 billion increase in defense spending, which the White House says will be offset by the other cuts.

“This is the ‘America First’ budget,” said White House budget director Mick Mulvaney, a former South Carolina congressman who made a name for himself as a spending hawk before Trump plucked him for his Cabinet, adding that “if he said it in the campaign, it’s in the budget.”

In a proposal with many losers, the Environmental Protection Agency and State Department stand out as targets for the biggest spending reductions. Funding would disappear altogether for 19 independent bodies that count on federal money for public broadcasting, the arts and regional issues from Alaska to Appalachia. Trump’s budget outline is a bare-bones plan covering just “discretionary” spending for the 2018 fiscal year starting on Oct. 1. It is the first volley in what is expected to be an intense battle over spending in coming months in Congress, which holds the federal purse strings and seldom approves presidents’ budget plans.

Trump wants to spend $54 billion more on defense, put a down payment on his border wall, and breathe life into a few other campaign promises. His initial budget outline does not incorporate his promise to pour $1 trillion into roads, bridges, airports and other infrastructure projects.  The budget directs several agencies to shift resources toward fighting terrorism and cybercrime, enforcing sanctions, cracking down on illegal immigration and preventing government waste.

The White House has said the infrastructure plan is still to come.

That said, Congress controlled by Trump’s fellow Republicans, is likely to reject some or many of his proposed cuts with some republicans calling the budget “dead on arrival.” Some of the proposed changes, which Democrats will broadly oppose, have been targeted for decades by conservative Republicans. Moderate Republicans have already expressed unease with potential cuts to popular domestic programs such as home-heating subsidies, clean-water projects and job training.

Trump is willing to discuss priorities, said Mulvaney. “The president wants to spend more money on defense, more money securing the border, more money enforcing the laws, and more money on school choice, without adding to the deficit,” Mulvaney told a small group of reporters during a preview on Wednesday. “If they have a different way to accomplish that, we are more than interested in talking to them,” Mulvaney said.

The defense increases are matched by cuts to other programs so as to not increase the $488 billion federal deficit. Mulvaney acknowledged the proposal would likely result in significant cuts to the federal workforce. “You can’t drain the swamp and leave all the people in it,” Mulvaney said.

A visual summary of the proposed budget changes is shown below, courtesy of Reuters:

The biggest losers:

Trump asked Congress to slash the EPA by $2.6 billion or more than 31 percent, and the State Department by more than 28 percent or $10.9 billion. Mulvaney said the “core functions” of those agencies would be preserved. Hit hard would be foreign aid, grants to multilateral development agencies like the World Bank and climate change programs at the United Nations.

Trump wants to get rid of more than 50 EPA programs, end funding for former Democratic President Barack Obama’s signature Clean Power Plan aimed at reducing carbon dioxide emissions, and cut renewable energy research programs at the Energy Department. Regional programs to clean up the Great Lakes and Chesapeake Bay would be sent to the chopping block.

Community development grants at the Housing Department – around since 1974 – were cut in Trump’s budget, along with more than 20 Education Department programs, including some funding program for before- and after- school programs. Anti-poverty grants and a program that helps poor people pay their energy bills would be slashed, as well as a Labor Department program that helps low-income seniors find work.

Long reviled by conservatives, the Internal Revenue Service would get a $239 million cut, despite Treasury Secretary Steven Mnuchin’s request for more funding. The Education Department would receive $1.4 billion to invest in public charter schools and private schools, even as its overall budget is cut by 14 percent. But other numbers appear to contradict some of Trump’s top priorities. One of his campaign pledges was to work to cure diseases, but the National Institutes of Health will reportedly see $5.8 billion slashed from its budget.

Trump calls for a 13 percent cut to the Transportation Department, which would ostensibly play a big role in Trump’s promised infrastructure overhaul. That includes $500 million from the TIGER grant program, which provides funding for road and bridge projects.

Trump’s rural base did not escape cuts. The White House proposed a 21 percent reduction to the Agriculture Department, cutting loans and grants for wastewater, reducing staff in county offices and ending a popular program that helps U.S. farmers donate crops for overseas food aid.

And the winners

White House officials looked at Trump’s campaign speeches and “America First” pledges as they crunched the numbers, Mulvaney said. “We turned those policies into numbers,” he said, explaining how the document mirrored pledges to spend more on the U.S. nuclear weapons arsenal, veterans’ health care, the FBI, and Justice Department efforts to fight drug dealers and violent crime.

The Department of Homeland Security would get a 6.8 percent increase, with more money for extra staff needed to catch, detain and deport illegal immigrants. Trump wants Congress to shell out $1.5 billion for the border wall with Mexico in the current fiscal year – enough for pilot projects to determine the best way to build it – and a further $2.6 billion in fiscal 2018, Mulvaney said.

The estimate of the full cost of the wall will be included in the full budget, expected in mid-May, which will project spending and revenues over 10 years. Trump has vowed Mexico will pay for the border wall, which the Mexican government has flatly said it will not do. The White House has said recently that funding would be kick-started in the United States.

The voluminous budget document will include economic forecasts and Trump’s views on “mandatory entitlements” – big-ticket programs like Social Security and Medicare, which Trump vowed to protect on the campaign trail.

“There is no question this is a hard-power budget,” said Mulvaney. “It is not a soft-power budget.”

The budget requests $1.5 billion to detain and remove undocumented immigrants, and $314 million to hire 500 new Border Patrol officers and 1,000 new Immigration and Customs Enforcement officers.

 

end

 

Goldman Sachs comments on the above;

(courtesy Goldman Sachs/zerohedge)

Goldman Warns, Trump Budget “More Notable For What’s Not Included”

As expected, the White House has released topline spending totals for government agencies in FY2018, endorsing a $30bn nominal cut in congressional appropriations. However, as Goldman Sachs details, the release includes no projections of the overall fiscal path or economic assumptions, and includes no discussion of tax reform or infrastructure proposals. Those details are expected to be released in May.

MAIN POINTS:

1. The President’s “skinny” Budget proposes a $30bn (0.15% of GDP) nominal reduction in total funding appropriated to government agencies in 2018, essentially endorsing the decline in spending called for under current law as a result of the spending caps under sequestration. Within this declining topline figure, the White House proposes to shift $54bn (0.3% of GDP) from non-defense to defense spending in 2018.

2. For FY2017, the budget proposes $3bn in new funding for the border wall and immigration enforcement, and $5bn in new supplemental defense spending. These proposals may be considered as part of the spending bill Congress will attempt to pass by April 28, when current government spending authority expires.

3. The proposal should be seen as a starting point for congressional negotiations. Note that congressional appropriations bills are not passed through the “reconciliation” process and thus will likely to need 60 votes–and thus at least 8 Democratic votes—to pass in the Senate. Assuming Democrats object, it seems unlikely that the full extent of the proposed cuts to domestic agencies will be approved, which would lead to a smaller increase in defense spending and/or a smaller cut (or increase) in total congressional appropriations than what the President proposes.

4. From a market perspective, this proposal is more notable for what is not included…

  • It provides no economic or fiscal projections, and
  • no discussion of tax reform or infrastructure plans, which the White House says will be released “in coming months”, likely as part of a full budget submission to Congress that we expect to be released around May.
  • It also includes no discussion of the Obamacare replacement plan.

But apart from that, everything is awesome?

Utter nonsense has Bharara explains why he did not charge any Wall Street banker executives:

(courtesy Mike Krieger/Libert BlitzkriegBlog)

Preet Bharara Explains Why He Let Wall Street Bank Executives Avoid Prison

Authored by Mike Krieger via Liberty Blitzkrieg blog,

Recently dismissed U.S. Attorney for the Southern District of New York, Preet Bharara, is suddenly being celebrated as an aggressive warrior in the fight against Wall Street corruption.

Really? You could’ve fooled me. Perhaps I was in a coma when a string of big bank executives were arrested and sent to prison.

No, what actually happened is one of the most powerful attorneys in the nation came up with a mealy-mouthed, cowardly rationale for why he let these financial thieves off the hook.

Crain’s reports:

Bharara was nowhere to be found when it came to charging the top executives whose actions led to the collapse of Lehman Brothers, Merrill Lynch and AIG, and who made all manner of misleading statements to cover up how sick their firms were. Goldman Sachs executives sold institutional investors a mortgage-backed security that sales staffers described as “one shitty deal.

 

Where was Bharara when it mattered most?

 

We don’t have to wonder for too long because the prosecutor explained his actions—or lack thereof—at a Crain’s forum three years ago. Bharara said at the time that he didn’t think he could win a case against Wall Street top dogs because they had hired advisers assuring them what they were doing was legal.

 

“What you do have to prove is criminal intent,” he said. “And it’s very difficult if a bank president has in his hands a letter or opinion from a law firm or accountant saying, ‘If you do X, Y and Z when you sell these mortgage-backed securities, you’re good.’

 

“Now it may make you angry,” he told the audience. “But if you have the opinion, it is a very difficult thing [for a prosecutor] when they say, ‘I asked my lawyers to do the best they could to tell me what I’m supposed to do.’”

 

Read those statements again. The leading white-collar prosecutor in the country said that advice from the right lawyer or accountant is tantamount to a get-out-of-jail-free card.

 

Jesse Eisinger, a Pulitzer Prize–winning business reporter, will soon have a book out explaining how federal prosecutors lost their nerve to bring Wall Street leaders to justice. Its title is The Chickenshit Club.

Now that sounds like a book worth reading.

end

Puerto Rico bonds are plunging again

(courtesy zero hedge)

Puerto Rico Bonds Are Plunging Again

Puerto Rico bonds are in the midst of the biggest three-day rout since April 2016, when island officials advanced a moratorium bill that paved the way for the first default on its general-obligation debt, according to data compiled by Bloomberg.

As The FT reports,Puerto Rico plans to begin restructuring talks with its multitude of creditors “immediately” after its turnround plan was on Monday approved by the commonwealth’s federal oversight board, according to the island’s governor.

The next steps are implementing some of the promised economic reforms and to “aggressively pursue” restructuring talks with creditors, Puerto Rican governor Ricardo Rosselló told the FT.

“We will reach out to them immediately and move quickly,” he said. “This [turnround plan] sends a clear signal to the market that there is a paradigm change in our credibility compared to the last administration.”

And the reaction in Muni bonds is clear…

As the federal oversight board’s approval of a fiscal recovery plan Monday, covers less than a quarter of the debt payments due from 2018 through 2026, leaving bondholders facing steeper losses than they did under the governor’s previous proposal.

end

 

This is why there will be zero agreement on the debt ceiling.  Republican McCain blasts Rand Paul for not supporting NATO’s entry for the corrupt Montenegro.

(courtesy zerohedge)

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